CAE is a leading global training company in the civil aviation, defense and security, and healthcare sectors. CAE is the preferred training partner for aviation professionals, business aircraft operators and aircraft manufacturers around the world.
The company has the world’s largest civil aviation training network and is a leader in aviation personnel recruitment with over 170 aircraft, over 300 full flight simulators and more than 60 training locations.
It has made flying safer, maintained defense readiness, and improved patient safety in its seven decades of experience. The company’s defense business is represented in over 40 countries and on more than 70 platforms worldwide.
The company’s healthcare business serves customers in more than 80 countries around the world. Geographically, the US accounts for 43% of sales, followed by Europe and the UK (23%) and the rest of the world (~ 43%).
CAE offers a comprehensive portfolio of training services and simulation products for the air, land, marine and public safety markets. The company is active in civil aviation training solutions (~ 60% of sales), defense and security (~ 37%), and healthcare (~ 3%).
CAE is also available as dual-traded stock trading under CAE on the NYSE.
DISCLOSURE: Please note that links to merchants mentioned in this post may use an affiliate link. Using an affiliate link means that, at zero cost to you, I will potentially earn you a commission every time you buy something through that affiliate link.
Sales growth and market presence
CAE trains more than 135,000 pilots every year. The company operates in highly regulated industries with training requirements. This leads to recurring business and deadlocked customer relationships. CAE usually enters into long-term agreements with business aviation customers worldwide such as AirAsia, Jazz Aviation, Flexjet, etc.
A large network of global training centers, unique training solutions and a wide range of products are CAE’s main competitive strengths. The civil aviation segment should benefit from long-term growth trends in commercial and business aviation.
The company currently has a 30% share of the civil aviation training market, valued at $ 6.2 billion, and a 70% share of simulators worldwide. Simulation products now make up nearly 40% of CAE’s total revenue, and training and services make up the remaining ~ 60%. There is a growing demand for new pilots for civil and business jets, as well as for captain promotion.
The defense and security business is present in key growth markets and should benefit from increased government spending in this sector. CAE’s defense business has tremendous headroom to grow in the $ 14 billion military training and simulation market. Defense organizations around the world trust CAE for its innovative and comprehensive training solutions.
The pandemic caused significant disruption to the company’s operations. However, the company bounced back to quarterly profitability and positive free cash flow. In addition, the company introduced new digitally supported services, software solutions and innovative business processes and reduced its cost base during the quarter.
The anticipated acquisition of L3Harris’ military training business will significantly accelerate its growth strategy in defense and expand its position in other major military training and simulation areas. CAE has good chances of benefiting from growing trends such as e-learning, remote work, the need for security and the digital transformation and virtualization of the physical world.
As a leading provider of a wide range of training solutions in the healthcare sector, the CAE healthcare segment should also benefit from the increasing use of simulation, quality care and patient safety in the post-Covid world.
CAE has increased its earnings per share by more than 9% CAGR over the past five years. However, the company has currently suspended its share buyback and dividends.
The company enjoys the reputation of a trustworthy partner for regulatory authorities and industry associations such as IATA, Federal Aviation, EASA etc. The company is constantly working on the development of training solutions for its partners. A strong customer list ensures the transparency of the cash flows. CAE’s increased focus on services also increases the proportion of recurring sales.
The company has sought to grow its revenue from services, which now account for nearly 60% of total revenue, compared to just 15% in 2001. CAE is also growing through acquisitions. The strategic acquisition of L3 Harris’ military training business is expected to result in earnings per share in the lower ten percent for the first full year after the closure. It also estimates cost synergies of approximately $ 35-45 million to be realized by the end of the second year of closure, which is expected in the second half of 2021.
It has poured over $ 510 million of organic capital into Civil in the past five years, which has increased its recurring income in Civil over the past five years, increased its recurring income base, and has been very profitable and highly profitable. The training operations have a strong cash flow and the company can continue to generate positive cash flow even when the workload is low.
Unique comprehensive solutions, unmatched global reach, size and deep customer relationships create a deep moat around CAE’s business. An added benefit for the company is a large backlog with government customers that is essential for national security.
The commercial airline training industry is quite competitive. CAE’s main competitors are aircraft manufacturers and companies with close industry ties.
Many aerospace and defense companies are gaining market share by consolidating existing commercial aircraft simulation companies and developing their own in-house skills. Rockwell Collins, Lockheed Martin, Boeing, Raytheon, etc. are top competitors. Many new participants have also joined the team in recent years.
As a pure training company, CAE stands out from the competition with innovative training solutions such as the next-generation pilot training solution CAE Rise and the proven leadership role in training equipment and services.
CAE expects strong growth in fiscal year 2022 and has good opportunities to expand its leadership position in the three attractive markets of civil, defense and healthcare with a secular tailwind in a post-COVID-19 world. The utilization of the training centers is gradually increasing as things return to normal and the flight crews resume their training activities.
The company invests in strengthening its offering and expanding its addressable market with highly innovative software solutions and is well positioned to leverage technology and drive improved customer experiences in the future. The upcoming acquisition transaction is expected to offer significant value creation opportunities for both customers and shareholders.
My portfolio has generated over 12% annual returns since 2009. It’s not since the beginning of the year or 2019 it’s from 2009 !!! That’s a constant return, which means that after the rule of 72 I double my portfolio every 6 years.
My approach is simple, but you need key data that I cultivated using the Dividend Snapshot Screeners. No other investment service offers you easily understandable data, but also usable data. No hidden magic.
In fact, I’ve tried all of the investment services for dividend investors like an investment services crash test dummy. Just ask me and you will see why I couldn’t use anything out there and that’s how the Dividend Snapshot Screeners were born!