HNZ Group Reports 2016 Third Quarter Results

  • Revenue of $56.4 million, versus $59.6 million last year
  • Adjusted EBITDAR of $13.1 million or 23.2% compared to $15.7 million or 26.3% a year ago
  • Adjusted EBITDA of $8.9 million or 15.8% compared to $12.6 million or 21.2% a year ago
  • Net income of $1.7 million or $0.13 per share versus a net loss of $8.0 million or $0.61 per share after a trade name impairment charge last year
  • Solid financial position with a $15.6 million net cash position and an undrawn $75 million credit facility

MONTREAL, Nov. 13, 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 third quarter ended September 30, 2016.




Financial Highlights

Quarters ended September 30,

Nine months ended September 30,

(in thousands of dollars, except per share data)

2016

2015

2016

2015

Revenue

56,425

59,606

161,416

139,971

Adjusted EBITDAR [1]

13,086

15,689

37,638

24,885

Adjusted EBITDA [2]

8,918

12,627

24,818

18,604

Net income (loss) [3]

1,692

(8,007)

6,427

(11,115)


Per share - basic and diluted ($)

0.13

(0.61)

0.49

(0.85)

Cash flows related to operating activities

8,984

3,502

11,438

3,195

Weighted-average shares outstanding

13,020,845

13,068,700

13,023,231

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

 

THIRD QUARTER RESULTS
Revenue decreased by $3.2 million to $56.4 million in the third quarter of 2016, compared to $59.6 million a year ago, mainly as a result of decreased revenue from the onshore business segment. The Corporation flew 14,257 hours compared to 14,707 hours in the third quarter of 2015, a decrease of 3.1%.

Onshore revenue decreased by $4.4 million primarily due to lower VFR flying in Canada, partially offset by the addition of Acasta HeliFlight Inc. (Acasta) and the North Warning System contract (NWS). Ancillary revenue decreased by $0.9 million mainly due to decreased activity at Nampa Valley and Heli-Welders, partially offset by increases in the Contracted Flying and Training Services (CFTS) project. Finally, offshore revenue increased by $2.1 million from the third quarter of 2015 due to the Shell Canada offshore support contract in Halifax, gains in Southeast Asia, and slightly increased business from our Norsk partner in Norway, partially offset by a reduction in offshore activities in New Zealand and the Philippines.

Operating expenses, before aircraft operating leases expenses, decreased by $1.0 million to $43.0 million in the third quarter compared to last year. The decrease in operating expenses is primarily explained by lower VFR activity and cost structure in Canada, lower costs associated with Shell Halifax due to non-recurring implementation costs incurred last year, and lower costs at Norsk, partially offset by the NWS contract, the addition of Acasta and higher support costs.

Adjusted EBITDAR and Adjusted EBITDA for the third quarter of 2016 were $13.1 million and $8.9 million respectively or 23.2% and 15.8% of revenues, compared to $15.7 million and $12.6 million a year earlier.

Net income attributable to the shareholders of the Corporation totaled $1.7 million or $0.13 per share, compared to a net loss of $8.0 million, or ($0.61) per share after a trade name impairment charge for the same period in 2015. Cash flows related to operating activities were $9.0 million in the third quarter of 2016 versus $3.5 million in the corresponding period a year earlier.

Adjusted Net Free Cash Flows for the nine months ended September 30, 2016 totaled $14.0 million, compared to $12.6 million for the same period a year ago. For the twelve-month period ended September 30, 2016, Adjusted Net Free Cash Flows stood at $11.7 million, compared with $10.3 million for the year ended December 31, 2015.

"The third quarter results reflect ongoing challenges in the onshore market and competitive market conditions as a whole," said Don Wall, President and Chief Executive Officer of HNZ Group. "The decrease in onshore revenue was driven primarily by lower resource activity. While offshore revenues benefited from the Shell Halifax support contract, they also reflected the renewed contracts in Asia Pacific which were negotiated earlier in the year. Ancillary revenue declined slightly, corresponding to lower overall industry demand. The Adjusted EBITDA margin decline reflects both a challenging market and our strategy to lease aircraft in the offshore market rather than purchasing fleet. In spite of the difficult economic conditions, we concluded the quarter with cash on hand, no debt and an unused credit facility."

As at September 30, 2016, the Corporation's financial position is strong with working capital of $61.0 million, and cash and cash equivalents, net of bank indebtedness, of $15.6 million.

NINE-MONTH RESULTS
For the nine-month period ended September 30, 2016, revenue totaled $161.4 million, compared with revenue of $140.0 million in the corresponding period of 2015. This increase is explained by higher offshore revenue of $13.8 million, an increase in ancillary revenue of $6.2 million, and an increase in onshore revenue of $1.4 million. The Corporation flew 32,524 hours over the nine-month period ended September 30, 2016, compared to 32,390 hours in the same period in 2015.

Adjusted EBITDAR and Adjusted EBITDA for the nine-month period amounted to $37.6 million and $24.8 million respectively, compared to $24.9 million and $18.6 million a year earlier.

Net income attributable to the shareholders of the Corporation totaled $6.4 million or $0.49 per share, compared to a net loss of $11.1 million, or ($0.85) per share for the same period in 2015. Cash flows related to operating activities were $11.4 million for the nine-month period versus $3.2 million in the corresponding period a year earlier.

THIRD QUARTER HIGHLIGHTS
Renewal of Normal Course Issuer Bid
On August 25, 2016, the Toronto Stock Exchange (the "TSX") accepted the Corporation's notice of intention to make a normal course issuer bid to purchase up to 390,625 common shares and/or variable voting shares of the Corporation through the facilities of the TSX for a period of twelve months ending on August 28, 2017. This represents approximately 3% of the issued and outstanding common and variable voting shares of the Corporation.

OUTLOOK
"Over the first nine months in a difficult market, we have grown revenue and profitability across the group. Looking forward, we will continue to address reduced onshore activity in Canada and will adjust the cost structure as required. We are pleased to have supported our customers with renewed offshore oil and gas contracts in both New Zealand and the Philippines earlier this year, which has increased HNZ's presence and long-term viability both in Asia Pacific and on an international level. With our strong balance sheet, we remain committed to building shareholder value through opportunistic buying and pursuing diversification," concluded Mr. Wall.

CONFERENCE CALL
The Corporation will hold a conference call to discuss these results on Monday, November 14, 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: 4687225. This tape recording will be available until November 21, 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 EBITDA, Adjusted EBITDAR, Adjusted operating income, Adjusted Net Free Cash Flows, net income (loss) before non-cash impairment charge and earnings (loss) per share basic and diluted before non-cash impairment charge. 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 (loss) per share basic and diluted before non-cash impairment charge" 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 (loss) per share basic and diluted before non-cash impairment charge 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 (loss) per share basic and diluted before non-cash impairment charge 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 (loss) per share basic and diluted before non-cash impairment charge 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 (loss) per share basic and diluted before non-cash impairment charge 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 (loss) per share basic and diluted before non-cash impairment charge 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 September 30,


Nine-month periods

ended September 30,

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

2016

2015


2016

2015







Revenue

56,425

59,606


161,416

139,971

Operating expenses before aircraft
operating leases expenses

42,988

44,041


123,234

116,714

Foreign exchange loss (gain)

351

(124)


544

(1,628)

Adjusted EBITDAR(1)

13,086

15,689


37,638

24,885

Aircraft operating leases expenses

4,168

3,062


12,820

6,281

Adjusted EBITDA(1)

8,918

12,627


24,818

18,604

Amortization

5,065

4,558


14,565

13,639

Trade name impairment charge

17,400


17,400

Net gain on disposal of property, plant and
equipment

(13)

(493)


(447)

(803)

Net financing charges

94

149


472

458

Income (loss) before income taxes

3,772

(8,987)


10,228

(12,090)

Net income (loss) attributable to:






Shareholders of the Corporation

1,692

(8,007)


6,427

(11,115)

Non-controlling interests

(277)

(1,020)


(1,498)

(1,169)

Net income (loss)

1,415

(9,027)


4,929

(12,284)

Earnings (loss) per share basic and diluted
before non-cash impairment charge(1)

0.1299

0.5396


0.4935

0.3019

Earnings (loss) per share basic and diluted

0.1299

(0.6127)


0.4935

(0.8505)

Dividends declared per share

0.2756


0.8269

Total assets

307,805

305,585


307,805

305,585

(1)

See "Definition of Non-IFRS Measures". Adjusted EBITDAR, Adjusted EBITDA, and Earnings (loss) per share basic and diluted before non-cash impairment charge 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


Nine-months ended

Last twelve
months ended

Year ended

(in $000's)

September 30,
2016

September 30,

2015

September 30,

2016

December 31,

2015






Cash flows related to operating activities

11,438

3,195

21,654

13,411

Add (deduct):





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

7,190

14,109

(3,348)

3,571


18,628

17,304

18,306

16,982

Less:





Maintenance CAPEX(1)

(4,579)

(4,719)

(6,584)

(6,724)

Adjusted Net Free Cash Flows(2)

14,049

12,585

11,722

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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