June 21, 2019 - 8:22 PM EDT
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BC Ferries Releases Year-End Results

Canada NewsWire

Earnings Reinvested in New Vessels, Terminal Upgrades and Information Technology

VICTORIA, June 21, 2019 /CNW/ - BC Ferries released its year-end results today with consolidated net earnings of $52.2 million for fiscal 2019, compared to consolidated net earnings of $59.9 million for fiscal 2018. This year, BC Ferries experienced the highest vehicle traffic levels ever and passenger traffic levels were the second highest in the company's history.

"High traffic volumes allow good financial results which enable us to expand our service to communities, renew the fleet, upgrade terminals, pay down debt and reduce future borrowing," said Mark Collins, BC Ferries' President and CEO. "These are essential for a sustainable and environmentally-friendly ferry system. Our $3.9 billion 12-year capital plan addresses the need for a more resilient ferry service and emphasizes capacity, operational efficiency, affordability and flexibility."

BC Ferries invested $241.1 million in capital expenditures in the 12 months ended March 31, 2019 comprised of:

  • $133.5 million in vessel upgrades and modifications
  • $49.0 million in new vessels
  • $28.2 million in information technology
  • $19.5 million in terminal building upgrades and
  • $10.9 million in terminal marine structures

Clean, sustainable and quiet operations are top priorities for BC Ferries. The company now has five vessels operating on liquefied natural gas (LNG). While still a fossil fuel, it is a cleaner and less expensive fuel source than the ultra-low sulphur diesel used for the other vessels. The cable ferry, which operates between Buckley Bay on Vancouver Island and Denman Island, has smaller power requirements than a traditional ferry, leading to a reduction in greenhouse gas emissions of approximately 50 per cent.

BC Ferries is investing in clean, modern ferry technology. The company currently has two Island Class electric battery hybrid ships under construction for service to coastal communities on Northern Vancouver Island. When electric technology matures and electricity is available in the quantities required, BC Ferries plans to operate them as fully electric ferries. Batteries for these two new vessels are supplied by Corvus Energy, a B.C. company. In May 2019, BC Ferries issued a Request for Proposals for technical services to reduce underwater radiated noise from its vessels. This is to help reduce impacts on southern resident killer whales.

"Continued investment to reduce our environmental footprint is of great importance to BC Ferries," said Collins. "We are on a path to greater sustainability by continuously developing and implementing innovative and cost-effective ways to minimize our impact on the coastal environment in which we operate."

BC Ferries also continues to focus on fare affordability. At the start of fiscal 2019 (April 1, 2018), BC Ferries, with partial funding from the Province, reduced the fares on all routes by 15 per cent, with the exception of the three Metro Vancouver – Vancouver Island routes. Fares on these routes were held constant. The B.C. seniors' passenger discount was also increased from 50 per cent to 100 per cent for travel Monday to Thursday. There are no fare increases being introduced in Fiscal 2020.

Vehicle traffic increased 1.9 per cent and passenger traffic increased 1.2 per cent over the prior year. To accommodate the higher traffic volumes and improve the customer experience, BC Ferries provided 877 additional round trips throughout the system over the previous year and 3,281.5 more round trips over and above what was required under the Coastal Ferry Services Contract. The company also adjusted the schedule for the routes operating out of Horseshoe Bay terminal. 

During fiscal 2019, the company also re-introduced the upgraded Spirit of British Columbia into service and implemented a new reservation system. Together, these actions resulted in an increase in labour, fuel consumption, and training-related costs partially offset by the lower cost reflecting the Spirit of British Columbia's consumption of LNG rather than marine diesel. The increase in operating expenses also included the impact of higher marine diesel prices, wage rate increases in accordance with the Collective Agreement and higher depreciation. As a result, total operating expenses increased $36.4 million from $784.3 million to $820.7 million

BC Ferries' full financial statements, including notes and Management's Discussion and Analysis, as well as the company's Statement of Executive Compensation for fiscal 2019, are filed on SEDAR and will be available at www.sedar.com

BC Ferries is one of the largest ferry operators in the world based on passengers transported annually and transportation infrastructure, and carried 22.3 million passengers and 8.9 million vehicles during the fiscal year ended March 31, 2019.  BC Ferries provides frequent year-round ferry transportation services to the west coast of Canada on 25 routes, currently supported by 35 vessels and 47 terminals, and also manages other remote routes through contracts with independent operators.

FORWARD LOOKING STATEMENTS
This release contains certain "forward looking statements". These statements relate to future events or future performance and reflect management's expectations regarding our growth, results of operations, performance, business prospects and opportunities and industry performance and trends. They reflect management's current internal projections, expectations or beliefs and are based on information currently available to management. Some of the market conditions and factors that have been considered in formulating the assumptions upon which forward looking statements are based include traffic, the Canadian Dollar relative to the US Dollar, fuel costs, construction costs, the state of the local economy, fluctuating financial markets, demographics, tax changes, and the requirements of the Coastal Ferry Services Contract.

Forward looking statements included in this release include statements with respect to: the 12-year capital plan, Performance Term Five, fares, alternative fuel options, Island Class vessels, the cable ferry, the minor class vessel replacements, the major class vessel replacements, underwater radiated noise, and the Spirit Class mid-life upgrades.  In some cases, forward looking statements can be identified by terminology such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential", "continue" or the negative of these terms or other comparable terminology. A number of factors could cause actual events or results to differ materially from the results discussed in the forward looking statements. In evaluating these statements, prospective investors should specifically consider various factors including, but not limited to, the risks and uncertainties associated with: vendor non-performance; capital market access; interest rate, foreign currency, fuel price, and traffic volume fluctuations; the implementation of major capital projects; security, safety, and environmental incidents; confidential or sensitive information breaches; changes in laws; vessel repair facility limitations; economic regulatory environment changes; tax changes; and Aboriginal rights and title claims.

Actual results may differ materially from any forward looking statement. Although management believes that the forward looking statements contained in this release are based upon reasonable assumptions, investors cannot be assured that actual results will be consistent with these forward looking statements. These forward looking statements are made as of the date of this release, and British Columbia Ferry Services Inc. assumes no obligation to update or revise them to reflect new events or circumstances except as may be required by applicable law.

NON-IFRS MEASURES
In addition to providing measures prepared in accordance with International Financial Reporting Standards (IFRS), we present certain financial measures that do not have any standardized meanings prescribed by IFRS and therefore are unlikely to be comparable to similar measures presented by other companies. These supplemental financial measures are provided to assist readers in determining our ability to generate cash from operations and improve the comparability of our results from one period to another. We believe these measures are useful in assessing operating performance of our ongoing business on an overall basis.

BACKGROUNDER

Significant events in fiscal 2019 or subsequent to the period include the following:

Cost of Travel

  • On April 1, 2018, BC Ferries applied a fare reduction of 15 per cent on all routes with the exception of the three Metro Vancouver – Vancouver Island routes where they were held constant. The B.C. seniors' passenger discount increased from 50 per cent to 100 per cent for travel Monday to Thursday. 

  • On April 1, 2019, as agreed with the Province, fares were held at the same level. The total estimated value of these initiatives over fiscal 2019 and fiscal 2020 is approximately $98 million, of which BC Ferries will contribute $39 million in foregone revenue and the Province will contribute $59 million towards the fare reduction and increase to the B.C. Seniors' discount.

  • On June 1, 2019, due to current fuel market conditions, the company implemented a fuel surcharge of 1.5 per cent on average on all routes with the exception of the Port HardyPrince Rupert, Prince Rupert – Haida Gwaii and Port Hardy – Central Coast routes.

Vessels

  • On June 6, 2018, the Spirit of British Columbia and on April 18, 2019, the Spirit of Vancouver Island returned to service on our TsawwassenSwartz Bay route following their mid-life upgrades. These mid-life upgrades, which will enable the vessels to be in service for another 25 years, included major upgrades to the customer amenities, and the conversion to dual-fuel so the vessels can operate on LNG or ultra-low sulphur marine diesel.

  • On September 16, 2018, BC Ferries commenced direct seasonal service between Port Hardy and Bella Coola using the Northern Adventure, running through to October 11, 2018. On May 18, 2019, the Northern Sea Wolf entered service in the Central Coast region. The Northern Sea Wolf, a 75-metre vessel built in 2000, underwent extensive upgrades necessary to bring it up to BC Ferries and Transport Canada's standards of safety and reliability.  The vessel accommodates approximately 35 vehicles and 150 passengers and crew.   

  • On October 5, 2018, BC Ferries issued a Request for Expression of Interest ("RFEOI") for the procurement of up to five new major vessels to replace aged fleet assets with the procurement process open to local, national and international shipyards. These new major vessels will reflect capacity and levels of service consistent with the current Coastal and Spirit Class vessels in size, capabilities and passenger amenities. These vessels are anticipated to begin service in 2023 on the three Metro Vancouver and Vancouver Island which will allow for the retirement of the Queen of Alberni, Queen of New Westminster, Queen of Cowichan and Queen of Coquitlam. 

  • On January 7, 2019, the BC Ferries Commissioner approved BC Ferries' application of a major capital expenditure for one Salish Class vessel and four Island Class vessels. The procurement process includes two Request for Proposals ("RFP") open to local, national and international shipyards.  The first RFP issued in November 2018 is for the construction of one vessel, identical to our existing Salish Class vessels, with a capacity of 600 passengers and approximately 138 vehicles and an expected delivery date in 2021. The second RFP issued in December 2018 is for the construction of four additional 81-metre Island Class ferries, each with a capacity of up to 450 passengers and approximately 47 vehicles. The expected delivery date of the first two Island Class vessels is in 2020, with the following two ships expected to be delivered in 2021. 

  • On February 7, 2019 and on March 14, 2019, two new Island Class vessels were launched with provisional delivery in Romania expected in the summer.  When these new vessels are placed into service in early 2020, it will allow BC Ferries to retire the 60-year old North Island Princess and the 54-year old Howe Sound Queen.  The company intends to deploy the first new vessel to provide service between Powell River and Texada Island and the second new vessel to provide service between Port McNeill, Alert Bay and Sointula.

  • On May 6, 2019, BC Ferries issued a Request for Proposals to identify a proponent to provide expertise in a program-based approach to manage and minimize underwater radiated noise in both new vessel design and construction, as well as with existing vessels operating in the Salish Sea. 

General 

  • On January 25, 2019, the Commissioner issued Order 19-03, superceding Order 17-02.  It re-established the criteria for determining a major capital expenditure requiring advance approval.  The Commissioner's orders are available on the Commissioner's website at www.bcferrycommission.com.

  • On February 22, 2019, the Province released its report on the review of coastal ferry services in British Columbia.  Based on recommendations in the report, on May 16, 2019, the Province enacted legislation to amend the Coastal Ferry Act.

  • On April 1, 2019, the Commissioner released the Preliminary Decision on Price Caps for Performance Term Five, setting increases in price caps at 2.3 per cent per year from April 1, 2020 through March 31, 2024.  BC Ferries is reviewing the preliminary decision and providing additional information.  The Commissioner will issue the decision on final price caps by no later than September 30, 2019.

 

BRITISH COLUMBIA FERRY SERVICES INC.
Consolidated Statements of Financial Position
(Expressed in thousands of Canadian dollars)





As at March 31


2019

2018

Assets



Current assets



Cash and cash equivalents

59,888

69,913

Restricted short-term investments

31,651

32,276

Other short-term investments

74,648

114,259

Trade and other receivables

23,246

26,258

Prepaid expenses

8,306

8,434

Inventories

30,870

31,584

Derivative assets

8,145

12,530


236,754

295,254

Non-current assets



Loan receivable

24,515

24,515

Land lease

-

29,771

Property, plant and equipment

1,820,232

1,713,080

Intangible assets

101,029

99,802


1,945,776

1,867,168

Total assets

2,182,530

2,162,422




Liabilities



Current liabilities



Accounts payable and accrued liabilities

80,173

77,233

Interest payable on long-term debt

18,429

18,537

Contract liabilities

28,709

32,034

Current portion of long-term debt

57,183

34,594

Current portion of accrued employee future benefits

2,000

3,000

Current portion of lease liabilities

2,184

1,652

Provisions

62,778

60,372


251,456

227,422

Non-current liabilities



Accrued employee future benefits

20,583

21,299

Long-term debt

1,222,860

1,279,775

Lease liabilities

39,797

38,769

Other liabilities

9,516

7,750


1,292,756

1,347,593

Total liabilities

1,544,212

1,575,015




Equity



Share capital

75,478

75,478

Contributed surplus

25,000

25,000

Retained earnings

525,006

477,955

Total equity before reserves

625,484

578,433

Reserves

12,834

8,974

Total equity including reserves

638,318

587,407

Total liabilities and equity

2,182,530

2,162,422




 

 

BRITISH COLUMBIA FERRY SERVICES INC.
Consolidated Statements of Comprehensive Income
(Expressed in thousands of Canadian dollars)





Years ended


March 31

2019

2018




Revenue



Vehicle and passenger fares

618,215

640,234

Net retail

63,860

60,071

Fuel rebates

(4,585)

(19,386)

Other income

11,093

11,367

Revenue from customers

688,583

692,286




Ferry service fees

206,566

178,540

Federal-Provincial Subsidy Agreement

30,504

29,782

Total revenue

925,653

900,608




Expenses



Operations

525,895

498,343

Maintenance

81,697

87,615

Administration

39,868

38,399

Depreciation and amortization

173,250

159,916

Total operating expenses

820,710

784,273




Operating profit

104,943

116,335




Net finance and other expenses



Finance expenses

59,194

60,679

Finance income

(6,182)

(5,495)

Net finance expense

53,012

55,184

(Gain) loss on disposal and revaluation of property, plant and equipment and intangible assets

(258)

1,178

Net finance and other expenses

52,754

56,362




NET EARNINGS

52,189

59,973







Other comprehensive income



Items that will be reclassified subsequently to net earnings

7,450

13,580

Items that will not be reclassified subsequently to net earnings

7,945

(118)

Total other comprehensive income

15,395

13,462

Total comprehensive income

67,584

73,435




 

 

BRITISH COLUMBIA FERRY SERVICES INC.
Consolidated Statements of Cash Flows
(Expressed in thousands of Canadian dollars)





Years ended


March 31

2019

2018




Cash flows from operating activities






Net earnings

52,189

59,973




Items not affecting cash



Net finance expense

53,012

55,184

Depreciation and amortization

173,250

159,916

Loss on disposal of property, plant and equipment

59

376

Other non-cash changes to property, plant and equipment

(1,016)

1,809

Changes in:



Accrued employee future benefits

(1,716)

43

Derivative assets and liabilities recognized in net earnings

52

(64)

Provisions

2,406

4,661

Long-term land lease

-

459

Accrued financing costs

378

(233)

Total non-cash items 

226,425

222,151

 

Movements in operating working capital



Trade and other receivables

3,012

(10,939)

Prepaid expenses

128

(980)

Inventories

714

(3,327)

Accounts payable and accrued liabilities

2,940

22,060

Contract liabilities

(2,425)

11,329

Change in non-cash working capital

4,369

18,143

Change attributable to capital asset acquisitions

(3,298)

(24,258)

Change in non-cash operating working capital

1,071

(6,115)

Cash generated from operating activities

279,685

276,009

Interest received

5,649

5,560

Interest paid

(65,335)

(65,615)




Net cash generated by operating activities

219,999

215,954



 

 

BRITISH COLUMBIA FERRY SERVICES INC.
Consolidated Statements of Cash Flows
(Expressed in thousands of Canadian dollars)





Years ended


March 31

2019

2018

Cash flows from financing activities



Proceeds from long-term debt

-

45,264

Repayment of long-term debt

(35,282)

(35,312)

Repayment of lease liabilities

(2,184)

(1,583)

Dividends paid on preferred shares

(6,038)

(6,038)

Deferred financing costs

-

(1,417)

Net cash (used in) generated by financing activities

(43,504)

914




Cash flows from investing activities



Proceeds from disposal of property, plant and equipment

292

476

Purchase of property, plant and equipment and intangible assets

(227,048)

(220,936)

Changes in debt service reserve

625

150

Net proceeds from short-term investments

39,611

1,323

Net cash used in investing activities

(186,520)

(218,987)




Net decrease in cash and cash equivalents

(10,025)

(2,119)




Cash and cash equivalents, beginning of year

69,913

72,032




Cash and cash equivalents, end of year

59,888

69,913

 

BRITISH COLUMBIA FERRY SERVICES INC.
Consolidated Statements of Cash Flows
(Expressed in thousands of Canadian dollars)















Share
capital

Contributed
surplus

Retained
earnings

Total
equity
before
reserves

Reserves

Total
equity
including
reserves

Balance as at April 1, 2017

75,478

25,000

424,020

524,498

(3,066)

521,432

Net earnings

-

-

59,973

59,973

-

59,973

Other comprehensive income

-

-

-

-

13,462

13,462

Realized hedge gains recognized in fuel swaps

-

-

-

-

(1,670)

(1,670)

Hedge losses on interest rate forward contract reclassified to net earnings

-

-

-

-

248

248

Preferred share dividends

-

-

(6,038)

(6,038)

-

(6,038)








Balance as at March 31, 2018

75,478

25,000

477,955

578,433

8,974

587,407








Impact of adoption of IFRS 15

-

-

900

900

-

900








Balance as at April 1, 2018

75,478

25,000

478,855

579,333

8,974

588,307

Net earnings

-

-

52,189

52,189

-

52,189

Other comprehensive income

-

-

-

-

15,395

15,395

Realized hedge gains recognized in fuel swaps

-

-

-

-

(11,783)

(11,783)

Hedge losses on interest rate forward contract reclassified to net earnings

-

-

-

-

248

248

Preferred share dividends

-

-

(6,038)

(6,038)

-

(6,038)








Balance as at March 31, 2019

75,478

25,000

525,006

625,484

12,834

638,318

 

SOURCE British Columbia Ferry Services Inc.

View original content: http://www.newswire.ca/en/releases/archive/June2019/21/c8062.html

Media Contact: BC Ferries, Media Relations, Victoria: (250) 978-1267; Customer Contact: Victoria: (250) 386-3431, Toll-free: 1-888-BCFERRY (1-888-223-3779)Copyright CNW Group 2019


Source: Canada Newswire (June 21, 2019 - 8:22 PM EDT)

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