HNZ Group reports 2015 year-end results

  • Revenue of $188.7 million, versus $207.5 million last year
  • Adjusted EBITDAR of $32.6 million or 17.3% compared to $44.0 million or 21.2% a year ago
  • Adjusted EBITDA of $22.0 million or 11.7% compared to $34.7 million or 16.7% a year ago
  • Net income of $1.3 million or $0.10 per share before non-cash impairment charge or net loss after impairment charge of $13.8 million or $1.05 per share versus net income of $12.3 million or $0.94 per share last year
  • Solid financial position with a $11.1 million net cash position and $125 million credit facility

MONTREAL, March 17, 2016 /CNW Telbec/ - HNZ Group Inc. (TSX: HNZ.A, HNZ.B) (the "Corporation"), an international provider of helicopter transportation and related support services, today announced its financial and operating results for the fourth quarter and fiscal year ended December 31, 2015.

 






Financial Highlights

Quarters ended December 31,


Fiscal years ended December 31,

(in thousands of dollars, except per unit data)

2015


2014


2015


2014

Revenue

48,761


41,999


188,732


207,532

Adjusted EBITDAR (1)

7,673


1,833


32,559


44,040

Adjusted EBITDA (2)

3,432


24


22,036


34,658

Non-cash impairment charge

-


-


17,400


-

Net (loss) income (3)

(2,652)


(2,933)


(13,766)


12,281


Per share - basic and diluted ($)

(0.20)


(0.22)


(1.05)


0.94

Adjusted cash flows related to operating activities (4)

(321)


3,067


16,982


33,870

Weighted-average shares outstanding (all classes)

13,057,785


13,068,700


13,065,971


13,068,700

(1)

Adjusted EBITDA (as defined below) before aircraft operating leases expense but including payments made to lessors to cover variable costs
for leased aircraft such as maintenance and crew costs (see reconciliation in the Non-IFRS financial measures section)

(2)

Net income (loss) before net financing charges, income taxes, depreciation and amortization, adjusted for gain or loss on disposal of property,
plant and equipment, non-cash impairment charge (if any), change in fair value of the obligation to purchase the shares of non-controlling interests
in subsidiaries as disclosed in the reconciliation of the EBITDA and EBITDAR (see reconciliation in the Non-IFRS financial measures section)

(3)

Attributable to the shareholders of the Corporation

(4)

Before net changes in non-cash working capital balances and deferred revenues (see reconciliation in the Non-IFRS financial measures section)

 

FOURTH QUARTER RESULTS
Revenue increased by $6.8 million to $48.8 million in the fourth quarter of 2015, compared to $42.0 million a year ago. This increase is mostly attributable to increased offshore and ancillary revenues, partially offset by a decrease in onshore revenue. The Corporation flew 8,290 hours compared to 8,351 hours in the fourth quarter of 2014, a decrease of 0.7%.

Offshore revenue increased by $7.1 million from the fourth quarter of 2014, mainly due to the Shell Canada offshore support contract in Halifax, and a slight increase in oil in gas support revenues in Asia Pacific and Norway. Ancillary revenue increased by $2.4 million primarily due to additional revenue from the Contracted Flying and Training Services Contract and increased flight training revenues from HNZ Topflight. Onshore revenues decreased by $2.7 million due to the completion of the USTRANSCOM contracts in Afghanistan and reduced utility flying revenue in Canada, partially offset by revenues from the newly awarded North Warning System contract which commenced October 1, 2015.  

Operating expenses, before aircraft operating leases expenses, increased by $0.8 million to $39.4 million in the fourth quarter compared to last year. The increase in operating expenses reflects the commencement of the Shell Canada offshore contract, partially offset by reductions in onshore expenditures and support costs.

Adjusted EBITDAR and adjusted EBITDA for the fourth quarter of 2015 were $7.7 million and $3.4 million respectively or 15.7% and 7.0% of revenues, compared to $1.8 million and $0.02 million or 4.4% and 0.0% of revenues a year earlier.

Net loss attributable to the shareholders of the Corporation totaled $2.7 million or $0.20 per share, compared to a net loss of $2.9 million, or $0.22 per share for the same period in 2014. Adjusted cash flows related to operating activities before net change in non-cash working capital balances and deferred revenues were a negative $0.3 million in the fourth quarter of 2015 versus $3.1 million in the corresponding period a year earlier.

The foreign exchange loss in the fourth quarter amounted to $1.7 million compared to a loss of $1.6 million in the comparable quarter, both as a result of the depreciation of the Canadian dollar.

"In the context of difficult ongoing market conditions in both oil and gas and other resources, revenues and EBITDA for the fourth quarter improved over the same period last year as a result of the short-term Shell offshore support contract in Halifax, Nova Scotia and the commencement of the long-term U.S. Department of Defense North Warning System contract. Continued cost control measures including reductions in discretionary spending, support reductions and achieving cost reductions from suppliers have enabled us to maintain a solid financial position during fiscal 2015 and end the year with a strong balance sheet including $11.1 million of net cash and cash equivalents," said Don Wall, President and Chief Executive Officer of HNZ Group.

As at December 31, 2015, the Corporation's financial position is strong with working capital of $47.1 million, and cash and cash equivalents of $13.5 million, combined with an operating credit facility drawdown of $2.4 million.

YEAR-END RESULTS
For the twelve-month period ended December 31, 2015, revenue totaled $188.7 million, compared to $207.5 million in the corresponding period of 2014. This variation is explained by a decrease in onshore revenue of $37.1 million, partially offset by an increase in offshore revenue of $11.2 million and an increase in ancillary revenue of $7.1 million. The Corporation flew 40,680 hours in 2015, compared to 46,202 hours in 2014, a decrease of 11.9%.

Adjusted EBITDAR and adjusted EBITDA for the twelve-month period amounted to $32.6 million and $22.0 million respectively, compared to $44.0 million and $34.7 million a year earlier.

During the third quarter of 2015, the Corporation recorded a trade name impairment charge of $17.4 million or $15.1 million net of tax impact, with respect to future estimated cash flows from its Canadian onshore cash generating unit.  This is due to the expected ongoing reduction in demand for helicopter services as a result of lower resource support activity. The trade name impairment charge is a non-cash and non-recurring adjustment and has no adverse impact on the Corporation's ability to meet its debt covenants.

Net income attributable to the shareholders of the Corporation prior to the recognition of the non-cash impairment charge was $1.3 million or $0.10 per share, compared to $12.3 million, or $0.94 per share for the same period in 2014. After recognizing the non-cash impairment charge, the Corporation experienced a net loss of $13.8 million or $1.05 per share. Adjusted cash flows related to operating activities before net change in non-cash working capital balances and deferred revenues totaled $17.0 million, versus $33.9 million in the corresponding period a year earlier, mainly due to reduced activities.

Adjusted net free cash flows for the twelve months ended December 31, 2015 were $10.3 million, compared to $28.5 million for the year ended December 31, 2014.

2015 AND POST-YEAR HIGHLIGHTS
Expanding Northern Canadian Operations Through Investment in Acasta HeliFlight Inc.
On March 8, 2016, the Corporation announced that it has enhanced its presence in Northern Canada through the creation of Acasta HeliFlight Inc. ("Acasta"). Acasta is based in Yellowknife, NWT and will provide specialized Northern Canadian VFR helicopter transportation services across all sectors of the regional economy. Acasta will be primarily under the leadership of President Adam Bembridge, a local aviation executive with experience in the North and a recognized pioneer in the area of building mutually beneficial alliances with Northern Aboriginal organizations.

Suspension of Dividend
On November 15, 2015, the Corporation announced the suspension of its monthly dividend, to preserve cash and a strong balance sheet during the current economic environment, effective January 1, 2016. Dividends previously declared were paid including the dividend payment for Shareholders of record at the close of business on December 31, 2015, which was paid on January 15, 2016.

Award of United States Department of Defense North Warning System Contract
On September 3, 2015, the Corporation announced that it had received a notice of intent to award a contract from the United States Department of Defense in support of the North Warning System ("NWS"). HNZ, operating under the brand Canadian Helicopters, has been selected as the "successful offeror" with regard to the consolidated Rotary Wing Operations and Maintenance, Bulk Fuel and Supplemental Rotary Wing contract. The Department of Defense decision was taken following a competitive bidding process. A total of nine owned IFR medium and heavy helicopters, including some redeployed fleet from Afghanistan, will be used for the contract.

The contract, which began on October 1, 2015, includes a year-round service employing five aircraft on the Operations and Maintenance component, and four aircraft in a seasonal capacity servicing the Bulk Fuel and Supplemental components with various commencement dates. The NWS is an early warning radar system, comprised of 47 radar sites spanning the Canadian Arctic. The contract is for a six-month base period with four one-year and one six-month extensions, each exercisable at the option of the Department of Defense, for a total of five years with expected aggregate revenues of approximately US$61 million.

Investment in Norsk Helikopterservice
On June 1, 2015, the Corporation announced that it had acquired an interest in Norsk, an offshore helicopter provider based in Stavanger, Norway, through a combination of common shares, representing a 49.9% voting and equity interest in Norsk, and convertible debt.

Norsk's offshore operations provide crew transport to oil and gas customers within the Norwegian continental shelf. It currently operates one Sikorsky S-92 heavy aircraft supporting ad hoc work for oil and gas operators. Norsk employs approximately 25 people and operates out of Stavanger's Sola Airport. The Norwegian offshore market is one of the largest in the world and Norsk is well positioned to benefit from new activity and retendering opportunities from existing contracts.

HNZ's investment in Norsk and Norway represents its first in the European market and complements its operations in North America and the Asia-Pacific region.

OUTLOOK
"We expect continuing headwinds with pressure on volumes and pricing in the current economic environment. However, we remain opportunistic represented by our recently announced investment in Acasta HeliFlight. We will continue to work towards achieving growth in the offshore market and remain focused on aligning operating expenses with the current economic environment and preserving a solid balance sheet," concluded Mr. Wall.

CHANGES IN BUSINESS SEGMENTATION AND MD&A DISCLOSURE
During the first quarter, the Corporation changed the reporting of its financial results to the following business segments: offshore operations; onshore operations; and ancillary services. This new segmentation reflects Management's view of the business and also HNZ's growth strategy going forward, with an emphasis on growing offshore helicopter transportation services.

Offshore operations revenue is generated from helicopter transportation services. It is comprised of work mainly related to personnel and cargo transport using medium and heavy category aircraft for oil and gas, and in limited cases, mining companies. The offshore operations also include medevac and search and rescue activities, and the provision of crew to an international oil and gas company in Australia. Offshore revenue relies on fixed monthly standing charges plus an hourly flying rate.

Onshore operations revenue is generated from helicopter transportation services. Onshore operations are diverse and typically use light and some medium category aircraft to provide services for a short period or season for oil and gas, mining and utility companies and governmental entities. Our onshore operations also include the provision of Emergency Medical Services for the government of Nova Scotia and our contracts with the United States Department of Defense for the North Warning System and in previous years in Afghanistan. Onshore revenue is currently earned primarily from our activities in Canada and Antarctica and has inherent seasonality and variability in demand.

Ancillary services revenue is mostly generated from the Corporation's repair and maintenance services in Canada and in the United States, from flight training in Canada, and from other minor sources including aircraft leases.

CONFERENCE CALL
The Corporation will hold a conference call to discuss these results on Friday, March 18, 2016 at 11:00 AM (ET). Interested parties can join the call by dialing 514-807-9895 (Montreal) or 1-888-231-8191 (toll free). If you are unable to call at this time, you may access a tape recording of the conference call by dialing 416-849-0833 (Toronto), 514-807-9274 (Montreal), or 1-855-859-2056 (toll free) followed by access code: 62882581. This tape recording will be available until March 25, 2016.

ABOUT HNZ GROUP INC.
HNZ Group is an international provider of helicopter transportation and related support services with operations in Canada, New Zealand, Australia, Norway, Southeast Asia and Antarctica. The Corporation operates in excess of 115 helicopters to support offshore and onshore charter activities. Offshore operations worldwide are provided through HNZ Global and partner Norsk Helikopterservice while onshore charter operations are managed by Canadian Helicopters in Canada, Asia-Pacific and Antarctica. Clients consist of multinational companies and government agencies including offshore and onshore oil and gas, mineral exploration, military support, hydro and utilities, forest management, construction, air ambulance and search and rescue. In addition to charter services, it provides ancillary services which include third-party repair and maintenance services and flight training, including the internationally recognized HNZ Topflight advanced training centre in Penticton, British Columbia. HNZ Group is a publicly traded company on the Toronto Stock Exchange (TSX: HNZ.A, HNZ.B) and is headquartered near Montreal, Canada and employs approximately 600 personnel from 35 locations around the world.

FORWARD-LOOKING STATEMENTS
Certain statements in this press release may constitute "forward-looking" statements which involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Corporation, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.  When used in this press release, such statements use such words as "may", "will", "intend", "should", "expect", "believe", "plan", "anticipated", "estimate", "predict", "potential" or the negative of these terms and other similar terminology.  Examples of such statements include, but are not limited to, statements regarding the financial position, results of operations, objectives, dividend policy, participation in bidding processes, continuing business relationships with actual or potential key clients (in particular Rio Tinto and Shell), expected revenues from contracts with key clients, seasonal levels of activity, maintenance of contractual relationships, impact of any economic uncertainty, expected competition, use of available funds, maintenance of strategic relationships with aboriginal groups and regulations (in particular environmental and transportation regulations), legislation (including tax legislation) applicable to the Corporation. Consequently, readers should not place any undue reliance on such forward-looking statements.

Although the forward-looking statements contained in this press release are based upon what management of the Corporation believes are reasonable assumptions, the Corporation cannot assure investors that actual results will be consistent with these forward-looking statements. The assumptions on which the forward-looking statements are based include, but are not limited to, general economic trends, industry trends, current contractual and business relationships, capital markets and current competitive, governmental, regulatory and legal environment.

These statements are not based on historical facts but instead reflect current expectations of management regarding future events and operating performance and speak only as of the date of this press release. Forward-looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such results will be achieved. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements, including, but not limited to, the factors discussed in this press release or referred to under "Risk Factors". These forward-looking statements are made as of the date of this press release, and the Corporation assumes no obligation to update or revise them to reflect new events or circumstances, unless required by applicable laws.

NON-IFRS FINANCIAL MEASURES
This press release contains certain non-IFRS financial measures as defined under applicable securities legislation, including adjusted EBITDAR, adjusted EBITDA, Adjusted cash flows related to operating activities and Adjusted net free cash flows. The Corporation believes that such non-IFRS financial measures improve the period-to-period comparability of the Corporation's results by providing more insight into the performance of ongoing core business operations. As required by applicable securities legislation, the Corporation has provided reconciliations of those measures to the most directly comparable IFRS measures. Investors and other readers are encouraged to review the related IFRS financial measures and the reconciliation of non-IFRS measures to their most directly comparable IFRS measures set forth below and should consider non-IFRS measures only as a supplement to, not as a substitute for or as measure to, measures of financial performance prepared in accordance with IFRS.

  • References to "Adjusted EBITDA" are to net income (loss) before net financing charges, income taxes, depreciation and amortization, adjusted for gain or loss on disposal of property, plant and equipment, trade name impairment charge (if any), goodwill impairment charge (if any) and change in fair value of the obligation to purchase the shares of non-controlling interests in subsidiaries as disclosed in the Summary of Selected Consolidated Financial Information. Adjustments to standard EBITDA are made by management to normalize for non-recurring events.
  • References to "Adjusted EBITDAR" are to Adjusted EBITDA before aircraft operating leases expense but including payments made to lessors to cover variable costs for leased aircraft such as maintenance and crew costs (as disclosed in the Summary of "Selected Consolidated Financial Information").
  • References to "Adjusted operating income" are to revenues less direct operating expenses. Direct operating expenses include crew and maintenance costs, cost of goods sold (if applicable), direct base costs, aircraft leases and other operating expenses.
  • References to "Adjusted Net Free Cash Flows" are to cash flows from operating activities plus (minus) net change in non-cash working capital balances and deferred revenues less "Maintenance CAPEX". "Maintenance CAPEX" is defined by management as any capital expenditure which is undertaken to maintain current output in terms of revenues and operating cash flows, as opposed to "Growth CAPEX" which is defined as capital expenditures undertaken to increase the Corporation's capacity for potential growth as defined by management.
  • References to net income (loss) before non-cash impairment charge are to net income (loss) plus the trade name impairment charge and goodwill impairment charge.
  • References to earnings before non-cash impairment charge per share basic and diluted are to earnings per share plus the trade name impairment charge and goodwill impairment charge per share basic and diluted.

Since Adjusted EBITDAR, Adjusted EBITDA, Adjusted Net Free Cash Flows, net income (loss) before non-cash impairment charge and earnings before non-cash impairment charge per share basic and diluted are useful to many investors to compare issuers on the basis of the ability to generate cash from operations on a recurring basis, management believes that, in addition to net income (loss), Adjusted EBITDAR, Adjusted EBITDA, Adjusted Net Free Cash Flows, net income (loss) before non-cash impairment charge and earnings before non-cash impairment charge per share basic and diluted are useful supplementary measures which exclude non-recurring items or items that are not related to day-to-day operations. Management believes that Adjusted Net Free Cash Flows provides useful additional information to investors concerning the operations and cash flows of the Corporation including the amount available for distribution to the shareholders, repayment of debt and other investing activities.

Adjusted EBITDAR, Adjusted EBITDA, Adjusted Net Free Cash Flows, Adjusted operating income, net income (loss) before non-cash impairment charge and earnings before non-cash impairment charge per share basic and diluted are not earnings or cash flows measures recognized under IFRS and do not have a standardized meaning prescribed by IFRS. Therefore, Adjusted EBITDAR, Adjusted EBITDA, Adjusted Net Free Cash Flows, adjusted operating income, net income (loss) before non-cash impairment charge and earnings before non-cash impairment charge per share basic and diluted may not be comparable with similar measures presented by other entities. Investors are cautioned that Adjusted EBITDAR, Adjusted EBITDA, Adjusted Net Free Cash Flows, Adjusted operating income, net income (loss) before non-cash impairment charge and earnings before non-cash impairment charge per share basic and diluted should not be construed as alternatives to net income or earnings per share determined in accordance with IFRS as indicators of the Corporation's performance, or to cash flows related to operating, investing and financing activities as measures of liquidity and cash flows.

 

Adjusted EBITDAR and Adjusted EBITDA Reconciliation to income before income taxes







Three-month periods


Twelve-month periods


ended December 31


ended December 31

($000's except for shares and per share amounts)

2015

2014


2015

2014

Revenue

48,761

41,999


188,732

207,532

Operating expenses before aircraft operating leases expenses

39,378

38,576


156,091

162,431

Foreign exchange loss

1,710

1,590


82

1,061

Adjusted EBITDAR

7,673

1,833


32,559

44,040

Aircraft operating leases expenses1

4,241

1,809


10,523

9,382

Adjusted EBITDA

3,432

24


22,036

34,658

·

Amortization

4,855

4,077


18,494

17,035

·

Non-cash impairment charge

-

-


17,400

-

·

Net (gain) loss on disposal of property, plant and equipment

210

(11)


(593)

(300)

·

Net financing charges

135

131


593

592

·

Change in fair value of other liabilities

(40)

-


(40)

-

Income (loss) before income taxes

(1,728)

(4,173)


(13,818)

17,331

Net (loss) income attributable to:






Shareholders of the Corporation

(2,652)

(2,933)


(13,766)

12,281

Non-controlling interests

(811)

64


(1,981)

446

Net (loss) income

(3,463)

(2,869)


(15,747)

12,727

 

Adjusted cash flows from operating activities and Adjusted net free cash flow Reconciliation to cash flows from operating activities





Twelve months ended





December 31,

December 31,

(in $000's)

2015

2014




Cash flows related to operating activities

13,411

37,836

Add (deduct):

Net change in non-cash working capital balances and deferred revenues

3,571

(3,966)

Adjusted cash flows related to operating activities

16,982

33,870

Less:

Maintenance CAPEX

(6,724)

(5,366)

Adjusted net free cash flows

10,258

28,504

 

Note to readers: Complete consolidated financial statements and Management's Discussion & Analysis of Operating Results and Financial Position are available on the Corporation's website at www.hnz.com and on SEDAR at www.sedar.com.

 




1

The aircraft operating lease expenses exclude the payments made to lessors to cover variable costs for leased aircraft such as maintenance and crew costs.

 

SOURCE HNZ Group Inc.

For further information: HNZ Group Inc., Matthew Wright, Vice-President and Chief Financial Officer, Tel: 780-429-6903


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