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HNZ Group Reports 2016 Year-end Results

  • Revenue of $212.3 million , versus $188.7 million last year
  • Adjusted EBITDAR of $45.2 million or 21.3% compared to $32.6 million or 17.3% a year ago
  • Adjusted EBITDA of $27.1 million or 12.8% compared to $22.0 million or 11.7% a year ago
  • Net income of $3.4 million or $0.26 per share versus a net loss of $13.8 million or ($1.05) per share after a trade name impairment charge last year
  • Solid financial position with a $15.0 million cash position and a $75 million credit facility ( $65 million net of letters of credit)


MONTREAL , March 16, 2017 /CNW/ - HNZ Group Inc. (HNZ.TO) (the "Corporation"), an international provider of helicopter transportation and related support services, today announced its financial and operating results for the fourth quarter and fiscal year ended December 31, 2016 .

Financial Highlights

Quarters ended December 31,

Fiscal years ended December 31,

(in thousands of dollars, except per share data)

2016

2015

2016

2015

Revenue

50,925

48,761

212,341

188,732

Adjusted EBITDAR [1]

7,536

7,673

45,174

32,559

Adjusted EBITDA [2]

2,270

3,432

27,088

22,036

Net (loss) income [3]

(3,001)

(2,652)

3,426

(13,766)


Per share - basic and diluted ($)

(0.23)

(0.20)

0.26

(1.05)

Cash flows related to operating activities

1,477

10,216

12,915

13,411

Weighted-average shares outstanding (all classes)

13,012,673

13,057,785

13,020,592

13,065,971


[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

 

FOURTH QUARTER RESULTS
Revenue increased by $2.1 million to $50.9 million in the fourth quarter of 2016, compared to $48.8 million a year ago, mainly as a result of increased revenue from the ancillary business segment. The Corporation flew 8,304 hours compared to 8,290 hours in the fourth quarter of 2015, representing an increase of 0.2%.

Ancillary revenue increased by $1.3 million mainly due to higher activity levels at the Contracted Flying and Training Services (CFTS) project and an increase at Nampa Valley and Heli-Welders. Onshore revenue increased by $0.8 million primarily due to the addition of Acasta HeliFlight Inc. (Acasta) and an increase from the North Warning System contract (NWS). Finally, offshore revenue remained flat with gains in Southeast Asia offset by lower activity levels at the Shell Canada offshore support contract in Halifax and decreases from the Shell Philippines contract.

Operating expenses, before aircraft operating leases expenses, increased by $4.3 million to $43.7 million in the fourth quarter compared to last year. The increase in operating expenses is primarily explained by increased activity at the CFTS project, increased costs at Norsk, the addition of Acasta and increased activity in Southeast Asia , partially offset by lower costs at HNZ Topflight and the Nova Scotia EMS contract.

The Corporation recorded a foreign exchange gain of $0.3 million in the fourth quarter, compared to a loss of $1.7 million in the comparable quarter last year. The $2.0 million variation is mostly explained by a loss recorded in 2015 on revaluation of net working capital accounts from foreign subsidiaries.

Adjusted EBITDAR and Adjusted EBITDA for the fourth quarter of 2016 were $7.5 million and $2.3 million respectively or 14.7% and 4.5% of revenues, compared to $7.7 million and $3.4 million a year earlier.

For the three-month period ended December 31, 2016 , the Corporation recorded an income tax expense of $1.5 million (income tax expense of $1.7 million for the comparative period in 2015). Income tax expense excludes the recognition of the benefit for losses incurred in various subsidiaries for which a tax benefit was not recognized during the three-month period ended December 31, 2016 .

Net loss attributable to the shareholders of the Corporation totaled $3.0 million or ($0.23) per share, compared to a net loss of $2.7 million , or ($0.20) per share in 2015. Cash flows related to operating activities were $1.5 million in the fourth quarter of 2016 versus $10.2 million in the corresponding period a year earlier.

"The fourth quarter reflected continued increases in Ancillary activity, combined with seasonality and ongoing pressure in the Canadian onshore due to lower resource activity. The addition of Acasta has broadened our exposure to a strong segment of the market, and we are seeing the benefits of the investment. While the offshore market remained flat, the recent contract awards are demonstrating our capability in the segment," said Don Wall , President and Chief Executive Officer of HNZ Group Inc. "We were pleased to be able to achieve modest profitability for the year in a difficult market, and finish 2016 with a strong balance sheet and $15.0 million cash on hand."

As at December 31, 2016 , the Corporation's financial position is strong with working capital of $58.1 million , and cash and cash equivalents of $15.0 million .

YEAR-END RESULTS
For the twelve-month period ended December 31, 2016 , revenue totaled $212.3 million , compared with revenue of $188.7 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 $7.5 million and an increase in onshore revenue of $2.3 million . The Corporation flew 40,828 hours over the twelve-month period ended December 31, 2016 , compared to 40,680 hours in 2015.

Adjusted EBITDAR and Adjusted EBITDA for the twelve-month period amounted to $45.2 million and $27.1 million respectively, compared to $32.6 million and $22.0 million a year earlier.

Net income attributable to the Shareholders of the Corporation totaled $3.4 million or $0.26 per share, compared to a net loss of $13.8 million , or ($1.05) per share in 2015. Cash flows related to operating activities were $12.9 million for the twelve-month period versus $13.4 million in the corresponding period a year earlier.

Adjusted Net Free Cash Flows for the twelve months ended December 31, 2016 totaled $10.6 million , compared to $10.3 million for the same period a year ago.

2016 AND POST-YEAR HIGHLIGHTS
Nova Scotia Offshore Operations Contract
On March 9, 2017 , the Corporation announced that it had secured a new, multi-year contract to provide helicopter services to support ExxonMobil Canada and Encana Corporation's activities offshore Nova Scotia , Canada.  The Corporation will supply two Sikorsky S-92 helicopters for a term of 3 years beginning late in the second quarter of 2017. Helicopter transportation is integral to supporting safe, day-to-day operations of the Sable Offshore Energy Project and the Deep Panuke Project, both of which are natural gas production facilities located approximately 200 kilometres from shore.

Extension of Nova Scotia Emergency Health Services Contract
On January 26, 2017 , the Corporation announced the extension of the Emergency Health Services ("EHS") LifeFlight air ambulance helicopter services contract with the Province of Nova Scotia . HNZ, operating under the Canadian Helicopters brand, will continue to support EHS through an amended agreement by supplying two Sikorsky S-76C+ helicopters, an upgrade from one currently employed Sikorsky S-76A model. The amended agreement is set to commence on August 1, 2017 with an expiration date of March 31, 2032 . Revenues are expected to be approximately $105 million over the course of the contract and will be invoiced in Canadian dollars.

Investment in Australia to Support INPEX Offshore Contract
On December 1, 2016 , the Corporation announced the creation of PHI HNZ Australia Pty Limited, a legal entity held 50% by PHI, Inc. ("PHI") and 50% by the Corporation, to provide offshore helicopter transportation services for the INPEX-led Ichthys LNG Project. The entity will supply up to four Sikorsky S-92 heavy helicopters, alongside the Ichthys Project's current aviation provider, in support of the safe and efficient installation, hook up, commissioning and production activities of this project's offshore facilities in Australia . The leased aircraft from PHI will be based out of Broome, Western Australia . The contract will commence on or before April 1, 2017 with a base term of five years, plus two, two-year option periods.

PHI HNZ Australia Pty Limited is designed to provide a comprehensive aircraft solution to the Ichthys Project. Employing PHI aircraft and HNZ employees, the entity will execute all aspects of the contract through service agreements providing personnel, equipment and support for flight operations, maintenance and administration.

Normal Course Issuer Bid
On August 25, 2016 , the Corporation announced the renewal of a normal course issuer bid ("NCIB") to repurchase up to 390,625 common shares and/or variable voting shares representing approximately 3% of the issued and outstanding common shares and variable voting shares, with daily repurchases limited to 1,059 common shares and/or variable voting shares other than block purchase exceptions. The NCIB will be conducted over a period of twelve months ending on August 28, 2017 . During the year ended December 31, 2016 , the Corporation repurchased 38,091 shares for a consideration of $421,962 (27,467 shares for a consideration of $303,245 were repurchased during the year-ended December 31, 2015 ).

Renewal of Offshore Oil and Gas Helicopter Support Contract in New Zealand
On June 1, 2016 , HNZ announced that HNZ New Zealand entered into an offshore oil and gas helicopter support contract with a consortium of customers which includes Shell Todd Oil Services Limited, AWE Taranaki Limited, OMV New Zealand Limited and Origin Energy Resources (Kupe) Limited, New Plymouth.

The contract commenced on April 1, 2016 , as HNZ began crew change helicopter services from New Plymouth to various offshore petroleum platforms in New Zealand using two AgustaWestland AW139 helicopters. This contract replaced two previous contracts HNZ held with the same customer group which collectively utilized three AW139 helicopters. One of the New Zealand based AW139 aircraft was redeployed to other opportunities outside the country. The initial term of the contract is five years with five one-year option periods, exercisable by the customer.

Revenues under the contract during the initial five year term are expected to be approximately $60 million ( $67 million NZD) including annual inflation adjustments over the period. The contract contains both US dollar and New Zealand dollar revenues, corresponding to the underlying costs of the operation.

Renewal of Offshore Oil and Gas Helicopter Support Contract with Shell Philippines Exploration
On June 1, 2016 , HNZ was awarded a five year extension to its existing contract with Shell Philippines Exploration, BV ("SPEX"). The extension replaced the original five one-year option periods at the expiry of the existing contract, and will be in effect from August 2017 to August 2022 . The contract for SPEX is for the supply of two AgustaWestland AW139 helicopters for the provision of services to the Malampaya Gas Platform.

Revenues for the extension period of five years are expected to be approximately $61 million ( $47 million USD ). Non-recurring costs of approximately $3 million USD were incurred in relation to transition of replacement aircraft into the contract during financial year 2016.

OUTLOOK
"Looking forward, we remain focused on expanding our presence in the offshore market which represented close to 45% of total revenue in 2016. In the past 12 months, HNZ's long-term visibility was enhanced as multi-year contracts were secured. These include the new INPEX-led Ichthys LNG offshore project and, subsequent to year-end, the Nova Scotia Emergency Health contract extension and expansion until 2032, as well as a three year Nova Scotia offshore operations contract. We are well positioned to take advantage of strategic growth opportunities through acquisitions, joint ventures and diversification," concluded Mr. Wall.

CONFERENCE CALL
The Corporation will hold a conference call to discuss these results on Friday, March 17, 2017 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: 74473973. This tape recording will be available until March 24, 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, 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 EBITDA, Adjusted EBITDAR, 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 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 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, 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 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, 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 may not be comparable with similar measures presented by other entities. Investors are cautioned that 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 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 December 31,

Twelve-month periods

ended December 31,

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

2016

2015

2016

2015






Revenue

50,925

48,761

212,341

188,732

Operating expenses before aircraft operating leases expenses

43,676

39,378

166,910

156,091

Foreign exchange (gain) loss

(287)

1,710

257

82

Adjusted EBITDAR

7,536

7,673

45,174

32,559

Aircraft operating leases expenses(1)

5,266

4,241

18,086

10,523

Adjusted EBITDA

2,270

3,432

27,088

22,036

Amortization

5,587

4,855

20,152

18,494

Trade name impairment charge(2)

17,400

Net (gain) loss on disposal of property, plant and equipment

(582)

210

(1,029)

(593)

Net financing charges

112

135

584

593

Change in fair value

350

(40)

350

(40)

Loss (income) before income taxes

(3,197)

(1,728)

7,031

(13,818)

Net (loss) income attributable to:





Shareholders of the Corporation

(3,001)

(2,652)

3,426

(13,766)

Non-controlling interests

(1,680)

(811)

(3,178)

(1,981)

Net (loss) income

(4,681)

(3,463)

248

(15,747)

 

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


Twelve-months ended

(in $000's)

December 31,
2016

December 31,
2015




Cash flows related to operating activities

12,915

13,411

Add:

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

6,450

3,571

Adjusted cash flows related to operating activities

19,365

16,982

Less:

Maintenance CAPEX

(8,726)

(6,724)

Adjusted Net Free Cash Flows

10,639

10,258

 

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.



2

During the third quarter of 2015, the Corporation recorded a trade name impairment charge of $17,400 thousand, $15,060 thousand net of taxes.


SOURCE HNZ Group Inc.


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