Bristow positioned for growth, as CEO ‘applies Aesop’s lessons’: analysts


Global helicopter operator Bristow is positioned for growth next year, according to Chris Bradshaw, group president and CEO. Industry specialists consulted by Helicopter Investor (HI) agree – with one even suggesting Bradshaw’s strategy was applying lessons taught in Aesop’s Fables.

“The Americas is the first place we started to see some green shoots of additional activity and we are supporting a small number of incremental [oil and gas] exploration projects in the Americas region,” Bradshaw told an investor call recently. “We believe a broader base activity will increase in earnest in 2023.”

During the call Bradshaw reported a net loss of $15.8m for the year ended March 31st on total revenues of $1.185bn. That compared with a net loss of $56.1m on total revenues of $1.178bn for the previous fiscal year. In fourth quarter (Q4) results to March 31st, 2022, the company posted a net loss of $4.3m on operating revenues of $275.6m versus a net loss of $0.1m for the quarter ended December 31st, 2021 on operating revenues of $285m. (Bristow’s Q4 results often reflect reduced flying hours due to poor weather and fewer daylight hours in the northern hemisphere).

Bradshaw also highlighted Bristow’s acquisition of British International Helicopters [BIH] – which operates in the Falkland Islands – and the operators’ government services business. This has grown from US and UK government contracts to include the Netherlands, the Dutch Caribbean and the Falkland Islands. The operator is awaiting the results of its tender to the UK government for the Search and Rescue (SAR) generation two contract.

Clark McGinn, principal of consultancy Uplifting Advice, tells HI the industry is grappling with three big challenges in the form of: competition (too many operators); helicopter oversupply (despite the loss of the H225) and the need to generate operational efficiencies to mitigate falling revenues.

“The good news is that the new Bristow management has grasped all three of these themes,” McGinn tells us. “They have embraced consolidation, firstly through the BRS/ERA merger bringing much needed consolidation to the Gulf of Mexico and latterly through exiting Australia and acquiring BIH.”

The executive team has also been active in right-sizing the fleet in the past two years, selling 64 helicopters and generating $82m. “While those helicopters had been written-down on value, the disposals lost around a further $7m, but kudos for addressing this head-on,” says McGinn.

Also, the return of 14 S-92 helicopters and two AW139s to lessors has been an additional reduction in over-capacity. “The merger predicted run-rate expense savings of an annualised $35m, that was raised to $50m, and the investor’ call confirmed actual savings of $53m,” he adds.

Bristow’s senior management team also won praise after the call from David Fowkes MD – head of Aviation and Aerospace Investment Banking, Raymond James. “It’s a really tough market and Chris has always been laser-focused on delivering strong free-cash flow,” Fowkes tells HI. “You constantly hear him stressing return on capital – he’s always focused on his lenders and investors.”

Fowkes went so far as to evoke Aesop’s Fables. “It’s like the story of the ant and the grasshopper. Chris prioritises the critical and often difficult work required to provide the strength and flexibility needed to navigate whatever the seasons bring. It’s allowed Era, and now Bristow, to pivot and deliver investor value in an industry that people once thought was a commodity, and then were convinced required a premium service and now turns out may be a commodity business after all.”

After inheriting “a ton of baggage” from the BRS/ERA merger, the Bristow team is “working the plan”, said Fowkes. The stability of their growing government services contract business exerts a moderating influence to balance the historically volatile oil and gas environment, he said. “SAR and related contracts are a much more stable and predictable business than oil and gas, in which helicopter operators continue to struggle to earn an acceptable return,” he says.

Revenue from oil and gas now accounts for less than 60% of group revenue while earnings from government services has now risen to about 25%.

However, with oil topping $100 a barrel, more equipment and personnel are being flown to existing offshore platforms as producers look to boost output through increased well maintenance. Platform rotations are migrating back to two weeks compared with the three weeks more common in a low oil price environment. Finally, exploration has begun to show signs of picking up after a long relatively inactive period. All of these point to the potential to generate more demand for flights in the near-term.

But both McGinn, from Uplifting Advice, and Fowkes stressed the toughness of the current market. “The bad news is that, even with the purposeful successes, the group is still not making an operating profit, although FY22’s loss of $15m is significantly less than last year’s $56m,” says McGinn.

While earnings before interest, tax, depreciation and amortisation (EBITDA) grew from $465m to $112m, it is indicative of suggestions in these competitive markets that adjusted EBITDA fell by $25m year-on-year, he says. But balance sheet and liquidity metrics remain comfortable, which allowed the asset-backed loan lenders to extend the maturity of that facility.

“Bradshaw and his team seem to be doing all the right things, but are playing against the behemoths of cost, the supply chain procurement managers in the oil companies,” says McGinn.

“This is a cyclical market and we are, as Chris said in the call, edging to a better supply/demand dynamic. But it is not here yet. Assuming the OEMs maintain the current low production lines for oil and gas, and hoping that further operator consolidation continues, the tide is slowly in Bristow’s favour. But a lot could go wrong.”


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