HNZ Group Reports 2017 Second Quarter Results

  • Revenue of $56.4 million, versus $57.3 million last year
  • Adjusted EBITDAR of $7.6 million or 13.5% compared to $14.2 million or 24.8% a year ago
  • Adjusted EBITDA of $5.1 million or 9.0% compared to $11.1 million or 19.4% a year ago
  • Net income from continuing operations of $4.1 million or $0.31 per share versus $3.7 million or $0.28 per share last year
  • Net income for the period of $2.5 million or $0.19 per share versus $3.1 million or $0.24 per share last year
  • Net mobilization costs and other startup costs incurred were $3.7 million in the second quarter for our four recently awarded contracts
  • Net loss from discontinued operations at Norsk Helikopterservice was $3.3 million in the second quarter and $5.6 million year to date
  • Solid financial position with a $1.5 million net cash position and a $75 million credit facility ($54.0 million available net of letters of credit and drawdowns)

MONTREAL, Aug. 14, 2017 /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, 2017.




Financial Highlights

Quarters ended June 30,

Six months ended June 30,

(in thousands of dollars, except per share data)

2017

2016

2017

2016

Revenue

56,351

57,250

96,303

102,550

Adjusted EBITDAR [1]

7,647

14,238

9,239

24,964

Adjusted EBITDA [2]

5,106

11,139

5,332

18,639

Net income from continuing operations [3]

4,085

3,659

435

6,456


Per share - basic and diluted ($)

0.31

0.28

0.03

0.50

Net income (loss) [3]

2,512

3,122

(2,327)

4,735


Per share - basic and diluted ($)

0.19

0.24

(0.18)

0.36

Cash flows related to operating activities

(7,039)

4,154

(7,229)

5,533

Weighted-average shares outstanding (all classes)

12,974,624

13,020,845

12,988,883

13,024,424

[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 was $56.4 million in the second quarter of 2017, a decrease of $0.9 million compared to $57.3 million a year ago. This variation is mostly explained by a decrease in onshore revenue and ancillary revenue, partially offset by an increase in offshore revenue. The Corporation flew 10,725 hours compared to 11,557 hours in the second quarter of 2016, a decrease of 7.2%.

Onshore revenue decreased by $4.5 million as a result of lower VFR activity in western Canada and the completion of an onshore contract in Asia-Pacific. Offshore revenue increased by $6.3 million from the second quarter of 2016 primarily due to the addition of the new INPEX contract, partially offset by the completion of the Shell Halifax contract. Ancillary revenue decreased by $2.7 million mainly due to decreased activity at Heli-Welders and Nampa Valley.

Operating expenses, before aircraft operating leases expenses, increased by $8.6 million to $50.9 million in the second quarter, compared to last year. The increase is primarily explained by startup costs for the new INPEX crew transport offshore contract and the new INPEX-Shell Search and Rescue (SAR) contract in Asia-Pacific. Startup costs including mobilization costs and crew training contributed to the higher operating costs, partially offset by lower costs from the completion of the Shell Halifax contract, and lower costs at Nampa Valley and Heli-Welders due to decreased activity.

Foreign exchange gain for the second quarter of 2017 amounted to $2.2 million compared to a foreign exchange loss of $0.8 million a year ago. The variation is mostly due to a $3.4 million foreign exchange gain from the wind-down of the investment in Laos.

Adjusted EBITDAR and adjusted EBITDA for the second quarter of 2017 were $7.6 million and $5.1 million respectively or 13.5% and 9.0% of revenues, compared to $14.2 million and $11.1 million a year earlier.

During the second quarter, the Corporation recorded an income tax recovery of $2.2 million, compared to an income tax expense of $2.3 million for the same period in 2016. This variance is primarily attributable to the recording of a deferred tax asset associated with prior years' tax losses not previously recognized.

Net income from continuing operations attributable to the shareholders of the Corporation totaled $4.1 million or $0.31 per share, compared to $3.7 million, or $0.28 per share for the same period in 2016. Net income attributable to the shareholders of the Corporation totaled $2.5 million or $0.19 per share, compared to $3.1 million, or $0.24 per share in 2016. Cash flows related to operating activities were ($7.0) million in the second quarter of 2017 versus $4.2 million in the corresponding period a year earlier and is primarily related to the net mobilization costs incurred, as well as the decline in revenue.

Adjusted net free cash flows for the six months ended June 30, 2017 were ($1.1) million, compared to $11.4 million for the same period a year ago. For the twelve-month period ended June 30, 2017, adjusted net free cash flows stood at $5.2 million, compared with $17.7 million for the year ended December 31, 2016.

"HNZ's second quarter revenue was approximately the same as the comparable period last year, but represented a continued shift towards offshore revenue. The quarter was one which reflected the impact of the decision to cease funding Norway based Norsk, significant start-up costs for the commencement of four new long term contracts in Australia and Canada and onshore activity weakness. Global market conditions and local operating challenges had emerged since the initial investment in Norway and we made the decision to terminate rather than continue to incur significant losses. Norsk related losses for the quarter were $3.3 million. Net mobilization and other startup costs incurred for the start of INPEX-Shell SAR and PHI/HNZ operations, as well as ExxonMobil/Encana and Nova Scotia EMS contracts were $3.7 million in the quarter. While challenging for the quarter these one time costs incurred set the stage for significantly improved profitability for the balance of 2017 and beyond," said Don Wall, President and Chief Executive Officer of HNZ Group Inc.

As at June 30, 2017, the Corporation's financial position is strong with working capital of $51.7 million, and cash and cash equivalents of $12.6 million, combined with short-term debt of $11.1 million.

SIX-MONTH RESULTS
For the six-month period ended June 30, 2017, revenue totaled $96.3 million, compared with revenue of $102.6 million in the corresponding period of 2016. The decrease is mostly explained by lower onshore revenue of $5.7 million and lower ancillary revenue of $3.3 million, partially offset by an increase in offshore revenue of $2.7 million. The Corporation flew 17,091 hours compared to 18,073 hours in 2016.

Adjusted EBITDAR and adjusted EBITDA for the six-month period amounted to $9.2 million and $5.3 million respectively, compared to $25.0 million and $18.6 million a year earlier.

Net income from continuing operations attributable to the shareholders of the Corporation totaled $0.4 million or $0.03 per share, compared to $6.5 million, or $0.50 per share for the same period in 2016. Net loss attributable to the shareholders of the Corporation totaled ($2.3) million or ($0.18) per share, compared to net income of $4.7 million, or $0.36 per share in 2016. Cash flows related to operating activities were ($7.2) million for the six-month period versus $5.5 million in the corresponding period a year earlier.

POST SECOND QUARTER HIGHLIGHTS
Ceasing Norsk operations
On July 4, 2017, HNZ announced that the operations carried out by Norsk Helikopterservice AS ("Norsk"), a Norwegian entity in which the Corporation holds a 49.9% interest, ceased on June 30, 2017. Norsk has encountered various challenges in the Norwegian market, and has not performed as projected. After considering the results and prospects of this investment, the Corporation has decided to focus its efforts on other aspects of its strategic plan, and to discontinue funding its interests accordingly. Norsk has implemented an orderly wind-up process including the termination of employees, the return of a leased aircraft to the lessor and settling of other matters, while Norsk's majority shareholder evaluates its options.

OUTLOOK
"We enter the second half of 2017 with our long-term contracts recently signed representing approximately $90 million in annualized revenues. As we have previously indicated, our recurring revenue base from long-term contracts now accounts for approximately two thirds of HNZ's total revenue. We have continued to experience weakness in our onshore markets and continue to look to match our cost structure with it. Our financial position remains strong, and allows us to seek new opportunities for investment and growth," concluded Mr. Wall.

CONFERENCE CALL
The Corporation will hold a conference call to discuss these results on Tuesday, August 15, 2017 at 11:00AM (ET). Interested parties can join the call by dialing 514-807-9895 (Montreal) or 1-866-865-3087 (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: 61198454. This tape recording will be available until August 22, 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, 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 HNZ brand, 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 36 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) from continuing operations 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 as a means to measure operating results and to assess comparability with peers, as there are differences in the way corporations finance their aircraft and other assets.
  • References to "Adjusted operating income" are to revenues less direct operating expenses from continuing operations. 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" from continuing operations. "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 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 period ended
June 30


Six-month period ended

June 30

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

2017

2016


2017

2016

Continuing operations






Revenue

56,351

57,250


96,303

102,550

Operating expenses before aircraft operating
leases expenses

50,920

42,252


89,423

77,362

Foreign exchange (gain) loss

(2,216)

760


(2,359)

224

Adjusted EBITDAR(1)

7,647

14,238


9,239

24,964

Aircraft operating leases expenses

2,541

3,099


3,907

6,325

Adjusted EBITDA(1)

5,106

11,139


5,332

18,639

Amortization

4,336

4,760


8,566

9,055

Net gain on disposal of property, plant and equipment

(1,282)

(10)


(1,331)

(434)

Net financing charges

88

276


159

379

Income (loss) before income taxes from continuing operations

1,964

6,113


(2,062)

9,639

Income taxes expense (recovery)







Current                                                                   

1,126

2,643


555

3,850


Deferred

(3,294)

(319)


(3,100)

(909)


(2,168)

2,324


(2,545)

2,941

Net income from continuing operations

4,132

3,789


483

6,698







Discontinued operations






Net loss from discontinued operations

(3,295)

(962)


(5,641)

(3,183)

Net income (loss) for the period

837

2,827


(5,158)

3,515







Net income (loss) attributable to:






Shareholders of the Corporation

2,512

3,122


(2,327)

4,735

Non-controlling interests from continuing operations

47

130


48

242

Non-controlling interests from discontinued operations

(1,722)

(425)


(2,879)

(1,462)


837

2,827


(5,158)

3,515

Earnings per share basic and diluted from continuing operations

 

0.3149

0.2810


0.0335

0.4957

Total assets

309,065

306,306


309,065

306,306

[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

Twelve months
ended
June 30,

2017

Year
ended
December 31,
2016

(in $000's)

June 30,
2017

June 30,
2016

Cash flows related to operating activities

(7,229)

5,533

6,907

19,668

Add (deduct):

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

8,863

9,372

6,262

6,771


1,634

14,905

13,169

26,439

Less:

Maintenance CAPEX(1)

2,733

3,500

7,951

8,718

Adjusted Net Free Cash Flows(2)

(1,099)

11,405

5,218

17,721





[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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