HNZ Group reports 2017 first quarter results

  • Revenue of $40.3 million, versus $46.2 million last year
  • Adjusted EBITDAR of $0.4 million or 1.0% compared to $9.9 million or 21.4% a year ago
  • Adjusted EBITDA of ($2.1) million or -5.2% compared to $5.5 million or 11.9% a year ago
  • Net loss of $4.8 million or ($0.37) per share versus net income of $1.6 million or $0.12 per share last year
  • Solid financial position with a $9.3 million net cash position and a $75 million credit facility ($59.7 million available net of letters of credit and drawdowns)
  • $1.1 million in net mobilization costs incurred for startup of INPEX joint operations
  • Approximately $90 million dollars in contracted annualized revenue signed in last six months

MONTREAL, May 11, 2017 /CNW Telbec/ - 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 first quarter ended March 31, 2017.

 



Financial Highlights

Quarters ended March 31,

(in thousands of dollars, except per share data)

2017


2016

Revenue

40,316


46,205

Adjusted EBITDAR (1)

442


9,884

Adjusted EBITDA (2)

(2,062)


5,502

Net (loss) income (3)

(4,839)


1,612


Per share - basic and diluted ($)

(0.37)


0.12

Cash flows related to operating activities

(3,042)


(1,384)

Weighted-average shares outstanding (all classes)

13,003,142


13,028,003



[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

 

FIRST QUARTER RESULTS
Revenue decreased by $5.9 million to $40.3 million in the first quarter of 2017, compared to $46.2 million a year ago, mainly as a result of lower offshore activity in Canada due to the completion of the Shell Halifax contract. The Corporation flew 6,404 hours compared to 6,569 hours in the first quarter of 2016, representing a decrease of 2.5%.

Offshore revenue decreased by $4.2 million primarily due to the completion of the Shell Halifax contract and reduced revenue from renegotiated offshore contracts, partially offset by increases in other contracts in Southeast Asia. Onshore revenue decreased by $1.2 million as a result of reductions in Asia Pacific, partially offset by increases in Canada and a full quarter of Acasta HeliFlight. Finally, ancillary revenue decreased by $0.5 million mainly due to decreased activity at Nampa Valley and flight training.

Operating expenses, before aircraft operating leases expenses, increased by $3.1 million to $40.0 million in the first quarter compared to last year. The increase in operating expenses is primarily explained by increased offshore costs in Asia Pacific including net mobilization costs of $1.1 million for the new INPEX contract, higher maintenance costs in the Canadian VFR and higher support costs, partially offset by lower costs in the Shell Halifax contract.

The Corporation recorded a foreign exchange gain of $0.1 million in the first quarter, compared to a gain of $0.6 million last year. The $0.5 million variation is mostly due to the depreciation of the Canadian dollar.

Adjusted EBITDAR and Adjusted EBITDA for the first quarter of 2017 were $0.4 million and ($2.1) million respectively, compared to $9.9 million and $5.5 million a year earlier.

Net loss attributable to the shareholders of the Corporation totaled $4.8 million or ($0.37) per share, compared to a net income of $1.6 million, or $0.12 per share in 2016. Cash flows related to operating activities were ($3.1) million in the first quarter of 2017 versus ($1.4) million in the corresponding period a year earlier.

"The first quarter results reflect a transition period with four new long-term contracts in their start-up phases. The completion of the Shell Canada offshore support contract in Halifax and reduced revenue from renegotiated contracts also impacted results as anticipated. Furthermore, we experienced some weaker activity levels in the Asia Pacific onshore. As expected, our first quarter operations were subject to predictable seasonal weakness in the onshore. While overall market conditions remain challenging, we continue to demonstrate our capability to grow in a difficult market," said Don Wall, President and Chief Executive Officer of HNZ Group Inc.

As at March 31, 2017, the Corporation's financial position is strong with working capital of $53.7 million, and cash and cash equivalents, net of short-term debt, of $9.3 million.

POST FIRST QUARTER HIGHLIGHTS

Offshore Search and Rescue Contract in Australia to Support Inpex and Shell
On May 8, 2017, the Corporation announced that it has been awarded contracts by INPEX Operations Australia Pty Ltd ("INPEX") and Shell Australia Pty Ltd ("Shell") to provide offshore search and rescue services for the INPEX-led Ichthys LNG Project and the Shell-led Prelude FLNG Project. HNZ will supply one leased Sikorsky S-92 heavy helicopter to provide 365-day search and rescue and medical evacuation services, in support both offshore facilities in Australia. The contract terms are five years, plus two, two-year optional renewal periods.

OUTLOOK
"As another indication of our capability and momentum in the offshore market, we were recently awarded a 5-year search and rescue offshore contract to support INPEX Operations and Shell in Australia. This new contract extends our relationships with both customers and reflects their continued confidence in our services. As a result of the four new contracts announced over the past six months, our contracted revenue is expected to increase by approximately $90 million dollars on an annualized basis with contract terms ranging from three to 15 years. From 2015 to 2017, we have seen our contracted revenue as a percentage of the total revenue increase from approximately one-half to two-thirds. We are looking forward to a solid second half of 2017 as we start to benefit from the contribution of new contracts," concluded Mr. Wall.

CONFERENCE CALL
The Corporation will hold a conference call to discuss these results on Friday, May 12, 2017 at 2:00AM (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: 10742211. This tape recording will be available until May 19, 2017.

ABOUT HNZ GROUP INC.
HNZ Group Inc. is an international provider of helicopter transportation and related support services with operations in Canada, Australia, New Zealand, Norway, Antarctica, the United States and Southeast Asia. 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. The Corporation is headquartered near Montreal, Canada and employs approximately 600 personnel from 37 locations around the world. Revenue from offshore and ancillary operations is mostly earned evenly throughout the year while onshore operations follow a seasonal pattern with the highest revenue occurring from May to October.

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, expected revenues from contracts with key clients, seasonal levels of activity, maintenance of contractual relationships, any goodwill impairment that could result from changes to those 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) and 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 the 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 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 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"). This measure is commonly used in the Corporation's industry; however, these costs can vary significantly among different corporations within the industry due to differences in the way corporations finance their aircraft and other assets.
  • 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. The Corporation uses this measure as a means to evaluate the segment performance for the purposes of making decisions.
  • 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. This measure is commonly used in the Corporation's industry and is used by the Corporation as an indicator of financial strength and performance of its business, indicating the amount of cash the Corporation is able to generate from operations and after capital expenditures.

Since Adjusted EBITDA, Adjusted EBITDAR and Adjusted Net Free Cash Flows 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 operating income and Adjusted Net Free Cash Flows 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 EBITDA, Adjusted EBITDAR, Adjusted operating income and Adjusted Net Free Cash Flows are not earnings or cash flows measures recognized under IFRS and do not have a standardized meaning prescribed by IFRS. Therefore, Adjusted EBITDA, Adjusted EBITDAR, Adjusted operating income and Adjusted Net Free Cash Flows may not be comparable with similar measures presented by other entities. Investors are cautioned that Adjusted EBITDA, Adjusted EBITDAR, Adjusted operating income and Adjusted Net Free Cash Flows 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

March 31,

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

2017

2016

Revenue

40,316

46,205

Operating expenses before aircraft operating leases expenses

40,003

36,924

Foreign exchange gain

(129)

(603)

Adjusted EBITDAR

442

9,884

Aircraft operating leases expenses(1)

2,503

4,382

Adjusted EBITDA

(2,062)

5,502

Amortization

4,288

4,518

Net gain on disposal of property, plant and equipment

(49)

(424)

Net financing charges

72

103

Income (loss) before income taxes

(6,373)

1,305

Net income (loss) attributable to:



Shareholders of the Corporation

(4,839)

1,612

Non-controlling interests

(1,156)

(925)

Net income (loss)

(5,995)

687

 

Adjusted cash flows from operating activities and adjusted net free cash flow reconciliation to cash flows from operating activities



Three months ended

 

Twelve months
ended

Year

ended

(in $000's)

March 31,
2017

March 31,

2016

March 31,

2017

December 31,
2016

Cash flows related to operating activities

(3,042)

(1,383)

11,256

12,915

Add (deduct):

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

1,730

5,696

2,484

6,450

Adjusted cash flows related to operating activities

(1,312)

4,313

13,740

19,365

Less:

Maintenance CAPEX

1,728

1,576

8,878

8,726

Adjusted Net Free Cash Flows

(3,040)

2,737

4,862

10,639

 

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 aircrafts 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

RELATED LINKS
http://hnz.com/

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