Bristow’s rainy day savings
Management teams rarely get the credit for being conservative, but Bristow definitely deserves it. In October 2014 BC (before oil crash), Jonathan Baliff said that Bristow was collecting cash for when markets got tougher or interest rates rose. It was a sensible decision.
Bristow had a good 2015 financial year, which ended on March 31, 2015. Its revenue rose 13.9% to $1.7 billion compared to $1.5 billion in 2014. Its Large Aircraft Equivalent (Bristow’s unique way of looking at its fleet) rose from 158 to 166 aircraft. But its adjusted net income fell by 18% to $134 million, compared to $163 million in 2014. Changes in foreign exchange rates accounted for much of this drop – taking of $39.4 million – with much of this from the Brazilian real. Its LACE rate also fell from $9.34 million to $9.21 million during the year.
Bristow is continuing to grow – its UK SAR programme is on time and on budget (rare for a large UK infrastructure programme) – and it is now operating at four bases.
But – as Baliff predicted in October – Bristow faces tough markets. “Our LACE rates are coming down. A lot of that is due to cost efficiencies by our clients with reduced activity per aircraft. So we are seeing a lot of excess aircraft in the marketplace, because our competitors are doing the same thing,” said Baliff on an analyst call. “We all want to make our clients more efficient. So there is excess capacity in the marketplace which then knock-on effects are usually we are predicting lower LACE rates, lower utilization.”
“We all want to make our clients more efficient. So there is excess capacity in the marketplace which then knock-on effects are usually we are predicting lower LACE rates, lower utilization.”
Although Bristow expects oil prices to rise it is expecting volatility to delay new off-shore projects. Bristow expects the North Sea and the Gulf of Mexico to be particularly tough. It is also fairly negative about Brazil in the short term. The company however is seeing some new opportunities in the Caribbean and South America.
“The Asia-Pacific region appears to be a rare bright spot,” said Jeremy Akel, senior vice president and chief operating officer at Bristow. “We are pursuing several additional opportunities in Australia and in the regions to support an increase in offshore development activity.” [Note – There are still some places left at Helicopter Investor Asia 2015 – Singapore June 8]
“The Asia-Pacific region appears to be a rare bright spot”
Bristow is estimating a fall of between 5 per cent and 10 per cent in its oil and gas revenues for the 2016 financial year. The UK SAR contract and Airnorth – the airline is acquired –will help with some of this.
“We still believe an improvement in the business environment for our clients is likely to move through a U-shaped recovery,” said Baliff, on an analyst call. “But it will take longer to recover, 18 to 24 months from today, compared to what we were talking about before which was 12 to 24 months.”
But these tough markets are also an opportunity for Bristow. In October last year Baliff also said that they would be using their cash reserves to acquire other companies. Baliff ended the call saying 2016 would be eventful.