"The full brunt of the Covid-19 pandemic hit us during our first quarter, with sharply lower demand and major disruptions to our global operations," said Marc Parent, CAE's President and Chief Executive Officer."
CAE reported revenue of $550.5 million for the first quarter of fiscal 2021, compared with $825.6 million (Canadian) in the first quarter last year – a drop of 33%.
Civil Down Nearly Half
The pandemic continued to negatively impact CAE Civil training revenues – Q1 Civil revenue was $248 million, down 48% compared to the same quarter last year – with significantly lower than usual training utilization resulting from lower customer demand and government restrictions that forced temporary closures and disruptions to Civil operations worldwide. At the worst point during the quarter, more than half of the company’s Civil training locations worldwide had totally suspended operations or operated at significantly reduced capacity. Because of these extreme conditions, training centre utilization dipped to the low 20% range and averaged 33% for the quarter. By the end of June, all previously closed training locations had re-opened; utilization has since continued to be approximately 40%. Several locations remained operating at reduced capacities.
CAE was also required to suspend the manufacture of simulator products at its main facility. During the quarter, Civil delivered only two full-flight simulators (FFSs) to customers. Also, CAE signed training solutions contracts valued at $193.5 million, including a contract for an Airbus A320 FFS for China Express, a four-year training agreement with Alitalia, a five-year training agreement with Boeing to support Boeing's ab initio Pilot Development Program, a five-year training agreement with WAMOS Air, a five-year training agreement with long-term business aviation partner, SC Aviation, and a two-year business aviation training agreement with Air Hamburg.
The Civil backlog at the end of the quarter was $4.5 billion.
For a report on how the overall civil sim and flight training device market has been impacted by the virus and economic crisis, check out Stalled, But Not Stopped.
Slight Dip for Defence
First quarter CAE Defence and Security revenue was $280.2 million, down 13% compared to the same quarter last year. A range of global defence programs involving government and OEM customers experienced delays due to travel bans, border restrictions, client access restrictions and supply chain disruptions. In addition, there have been delays in the award of new contracts, as government acquisition authorities follow directives in their respective countries to shelter-in-place and eliminate travel.
During the quarter, CAE D&S booked orders for $201.3 million, including contracts to provide the US Air Force with upgrades and enhancements to both the KC135 and C130H aircrew training system programs and to continue providing a range of in-service support solutions for the Royal Canadian Air Force's CF18 aircraft. Other notable contracts include providing Airbus Defence and Space with support for the development of new and upgraded training capabilities for Germany's Eurofighter program. CAE also received orders to continue providing maintenance and support services for the Royal Navy Merlin helicopter training systems.
The Defence & Security backlog at the end of the quarter, including options and CAE's interest in joint ventures, was $4 billion.
Healthcare Invents Ventilator
First quarter Healthcare revenue was $22.3 million, down 19% compared to $27.5 million in the same quarter last year. CAE Healthcare launched simulation-based training solutions, both web- and hardware-based, to train personnel in the safe practice of ventilation and intubation, and released a Covid-19 ultrasound training suite to provide hands-on foundational training for physicians.
As a testament to CAE's engineering integration capabilities, the company was selected by the Government of Canada to design, manufacture and supply 10,000 ventilators to help save lives of Covid-19 patients. The majority of CAE Air1 ventilator deliveries are expected in the second half of fiscal 2021.
Losses Trigger Restructuring
First quarter net loss attributable to equity holders was $110.6 million (negative $0.42 per share) compared to a net income of $61.5 million ($0.23 per share) last year. Net loss before specific items(6) in the first quarter of fiscal 2021 was $30.3 million (negative $0.11 per share) compared to a net income of $63.2 million ($0.24 per share) last year.
Backlog remains solid at $8.6 billion.
CAE announced that it will take additional measures to adapt its global workforce and adjust its business to correspond with the expected lower level of demand. These measures also include the introduction and acceleration of new digitally enhanced processes. CAE expects to record restructuring expenses of approximately $100 million over the next 12 months, consisting mainly of real estate costs, asset relocations and other direct costs related to the optimization of footprint and employee termination benefits. The company expects cost reductions of approximately $50 million annually starting in fiscal year 2022.
Parent suggested, "The worst of the pandemic's impacts on CAE may now indeed be behind us; however, the pace of recovery is unlikely to be linear or quick, and it will most certainly be dictated by the rate at which travel restrictions and quarantines can safely be lifted and economic activity improves. We continue to view the current fiscal year as a tale of two halves, with the first half of the year marked by lower demand and disruptions, and the second half, to potentially begin to inflect more positively. With that, we continue to expect free cash flow to turn positive in our second half of the fiscal year."
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