HNZ Group Inc., an international provider of helicopter transportation and related support services, has announced its financial and operating results for the first quarter ended March 31, 2017.
First quarter results
Revenue decreased by $5.9 million to $40.3 million in the first quarter of 2017, compared to $46.2 million a year ago, mainly as a result of lower offshore activity in Canada due to the completion of the Shell Halifax contract. The Corporation flew 6,404 hours compared to 6,569 hours in the first quarter of 2016, representing a decrease of 2.5 percent.
Offshore revenue decreased by $4.2 million primarily due to the completion of the Shell Halifax contract and reduced revenue from renegotiated offshore contracts, partially offset by increases in other contracts in Southeast Asia. Onshore revenue decreased by $1.2 million as a result of reductions in Asia Pacific, partially offset by increases in Canada and a full quarter of Acasta HeliFlight. Finally, ancillary revenue decreased by $0.5 million mainly due to decreased activity at Nampa Valley and flight training.
Operating expenses, before aircraft operating leases expenses, increased by $3.1 million to $40 million in the first quarter compared to last year.
The increase in operating expenses is primarily explained by increased offshore costs in Asia Pacific including net mobilization costs of $1.1 million for the new INPEX contract, higher maintenance costs in the Canadian VFR and higher support costs, partially offset by lower costs in the Shell Halifax contract.
The corporation recorded a foreign exchange gain of $0.1 million in the first quarter, compared to a gain of $0.6 million last year. The $0.5 million variation is mostly due to the depreciation of the Canadian dollar.
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 first quarter of 2017 were $0.4 million and ($2.1) million respectively, compared to $9.9 million and $5.5 million a year earlier.
Net loss attributable to the shareholders of the corporation totaled $4.8 million or ($0.37) per share, compared to a net income of $1.6 million, or $0.12 per share in 2016. Cash flows related to operating activities were ($3.1) million in the first quarter of 2017 versus ($1.4) million in the corresponding period a year earlier.
“The first quarter results reflect a transition period with four new long-term contracts in their start-up phases. The completion of the Shell Canada offshore support contract in Halifax and reduced revenue from renegotiated contracts also impacted results as anticipated. Furthermore, we experienced some weaker activity levels in the Asia Pacific onshore. As expected, our first quarter operations were subject to predictable seasonal weakness in the onshore. While overall market conditions remain challenging, we continue to demonstrate our capability to grow in a difficult market,” said Don Wall, president and chief executive officer of HNZ Group Inc.
As at March 31, 2017, the corporation’s financial position is strong with working capital of $53.7 million, and cash and cash equivalents, net of short-term debt, of $9.3 million.
Post-first quarter highlights
On May 8, 2017, the corporation announced that it has been awarded contracts by INPEX Operations Australia Pty Ltd (INPEX) and Shell Australia Pty Ltd (Shell) to provide offshore search and rescue services for the INPEX-led Ichthys LNG Project and the Shell-led Prelude FLNG Project. HNZ will supply one leased Sikorsky S-92 heavy helicopter to provide 365-day search-and-rescue and medical evacuation services, in support both offshore facilities in Australia.
The contract terms are five years, plus two, two-year optional renewal periods.
Outlook
“As another indication of our capability and momentum in the offshore market, we were recently awarded a five-year search-and-rescue offshore contract to support INPEX Operations and Shell in Australia. This new contract extends our relationships with both customers and reflects their continued confidence in our services. As a result of the four new contracts announced over the past six months, our contracted revenue is expected to increase by approximately $90 million on an annualized basis with contract terms ranging from three to 15 years.
From 2015 to 2017, we have seen our contracted revenue as a percentage of the total revenue increase from approximately one-half to two-thirds. We are looking forward to a solid second half of 2017 as we start to benefit from the contribution of new contracts,” concluded Wall.
