CAE announces (TSE:CAE) civil aviation and defence contracts worth $475m

Flight training specialist CAE Inc (TSE:CAE, Mkt cap 4.96B, P/E 21.20, Div/yield 0.08/1.73, EPS 0.88, Shares 268.50M) has signed a series of aviation training contracts worth more than C$250m with airlines and business aircraft operators around the world.

CAE announces TSE:CAE civil aviation and defence contracts $475m

CAE announces (TSE:CAE) civil aviation and defence contracts worth C$475m

Announcing the new contracts last week, the Canadian company said that they include cadet-to-captain training programs, crew resourcing services, and the sale of 12 full-flight simulators (FFS), bringing the total number of FFS sales announced so far this fiscal year to 38.

Among the latest FFS customers are Xiamen Airlines and Shanghai Eastern Flight Training Co in China, Korean Air in South Korea, Sriwijaya Air in Indonesia, and Southwest Airlines in the United States.

Ab-initio pilot training and resourcing agreements were signed with Jetstar Airways Australia and Jetstar Airways Japan, and CAE signed airline and business aviation pilot training contracts with Jet Airways in Asia, Smart Aviation in the Middle-East and Redstar Aviation in Europe.

CAE also announced last week that it had won defence contracts valued at more than C$175m to provide new simulation products, simulator upgrades and training support services for global military customers.

These contracts include a French Air Force ground-based training system for Babcock France, a C295 full-flight simulator for Airbus Defence & Space, and continuing simulator upgrades as well as training support services on the MH-60 Seahawk for both the United States Navy and Royal Australian Navy.

"The contract with Babcock France is a strategic win in Europe that will provide the French Air Force with a modernised training solution for future fighter pilots," commented Gene Colabatistto, CAE group president for Defence & Security. "We have been Airbus' long-time training partner on the C295 program and are pleased we will continue to support the training required on this platform, which now will also include the Royal Canadian Air Force following Canada's selection of the C295 for its Fixed-Wing Search and Rescue program.

"Global militaries and original equipment manufacturers continue to recognize CAE's expertise and experience as a training systems integrator on enduring platforms, and this continues to provide us a healthy pipeline of opportunities around the world."

Montreal based CAE Inc. (TSE-CAE) provides training for the civil aviation, defense and security, and healthcare markets. The Company designs and integrates training solutions. The Company operates through three segments: Civil Aviation Training Solutions, Defense and Security, and Healthcare. It provides integrated training solutions to three markets, such as the civil aviation market, which includes aircraft manufacturers, commercial airlines, regional airlines, business aircraft operators, civil helicopter operators, third-party training centers, flight training organizations, maintenance repair and overhaul organizations and aircraft finance leasing companies; the defense and security market, which includes defense forces, original equipment manufacturers (OEMs), government agencies and public safety organizations, and the healthcare market, which includes hospital and university simulation centers, medical and nursing schools, paramedic organizations, defense forces, medical societies and OEMs. More from Reuters » 

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CAE Inc (TSE-CAE) wins defence contracts worth more than $100-million

Flight training simulator provider CAE Inc (TSE-CAE, Mkt cap 4.41B, P/E 18.42, Div/yield 0.08/1.83, EPS 0.89, Shares 269.63M) said last week that it has signed defence contracts valued at more than C$100m.

CAE defence contracts $100m

Cae Inc (TSE-CAE) wins defence contracts worth more than $100-million

The Montreal-based company will provide a range of simulation products and training support services for military customers in Canada and the UK, including Lockheed Martin and L-3 MAS.

In the UK, CAE will provide synthetic training equipment for the rotary-wing element of the country’s Military Flying Training System (UKMFTS) program. This contract, awarded by Lockheed Martin, covers seven flight training devices and one command and tactics trainer for the Airbus Helicopters H135/H145 family to support helicopter pilot training for the RAF, British Army and Royal Navy.

“We will now be providing simulators and training devices for both the fixed-wing and rotary-wing elements of UKMFTS, in addition to already having providing the Hawk full-mission simulators and tactical mission trainers used for rear-crew and observer training,” said Ian Bell, CAE’s vice president and general manager for Europe/Middle East/Africa.

In Canada, Lockheed Martin has awarded the company a five-year contract to continue providing in-service support for the Royal Canadian Air Force‘s CC-130J aircraft maintenance technician training program. This includes maintenance and support for the CC-130J fuselage training devices, integrated cockpit systems training device, and virtual maintenance trainers.

And in another Canadian contract, L-3 MAS, a subsidiary of L-3 Communications, has issued an order for CAE to continue providing a range of in-service support solutions for the Royal Canadian Air Force’s CF-18 fleet. CAE will provide avionics software upgrades, integrated logistics support and data management services.

“Our expertise as a training systems integrator and experience on enduring military aircraft platforms is providing us numerous opportunities around the world as defence forces look to expand their use of simulation for integrated mission training,” commented Gene Colabatistto, CAE group president for Defence & Security. “We are particularly pleased to once again be selected to provide synthetic training equipment for the UK MFTS program as well as demonstrating the recurring business we have to support the RCAF with long-term services.”

CAE Inc. (TSE-CAE) provides training for the civil aviation, defense and security, and healthcare markets.

Montreal based CAE Inc. (TSE-CAE) provides training for the civil aviation, defense and security, and healthcare markets. The Company designs and integrates training solutions. The Company operates through three segments: Civil Aviation Training Solutions, Defense and Security, and Healthcare. It provides integrated training solutions to three markets, such as the civil aviation market, which includes aircraft manufacturers, commercial airlines, regional airlines, business aircraft operators, civil helicopter operators, third-party training centers, flight training organizations, maintenance repair and overhaul organizations and aircraft finance leasing companies; the defense and security market, which includes defense forces, original equipment manufacturers (OEMs), government agencies and public safety organizations, and the healthcare market, which includes hospital and university simulation centers, medical and nursing schools, paramedic organizations, defense forces, medical societies and OEMs. More from Reuters » 

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CAE to make 350 job cuts within a year

CAE Inc. (TSE:CAE, Mkt cap 3.95B, P/E19.52, Div/yield 0.08/2.03, EPS 0.76, Shares 268.58M) has announced it is to cut 350 employees from its global workforce in the next 12 months, a move it believes will increase its competitive advantage.

CAE Inc cut 350 employees global workforce

CAE Inc. has announced it is to cut 350 employees from its global workforce

As CBC News reports, the majority of the job cuts will be made in Montreal, which is where the company headquarters resides, alongside its largest production facility.

The flight simulator and training company currently boasts 8,000 employees – meaning the job cuts will see a 4% deduction of its workforce – but CAE believes that ambitions to improve its production processes and revamp its business focus are only possible with a reduced headcount.

“This will ensure that CAE maintains a strong leadership position in a highly dynamic market and will create an even wider gap between CAE and its competitors,” said Marc Parent, its president and chief executive officer.

He added that the firm will go to great lengths in order to soften the blow for those employees affected by the changes.

Restructuring costs are expected to amount to $19 million, on top of the $5.7 million recorded in the company’s fiscal first quarter.

In the three-month period from April 1 to June 30, CAE saw its overall revenue climb 6% to $557 million, attributed to developments in its aviation and health technology arms.

Revenue from CAE’s defence and security business was relatively unchanged at $196.9 million but revenue from civil aviation training increased 9% to $336.2 million, while Healthcare contributed $23.9 million, up 23%.

Net income for the firm’s first quarter also saw a rise from 12 months ago, notching up to $44.5 million from $41.6 million. Excluding restructuring costs, net income would have been $50.6 million, up from $43.8 million.

CAE Inc. is a Quebec-based company that provides modeling, simulation and training for civil aviation and defence. Its operations are managed through five segments: Training & Services/Civil, provides commercial, business and helicopter aviation training for flight, cabin, maintenance and ground personnel and ab initio pilot training and crew sourcing services; Simulation Products/Civil, designs, manufactures and supplies civil flight simulation training devices and visual systems; Simulation Products/Military, designs, manufactures and supplies advanced training equipment and software tools for defense and security; Training & Services/Military, supplies turnkey training services, simulation-based integrated enterprise solutions and maintenance and in-service support solutions, and New Core Markets, designs and manufactures healthcare training services and devices and mining services and tools.

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BNN Market Call Tonight Interview: Market Outlook and Top Picks

Market Call Outlook:

After a number of years of positive performance, North American markets are looking a stretched. In Canada, the retreat in energy prices continues to reverberate through the economy. In the US, valuations are appearing somewhat on the high side and investors are wary of any impending interest rate hikes. Given the strength of the US dollar, we do not believe rate hikes are likely in the immediate future. Despite the slower rate of growth in China, the market there continues to reach new highs despite falling export and import levels.  Commodities have been constrained by the anticipated lower demand levels from China. The European economy appears to be stabilizing to some degree with the obvious problems in Greece, Portugal and Spain still weighing on investors concerns. In this environment, we would not be surprised to see a pullback in the markets that would afford investors the opportunity to find better values.

Market Call Top picks Michael Sprung Alaris Royalty ARC Resources CAE Inc

Market Call Top picks from Michael Sprung: Alaris Royalty, ARC Resources, CAE Inc

Market Call Top Picks:

Alaris Royalty Corp. (TSE:AD, Mkt cap 993.91M, P/E 17.42, Div/yield 0.12/4.86, EPS 1.77, Shares 32.18M) Owned by Clients: Last Purchase May 28, 2015, $31.62
Alaris Royalty is a unique investment firm that invests  in a diversified range of private companies with solid long term histories and stable management teams. The nature of the investment allows Alaris to participate in future growth while  the entrepreneurs maintain control provided certain agreed upon benchmarks are met.  Management has had a successful track record in identifying good investment opportunities. Last week, management announced the largest investment to date in a construction firm in  Texas. As investments and cash flow have grown, dividends have increased. We anticipate that investors will continue to participate in Alaris’ growth.

ARC Resources Ltd (TSE:ARX, Mkt cap 7.42B, P/E 19.82, Div/yield 0.10/5.50, EPS 1.10, Shares 340.03M) Owned by Clients: Last Purchase May 28, 2015, $22.80

ARC Resources is a Canada-based oil and gas company. The Company’s business activities include the exploration, development and production of crude oil, natural gas and natural gas liquids in five core areas across western Canada. The Company is also engaged in the Sunrise gas plant construction. Its operations are focused in five core areas across western Canada. ARC Resources has a strong balance sheet and the dividend is well covered even at current commodity prices. The shares offer an attractive yield of 5.5% at current prices.

CAE, Inc. (TSE:CAE, Mkt cap 3.98B, P/E 19.72, Div/yield 0.07/1.88, EPS 0.76, Shares 267.18M) Owned Personally and by Clients, Last Purchase August 21, 2014, $13.45

CAE Inc is a Canada-based company that provides modelling, simulation and training for civil aviation and defence. The Company has a good balance of customers between military and civil applications. CAE has invested over the last few years in expanding training facilities in anticipation of a pending higher turnover in pilot retirements over the coming years resulting in greater demand for training services. As such, utilization rates should increase as capital expenditures are reduced. CAE is well financed and managed.

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    CAE Healthcare Unit Going From Strength To Strength

    CAE, Inc. (TSE:CAE, Mkt cap 4.02B, P/E 20.17, Div/yield 0.07/1.86, EPS 0.75, Shares 267.18M) is talking up its healthcare division, despite the unit only accounting for a small proportion of its total revenue in fiscal 2015.

    CAE Healthcare division double-digit growth

    CAE Healthcare division is anticipating double-digit growth

    As the Financial Post reports, that’s because it is anticipating double-digit growth “at a minimum” from this area of its business over the next few years.

    That optimism doesn’t appear to be misguided either, with revenue for the healthcare division increasing by 35% in the fourth quarter to $29.3 million while operating profit rose nearly six-fold to $4.1 million.

    Whilst that still only means that the unit accounts for $94.3 million – or just over 4% – of its total revenue for last year, the Montreal-based firm believes the potential for the division is considerable.

    Marc Parent, the company’s CEO, explained: “What’s really going to throw the cover off the ball of this business is if and when — and to me it’s when — we get the adoption of regulation that mandates the use of simulation for initial and recurrent training like it does for pilots.”

    He added that need for such regulation is necessitated by the number of people who die every year from healthcare errors, stating that it is “equivalent to a jumbo jet crashing every single day with all fatalities on board.”

    Parent concluded by saying: “Would you fly if that happened on airplanes? Nobody would, but that outcry doesn’t happen in healthcare.”

    CAE this week reported fiscal fourth-quarter profit of $51.7 million – equating to 19 cents per share, according to the company, meaning it narrowly missed Wall Street expectations.

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    The opinions expressed here are ours alone. They are provided for information purposes only and are not tailored to the needs of any particular individual or company, are not an endorsement, recommendation, or sponsorship of any entity or security, and do not constitute investment advice. We strongly recommend that you seek advice from a qualified investment advisor before making any investment decision.

     

    CAE Announces $19.8m Purchase Of Bombardier’s Military Aviation Training Unit

    CAE / Bombardier  deal includes the NATO Flight Training in Canada.

    CAE Inc. (TSE:CAE, Mkt cap 4.17B, P/E 21.74, Div/yield 0.07/1.77, EPS 0.73, Shares 265.24M) has reached an agreement with Bombardier Inc. to acquire its military flight-training business for $19.8 million, which CAE claims strengthens its core capabilities as a training systems integrator globally.

    The Financial Post suggests Bombardier's decision to sell comes as little surprise given that the company continues to struggle to maintain liquidity in the face of declining cash flow.

    Just this month, Bombardier brought into question its cash levels after slashing its financial outlook and suspending development of its Learjet 85 program – news which saw its shares plunge about 30% since the announcement a fortnight ago.

    However, it's hoped that the sale of its military training unit will allow the company to better focus on its core business area and restore shareholder faith in the business.

    For CAE, the acquisition will expand its business into live flying training of military pilots, including fighter pilots for the Royal Canadian Air Force and its allies.

    The deal includes the NATO Flight Training in Canada program, which trains fighter pilots for NATO members in Moose Jaw, Sask., and Cold Lake, Alta.

    "As a training systems integrator for air forces globally, this addition to CAE gives us another important capability and opportunity for growth," Marc Parent, CAE's chief executive, said in a statement.

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    Stockwatch – CAE Q2 Results Show Steady Progress

    Stockwatch – CAE has secured new contracts totalling $120 million.

    Stockwatch – CAE, Inc. (TSE:CAE, Mkt cap 3.85B, P/E 20.09, Div/yield 0.07/1.92, EPS 0.73, Shares 265.24M) says its second quarter results, which show that attributable profit grew to $42.9 million from $38.3 million reported in the same period last year, are a sign that the company is moving in the right direction.

     CAE strong demand hardware software world airlines replace old planes new ones

    Stockwatch -CAE has secured new contracts totalling $120 million.

    The financial results for the quarter ended Sept. 30 come on the back of the news that the Canadian aviation-training and simulation products provider has secured new contracts totalling $120 million.

    Marc Parent, CAE’s president and chief executive officer, appeared to be content with the figures for the three-month period and immediately turned his attention to the future.

    “Performance for the second quarter was in line with our outlook for growth in Civil and Healthcare, and for resiliency in Defence… For CAE overall, we are reiterating our expectations for a stronger performance in the second half and solid growth for the year as a whole,” he said.

    Expectations are likely to be heightened by a substantial increase in revenue, which swelled to $529.4 million from last year’s $478.2 million, exceeding analysts’ prediction of $508.90 million, according to Thomson Reuters I/B/E/S.

    Earnings per share also moved in the right direction, notching up to $0.16, compared to $0.15 last year, falling in line with analysts’ estimates.

    CAE will pay a dividend of $0.07 per share effective December 31, to shareholders of record at the close of business on Dec. 15.

    CAE is likely to see strong demand for both its hardware and software as the world’s airlines continue to replace old planes with new ones. The company also stands to benefit from increased demand for training pilots of business jets, as sales of such aircraft rise with an improving U.S. economy.

    Due to US cutbacks in defense spending, CAE will do less business selling simulators for training military pilots. However, because of a deal it recently inked with General Atomics, a California-based maker of surveillance aircraft, CAE will now be training the operators of drones. General Atomics boasts 24 per cent of the U.S. drone market, so CAE’s deal is obviously significant.

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    Investors Digest – ‘Best Buys’ from Michael Sprung

    Investors Digest of Canada recently interviewed Michael Sprung. Here is the full text as published in this week’s issue.

    You’ll often hear start-ups being touted as nimbler and more innovative than older companies. But there are advantages to a company having been around for a while. Just ask Michael Sprung.

    Investors Digest - Precision Drilling Corp bench strength technical managerial

    Investors Digest – Precision Drilling has bench strength from both a technical and managerial point of view.

    Mr. Sprung is president of Sprung Investment Management in Toronto. And he’ll tell you that because Precision Drilling Corp. (PD-TSX, $11.36) has been in business for many years, it has bench strength from both a technical and managerial point of view.

    Mr. Sprung is particularly impressed with Kevin Neveu, Precision’s president and CEO, as well as with Rob McNally, its executive vice president and chief financial officer.

    But Mr. Sprung also lauds Precision’s decision to broaden its footprint, singling out the service and marketing deal it inked in July with Schlumberger, the world’s biggest oilfield services firm.

    Not only, he says, does the deal give Precision more visibility, but it also gives it access to Schlumberger’s technology.

    Mr. Sprung admits that since topping $15 a share in July, Precision has pulled back to where it’s now selling at roughly 1.5 times its book value.

    But as oil drilling in North America picks up over the next few years, he believes Precision could potentially top $15 and even $17 a share. And since the company’s downside is roughly $9.50, it boasts very good upside relative to its downside.

    Meanwhile, at 0.46:1, Precision has a good ratio of debt to equity. It’s also well capitalized. And at a little over two per cent, the company has a modest yield.

    Headquartered in Calgary, Precision is Canada’s biggest drilling and oilfield services firm, as well as a big player in the U.S.

    For the three months ended June 30, Precision swung to a net loss of $7.2 million or $0.02 a share, from net income of $473,000, or zero cents a share, for the similar period in 2013.

    But revenue presented a brighter picture, increasing to $475.2 million from $378.9 million, while adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) grew to $129.7 million from $88.2 million.

    For the six months ended June 30, Precision’s net earnings inched up to $94.4 million, or $0.32 a share, from $93.8 million, or $0.34 a share, for the similar period in 2013. Revenue was also higher, rising to $1.1 billion from $974.6 million, while adjusted EBITDA grew to $367 million from $303.4 million. For Mr. Sprung, Precision Drilling is a best buy.

    Mr. Sprung may like a meat-and-potatoes outfit such as Precision that caters to one of Canada’s primary industries. But he also has a soft spot for a firm like CAE Inc. (CAE-TSX, $13.68) whose flight simulators for training pilots are definitely high tech.

    Investors Digest CAE strong demand hardware software world airlines replace old planes new ones

    Investors Digest – CAE – strong demand as airlines continue to replace old planes.

    For one thing, he says, CAE should log a strong demand for both its hardware and software as the world’s airlines continue to replace old planes with new ones. Moreover, the company stands to benefit from increased demand for training pilots of business jets, as sales of such aircraft rise with an improving U.S. economy.

    Mr. Sprung admits that because of America’s cutbacks in defense spending, CAE will do less business selling simulators for training military pilots. But he notes that because of a deal it recently inked with General Atomics, a California-based maker of surveillance aircraft, CAE will now be training the operators of drones.

    And since General Atomics boasts 24 per cent of the U.S. drone market, CAE’s deal is obviously significant.

    In the meantime, CAE has a strong balance sheet; indeed, at roughly 35 per cent, its debt-to-capital ratio is well below the cut-off of 50 per cent, Mr. Sprung notes. Moreover, in Marc Parent, the company has a president and CEO with years of experience in the aviation industry.

    Then, too, CAE is fattening its order book, having regularly announced new contracts over the past few months. For Mr. Sprung, CAE is also a best buy.

    For the three months ended June 30, CAE’s net income fell to $41.6 million, or $0.17 a share, from $45.4 million, or $0.17 a share, for the similar period in 2013.

    But revenue was higher, rising to $526.2 million from $520.1 million, while gross profit fell to $136.5 million from $138.3 million. Operating profit, however, was up, rising 16.4 per cent to $71.7 million.

    © Copyright 2014 by MPL Communications Inc., Reproduced by permission of Investors Digest of Canada, 133 Richmond St. W., Toronto, ON   M5H 3M8. Sign up for free investment reports here>>

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