BC Ferries Releases Second Quarter Results

VICTORIA, Nov. 22, 2019 /CNW/ - BC Ferries released its second quarter results today for the three months ended September 30, 2019.

During the quarter, BC Ferries provided over 48,000 sailings, carrying 7.7 million passengers and 2.9 million vehicles. Passenger traffic decreased by 1.5 per cent, while vehicle traffic increased by 0.1 per cent compared to the same quarter in the prior year. Year-to-date, BC Ferries has carried 13.5 million passengers and 5.3 million vehicles, an increase of 0.1 per cent and 1.2 per cent, respectively, compared to the same period in the prior year. 

The company's net earnings for the second quarter of fiscal 2020 were $95.0 million, compared to net earnings of $90.9 million for the same quarter of the previous year. Year-to-date, since April 1, 2019, net earnings were $107.2 million, $10.3 million higher than in the same period in the prior year. 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 and traffic declines.

"All net earnings are reinvested back into the coastal ferry system, which is critical to ensure we continue to operate a resilient and affordable service," said Mark Collins, BC Ferries' President & CEO. "It appears that the traffic growth has reached its peak and, coupled with the recent price cap ruling, this makes prioritizing capital expenditures even more important. We engage with the communities we serve to prioritize our capital investments and levels of service. We are focused on a safe, reliable and sustainable system to serve our customers over the long term."

All net earnings are used to the benefit of ferry users including:

• Investing in infrastructure such as new vessels and terminals
• Improving the service, including increasing the number of sailings provided on a number of routes
• Offering discounts, reducing and freezing fares to provide more affordable travel
• Minimizing borrowing to lower the interest paid on debt
• Strengthening the ability to weather challenging economic conditions including weak traffic years

"Our 12-Year Capital Plan anticipates investing $3.9 billion to ensure system capacity, operational efficiency, resiliency and flexibility – all essential for efficient and sustainable operations," said Collins. "Our Clean Futures Plan outlines our strategy to reduce greenhouse gas emissions by replacing carbon intensive fossil fuels with clean energy. Ferry users expect us to both reinvest in the future and protect the pristine environment in which we operate." 

Capital expenditures in the three and six months ended September 30, 2019 totalled $29.9 million and $55.8 million respectively. Significant investments include the new Island Class vessels, Spirit Class mid-life upgrades, customer experience program, Texada Island wingwall replacement and various other projects.

BC Ferries' full financial statements, including notes and Management's Discussion and Analysis, 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: net earnings, fares, the 12-Year Capital Plan, the Clean Futures Plan to reduce greenhouse gas, the number of sailings, Island Class vessels, Spirit Class mid-life upgrade, the customer experience program, the Texada Island wingwall replacement, and other investment projects, and our borrowing expectations.  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.

SIGNIFICANT EVENTS SECOND QUARTER FISCAL 2020

Significant events during or subsequent to the Second Quarter of Fiscal 2020 include the following:

General

• The Coastal Ferry Act allows BC Ferries to submit additional information for the BC Ferries Commissioner's consideration in setting price caps generally, and in the final price cap determination, specifically. On September 5, 2019, BC Ferries filed supplemental information to the Commissioner regarding capital expenditures and financial resilience that the company believes are required to meet the long-term needs of ferry users, communities and the public. 
  
  
• On September 30, 2019, the BC Ferries Commissioner issued a ruling that established final price cap increases of 2.3 per cent for each of the four years of performance term five, being the four year period commencing on April 1, 2020 and ending on March 31, 2024. 
  
  
• Also on September 30, 2019, the Commissioner released a performance review of the efficiency of BC Ferries prepared by PwC. The report concludes that BC Ferries is exhibiting good cost control and should continue the current efforts to manage costs and increase efficiencies. The foregoing three documents are available on the Commissioner's website at: www.bcferrycommission.ca.
  
  
• On October 15, 2019, BC Ferries completed a private placement of $250 million of 30-year senior secured bonds with accredited investors. These bonds bear interest at a rate of 2.794 per cent per annum, payable semi-annually. The net proceeds of this new issue will be used, together with additional cash on hand, to provide for capital expenditures, general corporate purposes and to fund the series reserve account. These bonds were rated "A (high)" by DBRS and "AA-" by Standard & Poor's ("S&P").
  
  
• At the start of fiscal 2019 (April 1, 2018), BC Ferries, with partial funding from the Province, reduced fares on the minor and northern routes by 15 per cent. Fares on the three Metro Vancouver – Vancouver Island routes were held constant. These initiatives are in place through March 31, 2020.

Vessels

• On October 18, 2019, the Commissioner issued Order 19-02B, approving a supplementary application to amend the approved major capital expenditure amount for the construction and introduction of one new Salish Class vessel and four new Island Class vessels. The initial Order 19-02 granted on January 7, 2019, and Order 19-02B are available on the Commissioner's website at www.bcferrycommission.com.
  
  
• On October 25, 2019, contracts became effective with Damen Shipyard Group of Netherlands for the construction of four new Island Class vessels expected to enter service during fiscal 2023.  These four vessels are in addition to the two Island Class vessels which are expected to enter service in fiscal 2021.  The Island Class vessels will be outfitted with battery electric-hybrid propulsion and will each have a capacity of up to 450 passengers and approximately 47 vehicles. The total project budget for the four additional vessels, including financing and project management costs, is approximately $200 million.

SOURCE British Columbia Ferry Services Inc.