HNZ Group Inc., an international provider of helicopter transportation and related support services, today announced its financial and operating results for the second quarter ended June 30, 2016.
Second quarter results
Revenue increased by $15 million to $58.8 million in the second quarter of 2016, compared to $43.8 million a year ago, as a result of increased revenue from all three business segments.
The corporation flew 11,698 hours compared to 10,658 hours in the second quarter of 2015, an increase of 9.8 percent.
Offshore revenue increased by $5.3 million from the second quarter of 2015 due to the Shell Canada offshore support contract in Halifax, increased business in Southeast Asia and a full quarter of activity from our Norsk subsidiary in Norway, partially offset by a reduction in offshore activity in New Zealand.
Ancillary revenue increased by $5 million primarily due to increased activity at Nampa Valley, Heli-Welders, the Contracted Flying and Training Services (CFTS) project and HNZ Topflight.
Finally, onshore revenue increased by $4.7 million as a result of the new North Warning System contract (NWS), the addition of Acasta HeliFlight Inc. (Acasta), increased utility flying in Canada due to fire suppression activity and a short term seismic support contract in New Zealand.
Operating expenses, before aircraft operating leases expenses, increased by $5.9 million to $43.3 million in the second quarter compared to last year. The increase in operating expenses is primarily explained by the incremental Shell Halifax contract, increased costs at Nampa Valley and Heli-Welders associated with increased activity, the addition of Acasta, and non-recurring lease transition costs associated with the Shell Philippines contract renewal, partially offset by reductions in support costs.
Adjusted earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs (EBITDAR) and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for the second quarter of 2016 were $14.7 million and $10.4 million respectively or 25 percent and 17.7 percent of revenues, compared to $7.7 million and $6.1 million a year earlier.
Net income attributable to the shareholders of the corporation totaled $3.1 million or $0.24 per share, compared to a net loss of $0.1 million, or $0.00 per share for the same period in 2015.
Cash flows related to operating activities were $3.8 million in the second quarter of 2016 versus $4.4 million in the corresponding period a year earlier.
Adjusted net free cash flows for the six months ended June 30, 2016 totaled $8.7 million, compared to $2.1 million for the same period a year ago. For the 12-month period ended June 30, 2016, adjusted net free cash flows stood at $16.8 million, compared with $10.3 million for the year ended December 31, 2015.
“Our second quarter results reflect continued momentum with offshore support contracts, the U.S. Department of Defense North Warning System contract, ancillary services, as well as fire suppression activity and the short-term seismic contract in New Zealand,” said Don Wall, president and chief executive officer of HNZ Group.
“This solid quarter was achieved with improved operating conditions in most business segments and continued efforts to drive down costs. The company incurred non-recurring lease transition costs of $1.8 million in the period to take advantage of significantly improved market lease rates benefitting the longer run cost structure.
HNZ also negotiated a new favourable credit agreement with its lenders reducing its facility in order to minimize unwarranted standby charges. In Canada, the oil-and-gas and other resource sectors remain challenging with no indication of imminent improvement.”
As at June 30, 2016, the corporation’s financial position is strong with working capital of $54.2 million, and cash and cash equivalents, net of bank indebtedness of $14.7 million, combined with short-term debt of $5.4 million.
Six-month results
For the six-month period ended June 30, 2016, revenue totaled $105 million, compared with revenue of $80.4 million in the corresponding period of 2015. This increase is explained by higher offshore revenue of $11.7 million, an increase in ancillary revenue of $7 million and an increase in onshore revenue of $5.9 million. The corporation flew 18,267 hours over the six-month period ended June 30, 2016, compared to 17,683 hours in the same period in 2015.
Higher revenues also reflect larger aircraft revenues, resulting in a revenue mix change.
Adjusted EBITDAR and adjusted EBITDA for the six-month period amounted to $24.6 million and $15.9 million respectively, compared to $9.2 million and $6 million a year earlier.
Net income attributable to the shareholders of the corporation totaled $4.7 million or $0.36 per share, compared to a net loss of $3.1 million, or $0.24 per share for the same period in 2015.
Cash flows related to operating activities were $2.5 million for the six-month period versus $(0.3) million in the corresponding period a year earlier.
Second quarter highlights
New Zealand
On June 1, 2016, HNZ announced that its wholly-owned subsidiary, HNZ New Zealand Limited, 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 U.S. dollar and New Zealand dollar revenues, corresponding to the underlying costs of the operation.
Shell Philippines Exploration
On June 1, 2016, HNZ announced that HNZ New Zealand Limited 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). There are non-recurring costs of approximately US$3 million in relation to transition of replacement aircraft into the contract which will occur during financial year 2016. These costs will be recovered across the term of the extension period.
Outlook
“As indicated in the past, we remain focused on growing our presence in the offshore market. We are pleased to have renewed oil-and-gas offshore contracts in New Zealand and the Philippines. These have allowed us to secure multi-year assignments and thus extend HNZ’s long-term visibility. We are poised to take advantage of opportunities in both onshore
and offshore markets as they arise. Meanwhile we continue to benefit from a solid balance sheet, which will allow us to remain opportunistic in the marketplace,” concluded Wall.
