Shaping the future of training

In fiscal 2016, we continued to deliver next-generation integrated training solutions across the civil aviation, defence and security, and healthcare sectors. We sat at the table with airlines, national and international regulatory bodies, defence forces and medical associations to set new standards and improve regulations. We joined forces with customers and suppliers to translate the latest technologies into innovative products and services. This is how we are shaping the future of training worldwide.

Solid progress

Last year, we strengthened an already solid balance sheet. We delivered double-digit year-over-year increases in both revenue — $2.5 billion or 12% growth — and net income before specific items — $230.5 million or 15% growth. Our free cash flow increased to $248 million, 42% higher than last year, and our backlog grew by over $1 billion to $6.4 billion. We raised our shareholder dividend for the fifth consecutive year and introduced a share repurchase plan.

We reinforced our civil aviation leadership and established a new industry benchmark by selling 53 full-flight simulators worldwide. Acquiring Lockheed Martin Commercial Flight Training (LMCFT) supports our “training partner of choice” vision by growing our global training network and assets. We also expanded our live training capabilities by integrating NATO Flying Training in Canada (NFTC), a world-renowned military pilot training program.

Winning the contract to provide the U.S. Army with comprehensive training for its fixed-wing pilots increases our opportunities as a training systems integrator for air forces globally. In healthcare, we made significant headway by building the first turnkey healthcare simulation centre in Turkmenistan and launching five innovative products to enhance our portfolio.

I attribute these many achievements to three key competitive differentiators: our highly knowledgeable, skilled and dedicated employees, an unrivalled global network of aviation training centres, and a thriving culture of innovation that permeates our entire organization.

Innovation and synergies

CAE is a much different company than it was just a few short years ago. We are reinventing ourselves as we are leveraging our leadership in simulation products to sharpen our focus on providing end-to-end integrated training solutions. Nearly 60% of our business now comes from our services. This broader strategic focus is driving sustainable growth in our core segments by giving us access to a much larger market. It is also enhancing our stability by increasing the mix of recurring business in each segment.

We are leveraging synergies between our three core businesses which share the same six pillars of strength: a high degree of recurring business, a strong competitive moat, headroom in large markets, underlying secular tailwinds, the potential for superior returns and of course our culture of innovation. This unique combination of strengths creates a compelling risk/return investment proposition for CAE.

In fiscal 2016, we started rolling out a process improvement plan to change the way we engineer, build, deploy and support our simulators. Innovation is key to this process; so is our employees’ active participation. I am inspired by the results we are seeing. One team used its ingenuity to make our CAE 7000XR simulator lighter, more energy and resource efficient, and easier to maintain.

The strength of our employees

This success story is just one example among many of our employees’ innovation, passion and determination to shape the future of training. As we become a more customer-centric organization, our employees are stepping up to the plate to deliver on our vision. This includes our 2,000 flight instructors who are the focus of a new global initiative to accelerate our shift to a training services company.

I would like to take this opportunity to thank our 8,000 employees for actively supporting our vision and for keeping the spirit of innovation alive throughout our organization.

CSR in action

All of us at CAE take pride in the fact that our innovative training solutions make the world a safer, better and cleaner place. Our overriding goal is to amplify our contributions in each of our core markets and communities where we work and live. To achieve this goal, we are increasingly taking the three dimensions of our corporate social responsibility—environmental, social and economic—into account in every decision and action.

Becoming a signatory of the United Nations Global Compact in fiscal 2016 reinforced our commitment to operating responsibly. We are now one of the 12,000-plus signatories actively working to align their strategies and operations with universal human rights, labour, environmental and anti-corruption principles. One change we immediately made was to integrate our stance on human trafficking and child and forced labour into key supplier documents. Additional changes inspired by the UN Global Compact are under way.

Another achievement of which we are all proud at CAE is our continuously improving health and safety performance across our key performance indicators. Our governance is more rigorous, our metrics are more proactive, and our incidents are decreasing.

Looking ahead

As you will read in this report, we see promising growth opportunities ahead in all of our businesses. We are working from a solid position with a large backlog in Civil Aviation Training Solutions and Defence & Security, and a robust bid pipeline across our businesses including Healthcare. Our unique, comprehensive training solutions and global reach give us the opportunity to increase our share of the overall training market. Looking at the current year, we expect to see growth in all business segments, led primarily by Civil Aviation Training Solutions.

In summary, the prospects ahead of us are both promising and exciting. I want to thank our employees for their contribution to this great success. I would also thank our Board of Directors for their advice and their support, and obviously our shareholders for their trust. Today more than ever, CAE is committed to shaping the future of training.