BC Ferries Releases Second Quarter Results

VICTORIA, Nov. 24, 2017 /CNW/ - British Columbia Ferry Services Inc. (BC Ferries) saw the highest passenger traffic levels in the second quarter that the company has experienced in over 20 years. Vehicle traffic levels were the highest BC Ferries has ever experienced in both the second quarter and year-to-date. During this quarter, passenger and vehicle traffic increased 5.2 per cent compared to the same quarter in the previous year, resulting in higher revenue and contributing favourably to net earnings. BC Ferries offered a range of deeply discounted fares for travel on off-peak sailings, as a way to improve affordability for travellers and to increase availability on the popular sailings.

"Our focus will continue to be on our customers and the communities we serve," said Mark Collins, BC Ferries' President and CEO. "We understand reliable, efficient and affordable service, combined with strong environmental stewardship, is important to our customers and coastal communities."

In the three months ended Sept. 30, 2017, revenues increased by 3.5 per cent (3.3 per cent year-to-date) compared to the same period in the previous fiscal year, due to the increased traffic volumes, partially offset by a lower average vehicle tariff. The average tariff per vehicle decreased across the system mainly as a result of the many promotional discounted fares offered during this period.  The average tariff per passenger did not increase over the previous year because there has been no passenger fare increase since April 1, 2016.

"BC Ferries thanks our many customers for travelling with us this summer," said Collins.
"Having you travel with us and having these positive results reduces future pressure on fares and enables continued investment in new vessels and terminal improvements."

With record high traffic levels over the summer season, and conscious of the impact this can have on ferry customers, BC Ferries provided an extra 460 round-trips over and above its regular summer schedule, with some vessels providing shuttle service on the inter-island routes. Over the past six months, BC Ferries also introduced three new vessels into service.

"We continued to engage with coastal communities to ensure our services meet their needs," said Collins. "In this quarter, we increased scheduled service on three routes – to Powell River, Gabriola Island and Denman Island – in consultation with these communities."

BC Ferries' net earnings in the three months ended Sept. 30, 2017 were $98.4 million, $3.2 million higher than in the three months ended Sept. 30, 2016.  Year-to-date, net earnings were $115.7 million, $6.5 million lower than in the same period in the prior year due to additional service and new vessels.  Due to the seasonality of ferry travel, net earnings in the first and second quarters are typically reduced by net losses in the last two quarters of the fiscal year when routine vessel maintenance is scheduled.

"During the busy peak season, BC Ferries generates higher net earnings that are offset by lower earnings when traffic decreases in the off-peak seasons," said Collins. "Net earnings fund service improvements such as new vessels, upgrades of terminals and fare reductions like the ones offered this past summer to provide customers with more fare choice."

"Record traffic points to the need to increase capacity and that means adding new vessels and upgrading infrastructure," said Collins. "During this quarter, BC Ferries spent over $52 million for new vessels, terminal improvements and communications, which is part of our continuous rebuilding of the ferry network."

Capital expenditures in the three and six months ended Sept. 30, 2017 totalled $52.3 million and $143.5 million respectively. Significant investments were made to complete the Salish Class vessel project, begin a mid-life upgrade on the Spirit of British Columbia, acquire the new northern vessel, Northern Sea Wolf, as well as improve customer facing technology.

Operating costs increased in the quarter by 3.4 per cent (6.0 per cent year-to-date) compared to the same period in the previous fiscal year.  Increases in fuel consumption, labour and training related costs arose from increased service levels to communities, higher traffic volumes, additional sailings provided and the introduction of new ships.

BC Ferries' financial statements, including notes and Management's Discussion and Analysis are filed on SEDAR and will be available at www.sedar.com. 

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 U.S. 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 Spirit of British Columbia mid-life upgrade, the Northern Sea Wolf and the direct ferry service between Port Hardy and Bella Coola, and the Provincial government initiatives. 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 First Nations 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 include, but are not limited to, average tariff revenue per vehicle and per passenger. 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.

Significant events during or subsequent to the second quarter of fiscal 2018 include the following:

Vessels

• On August 3, 2017, BC Ferries' third Salish Class vessel, the Salish Raven, commenced regularly scheduled service in the Southern Gulf Islands which enabled the retirement of the 53-year old Queen of Nanaimo.
  
  
• On August 30, 2017, BC Ferries took delivery of a 75-metre vessel, built in 2000, which will accommodate approximately 35 vehicles and 150 passenger and crew on a new route providing direct service between Port Hardy and Bella Coola. The vessel, named Northern Sea Wolf following an engagement process with community members and local First Nations, departed Greece for Canada in early November. Once in B.C., the Northern Sea Wolf will undergo extensive upgrades in preparation for regular service on the mid-coast in the summer of 2018.
  
  
• On September 6, 2017, the Spirit of British Columbia, commenced its mid-life upgrade. The mid-life upgrade includes the conversion to dual-fuel so it can operate on liquefied natural gas or ultra-low sulphur marine diesel.  The vessel is expected to return to service by the summer of 2018, prepared for a further 25 years of service.

General

• On September 6, 2017, BC Ferries was awarded the DuPont Global Safety Award which recognized BC Ferries' achievements and commitment to safety excellence through the SailSafe program, a joint initiative of the company and the B.C. Ferry and Marine Workers' Union. The DuPont Safety and Sustainability Awards recognize outstanding initiatives across all industries worldwide aimed at enhancing workplace safety, sustainability and operational effectiveness.
  
  
• On October 16, 2017, Corrine E. Storey assumed the role of Vice President and Chief Operating Officer. Ms. Storey was previously Vice President of Customer Services and has been with BC Ferries for 13 years.
  
  
• In November 2017, British Columbia Ferries Commissioner (the "Commissioner") released a review of BC Ferries' Annual Customer Satisfaction Tracking Survey dated October 17, 2017 prepared by MNP LLP.  The report makes several recommendations to revise and augment the survey including adopting other measurement tools, addressing all routes and customer segments, and enhancing reporting.  These recommendations will be addressed as BC Ferries explores, defines and implements new data collection methodologies, analysis and reporting.  The Commissioner's reports are available on the Commissioner's website at www.bcferrycommission.ca.
  
  
• In November 2017, the Commissioner released a Comparative Fare Analysis prepared by PricewaterhouseCoopers LLP, updating an earlier review conducted in 2012. The report indicates that fares at BC Ferries are generally comparable with similar ferry operators worldwide, and that BC Ferries' cost per nautical mile rankings with other ferry operators have not changed significantly since 2012.  The Commissioner's reports are available on the Commissioner's website at www.bcferrycommission.ca.  
  
  
• During the quarter, the Provincial government announced initiatives that include allowing B.C. seniors to travel free during the week, reducing fares by 15 per cent on some routes and freezing fares on three of the major routes while conducting an operational review of
  BC Ferries. BC Ferries is working with the Province, within the regulatory framework, to accomplish these objectives.

SOURCE British Columbia Ferry Services Inc.