An unexpected demand for back taxes accumulated under previous ownership has led Offshore Helicopter Services (OHS) to issue a going concern warning in its latest accounts.
While the accounts cover the period to March 2022, the tax bill from HM Revenue & Customs (HMRC) arrived in October this year, the financial statement discloses.
This relates to the “underpayment of customs duty and import VAT” on goods brought into the country between September 2017 and March 2020, at which point the business was part of UK defence giant Babcock.
OHS believes it has a strong case for appeal and has “appointed tax and legal advisors and is currently preparing a multi-faceted defence, on various grounds”, in relation to “a complex set of circumstances given two successive changes in the company’s ownership since 31 August 2021”.
However, should it not prevail then the tax liability could be a sizeable one: including interest and any penalties, the total demand is for around £10 million ($12.4 million), the accounts state.
“In these circumstances, the company will need to obtain additional finance and/or reach agreement with HMRC regarding an installment repayment plan, neither of which are currently in place, in order for the company to continue as a going concern.
“As a result of this matter, the directors consider that there is a material uncertainty that may cast significant doubt over the company’s ability to continue as a going concern,” the accounts say.
Approached for comment, the company adds: “We believe the company has a strong defence and will keep staff fully updated throughout the legal process.”
No timeline for resolution of the tax issue has been disclosed, however.
OHS’s recent history is a complex one: in 2021 CHC Helicopter announced it had bought Babcock’s offshore transport business, but it was held at arm’s length pending the results of a review by the UK’s competition regulator.
But the probe concluded in June 2022 that the acquisition would harm competition in the sector, resulting in the sale of OHS to South Africa’s Ultimate Aviation Group in April this year.
Given the disruption, OHS’s latest accounts were only signed off on 10 November. The directors have prepared cash-flow forecasts for 12 months from that date “which indicate that the company will have sufficient funds to meet its liabilities as they fall due”, it states.
Those forecasts take into account recent price increases agreed with customers, the accounts note, alongside “other cost-saving measures”.
Ultimate Aviation’s owner Shaun Roseveare – and OHS director – has also “provided additional equity funding of £1.2 million” and has “provided written confirmation that he will provide additional funding during the next 12-month period should this become necessary”.
OHS registered a pre-tax profit of £28 million in the period to 31 March 2022 – a significant rise on the £13 million loss recorded the previous year – on turnover that rose to £113 million from £88 million.
Increased turnover was driven by higher activity generating an improvement in flying hours revenue of £11 million, plus “recharge revenue” of £5.3 million and intercompany revenue of £11 million – related to support of its sister businesses in Australia and Denmark.
Long-term contract fees brought in £35.5 million during the year, compared with £38 million in the previous period, while flying hours generated £48.5 million, up from £39.3 million.
But when exceptional items are excluded – chiefly a £41.3 million intercompany waiver between CHC and Babcock – the firm made an operating loss of £4.7 million against an operating profit of £1.1 million in the period to 31 March 2022.
Given the historic nature of the accounts, it is hard to gauge OHS’s current performance. However, the operator began a restructuring drive in August, a process which has now concluded.
