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HNZ Group Inc. (the “Corporation”), an international provider of helicopter transportation and related support services, has announced its financial and operating results for the first quarter ended March 31, 2014.
FIRST QUARTER RESULTS
The Corporation generated revenue of $56.0 million in the first quarter of 2014, compared with revenue of $54.2 million a year ago. The increase in revenue was due to an increase in Instrument Flight Rules (IFR) and Ancillary revenues, partially offset by a decrease in Visual Flight Rules (VFR) revenues. The Corporation flew 9,787 hours compared to 9,272 hours in the first quarter of 2013, an increase of 5.6 percent.
IFR revenue increased by $11.2 million mainly due to an increase in activity in the oil and gas sector in New Zealand and the start of the previously-announced Shell offshore support contract in the Philippines in September 2013. VFR revenue decreased by $11.7 million primarily due to the loss of the forest fire suppression contract in Australia, reduced activities in Afghanistan and decreased activities in environmental work in Antarctica partially offset by increased oil and gas activities in Western Canada. Ancillary revenue increased by $2.3 million due to higher revenues in repair and maintenance revenues from the Nampa and Heli-Welders businesses and increased activities in aircraft leases partially offset by lower ground handling activity in the Southern Hemisphere.
Operating expenses increased by $4.3 million in the first quarter compared to last year, mainly due to selling, general and administrative expenses, which increased by $3.5 million to $16.4 million. This increase is mainly explained by the increase in support and base costs in the Southern Hemisphere operations in connection with the increased activities in New Zealand and the contract in the Philippines.
EBITDAR and EBITDA for the first quarter of 2014 were $12.5 and $9.6 million, compared to $13.4 and $12.8 million a year earlier. Changes in operating margins reflect the decrease of activity in Afghanistan and the increasing use of helicopter operating leases in the offshore oil and gas sector. Furthermore, during the quarter, the Corporation recorded a foreign exchange net loss of $0.4 million compared to a net gain of $0.3 million last year.
Net income attributable to the shareholders of the Corporation totaled $3.6 million, or $0.27 per share in the first quarter of 2014, compared to $6.5 million, or $0.50 per share for the same period in 2013. Cash flows related to operating activities before net change in non-cash working capital balances and deferred revenues were $9.7 million in the first quarter of 2014, versus $11.4 million in the corresponding period a year earlier, mainly due to lower net income.
Net free cash flows totaled $8.2 million in the first quarter, compared to $8.5 million for the same period a year ago. For the twelve-month period ended March 31, 2014, net free cash flows stood at $54.1 million, compared with $54.3 million for the year ended December 31, 2013.
“We are pleased with HNZ’s results in the first quarter. Our operations generated an increase in year-over-year revenues despite a reduction of our activity in Afghanistan,” said Don Wall, president and chief executive officer of HNZ Group Inc. “HNZ benefited from higher levels of activity in the oil and gas sector in both the Southern and Northern Hemispheres, as well as improved ancillary revenue from our Nampa and Heli-Welders repair and maintenance subsidiaries. Importantly, the Corporation’s strong performance also resulted from the ongoing implementation of our Shell offshore support contract in the Philippines which started in September of last year.”
As at March 31, 2014, the Corporation’s financial position remains strong with working capital of $52.8 million and debt net of cash and cash equivalents and bank indebtedness, of $6.2 million, with $18 million drawn under the Corporation revolving operating credit facility of $125 million that matures on January 31, 2017. The Corporation also has an option to increase the credit facility to $175 million subject to certain conditions. For the first quarter, the long-term debt-to-equity ratio was 0.07, compared to 0.21 last year.
OUTLOOK
“Although revenues from our work in Afghanistan will continue to decrease throughout the year, we consider the prospects for HNZ from its traditional sources of business to be strong. Our recent successes in the offshore oil and gas sector have positioned the Corporation to capture additional opportunities in the Asia Pacific market, and we see considerable potential in oil and gas pipeline activity in Western Canada. HNZ is also well positioned to benefit from a recovery in mining and exploration activity. HNZ’s solid financial position will enable us to be proactive in the search for organic expansion and beneficial acquisitions,” concluded Wall.
CHANGES IN MD&A DISCLOSURE
During the first quarter of 2014, the Corporation added “Net free cash flows” and “EBITDAR” measures in its MD&A. Management believes this supplementary disclosure provides useful additional information to the cash flows of the Corporation including the amount available for distribution to the shareholders, repayment of debt and other investing activities.
