CAE Q1 Results Miss Estimates, Boosts Dividend; To Divest Mining

(RTTNews) - Canadian aviation-training and simulation products provider CAE, Inc. (CAE, CAE.TO) reported Wednesday a profit for the first quarter that declined from last year, despite improved margins and revenue growth, reflecting an income tax expense and lower margins at defence and security as well as healthcare.

Both earnings per share and quarterly revenues also missed analysts' expectations. The company also boosted its quarterly dividend and decided to divest its mining division following a strategic review of new core markets.

"The growth in our first quarter operating results came entirely from Civil, which saw operating income increase by 32% over last year. Defence had stable revenue and lower operating income, owing to the mix of programs in the quarter and persistent delays in government decision-making," President and CEO Marc Parent said in a statement.

The Montreal, Canada-based company reported net earnings of C$41.6 million or C$0.16 per share for the first quarter, lower than C$45.4 million or C$0.18 per share in the prior-year quarter.

Net income from continuing operations for the quarter was C$43.6 million or C$0.17 per share, compared to C$44.5 million or $0.17 per share in the year-ago quarter.

On average, ten analysts polled by Thomson Reuters expected the company to report earnings of C$0.18 per share for the quarter. Analysts' estimates typically exclude special items.

However, revenues for the quarter edged up to C$526.2 million from C$520.1 million in the same quarter last year, but missed eight Wall Street analysts' consensus estimate of C$553.29 million.

Revenue for civil simulation and training grew 2 percent to C$308.9 million from last year. During the quarter, the company obtained solutions contracts expected to generate future revenues of C$365.3 million, including 11 full-flight simulators (FFSs) for global airline customers.

Meanwhile, revenue for defence and security edged down to C$197.9 million from C$198.8 million, and revenue for healthcare also edged down to C$19.4 million from C$19.5 million in the year-ago quarter.

Total operating profit for the quarter increased to C$71.7 million from C$61.6 million in the prior-year quarter, and operating margin improved 180 basis points to 13.6 percent.

Civil simulation and training operating margins improved 350 basis points from last year. Meanwhile, operating margin for defence and security dropped 70 basis points, and healthcare operating margins contracted 60 basis points from last year.

Income tax expense for the quarter was C$11.6 million, compared to income tax benefit of C$0.1 million last year.

Backlog at the end of the first quarter was C$4.93 billion, up from C$4.41 billion a year ago.

The company noted that a strategic review of new core markets reaffirmed its conviction in healthcare and led to a process to divest Mining. The company added it will now focus capital and resources on its three remaining core business units: civil simulation and training (civil), defence and security (defence) as well as healthcare.

CAE's Board of Directors has today approved a C$0.01 increase in quarterly dividend to C$0.07, payable on September 30 to shareholders of record at the close of business on September 15, 2014.

"This marks CAE's fourth dividend increase in as many years and is testament to our confidence in the business. As in the last few years, we expect a stronger performance in the second half and solid growth for the year as a whole," Parent added.

In Wednesday's regular trading session, CAE is currently trading at $12.62, down $0.06 or 0.47% on a volume of 291 shares.