HNZ sees stagnant second quarter, shifts towards offshore
Canadian helicopter services company HNZ Group’s second quarter has been stagnant, seeing slight decreases in revenue and net income for the period but an increase in offshore operations.
Onshore revenue saw a drop-off of $4.5 million, which HNZ attributes to lower VFR activity in western Canada and the completion of an onshore contract in the Asia Pacific region. This is offset by an offshore revenue boost of $6.3 million during 2016. The group saw flight hours drop 7.2% from 11,557 to 10,725 year-on-year.
HNZ saw a net loss from cutting operations with Norwegian operator Norsk helicopters due to “challenges in the Norwegian market”. It also saw large up-front investment costs from opening four new long-term contracts in Australia and Canada.
Don Wall, president and CEO of HNZ Group, said: “HNZ’s second quarter revenue was approximately the same as the comparable period last year, but represented a continued shift towards offshore revenue. The quarter was one which reflected the impact of the decision to cease funding Norway based Norsk, significant start-up costs for the commencement of four new long term contracts in Australia and Canada and onshore activity weakness.
“Global market conditions and local operating challenges had emerged since the initial investment in Norway and we made the decision to terminate rather than continue to incur significant losses. Norsk-related losses for the quarter were $3.3 million.”
Revenue up, expenses up
HNZ signed an offshore contract with Japanese oil company INPEX and an INPEX-Shell joint search and rescue (SAR) contract in the Asia Pacific region. Both contracts boosted revenue and increased expenses. The revenue boosts were offset slightly by the completion of a Shell Halifax.
“Net mobilization and other startup costs incurred for the start of INPEX-Shell SAR and PHI/HNZ operations, as well as ExxonMobil/Encana and Nova Scotia EMS contracts, were $3.7 million in the quarter. While challenging for the quarter, these one-time costs incurred set the stage for significantly improved profitability for the balance of 2017 and beyond,” said Wall.
Position and outlook
HNZ’s position remains “strong”, according to the financial report. The company has $51.7 million available in cash and equivalents and a short-term debt of $11.1 million. The position is solidified with a $75 million credit facility.
The group has lost contracts and gained them, leaving results relatively unchanged for the second quarter. The signed contracts represent $90 million. Closing the report, Wall said: “We enter the second half of 2017 with our long-term contracts recently signed, representing approximately $90 million in annualized revenues. As we have previously indicated, our recurring revenue base from long-term contracts now accounts for approximately two thirds of HNZ’s total revenue.
“We have continued to experience weakness in our onshore markets and continue to look to match our cost structure with it. Our financial position remains strong, and allows us to seek new opportunities for investment and growth.”