2014 Annual Report


Don WallHNZ Group’s strength has always been in the quality and dedication of its people. In 2014, our employees around the world executed over 46,000 hours of safe, reliable and efficient helicopter transportation services and completed a range of maintenance, repair and training operations to our over 700 customers. The HNZ brand is gaining prominence within the global marketplace, and we continue to strive to increase our competencies and geographic footprint throughout the world.

This past year marked the conclusion of our contracts in support of the US military in Afghanistan. With over 60,000 accident-free hours flown over the five and half year period and over $400 million generated in revenue, our crews and support staff performed above expectations in executing this challenging mandate. Simply put, this contract significantly and positively impacted our company operationally, reputationally and financially.

HelicopterWhile we recognize this past achievement, we remain steadfastly focused on the future and we are committed to the ongoing success of HNZ Group. Moving forward post-Afghanistan, our strategy is to diversify our business and gain market share in offshore helicopter support contracts for oil and gas companies and governmental entities. This includes personnel and cargo transport as well as search and rescue operations. To broaden our geographic footprint and customer base in this competitive industry, we have strengthened our team by making strategic talent additions in 2014.

We are pleased to have added Rick Burt to the HNZ team in July as Vice President Offshore Operations, Business Development and Strategy. Rick’s contributions with respect to safety and technological innovation are well-known within the industry. He brings 35 years of offshore helicopter experience both as a pilot and in operational and executive roles.

Most recently, we welcomed Christine Baird to the HNZ team in November as a Strategic Advisor. During her three decades with a major helicopter provider, she led the international division through a period of tremendous growth. She brings a thorough knowledge of operations, industry networks and international business cultures to our target markets.

These additions combined with the appointment of Larry Murphy to the Board of Directors have enhanced our industry knowledge and positioned our company to succeed in the execution of our strategy.

In January 2015, we announced a new contract for Shell Canada for helicopter services from Halifax, Nova Scotia. Following a competitive tender process, HNZ was awarded a contract to support Shell’s “Shelburne Basin Venture Exploration Drilling Project”. The contract will utilize two Sikorsky S-92 heavy aircraft for offshore personnel and cargo transport and medevac services, and a third Sikorsky S-92 for dedicated search and rescue operations. The contract is expected to begin mid-2015 for a term of 260 days and generate approximately $20 million dollars in revenue.

As we expand our capabilities to include operating heavy offshore aircraft including a full, all weather search and rescue service in the North Atlantic, we believe that this contract indicates our initial success in executing our strategy and diversifying our business. Accordingly, the addition of this contract into our portfolio of activities is already driving increased tendering opportunities as our experience, capabilities and personnel continue to establish the HNZ brand as a global industry player.

Our financial results for 2014 reflect the conclusion of our Afghanistan contracts, the reduction of mining activity due to sustained lower commodity prices, and the dramatic decrease in the price of oil which marked the second half of the year. Total revenues amounted to $207.5 million for the twelve month period, while adjusted EBITDAR and EBITDA came to $44.0 million and $34.7 million or 21.2% and 16.7% respectively. Our net income of $12.3 million translated into $0.94 per share. Starting in fiscal 2015, we will return to greater seasonality with stronger results expected in the second and third quarters.

For the third consecutive year our global operations did not incur a single accident. We take nothing for granted, but recognize the efforts of all of our employees to continually drive our safety-conscious culture.

Consistent with our ongoing fleet strategy, HNZ sold seven surplus aircraft during 2014 for total net proceeds of $11.8 million. Going forward in 2015 and beyond, we expect to dispose of as many as thirteen additional surplus aircraft for estimated proceeds between $25 and $30 million.

HelicopterWe expect to continue to face headwinds in the Canadian market and also from reduced offshore oil and gas exploration as customers reduce discretionary capital expenditures and look for pricing concessions from their suppliers. However, we believe that there is some promise for increased tenders for offshore production support work as customers revisit markets to seek more favourable pricing.

Given HNZ’s solid financial position with no long-term debt, $14.1 million in cash, the value of surplus aircraft and a $125 million credit facility, we are well positioned to meet all of our ongoing obligations including the payment of dividends. Further, it is our intention to opportunistically pursue acquisitions and organic growth to build shareholder value.

Finally, in response to the downturn in the natural resource sector that is mainly affecting the Canadian business, we will continue to operate as efficiently as possible including managing our expenses and cost structure prudently.

I remain optimistic about the prospects of HNZ into 2015 and beyond due to the quality and motivation of our people. Their commitment and professionalism continues to enhance every aspect of the organization and I wish to express my thanks for their service over the past year. I also want to extend my appreciation to the members of the Board for their counsel and the shareholders of HNZ for their support.

Don Wall

Don Wall
President and Chief Executive Officer