HNZ Group Reports 2016 Second Quarter Results

  • Revenue of $58.8 million, versus $43.8 million last year
  • Adjusted EBITDAR of $14.7 million or 25.0% compared to $7.7 million or 17.6% a year ago
  • Adjusted EBITDA of $10.4 million or 17.7% compared to $6.1 million or 13.9% a year ago
  • Net income of $3.1 million or $0.24 per share versus a net loss of $0.1 million or $0.00 per share last year
  • Solid financial position with a $9.3 million net cash position and an amended $75 million credit facility extended to June 30, 2019

MONTREAL, Aug. 12, 2016 /CNW/ - HNZ Group Inc. (TSX: HNZ) (the "Corporation"), an international provider of helicopter transportation and related support services, today announced its financial and operating results for the second quarter ended June 30, 2016.

Financial Highlights

Quarters ended June 30,


Six months ended June 30,

(in thousands of dollars, except per share data)

2016


2015


2016


2015

Revenue

58,786


43,830


104,991


80,365

Adjusted EBITDAR [1]

14,668


7,731


24,552


9,197

Adjusted EBITDA [2]

10,398


6,093


15,900


5,977

Net income (loss) [3]

3,122


(64)


4,735


(3,107)


Per share - basic and diluted ($)

0.24


(0.00)


0.36


(0.24)

Cash flows related to operating activities

3,838


4,443


2,454


(307)

Weighted-average shares outstanding (all classes)

13,020,845


13,068,700


13,024,424


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, trade name impairment charge (if any), goodwill impairment charge (if any), change in fair value of the obligation to purchase the shares of non-controlling interests in subsidiaries (see reconciliation in the Non-IFRS financial measures section)

[3]

Attributable to the shareholders of the Corporation



SECOND QUARTER RESULTS
Revenue increased by $15.0 million to $58.8 million in the second quarter of 2016, compared to $43.8 million a year ago, as a result of increased revenue from all three business segments. The Corporation flew 11,698 hours compared to 10,658 hours in the second quarter of 2015, an increase of 9.8%.

Offshore revenue increased by $5.3 million from the second quarter of 2015 due to the Shell Canada offshore support contract in Halifax, increased business in Southeast Asia and a full quarter of activity from our Norsk subsidiary in Norway, partially offset by a reduction in offshore activity in New Zealand. Ancillary revenue increased by $5.0 million primarily due to increased activity at Nampa Valley, Heli-Welders, the Contracted Flying and Training Services (CFTS) project and HNZ Topflight. Finally, onshore revenue increased by $4.7 million as a result of the new North Warning System contract (NWS), the addition of Acasta HeliFlight Inc. (Acasta), increased utility flying in Canada due to fire suppression activity and a short-term seismic support contract in New Zealand.

Operating expenses, before aircraft operating leases expenses, increased by $5.9 million to $43.3 million in the second quarter compared to last year. The increase in operating expenses is primarily explained by the incremental Shell Halifax contract, increased costs at Nampa Valley and Heli-Welders associated with increased activity, the addition of Acasta, and non-recurring lease transition costs associated with the Shell Philippines contract renewal, partially offset by reductions in support costs.

Adjusted EBITDAR and adjusted EBITDA for the second quarter of 2016 were $14.7 million and $10.4 million respectively or 25.0% and 17.7% of revenues, compared to $7.7 million and $6.1 million a year earlier.

Net income attributable to the shareholders of the Corporation totaled $3.1 million or $0.24 per share, compared to a net loss of $0.1 million, or $0.00 per share for the same period in 2015. Cash flows related to operating activities were $3.8 million in the second quarter of 2016 versus $4.4 million in the corresponding period a year earlier.

Adjusted net free cash flows for the six months ended June 30, 2016 totaled $8.7 million, compared to $2.1 million for the same period a year ago. For the twelve-month period ended June 30, 2016, adjusted net free cash flows stood at $16.8 million, compared with $10.3 million for the year ended December 31, 2015.

"Our second quarter results reflect continued momentum with offshore support contracts, the U.S. Department of Defense North Warning System contract, ancillary services, as well as fire suppression activity and the short-term seismic contract in New Zealand," said Don Wall, President and Chief Executive Officer of HNZ Group. "This solid quarter was achieved with improved operating conditions in most business segments and continued efforts to drive down costs. The company incurred non-recurring lease transition costs of $1.8 million in the period to take advantage of significantly improved market lease rates benefitting the longer run cost structure. HNZ also negotiated a new favourable credit agreement with its lenders reducing its facility in order to minimize unwarranted standby charges. In Canada, the oil and gas and other resource sectors remain challenging with no indication of imminent improvement."

As at June 30, 2016, the Corporation's financial position is strong with working capital of $54.2 million, and cash and cash equivalents, net of bank indebtedness of $14.7 million, combined with short-term debt of $5.4 million.

SIX-MONTH RESULTS
For the six-month period ended June 30, 2016, revenue totaled $105.0 million, compared with revenue of $80.4 million in the corresponding period of 2015. This increase is explained by higher offshore revenue of $11.7 million, an increase in ancillary revenue of $7.0 million and an increase in onshore revenue of $5.9 million. The Corporation flew 18,267 hours over the six-month period ended June 30, 2016, compared to 17,683 hours in the same period in 2015. Higher revenues also reflect larger aircraft revenues, resulting in a revenue mix change.

Adjusted EBITDAR and adjusted EBITDA for the six-month period amounted to $24.6 million and $15.9 million respectively, compared to $9.2 million and $6.0 million a year earlier.

Net income attributable to the shareholders of the Corporation totaled $4.7 million or $0.36 per share, compared to a net loss of $3.1 million, or $0.24 per share for the same period in 2015. Cash flows related to operating activities were $2.5 million for the six-month period versus $(0.3) million in the corresponding period a year earlier.

SECOND QUARTER HIGHLIGHTS
Renewal of offshore oil and gas helicopter support contract in New Zealand
On June 1, 2016, HNZ announced that its wholly-owned subsidiary, HNZ New Zealand Limited, entered into an offshore oil and gas helicopter support contract with a consortium of customers which includes Shell Todd Oil Services Limited, AWE Taranaki Limited, OMV New Zealand Limited and Origin Energy Resources (Kupe) Limited, New Plymouth.

The contract commenced on April 1, 2016, as HNZ began crew change helicopter services from New Plymouth to various offshore petroleum platforms in New Zealand using two AgustaWestland AW139 helicopters. This contract replaced two previous contracts HNZ held with the same customer group which collectively utilized three AW139 helicopters. One of the New Zealand based AW139 aircraft was redeployed to other opportunities outside the country. The initial term of the contract is five years with five one-year option periods, exercisable by the customer.

Revenues under the contract during the initial five year term are expected to be approximately $60 million ($67 million NZD) including annual inflation adjustments over the period. The contract contains both US dollar and New Zealand dollar revenues, corresponding to the underlying costs of the operation.

Renewal of offshore oil and gas helicopter support contract with Shell Philippines Exploration
On June 1, 2016, HNZ announced that HNZ New Zealand Limited was awarded a five year extension to its existing contract with Shell Philippines Exploration, BV (SPEX). The extension replaced the original five one-year option periods at the expiry of the existing contract, and will be in effect from August 2017 to August 2022. The contract for SPEX is for the supply of two AgustaWestland AW139 helicopters for the provision of services to the Malampaya Gas Platform.

Revenues for the extension period of five years are expected to be approximately $61 million ($47 million USD). There are non-recurring costs of approximately $3 million USD in relation to transition of replacement aircraft into the contract which will occur during financial year 2016. These costs will be recovered across the term of the extension period.

OUTLOOK
"As indicated in the past, we remain focused on growing our presence in the offshore market. We are pleased to have renewed oil and gas offshore contracts in New Zealand and the Philippines. These have allowed us to secure multi-year assignments and thus extend HNZ's long-term visibility. We are poised to take advantage of opportunities in both onshore and offshore markets as they arise. Meanwhile we continue to benefit from a solid balance sheet, which will allow us to remain opportunistic in the marketplace," concluded Mr. Wall.

CONFERENCE CALL
The Corporation will hold a conference call to discuss these results on Monday, August 15, 2016 at 11:00AM (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: 54065732. This tape recording will be available until August 22, 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 under a number of different brands. Offshore operations are provided under the Norsk brand in Norway and HNZ elsewhere in the world, while onshore charter operations are under the Canadian Helicopters brand in Canada, Acasta in Northern Canada and the HNZ brand in 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 advanced flight training by the internationally recognized HNZ Topflight training center in Penticton, British Columbia. HNZ Group is a publically traded company on the Toronto Stock Exchange (TSX: HNZ) and is headquartered near Montreal, Canada and employs approximately 600 personnel from 38 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 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 (if any) and goodwill impairment charge (if any).
  • References to earnings before non-cash impairment charge per share basic and diluted are to earnings per share plus the trade name impairment charge (if any)  and goodwill impairment charge (if any) 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 assess performance 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 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 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

ended June 30,


Six-month periods

ended June 30,

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

2016

2015


2016

2015







Revenue

58,786

43,830


104,991

80,365

Operating expenses before aircraft

43,322

37,443


80,246

72,673


operating leases expenses

Foreign exchange loss (gain)

796

(1,344)


193

(1,505)

Adjusted EBITDAR[1]

14,668

7,731


24,552

9,197

Aircraft operating leases expenses

4,270

1,638


8,652

3,220

Adjusted EBITDA[1]

10,398

6,093


15,900

5,977

Amortization

4,981

4,626


9,499

9,081

Net gain on disposal of property, plant

(10)

(249)


(434)

(310)


and equipment

Net financing charges

276

225


379

309

Income (loss) before income taxes

5,151

1,491


6,456

(3,103)

Net income (loss) attributable to:






Shareholders of the Corporation

3,122

(64)


4,735

(3,107)

Non-controlling interests

(295)

(209)


(1,220)

(150)

Net income (loss)

2,827

(273)


3,515

(3,257)

Earnings (loss) per share basic and




0.3635

(0.2378)


diluted

0.2398

(0.0049)


Dividends declared per share

0.2756


0.5513

Total assets

306,306

322,425


306,306

322,425



[1]

See "Definition of Non-IFRS Measures". Adjusted EBITDAR and Adjusted EBITDA are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS. Adjusted EBITDAR and Adjusted EBITDA may not be comparable to similar measures presented by other issuers.



 

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


Six months ended

Last twelve
months ended

Year ended

(in $000's)

June 30,
2016

June 30,

2015

June 30,

2016

December 31,

2015






Cash flows related to operating activities

2,454

(307)

16,172

13,411

Add (deduct):





Net change in non-cash working capital






balances and deferred revenues

9,713

6,908

6,376

3,571


12,167

6,601

22,548

16,982

Less:

Maintenance CAPEX[1]

(3,499)

(4,509)

(5,714)

(6,724)

Adjusted Net Free Cash Flows[2]

8,668

2,092

16,834

10,258



[1]

See "Definition of Non-IFRS Measures" for a description of management's definition of Maintenance CAPEX and Growth CAPEX.  

[2]

See "Definition of Non-IFRS Measures" Adjusted net free cash flows is not a recognized measure under IFRS and does not have a standardized meaning prescribed by IFRS. Adjusted net free cash flows may not be comparable to similar measures presented by other issuers.  

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.

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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