18-Aug-2017 Source: HNZ
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 $0.03per 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 $0.36per share in 2016. Cash flows related to operating activities were ($7.2) million for the six-month period versus $5.5 millionin 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
