CAE in 'transitional phase' as profits shrink again

New-business push and market pressures knock £50m-turnover VAR's bottom line

CAE Technology Services has seen profits fall for a second consecutive year as margin pressures and its efforts to hook new customers took their toll on its bottom line.

According to its 2013 accounts, the Cisco and HP partner saw after-tax profit fall by more than half to £380,766 last year, compared with £938,116 in 2012 and almost £1.4m in 2011.

Turnover for the year to 30 June 2013 rose by more than £5m to £52.46m while headcount grew from 121 to 130.

In its directors' report, Watford-based CAE said it is going through a "transitional phase of development that requires investment in all areas of the business".

"The impact of this is represented by an increase of turnover of 11 per cent from a positive mix of business from new and existing customers but with a fall in overall gross margin percentage from 21.8 per cent to 20.5 per cent as a result of new business acquisition, a small number of disproportionately large hardware deals and some continuing market pressure on overall margin," CAE stated.

Administrative costs rose by 6.2 per cent due to an investment in management systems and people, CAE said, with staff costs rising from £5.944m to £6.307m year on year.

CAE said it had noted in its 2012 accounts that profitability might be knocked this year as it "adapts to the changing demands of customers and partners".

It added: "Whilst there are elements of trading that have experienced a long-term change in profitability, CAE is well positioned to address key technology challenges in the future and as those propositions achieve customer penetration and scale, profitability is likely to improve over both the short and long terms."