Mitchaa states:
Completely disagree.
Response: I respect your opinion, Sir. However my position is simply based on facts provided by the regulatory filings of the company and other publicly available information and my own personal knowledge and experience. I have no desire to see the failure of CHC (and have no affiliation to them now, or in the past), but the pure facts of the matter are pretty serious and apparent.
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There are 2 market leaders in the helicopter transportation business, CHC and Bristows, all other helicopter operators pale insignificant in comparison.
Response: As a global operator, it is extremely vulnerable to local or global competition in many of it's operating arenas. Size can be a benefit or a detractor, dependent on the condition of the parent. Pricing can be the most significant differentiator on any of these contracts, and if you can no longer price strategically and profitably to maintain or grow market share, then the door is wide open to the competition.
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With regards to which company is bigger, it possibly changes year to year but over the last few years, CHC have posted higher revenue figures each year, they are bringing in the most amount of money out of any operator world wide.
Response: The continual reversion to revenue as some kind of indicator of the health and status of the company, is completely deceiving, utterly irrelevant, but perhaps worse, maybe an indicator of the prior management strategy? . Some might suggest that this is precisely what got this organization into this bind - driven by a focus on increasing revenue without maintaining and protecting the fundamentals of the business. The soundest advice I ever received on this subject, was "Revenue is Vanity, Profit is Sanity and Cash is King".
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Name one other market leader anywhere that has ever went belly up and out of business? (Market leader remember please). Nope, you can't, they literally are too big to go under.
Response: OK, I'll bite - Eastman Kodak, but this is yet another irrelevant part of the discussion.! Market rules evolve and change, and any number of huge and pre-eminent businesses have either shrunk, or failed, in many cases reappearing as parts of the whole as they are sold off to support the core organization from folding. General Motors, Chrysler and just about every North American airline have successfully reorganized and returned to the marketplace. Enron never did!
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Where is this ludicrous suggestion coming from in the first place? The relationship to the share price? It's already been established that the majority of the company is not being traded upon, some 80% or so, so why are people getting worked up about a volatile share price in a volatile market?
Response: Agreed, the share price is actually irrelevant as it represents a very small part of the share holding (you may well wish to disagree with that comment if you are unfortunate enough to own this stock), but it is however a very sound indicator and response to the overall condition of the organization. The financials reported by CHC detail exactly what is wrong and the current state of the group. It is not ludicrous, not made up, but purely factual in legally required and certified public documents.
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CHC may post a $100m loss this financial year but many companies involved in oil and gas are. BP have just posted a $6.5bn loss. VW posted a near $2bn loss in a single quarter. Tesco posted a £6.5bn loss last year. What's $100m in the grand scheme of things when revenue is some 15-17x higher?
Response: It is alarming that you could be so cavalier in your attitude to simply brushing aside losses as a percentage of operating revenues, more concerning it has been going on for a long time - this company will not survive with that attitude, and it is clearly not shared by the new management (or board) and their current attempts to restructure the organization. Quoting very specific one time losses from other companies is simply irrelevant, as none of it is in relation to the identifiable cause, their overall operating revenues, the financial condition of the companies prior to these reports, and with consideration to the massive capital investment these organizations commit to, years in advance. The exception might be Tesco which appears to potentially be fraudulent accounting and conceivably may not survive.
First Reserve earlier this year told investors that the roughly $700 million of their cash that it invested in CHC in 2008 was valued at about $56 million at the end of 2014, according to people familiar with the correspondence.
Source.
First Reserve?s Funds Pitch South - WSJ
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As for other companies circling around like vultures? You do understand what has to be in place for new contracts yes? Not just aircraft and trained staff, but new bases, spares, hangar space, legal certification and approval and so on and on.
Response: Absolutely. There are local (both regional and global) competitors in every market CHC operates in, many are hungry as they lost work to some competitor or another in the past - anything is possible if the need demands. According to various posts here on this site, as many short term contracts are ending, crews are being laid off and aircraft parked. No company is going to hold onto assets that cost money and produce no revenue - just look at the current restructuring being undertaken by a disciplined and ordered management already at CHC. Hangars can be disposed of or built rapidly. Parts inventories are the bane of all operators, as they tie up massive amount of cash, cost money to maintain and continually depreciate. Parts inventories can be liquidated instantly even at vastly discounted rates and converted into CASH - they are the primary target of every accountant in the helicopter business! Survival changes all the rules.
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If the worst did happen and CHC went bankrupt, that does not necessarily mean the end of the line, they would not cease to operate, all that would happen is a buy out or a change in ownership. They would keep the profitable parts of the business that are making money and the existing infrastructure and staff.
Response: Totally agree, but again, anything is possible. It may see a smaller core business recovering from the influx of cash from the disposal of operating units and assets. There is a massive amount of cash floating around the globe right now, due to the poor performance of so many markets and businesses. However, no buyer will be found for the organization unless the business fundamentals are stabilized and turned around. The only way a distressed company will ever find a buyer is if it is discounted enough to allow the purchaser to recoup the money they will have to invest to turn it around.
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There's not even a small part of me that thinks CHC are finished. They literally are too big to go under and cease to exist.
Response: I admire your confidence. Personally, I would never make a statement like that, or subscribe to it. In business or life, anything can happen. In survival and turn around mode, all the rules are gone, anything and everything is on the table for discussion and on the block for sale. CHC has liquidated assets, ploughed in more cash, sold part of the company to a new investor and is still burning up cash on a daily basis. I do sincerely wish you all well, I would not like to see CHC fail.
Only time will tell.