CALGARY, May 16 /CNW/ - HSE Integrated Ltd. ("HSE" or the "Corporation") today announced the unaudited financial results for the Corporation for the first fiscal quarter ended March 31, 2011.


      Quarter ended       Quarter ended     Year-over-year
      March 31, 2011       March 31, 2010(2)     % change
Revenue   $ 24,481     $ 20,907     17.1%
Operating and materials     19,948       16,982     17.5%
Operating margin     4,533       3,925     15.5%
Operating margin %     18.5%       18.8%      
Selling, general and administrative     2,047       1,959     4.5%
Net earnings     507       124     308.9%
  Per-share basic     0.01       0.00      
  Per-share diluted     0.01       0.00      
EBITDA (1)   $ 2,486     $ 1,966     26.4%
EBITDA %     10.2%       9.4%      
Total assets   $ 51,319     $ 50,680     1.3%
Total long-term liabilities   $ 9,228     $ 10,900     (15.3)%

(1) See non-GAAP measures
(2) IFRS transition date was January 1, 2010; 2010 financial results have been adjusted to conform with IFRS


Revenue in Q1 2011 was $24.5 million, an increase of 17.1% from $20.9 million for the same period in the previous year. Operating margin grew 15.5% to $4.5 million from $3.9 million in 2010. SG&A rose 4.5% to $2.05 million from $1.96 million in Q1 2010. As a result of increased revenue and margin and a small increase in SG&A, EBITDA increased 26.4% to $2.5 million from $2.0 million in 2010. Profit for the quarter was $0.5 million or $0.01 per diluted share, a 308.9% increase from $0.1 million or $0.00 per share in the first quarter of the 2010 fiscal year.

The balance sheet remains strong. At March 31, 2011 working capital was $12.0 million, up from $10.0 million at March 31, 2010. Long term debt (bank debt plus capital leases plus convertible debentures) stood at $8.9 million, down from $9.0 million at December 31, 2010. At March 31, 2011 the Corporation had a cash or cash equivalent balance of $0.5 million.

Because of strong oil prices and a general recovery in conventional upstream exploration, drilling, completion and workover activity, HSE's Oilfield health and safety services experienced the first year-over-year first quarter revenue growth since 2006. This occurred in Canada and the United States. Revenue rose 32.7% to $11.9 million in the first quarter, up from $9.0 million in Q1 2010.

Due to the strengthening economy and increased expenditures in oil-intensive markets like oilsands, Industrial health and safety revenue also increased in the first quarter. Revenue was $12.6 million for the period, up 5.3% from $11.9 million in fiscal 2010. In terms of the revenue split, Industrial comprised 51.3% of total revenue in Q1 2011, down from 57.0% a year ago. Oilfield accounted for 48.7% of total revenue compared to 43.0% last year.

David Yager, Chairman and CEO, made the following comments on Q1 2011's financial performance and the outlook for the remainder of 2011 and beyond.

"The recovery that began in mid-2010 carried into the first quarter of 2011 as the demand for the Corporation's services grew in most of the markets in which the Corporation operates. This is reflected in significant year-over-year growth in revenues, EBITDA and profit. Based on client demand and current activity, the year-over-year quarterly financial performance improvement that began in the first quarter of 2010 should continue through the 2011 fiscal year.

The recent election of a majority government in Ottawa has also added an element of stability to the Canadian economy that would not otherwise be in place.

On the Oilfield side, drilling and development activity based on crude oil and gas reservoirs, rich in natural gas liquids, looks positive for the rest of 2011 and into 2012 in Canada and the United States. HSE's participation is reflected in the first quarter financial performance.

However, the one historic core business area that remains depressed with no recovery on the horizon is health and safety services related to sour gas drilling. This high-margin safety-intensive Oilfield activity has been a major source of business for companies like HSE in western Canada for decades.

There have been radical changes in North American gas markets in the past three years that have depressed gas prices on a BTU equivalent basis compared to oil. Low gas prices affect sour gas more negatively than sweet gas because of higher costs associated with development, recovery, processing and transportation.

In late 2010 the Corporation had concluded there would be no improvement in the sour gas safety business for the foreseeable future. While HSE is participating in the new type of Oilfield activity taking place in North America, it is not as safety intensive as sour-gas related activity and therefore will not generate the same levels of revenue and profits that the Corporation has enjoyed in previous years.

Therefore, in the first quarter of 2011 management commenced a multi-year strategic planning process to determine what changes to the Corporation's business would be necessary to achieve and exceed historical levels of revenue and profitability. Based on opportunities in seven markets in which HSE operates besides traditional upstream oil and gas in western Canada, the Corporation is confident that revenue expansion can be achieved through enhanced business development and market activities.

On the operating margin side, HSE has identified several key areas in which field service delivery efficiency can be increased without compromising service, quality, safety or compensation to our technical staff. Many of these initiatives are underway and all will be completed in the next year.

HSE exists because the health and safety industry in North America is a growth sector that will ultimately yield attractive returns for investors. However, major upheavals in the markets in which the Corporation operates, combined with a global recession and volatile capital and commodity markets, have made it difficult to demonstrate progress in capitalizing on the opportunity the Corporation has created for itself.

However, the Corporation believes it has entered into a new period of economic stability in which it will demonstrate the viability of the HSE business model. HSE has a strong balance sheet, outstanding management and personnel, great clients, a growing need for its services by all industries, the sector's most comprehensive service package, and growth opportunities in multiple markets."

Non-GAAP Measures
Certain measures in this document do not have any standardized meaning as prescribed by IFRS and previous Canadian GAAP, and therefore, are considered non- GAAP measures. This report makes reference to EBITDA, a measure that is not recognized under IFRS. Management believes that, in addition to net earnings, EBITDA is a useful supplementary measure. EBITDA provides investors with an indication of earnings before provisions for interest and bank charges, taxes, amortization, foreign exchange gains or losses, gains or losses on the disposal of property and equipment, and the non-cash effect of stock-based compensation expense. Investors should be cautioned that EBITDA should not be construed as an alternative to net earnings determined by IFRS and previous Canadian GAAP as an indication of the Corporation's performance. HSE's method of calculating EBITDA may differ from that of other companies' and, accordingly, may not be comparable to measures used by other companies.


On May 17, 2011, David Yager, CEO, and Lori McLeod-Hill, CFO, will be hosting an investor and analyst conference call. Details follow:

Conference Call Time and Date: Tuesday May 17, 2011 11:00 AM ET (9:00 AM MT)

Dial-In Number: 1-647-427-7450 (Toronto area) or 1-888-231-8191

Conference Replay to June 14, 2011: 1-416-849-0833 or 1-800-642-1687 (Passcode: 66700803)

Webcast: http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=3530340

HSE Integrated Ltd. trades on the TSX under the symbol "HSL"


SOURCE HSE Integrated Ltd.

For further information:

David Yager, Chairman & CEO
Telephone: (403) 266-1833
E-Mail: dyager@hseintegrated.com

Lori McLeod-Hill, CFO
Telephone: (403) 266-1833
E-Mail: lmcleod-hill@hseintegrated.com

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HSE Integrated Ltd.

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