HNZ GROUP INC
Don Wall
President and Chief Executive Officer
Tel: 780-429-6919
Tel: 450-452-3007
• Revenue of $43.8 million, versus $51.5 million last year
• Adjusted EBITDAR of $7.7 million or 17.6% compared to $9.6 million or 18.6% a year ago
• Adjusted EBITDA of $6.1 million or 13.9% compared to $7.1 million or 13.8% a year ago
• Net loss of $0.1 million or ($0.005) per share, versus net income of $2.0 million or $0.16 per share last year
• Investment in Norsk Helikopterservice AS, an offshore helicopter provider based in Stavanger, Norway
• Solid financial position with a $3.1 million net cash position and $125 million credit facility, allowing HNZ to pursue organic growth or opportunistic acquisitions
MONTREAL, August 13, 2015 - HNZ Group Inc. (TSX: HNZ.A, HNZ.B) (the "Corporation"), an international provider of helicopter transportation and related support services, today announced its financial and operating results for the second quarter ended June 30, 2015.Financial Highlights | Quarters ended June 30, | Six months ended June 30, | ||
(in thousands of dollars, except per share data) | 2015 | 2014 | 2015 | 2014 |
Revenue | 43,830 | 51,459 | 80,365 | 107,410 |
Adjusted EBITDAR (1) | 7,731 | 9,567 | 9,197 | 22,048 |
Adjusted EBITDA (2) | 6,093 | 7,113 | 5,977 | 16,730 |
Net (loss) income (3) | (64) | 2,036 | (3,107) | 5,629 |
Per share - basic and diluted ($) | (0.005) | 0.16 | (0.24) | 0.43 |
Adjusted cash flows related to operating activities (4) | 4,839 | 6,440 | 6,601 | 16,101 |
Weighted-average shares outstanding (all classes) | 13,068,700 | 13,068,700 | 13,068,700 | 13,068,700 |
(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, goodwill impairment charge (if any), change in fair value of the obligation to purchase the shares of non-controlling interests in subsidiaries as disclosed in the reconciliation of the EBITDA and EBITDAR (see reconciliation in the Non-IFRS financial measures section)
(3) Attributable to the shareholders of the Corporation
(4) Before net changes in non-cash working capital balances and deferred revenues (see reconciliation in the Non-IFRS financial measures section)
CHANGE IN BUSINESS SEGMENTATION
During the first quarter, the Corporation changed the reporting of its financial results to designate the following business segments: offshore operations; onshore operations; and ancillary services. This new segmentation reflects Management's view of the business and also HNZ's growth strategy going forward, with an emphasis on growing offshore helicopter
transportation services. See section CHANGES IN BUSINESS SEGMENTATION AND MD&A DISCLOSURE.
The Corporation generated revenue of $43.8 million in the second quarter of 2015, compared with revenue of $51.5 million a year ago. This decrease is mostly due to the completion of the USTRANSCOM contracts in Afghanistan in October 2014, partially offset by increased activities in Canadian onshore operations. The Corporation flew 10,658 hours compared to
11,365 hours in the second quarter of 2014, a decrease of 6.2%.
Onshore revenues decreased by $9.4 million due to reduced activities in Afghanistan, partially offset by increased forest fire fighting activities in Canada. Offshore revenue increased by $0.7 million from the second quarter of 2014, mainly due to increased revenues from the Shell offshore support contract in the Philippines and from the newly-acquired business of Norsk Helikopterservice AS ("Norsk"), partially offset by a decrease in oil and gas revenues in New Zealand. Ancillary revenue increased by $1.0 million mainly due to additional revenues earned from Nampa and Heli-Welders and increased flight training revenues from HNZ Topflight, partially offset by a decrease in aircraft leasing revenues.
Operating expenses before aircraft operating leases expense decreased by $4.8 million in the second quarter compared to last year. The decrease in operating expenses was proportionally less than the decrease in revenue reflecting a change in revenue mix.
Adjusted EBITDAR and adjusted EBITDA for the second quarter of 2015 were $7.7 million and $6.1 million respectively or
17.6% and 13.9% of revenues, compared to $9.6 million and $7.1 million or 18.6% and 13.8% of revenues a year earlier.
Net loss attributable to the shareholders of the Corporation totaled $0.1 million, or ($0.005) per share in the second quarter of 2015, compared to $2.0 million, or $0.16 per share for the same period in 2014. Adjusted cash flows related to operating activities before net change in non-cash working capital balances and deferred revenues were $4.8 million in the second quarter of 2015, versus $6.4 million in the corresponding period a year earlier, mainly due to reduced activities and revenues compared to the previous year.
Adjusted net free cash flows for the six months ended June 30, 2015 were $2.1 million, compared to $12.8 million for the same period a year ago. For the twelve-month period ended June 30, 2015, adjusted net free cash flows stood at $17.8 million, compared with $28.5 million for the year ended December 31, 2014.
"The second quarter reflected significant ongoing headwinds in the resource sector. As a result, we have implemented cost control measures with respect to personnel, fleet and support costs. Increased activity in the forestry sector in western Canada and at HNZ Topflight have partially offset the weakness in the domestic market," said Don Wall, President and Chief Executive Officer of HNZ Group. "We were pleased to announce an investment in Norsk in Norway during the second quarter, which will open up the Norwegian offshore market. We are excited about HNZ's prospects for that region. Additionally, final preparations for our operations in Halifax, Nova Scotia to support Shell Canada's exploration campaign have commenced. As expected, both the partnership with Norsk and the offshore Shell contract in Nova Scotia have required acquisition and startup costs which are reflected in the quarter."
As at June 30, 2015, the Corporation's financial position is strong with working capital of $40.8 million, and cash and cash equivalents of $10.2 million, combined with an operating credit facility drawdown of $7.1.
For the six-month period ended June 30, 2015, revenue stood at $80.4 million, compared with revenue of $107.4 million in the corresponding period of 2014. This variation is explained by a decrease in onshore revenue of $25.5 million and a
decrease in offshore revenue of $1.6 million, partially offset by an increase in ancillary revenue of $0.1 million. The Corporation flew 17,683 hours over the six-month period ended June 30, 2015, compared to 21,152 hours in the same period in 2014.
Adjusted EBITDAR and adjusted EBITDA amounted to $9.2 million and $6.0 million respectively, compared to $22.0 million and $16.7 million a year earlier.
The Corporation incurred a net loss attributable to the shareholders of the Corporation of $3.1 million, or ($0.24) per share, compared to a net income of $5.6 million, or $0.43 per share for the same period in 2014. Adjusted cash flows related to
operating activities before net change in non-cash working capital balances and deferred revenues totaled $6.6 million, versus $16.1 million in the corresponding period a year earlier.
On June 1, 2015, the Corporation announced that it had acquired an interest in Norsk, an offshore helicopter provider based in Stavanger, Norway, through a combination of common shares, representing a 49.9% voting and equity interest in Norsk,
and convertible debt.
Norsk's offshore operations provide crew transport to oil and gas customers within the Norwegian continental shelf. It currently operates one Sikorsky S-92 heavy aircraft supporting ad hoc work for oil and gas operators. Norsk employs approximately 25 people and operates out of Stavanger's Sola Airport. The Norwegian offshore market is one of the largest in the world and Norsk is well positioned to benefit from new activity and retendering opportunities from existing contracts.
HNZ's investment in Norsk and Norway represents its first in the European market and complements its operations in North
America and the Asia-Pacific region.
On July 27, 2015, the Corporation announced the appointment of Matthew Wright as Vice President and Chief Financial
Officer. Mr. Wright, formerly Manager of Investor Relations and Financial Analysis, has been with the Corporation since
January 2014. Mr. Wright holds a Masters of Business Administration with a finance specialization from the University of
Alberta, a Masters of Theological Studies from the University of Toronto and is a CFA charterholder.
Mr. Wright's appointment will be effective as of August 15, 2015. He will replace Robert Lafleur and both will work together during the transition period.
"Going forward, our emphasis remains on cost control and pursuing offshore opportunities in eastern Canada, Norway and Asia-Pacific. We anticipate headwinds in the resource sector for the balance of the year, which will primarily affect the onshore business in Canada. Accordingly, we are focused on aligning the business for the current market environment. We continue to sell surplus aircraft and have sold two this year for total proceeds of $0.9 million. Our balance sheet remains
strong, and with a net cash position of $3.1 million and a $125 million operating credit facility, we are well positioned to meet our ongoing obligations," concluded Mr. Wall.
During the first quarter, the Corporation changed the reporting of its financial results to the following business segments:
offshore operations; onshore operations; and ancillary services. This new segmentation reflects Management's view of the business and also HNZ's growth strategy going forward, with an emphasis on growing offshore helicopter transportation services.
Offshore operations revenue is generated from helicopter transportation services. It is comprised of work mainly related to personnel and cargo transport using medium and heavy category aircraft for oil and gas or mining companies. The offshore operations also include medevac and search and rescue activities, and the provision of crew to an international oil and gas company in Australia. Offshore revenue typically relies on fixed monthly standing charges plus an hourly flying rate.
Onshore operations revenue is also generated from helicopter transportation services. Onshore operations are diverse and typically use light and some medium category aircraft to perform work for a short period or season for oil and gas, mining and utility companies and governmental entities. Our onshore operations also include the provision of Emergency Medical Services for the government of Nova Scotia and our contracts with the United States Transportation Command for the North Warning System and in previous years in Afghanistan. The onshore revenue is currently earned primarily from our activities in Canada and Antarctica and has inherent seasonality and variability in demand.
Ancillary services revenue is mostly generated from the Corporation's repair and maintenance services in Canada and in the United States, from flight training in Canada including the internationally recognized HNZ Topflight advanced training centre in Penticton, British Columbia, and from other minor sources including aircraft leases.
The Corporation will hold a conference call to discuss these results on Friday August 14, 2015 at 11:00 AM (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: 95792494. This tape recording will be available until August 21, 2015.
HNZ Group is an international provider of helicopter transportation and related support services with operations in Canada, New Zealand, Australia, Norway, Southeast Asia and Antarctica. The Corporation operates in excess of 120 helicopters to support offshore and onshore charter activities. Offshore operations worldwide are provided through HNZ Global and partner Norsk while onshore charter operations are managed by Canadian Helicopters in Canada, 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 third-party repair and maintenance services and flight training including the internationally recognized HNZ Topflight advanced training centre in Penticton, British Columbia. HNZ Group is a publically traded company on the Toronto Stock Exchange (TSX: HNZ.A, HNZ.B) and is headquartered near Montreal, Canada employing approximately 700 personnel from 34 locations around the world.
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. Examples of such statements include, but are not limited to, the financial position, results of operations, objectives, dividend policy, participation in bidding processes, continuing business relationship with actual or
potential key clients (in particular Rio Tinto and Shell), expected revenues from contracts with key clients, seasonal levels of activity, maintenance of contractual relationships, impact of any economic uncertainty, the Corporation's ability to reduce operating costs, 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.
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 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 or referred to 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.
This press release contains certain non-IFRS financial measures as defined under applicable securities legislation, including adjusted EBITDAR, adjusted EBITDA, Adjusted cash flows related to operating activities 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, goodwill impairment charge (if any) and change in fair value of the obligation to purchase the shares of non-controlling interests in subsidiaries. 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.
• References to "Adjusted cash flows related to operating activities" are to cash flows related to operating activities before net changes in non-cash working capital balances and deferred revenues.
• References to "Adjusted net free cash flows" are to cash flows from operating activities before net change in non-cash working capital balances and deferred revenues less "Maintenance CAPEX" as determined by management. 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 determined by management.
Since Adjusted EBITDAR, Adjusted EBITDA, Adjusted cash flows related to operating activities and Adjusted Net Free Cash Flows are useful to many investors to compare issuers on the basis of the ability to generate cash from operations on a recurring basis, management believes that in addition to net income, Adjusted EBITDAR, Adjusted EBITDA, Adjusted cash flows related to operating activities and Adjusted net free cash flows are useful supplementary measures. 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 EBITDAR, Adjusted EBITDA, Adjusted cash flows related to operating activities 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 EBITDAR, Adjusted EBITDA, Adjusted cash flows related to operating activities and Adjusted net free cash flows may not be comparable with similar measures presented by other entities. Investors are cautioned that Adjusted EBITDAR, Adjusted EBITDA, Adjusted cash flows related to operating activities and Adjusted net free cash flows should not be construed as alternatives to net income 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.
Revenue 43,830 51,459 80,365 107,410
Operating expenses before aircraft operating leases
expenses 37,443 42,169 72,673 85,251
Foreign exchange loss (gain) (1,344) (277) (1,505) 111
Adjusted EBITDAR 7,731 9,567 9,197 22,048
Aircraft operating lease expenses1 1,638 2,454 3,220 5,318
Adjusted EBITDA 6,093 7,113 5,977 16,730
• Amortization 4,626 4,401 9,081 8,384
• Net (gain) loss on disposal of property, plant and
equipment (249) 703 (310) 785
• Net financing charges 225 150 309 346
Income (loss) before income taxes 1,491 1,859 (3,103) 7,215
Net (loss) income attributable to:Shareholders of the Corporation (64) 2,036 (3,107) 5,629
Non-controlling interests (209) 16 (150) 165
Net (loss) income (273) 2,052 (3,257) 5,794 Adjusted cash flows from operating activities and Adjusted net free cash flow Reconciliation to cash flows from operating activities Six months ended Last twelve months ended Year ended June 30, June 30, June 30, December 31,(in $000's)
2015 2014 2015 2014
Cash flows related to operating activities (307) 19,861 17,668 37,836
Add (deduct):
Net change in non-cash working capital balances
and deferred revenues 6,908 (3,760) 6,702 (3,966)
Adjusted cash flows related to operating activities 6,601 16,101 24,370 33,870Less:
Maintenance CAPEX 4,509 3,271 6,604 5,366
Adjusted net free cash flows 2,092 12,830 17,766 28,504
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.comand on SEDAR at www.sedar.com.
1 The aircraft operating lease expenses exclude the payments made to lessors to cover variable costs for leased aircraft such as maintenance and crew costs.
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