MONTREAL – The head of flight simulator company CAE Inc. said Tuesday U.S. President Donald Trump’s appetite for defence spending is a boon to the Montreal-based company, as newfound access to contracts tied to top-secret missions pave the runway for more revenue.
“On the defence side, budgets continue to be on the rise worldwide, and in the U.S. they are at historical highs,” president and CEO Marc Parent told shareholders at an annual general meeting Tuesday.
On Monday, Trump signed a $716-billion defence spending bill for 2019, an $82-billion increase from 2017 and a dramatic upswing from most Obama-era military budgets.
CAE’s acquisition of Virginia-based Alpha-Omega Change Engineering earlier this month opens the hatch to “top-secret missions,” mainly out of the U.S., Parent told reporters.
An agreement between the U.S. government and a CAE subsidiary allows a proxy board made up of two American generals and a military contractor executive to oversee the high-security contracts, he said.
“That opens up an extra $3 billion of potential market for us. So that brings our total addressable market in the world to $17 billion,” Parent said.
As to what the classified missions involve, he said only, “You can speculate all day long.”
Parent defended how CAE potentially stands to benefit amidst heightened military spending south of the border, more combative language from the White House and the creation of a new armed services branch focused on fighting wars in space.
“It’s certainly not offensive,” Parent said of CAE’s training and simulator programs. “It’s for defence and security forces and search and rescue.”
“To me, there is a societal benefit to what we do. It’s to help personnel execute their mission and save lives that way,” he said. “I don’t see it negatively.”
The annual meeting at CAE’s Montreal headquarters Tuesday saw former federal finance minister John Manley named chair of the company’s 10-member board of directors. Manley, current president and CEO of the Business Council of Canada, replaces James Hankinson at the helm.
CAE, which operates in roughly three dozen countries, saw annual revenue rise five per cent year-over-year to $2.83 billion in 2018. Record order intake in the civil aviation wing fuelled the increase as that division’s operating income grew 12 per cent.
CAE also increased its dividend as it reported its first-quarter profit and revenue improved compared with a year ago.
The simulator maker says it will now pay a quarterly dividend of 10 cents per share, up from nine cents.
The increased payment to shareholders came as it reported a first-quarter profit attributable to equity holders of $69.4 million or 26 cents per diluted share for the quarter June 30.
That compared with a profit of $59.6 million or 22 cents per diluted share in the same quarter a year earlier.
Revenue in the three-month period totalled $722 million, up from $656.2 million.
Companies in this story: (TSX:CAE)