TIDMGMS
RNS Number : 0042V
Gulf Marine Services PLC
04 August 2020
04 August 2020
Gulf Marine Services PLC
('Gulf Marine Services', 'GMS', 'the Company' or 'the
Group')
Interim results for the six months ended 30 June 2020
Financial Overview
H1 2020 H1 2019
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US $m US $m
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Revenue 49.8 55.0
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Gross profit 14.4 9.7
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General and administrative expenses 4.9 8.6
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Adjusted EBITDA[1] 31.4 23.4
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Asset impairment 0.0 (4.6)
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Loss for the period after tax (6.7) (16.7)
======== =======
Adjusted profit/(loss) for the period 1.8 (12.2)
======== =======
Net cash flow before debt service[2] 15.2 14.1
======== =======
Financial Highlights
-- Adjusted EBITDA increased by 34% to US$ 31.4 million (H1
2019: US$ 23.4 million) with an adjusted EBITDA margin of 63% (H1
2019: 43%). This reflects the benefit of cost savings and improved
utilisation, despite the impact of COVID-19 on the market
environment and operations. Full year adjusted 2020 EBITDA guidance
of US$ 57.0 - 62.0 million is reconfirmed and is now expected to be
at the upper end of the range.
-- Progress continues on the programme to reduce costs. The
2019/20 cost saving programme has secured US$ 16.5 million in
savings, on an annualised basis, significantly exceeding the
original target of US$ 6.0 million set in March 2019. As a result
of the Framework Agreement with Zakher Marine International
announced on 29 May 2020, further savings are expected to be
delivered going forward. A new cost savings target of US$ 18.5
million has been set.
-- Revenue reduced by 9% to US$ 49.8 million (H1 2019: US$ 55.0
million), mainly reflecting lower day rates for all vessel classes,
partially offset by an improvement in utilisation.
-- Average fleet utilisation for H1 2020 has increased to 78%, a
9 percentage point increase, despite the impact of COVID-19 on
tender activity and operations, together with the relocation of two
E-Class vessels from the North Sea to the Middle East, which had
those vessels off hire for a total of six months (with a 4% impact
on total fleet utilisation).
-- Charter day rates have remained low (reduced by on average
16% compared to H1 2019), reflecting the impact of COVID-19 on the
rate environment and the expiry of prior contracts secured in 2017
before the oil price downturn.
-- General and administrative expenses fell by 43% (US$ 3.7
million) reflecting the full impact of cost savings implemented in
2019 and early 2020.
-- The reduced loss for the period of US$ 6.7 million (H1 2019:
US$ 16.7 million) reflects increased EBITDA, reduced depreciation
and lower finance costs, as well as the impairment of US$ 4.6
million in H1 2019.
-- The restructuring of term debt facilities was executed with Lenders on 10 June 2020. This has re-established access to working capital facilities ([3]) , and reprofiled debt repayments (including an extension of final maturity) and amended covenant tests to more sustainable levels.
-- Net cash flow before debt service has increased reflecting
the impact of cost savings which have more than offset a decline in
revenue.
Operational Highlights
-- Continued strong safety performance with zero lost time injuries incurred (H1 2019: zero).
-- H1 2020 utilisation increased to 78% (H1 2019: 69%; FY 2019:
69%). This was mainly driven by a significant improvement in
utilisation of K Class vessels to 86% (H1 2019: 65%). E Class
vessel utilisation rose to 58% (H1 2019 54%), notwithstanding the
fact that two of the four vessels were off hire for a total of 6
months, while being relocated from the North Sea to the Middle
East. S-Class utilisation at 92% was stable (H1 2019: 96%)
-- Secured FY utilisation (including options) currently stands at 83% for 2020 and 54% for 2021.
-- COVID-19 cases were reported on two vessels which have since
returned to work. The financial impact has been small (US$ 1.4
million in lost revenue). Careful management of crew has proven
invaluable in minimising operational risks. Onshore staff have
returned to substantially normal working practices.
-- Secured backlog is US$ 225.1 million as at 1 August 2020, up
7% (US$ 14.6 million) compared to September 2019 (US$ 210.5
million).
-- Four new contract awards announced in 2020 with a combined
charter period of 8.5 years including contract extensions.
-- GMS Evolution, which is fitted with the unique GMS cantilever
has secured its first contract using this technology, working for a
Middle Eastern based NOC.
Tim Summers, Executive Chairman, GMS said:
"GMS has delivered a significant improvement in performance
despite the difficulties brought by COVID-19, and the resultant oil
price collapse. Vessel utilisation has been restored to 2016
levels, while adjusted EBITDA is up 34% on H1 2019. We have
continued to secure new contracts throughout the pandemic,
increasing the order book and profitability is up substantially
compared to the previous year.
Operational risks brought about by COVID-19 were managed
carefully, with minimal operational and financial disruption. Most
importantly, we have protected the health and wellbeing of our
employees.
The delivery of a restructured loan deal with our Lenders is an
important milestone. It will provide us with the stability going
forward to continue to build on the progress that we have already
made in turning around this business.
In fewer than twelve months, a new management team has
fundamentally repositioned GMS for success. With 83% fleet
utilisation already secured for 2020, and a lean cost base, we are
already demonstrating the business's ability to drive profitable
growth. In stabilising markets, the Board is determined to capture
this considerable opportunity for the reward of all of our
shareholders."
- Ends -
Analyst presentation:
The Company will be giving a presentation to analysts today, 04
August 2020, at 9.00AM BST. To register your interest please email
etrapnell@brunswickgroup.com
The replay of the presentation to analysts will be available on
demand later today at:
http://www.gmsuae.com/investor-relations/results-and-presentations
This announcement contains inside information and is provided in
accordance with the requirements of Article 17 of the EU Market
Abuse Regulation.
Steve Kersley
Chief Financial Officer (responsible for arranging the release
of this announcement)
Gulf Marine Services PLC
04 August 2020
Enquiries
For further information please contact:
Gulf Marine Services PLC
Tim Summers Brunswick
Executive Chairman Patrick Handley - UK
Tony Hunter Will Medvei - UK
Company Secretary Tel: +44 (0) 20 7404 5959
Tel: +44 (0) 207 603 1515 Jade Mamarbachi - UAE
Tel: +971 (0) 50 600 3829
Notes to Editors:
Gulf Marine Services PLC, a company listed on the London Stock
Exchange, was founded in Abu Dhabi in 1977 and has become a world
leading provider of advanced self-propelled self-elevating support
vessels (SESVs). The fleet serves the oil, gas and renewable energy
industries from its offices in the United Arab Emirates and Saudi
Arabia. The Group's assets are capable of serving clients'
requirements across the globe, including those in the Middle East,
South East Asia, West Africa, North America, the Gulf of Mexico and
Europe.
The GMS fleet of 13 SESVs is amongst the youngest in the
industry, with an average age of nine years. The vessels support
GMS's clients in a broad range of offshore oil and gas platform
refurbishment and maintenance activities, well intervention work
and offshore wind turbine maintenance work (which are opex-led
activities), as well as offshore oil and gas platform installation
and decommissioning and offshore wind turbine installation (which
are capex-led activities).
The SESVs are categorised by size - K-Class (Small), S-Class
(Mid) and E-Class (Large) - with these capable of operating in
water depths of 45m to 80m depending on leg length. The vessels are
four-legged and are self-propelled, which means they do not require
tugs or similar support vessels for moves between locations in the
field; this makes them significantly more cost-effective and
time-efficient than conventional offshore support vessels without
self-propulsion. They have a large deck space, crane capacity and
accommodation facilities (for up to 300 people) that can be adapted
to the requirements of the Group's clients.
Gulf Marine Services PLC's Legal Entity Identifier is
213800IGS2QE89SAJF77
www.gmsuae.com
Disclaimer
The content of the Gulf Marine Services PLC website should not
be considered to form a part of or be incorporated into this
announcement.
Chairman's Review
Building the business for the future
2020 has brought significant challenges for GMS, but the
business has responded well and continued to move forward.
The advent of COVID-19 has placed fresh demands on the
organisation. The Company was quick to respond, putting in place
firm and robust mitigation measures to manage this risk. During
this time, we have continued to deliver safe and reliable
operations for our customers ([4]) . The overall financial impact
to date on the business has been small.
The drive to further reduce costs is continuing successfully,
while at the same time the Company has continued to deliver
significant new business despite COVID-19. Current fleet
utilisation is at levels not seen since 2016. An agreement has been
secured with Lenders ([5]) to restructure our banking facilities.
This has given the business a stable platform, on which to complete
the business turnaround and deliver a recapitalisation.
Recent shareholder activity has, however, the potential to
frustrate the progress made thus far. Proposed changes voted for at
the most recent Annual General Meeting would have deprived the
business of an effectively functioning Board. The Board will
continue to work to promote the interests of all shareholders, so
that the profitable growth trajectory for the business can be
maintained.
Governance
On the 30 April 2020 GMS was the recipient of an unsolicited and
non-binding approach by Seafox International Limited to purchase
the Company, at a price of 7.3 pence per share (later raised to 10
pence).
After consulting widely with its stakeholders, the Board
unanimously rejected the proposal as it fundamentally undervalued
GMS; the timing was wholly opportunistic, coming at a time of
significant macro-economic uncertainty caused by COVID-19, which
had artificially depressed share prices.
After receiving the approach and subsequent to the Board's
rejection, a majority of shareholders wrote to the Company
indicating their unwillingness to accept an offer at this price.
Seafox subsequently withdrew from proceeding to make a firm offer
to all shareholders, instead purchasing further shares in GMS at an
average cost of 21.22p per share, taking its total shareholding to
29.99% as at 10 June 2020 (from 13.73% before the possible offer),
a price over 3 times their original possible offer.
At the Annual General Meeting, held on 30 June 2020, three large
shareholders voted together against the Remuneration Policy, the
Directors' Remuneration Report, and various related proposals
concerning remuneration (amendments to the LTIP scheme, deferred
bonus plan, executive share awards etc). They also voted to remove
three Directors: Mr. Steve Kersley (Chief Financial Officer), Mr.
Mike Turner (Senior Independent Non-Executive Director and Chair of
the RemCo) and Mr. David Blewden (Independent Non-Executive
Director and Chair of the Audit and Risk Committee).
Other than nine shares held by a single shareholder, the only
shareholdings that voted against every resolution that failed to
pass were beneficially owned by Seafox International Limited,
Mazrui Investments LLC and Horizon Energy LLC, and shares held in
two Swiss nominee accounts, which in aggregate represent 1.3% of
the Company's issued share capital. The Company has informed the
relevant authorities.
The removal of these Directors resulted in the Board being
reduced to only three Directors. The Company was left without a
lawfully constituted and functioning Audit Committee due to the
lack of an independent director with relevant financial experience
to serve as its Chair in line with UK Governance Guidelines ([6]) .
The Board also believed that it would be inappropriate to issue its
half year financial report without it having been reviewed and
approved by an Audit and Risk Committee with the requisite
experience and competence, which it would not have had with only a
single independent director.
In light of these limitations and to ensure that the continued
management of the business be subject to oversight by a balanced
board of suitably qualified, independent directors, the Board
reluctantly exercised its power under the Company's Articles of
Association to reappoint Mr. Turner and Mr. Blewden as directors of
the Company with immediate effect.
Total legal and advisory fees relating to the various Seafox
approaches currently amount to US$ 2.8 million.
Group performance
Adjusted EBITDA at US$ 31.4 million was 34% above that achieved
in the comparative period last year ([7]) . That represents a
remarkable achievement, given the headwinds that the business has
faced - the COVID-19 pandemic and its impact on operations, the
supply chain, oil demand and charter rates; the need to manage a
very tight liquidity position while banking arrangements were
placed on a stable footing; the inevitable disruption caused by a
potential takeover offer; and attempts to substantially change the
Board composition.
We have now secured savings of US$ 16.5 million since the cost
savings programme began in March 2019 and will now extend the
target to US$ 18.5 million of savings, on an annualised basis.
Delivery of cost savings has focused on creating a lean
organisation. Onshore headcount now stands at 59 compared to 113 at
the end of 2018. Vessel crew size has also been streamlined, and
the overall crew pool optimised. We have also focused on the asset
footprint and the cost effectiveness of the supply chain. The
Musaffah office and yard relocation is the latest step in this
journey, building on the work already carried out closing offices
and port facilities in North-West Europe and the Middle East. We
have also delivered significant savings by retendering material
supply contracts. The Framework Agreement with Zakher Marine
International will deliver further opportunities. We have already
completed three tenders to leverage fleet scale since the Agreement
was signed in May 2020, with cost savings of around 25% on
average.
Continuing to deliver new business through the height of the
pandemic highlights the trust that clients place in GMS as a
preferred supplier. Utilisation already secured for 2020 stands at
83% (compared to 69% delivered in the whole of the previous year).
All vessels are currently on hire, with 5 out of the fleet of 13
currently on long term contracts (of 3 - 5 years).
This has also underpinned the turnaround in profitability in
what has been a very difficult commercial environment. In August
2019, at the time of leadership change, EBITDA guidance for 2019
was set at US$ 45-48 million. We are pleased to be able to
reconfirm our 2020 guidance at January of US$ 57-62 million and
furthermore are now expecting to be at the top end of this
range.
Capital structure and liquidity
On 10 June 2020, GMS closed the deal to restructure its debt
facilities. This was a very important milestone for the
business.
This has removed the material uncertainties ([8]) regarding the
business's ability to continue as a Going Concern, allowing
Management to focus on growing profitability, while recapitalising
the business.
Commercial and Operations
The operational and commercial challenges of COVID-19 have been
significant for almost every business around the globe. GMS was
decisive in putting in place mitigation measures. Further cost
savings were delivered to improve financial resilience. Crew
changes were restricted offshore, and onshore staff moved swiftly
to virtual working. Testing, cleaning and quarantine procedures
have been rigorously enforced.
The results have been positive. Only two vessels have reported
COVID-19 cases and the impact on revenues has been marginal (only
1% of anticipated revenue lost during 2020). Virtual working
procedures have worked smoothly onshore with minimal operational
disruption. Through a carefully managed transition process, 75% of
onshore staff are now office based again. Supply chain disruption
has been minimal.
From a commercial perspective, the decision to move the two cold
stacked E-Class vessels from North-West Europe to the Middle East
has positioned the business well. Significant tender activity for
multi-barge, multi-year contracts remains. Both E-Class vessels
were under contract, within weeks of arriving, including work for
GMS Evolution, which has used the new technology of the cantilever
system, saving our customer time and improving safety during coiled
tubing well-work operations. The business will deliver utilisation
levels in 2020 not seen since 2016.
During the first half of 2020 4 contracts have been delivered,
totalling 8.5 years in secured revenues. The Backlog position is
robust, notwithstanding the disruption caused by COVID-19, which
has pushed back some tender activity in the short term. Secured
backlog now stands at US$ 225.1 million[9]. This is up by US$ 14.6
million (7%) compared to the same period last year.[10]
Outlook
The current rate environment is challenging, but the business
has been able to deliver profitable growth through delivering a
step change reduction in the cost base. Consequently, we can
reconfirm our forward 2020 EBITDA guidance of US$ 57-62 million,
announced in January and are now confident of delivering at the
upper end of this range.
GMS is now moving forward into a growth phase. Delivery of
significant new business with clients in current market conditions
is a powerful indicator that the business can deliver consistently
high levels of utilisation. We are building on the quality of our
assets, our reputation for high operating standards, and our
reinvigorated relationships with customers.
While there has been a deferral of some tender activity, demand
in our core Middle Eastern market remains active, underpinning the
high utilisation levels delivered for the current year. The
decision to relocate our two E-Class vessels has positioned us
well.
The delivery of the bank restructuring represents an important
milestone for the business, bringing much needed stability to our
financial position. Building on this foundation, the business is
well positioned to deliver an equity recapitalisation providing we
can secure shareholder support. The delivery of a constructive
outcome to the current disagreements over governance issues will be
critical to bringing this about.
Financial Review
H1 2020 H1 2019
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US$m US$m
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Revenue 49.8 55.0
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Gross profit 14.4 9.7
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General and administrative expenses 4.9 8.6
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Adjusted EBITDA[11] 31.4 23.4
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Asset impairment 0.0 (4.6)
======== =======
Loss for the period after tax (6.7) (16.7)
======== =======
Adjusted profit/(loss) for the period 1.8 (12.2)
======== =======
Net cash flow before debt service[12] 15.2 14.1
======== =======
Summary
Adjusted EBITDA increased 34% to US$ 31.4 million (H1 2019: US$
23.4 million) with an adjusted EBITDA margin of 63% (H1 2019: 43%).
This reflects the benefit of cost savings and improved utilisation,
despite the impact of COVID-19 on the market environment and
operations. Full year 2020 EBITDA guidance of US$ 57.0 - 62.0
million is reconfirmed and is expected to be at the upper end of
the range
Revenue reduced by 9% to US$ 49.8 million (H1 2019: US$ 55.0
million), mainly reflecting lower day rates, which have more than
offset the improvement in utilisation. Overall average day rates
deteriorated by 16% compared to H1 2019 mainly reflecting a decline
in E-Class rates, in part due to the expiry of legacy contracts
taken out before 2018.
The reduction in rates was more than offset by a significant
reduction in costs and improvement in utilisation. Utilisation has
increased to 78% (up 9 percentage points) reflecting a significant
increase in the utilisation of K-Class vessels, where 3 of the 6
vessels are now on long-term contracts. S-Class vessel utilisation
stayed broadly stable at almost 100%. E-Class utilisation has
increased (to 58% from 54% in the prior period) which is a strong
performance, given the time needed to relocate two of the four
vessels to the Middle East.
Cost of Sales has decreased by US$ 5.2 million to US$ 35.4
million reflecting the full year impact of the cost savings
programme, commenced in the previous year. Secured savings from
that programme since it began in March 2019 currently stand at US$
16.5 million. Included in 2020 cost of sales is an amount of US$
6.8 million which relates to the relocation of two E-Class vessels
to the MENA region. This has been treated as an exceptional item
and therefore excluded for the purposes of calculating adjusted
EBITDA and adjusted net profit. EBITDA before adjustment was US$
22.9 million (H1 2019: US$ 18.8 million). General and
Administration expenses have also been reduced substantially from
US$ 8.6 million to US$ 4.9 million (43%) as a result of the cost
savings programme.
The reduced loss for the period after tax of US$ 6.7 million (H1
2019: US$ 16.7 million) reflects increased EBITDA, reduced
depreciation and lower finance costs, as well as the impairment of
US$ 4.6 million in H1 2019 (H1 2020: nil).
Total capital expenditure for H1 2020 reduced to US$ 1.7 million
(H1 2019: US$ 4.2 million) reflecting the phasing of maintenance
and client specific capex on existing vessels. Net cash flow before
debt service ([13]) is slightly higher at US$ 15.2 million (H1
2019: US$ 14.1 million) reflecting the impact of cost savings which
have more than offset a decline in revenue.
An amendment to the Company's common terms agreement and related
loan documentation, to restructure debt facilities, was executed
with Lenders on 10 June 2020. This has re-established the Group's
access to its working capital facilities, and reprofiled debt
repayments and covenant tests to more sustainable levels. With
lower LIBOR rates, interest in the second half of the year is
expected to be approximately 5.3% (H2 2019 7.2%). This will provide
the business with the necessary financial stability for management
to focus on continuing to drive further improvements to operational
and financial performance. The Group has agreed that if by 31
December 2020, it has not successfully completed a capital increase
of at least US$ 75.0 million (net) and made a prepayment in respect
of the debt outstanding, it will be required to issue warrants to
the Banks and pay additional 5% interest on a PIK basis. The
warrant issue is subject to shareholder approval. The total cost of
restructuring was US$ 15.2 million, comprising bank fees, advisor
fees paid on behalf of the banks and professional fees. These
transaction costs have been recorded as a deduction against
borrowings.
Revenue and segmental profit
The table below shows the contribution to revenue and segment
gross profit or loss made by each vessel class during the
period.
Revenue Segmented gross profit/(loss)
---------------- -------------------------------
(US$'000) H1 2020 H1 2019 H1 2020 H1 2019
Vessel Class
E-Class vessels 13,186 18,951 (3,308) 259
S-Class vessels 16,200 18,201 8,160 5,847
K-Class vessels 20,407 17,815 9,627 5,703
Sundry rental income 1 2 (123) (2,071)
--------------------- ------- ------- --------------- --------------
Total 49,794 54,969 14,356 9,738
--------------------- ------- ------- --------------- --------------
Revenue in H1 2020 was US$ 49.8 million (H1 2019: US$ 55.0
million). This mainly reflects the impact of lower vessel day
rates, particularly for our E-Class vessels. Vessel day rates
remained under pressure during the current year, with the average
for the fleet decreasing to US$ 26k (H1 2019: US$ 31k). The average
day rates for E-Class vessels decreased to US$ 30k (H1 2019: US$
43k), for S-Class vessels to US$ 32k (H1 2019: US$ 34k) and for
K-Class vessels increased to US$ 22k (H1 2019: US$ 21k).
The reduction in E-Class rates arises due to completion of two
legacy contracts in North West Europe, which were secured pre-2018
and one contract which was secured at a higher rate due to the
short-term notice on the vessel requirement. For much of the second
half of 2019, two of the three vessels stationed in North West
Europe were cold stacked, reflecting the significant drop in oil
and gas activity.
A decision was therefore made to relocate two E-Class vessels
from North West Europe to the Middle East, given the higher levels
of activity in the region. These vessels arrived safely in February
on time and on budget.
The revenue impact of lower rates has been partially offset by a
significant improvement in total fleet utilisation to 78% (H1 2019:
69%). This has been driven by a material increase in the
utilisation of K-Class vessels to 86% (compared to 65% in H1 2019).
Three of the six K-Class vessels have now secured long-term
contracts of 3-5 years.
S-Class and E-Class utilisation has remained broadly stable (92%
compared to 96% H1 2019 for S-Class and rising to 58% from 54% for
E-Class). The stable high level of S-Class utilisation reflects the
strong marketability of these vessels, even in difficult market
conditions. Two of the three vessels are on long-term contracts
([14]) .
Cost of sales and general and administrative expenses
Cost of Sales has decreased by US$ 5.2 million to US$ 35.4
million reflecting the full year impact of the cost savings
programme which commenced in the previous year. These costs include
the cost of relocating two E-Class vessels to the Middle East from
North West Europe (US$ 6.8 million), which have been included as an
adjusting item.
The Group announced the delivery of annualised cost savings of
US$ 13.0 million at the end of 2019, with further savings expected
to be delivered in the current year. Cumulative savings secured
since the programme began in March 2019 now stand at US$ 16.5
million, following further headcount reductions, continued
retendering of supplier contracts and the decision to relocate to
lower cost Head Office and yard facilities. Further savings are
currently being sought. A revised target for annualised savings of
US$ 18.5 million has now been set. Delivery of further savings will
focus in particular on economies of scale and other synergies to be
derived from the Framework Agreement recently signed with Zakher
Marine International.
Depreciation and amortisation included in cost of sales
decreased to US$ 14.8 million (H1 2019: US$ 16.5 million),
reflecting lower asset carrying values following impairments in H1
2019 of US$ 4.6 million.
General and administrative expenses fell by 43% from US$ 8.6
million to US$ 4.9 million reflecting the full impact of cost
savings implemented in 2019. General and administrative expenses
excluding depreciation, amortisation and adjusting items ([15])
reduced by 39% to US$ 4.5 million (H1 2019: US$ 7.5 million),
reflecting the full year impact of the cost savings delivered in
2019, in conjunction with further headcount reductions in 2020.
Finance related costs
Finance costs in the period to 30 June 2020 were lower by 15% at
US$ 14.1 million versus H1 2019: US$ 16.5 million, reflecting lower
Libor rates and also lower interest payments following repayment of
principal sums. The average borrowing rate in the period was 6.7%
compared to 7.7% in H1 2019.
In H1 2020, there was a net foreign exchange gain of US$ 0.2
million (H1 2019: loss of US$ 0.5 million) arising from movements
in exchange rates of the Pound Sterling and Euro against the US
Dollar. Both the Pound Sterling and Euro strengthened against the
US dollar. The taxation expense remained flat at US$ 0.9 million
(H1 2019: US$ 1.0 million). There are no currency hedges in
place.
Cash flow and liquidity
The Group's net cash generated from operating activities
remained flat at US$ 18.4 million (H1 2019: net inflow of US$ 20.0
million). The net cash outflow from investing activities for H1
2020 reduced to US$ 3.1 million (H1 2019: US$ 6.0 million) as a
result of lower levels of capital expenditure. The Group's net cash
flow from financing activities during the period was an outflow of
US$ 17.0 million (H1 2019: US$ 22.2 million) relating to US$ 27.3
million of amortisation and US$ 16.9 million of interest payments
on the term loan, US$ 10.3 million on bank and adviser fees
relating to the debt restructuring, offset by a combined drawdown
of US$ 38.3 million on the new loan and working capital
facility.
Balance sheet
Total current assets at 30 June 2020 were US$ 39.3 million (31
December 2019: US$ 47.9 million). This mainly reflects a reduction
in trade and other receivables which fell to US$ 32.7 million (31
December 2019: US$ 39.2 million), reflecting lower revenue together
with more disciplined working capital management. Total current
liabilities decreased to US$ 41.8 million at 30 June 2019 (31
December 2019: US$ 437.1 million), primarily as a result of US$
385.9 million of bank borrowings being reclassified to due after
more than one year, following the completion of the agreement on
debt restructuring.
Total non-current assets at 30 June 2020 were US$ 713.3 million
(31 December 2019: US$ 722.3 million). This decrease is primarily
attributable to the decrease in the net book value of property,
plant and equipment arising from the non-cash impairment of US$ 4.6
million booked in 2019 and depreciation of US$ 12.9 million during
the period offset by capital expenditure of US$ 1.7 million. Total
non-current liabilities increased to US$ 389.5 million (31 December
2019: US$ 3.5 million) as a result of the reclassification of bank
borrowings discussed above.
Total net borrowings as at 30 June 2020 reduced to US$ 394.4
million (31 December 2019: US$ 398.5 million) mainly arising from a
net payment of US$ 4.5 million to the Group's working capital
facility. This reflects the reduction in the term facility due to
the repayment of amortisation payments, offset by a drawdown on the
newly granted working capital facility required mainly to settle
bank and adviser fees required to complete the debt
restructuring.
Total equity decreased from US$ 329.7 million at 31 December
2019 to US$ 321.3 million at 30 June 2020. The movement is mainly
attributed to the loss incurred during the period of US$ 6.7
million.
Going concern
The Financial Statements for the year ended 31 December 2019
contained a material uncertainty statement relating to Going
Concern. Similar statements have been required in each set of
Financial Statements issued over the past 18 months, following the
potential covenant breaches disclosed by the Company at the end of
2018, which required the renegotiation of the Company's debt
facilities.
By the time of issuance of the 2019 Financial Statements the
commercial negotiations with Lenders had been completed and were
documented in the form of a non-legally binding Term Sheet.
Negotiations were well advanced to finalise full legal
documentation.
The most recent material uncertainty therefore focused on two
issues:
The uncertainties relating to the delivery of a legally binding
loan documentation with Lenders.
The short-term liquidity issues arising from the lack of
adequate working capital facilities, while final loan documentation
was being put in place.
Following the finalisation of the negotiations with Lenders on
10 June 2020, Management have concluded that the Going Concern
assumption for the Group's 30 June 2020 condensed consolidated
financial statements is now appropriate, without any accompanying
statements on material uncertainty.
This is on the following basis:
1. Material Uncertainties regarding potential future covenant
breaches have been removed through agreement of the revised debt
package with Lenders. The first covenant testing date for one of
the covenants is 31 December 2020 and is forecast to be
compliant.
2. Renewed access to working capital facilities have enabled the
business to pay down suppliers and remove short term liquidity
concerns. USD$ 25.0 million of the working capital facility is
allocated to performance bonds and guarantees and US$ 25.0 million
is allocated to cash, of which US$ 19.0 million was drawn as at 30
June 2020 with a further US$ 2.5 million drawn in July 2020,
leaving US$ 3.5 million undrawn, available for cash.
3. Continued delivery of new business through the downturn has
underpinned revenue forecasts over the next twelve months[16].
Risks of discounts to existing customers have diminished and are
quantifiable. COVID-19 operational disruption has not had a major
financial impact on the business. While all of these risks still
exist, forecast cash flows still support the Company's ability to
service debt obligations and meet covenant tests over the next
twelve months.
Related party transactions
During the period there were related party transactions with our
partner in Saudi for leases of breathing equipment for some of our
vessels and office space totalling US$ 0.3 million (H1 2019: US$
0.6 million). These transactions were at usual commercial
terms.
Adjusting items
The Group presents adjusted results, in addition to the
statutory results, as the Directors consider that they provide a
useful indication of underlying performance. In H1 2020 the
adjusting items relate to the relocation of two vessels from the
North Sea to the Middle East (US$ 6.8 million), restructuring costs
(US$ 0.3 million) and costs incurred of US$ 1.4 million in relation
to Seafox bid defence. In H1 2019 the adjusting items related to a
non-cash impairment charge on non-core property, plant and
equipment of US$ 4.6 million.
A reconciliation between the adjusted non-GAAP and statutory
results is provided in note 4.
Risks and uncertainties
There are a number of risks and uncertainties which could have a
material impact on the Group's performance over the remaining six
months of 2020. The financial risks have been updated to reflect
the successful completion of the amendment and extension to the
Group's debt structure. A new risk to delivery of our strategy
arising from lack of shareholder alignment has also been
identified. Other than these, the Directors do not consider that
the principal risks and uncertainties have materially changed since
the last publication of the Annual Report for the year ended 31
December 2019. A detailed explanation of the risks summarised
below, and how the Group seeks to mitigate the risks, can be found
on pages 21 to 25 of the 2019 annual report which is available at
www.gmsuae.com .
-- Financial - A continuing low share price may prevent GMS from
raising sufficient levels of equity to recapitalise the
business.
-- Strategic - The Group is subject to threats from competitor
actions or the entrance of new competitors in the market. Lack of
shareholder alignment may threaten delivery of our strategy by
causing increased costs and diversion of organisational
resources.
-- People - Losing skills or failing to attract new talent to
our business has the potential to undermine performance.
-- Commercial - The Group relies on a limited number of
blue-chip clients that may expose it to losses if these
relationships breakdown. MENA NOCs have introduced local content
requirements as part of their tender processes designed to giving
preference to suppliers that commit to improving their local
content and levels of spend which may prevent GMS from winning
contracts. There is a risk that the Group's fleet capabilities no
longer match with changing client requirements. Failure to deliver
the specifications and expected performance could lead to
reputational damage and impact our ability to win work.
-- Compliance and Regulation - The Group has to appropriately
identify and comply with laws and regulations and other regulatory
statutes.
-- Health, Safety, Security, Environment and Quality - The
Group's operations have an inherent safety risk due to our offshore
operations.
-- Brexit - Continuing uncertainty surrounding the UK's exit
from the European Union and future legislation in the UK could
impact the Group's UK operations.
-- Operational - Changes in political landscapes could adversely
affect operations. The Group is at risk of loss through financial
cybercrime.
-- COVID-19 - There is a health and safety risk to staff, both
onshore and offshore, who come in contact with confirmed cases.
Offshore staff may be unable to board or leave Group vessels, given
restrictions on movement placed by the countries in which we
operate. Onshore staff may be unable to work as normal due to
mandatory health and safety restrictions, placed by Government,
including quarantine and travel restrictions. Disruption might be
caused to the supply chain, caused by the impact of COVID-19 on our
suppliers' operations. The impact of COVID-19 and the resultant
adverse impact on oil prices, on our client's financial position
might lead to loss of new business development opportunities, the
re-negotiation of existing contracts, or failure of clients to pay
on time.
RESPONSIBILITY STATEMENT
Financial information for the period ended 30 June 2020.
We confirm that to the best of our knowledge:
(a) the condensed set of consolidated financial statements has
been prepared in accordance with IAS 34 Interim Financial
Reporting;
(b) the interim management report includes a fair view of the
information required by DTR 4.2.7R (indication of important events
during the first six months and description of principal risks and
uncertainties for the remaining six months of the year); and
(c) the interim management report includes a fair view of the
information required by DTR 4.2.8R (disclosure of related party
transactions and changes therein).
By order of the Board
Tim Summers Stephen Kersley
Executive Chairman Chief Financial Officer
04 August 2020 04 August 2020
INDEPENT REVIEW REPORT TO GULF MARINE SERVICES PLC
We have been engaged by Gulf Marine Services plc (the "Company"
together with its subsidiaries, the "Group") to review the
condensed set of financial statements in the half-yearly financial
report for the six months ended 30 June 2020 which comprises the
condensed consolidated statement of comprehensive income, the
condensed consolidated balance sheet, the condensed consolidated
statement of changes in equity, the condensed consolidated
statement of cash flows and related notes 1 to 17. We have read the
other information contained in the half-yearly financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the Directors. The Directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34 "Interim
Financial Reporting" as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Financial Reporting Council for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2020 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure Guidance and Transparency Rules
of the United Kingdom's Financial Conduct Authority.
Use of our report
This report is made solely to the Company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council. Our work has been undertaken so that we might
state to the Company those matters we are required to state to it
in an independent review report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company, for our review
work, for this report, or for the conclusions we have formed.
Deloitte LLP
Statutory Auditor
Aberdeen, United Kingdom
4 August 2020
GULF MARINE SERVICES PLC
C ondensed Consolidated Statement of Comprehensive Income
for the period ended 30 June 2020
Six months period ended Year ended
30 June 31 December
---------------------------
2020 Restated* 2019
2019
US$'000 US$'000 US$'000
Notes (Unaudited) (Unaudited) (Audited)
Revenue 3 49,794 54,969 108,721
Cost of sales (35,438) (40,670) (74,570)
Impairment charge 10 - (4,561) (59,125)
Gross profit/(loss) 14,356 9,738 (24,974)
General and administrative
expenses (4,944) (8,596) (17,788)
Restructuring costs 7 (330) - (6,322)
Seafox bid defence costs 8 (1,375) - -
------------- ------------ -------------
Operating profit/(loss) 7,707 1,142 (49,084)
Finance income 7 8 16
Finance expense 9 (14,072) (16,530) (32,063)
Loss/(gain) on disposal
of property, plant and
equipment (7) 3 14
Gain on disposal of -
assets held for sale 328 -
Other income 29 75 529
Foreign exchange gain/(loss),
net 183 (474) (1,181)
------------- ------------ -------------
Loss for the period/year
before taxation (5,825) (15,776) (81,769)
Taxation charge for
the period/year 5 (858) (959) (3,696)
------------- ------------ -------------
Loss for the period/year (6,683) (16,735) (85,465)
============= ============ =============
Other comprehensive
income/(loss) - items
that may be reclassified
to profit or loss:
Net loss on cash flow
hedges (3,499) (449) (165)
Net change in cost of
hedging 2,260 (781) (1,337)
Exchange differences
on translating foreign
operations (392) 96 164
Total comprehensive
loss for the period/year (8,314) (17,869) (86,803)
------------- ------------ -------------
(Loss)/profit attributable
to:
Owners of the Company (6,671) (16,955) (85,778)
Non-controlling interests (12) 220 313
------------- ------------ -------------
(6,683) (16,735) (85,465)
Total comprehensive
(loss)/income attributable
to:
Owners of the Company (8,302) (18,089) (87,116)
Non-controlling interests (12) 220 313
------------- ------------ -------------
(8,314) (17,869) (86,803)
------------- ------------ -------------
Loss per share
Basic (cents per share) 6 (1.90) (4.84) (24.48)
------------- ------------ -------------
Diluted (cents per share) 6 (1.90) (4.84) (24.48)
------------- ------------ -------------
Results in each period/year are derived from continuing
operations.
The accompanying notes form an integral part of these condensed
consolidated financial statements.
*Details of the restatement relating to IFRS 16 'Leases'
adjustment can be found in note 2
GULF MARINE SERVICES PLC
Condensed Consolidated Balance Sheet
as at 30 June 2020
30 June 31 December
Notes 2020 2019
US$'000 US$'000
ASSETS
Non-current assets
Property, plant and equipment 10 702,857 714,234
Right-of-use assets 2,878 2,644
Dry docking expenditure 7,606 5,454
713,341 722,332
Total non-current assets
Current assets
Trade and other receivables 11 32,669 39,185
Cash and cash equivalents 6,630 8,404
Vessel held for sale - 300
--------- ------------
Total current assets 39,299 47,889
Total assets 752,640 770,221
========= ============
EQUITY AND LIABILITIES
Capital and reserves
Share capital 58,057 58,057
Share premium account 93,080 93,080
Restricted reserve 272 272
Group restructuring reserve (49,710) (49,710)
Share option reserve 12 3,561 3,572
Capital contribution 9,177 9,177
Cash flow hedge reserve (2,979) 520
Cost of hedging reserve - (2,260)
Translation reserve (2,812) (2,420)
Retained earnings 211,053 217,724
--------- ------------
Attributable to the Owners of the Company 319,699 328,012
Non-controlling interests 1,647 1,659
Total equity 321,346 329,671
--------- ------------
Non-current liabilities
Bank borrowings 13 385,904 -
Lease liabilities 1,296 1,204
Provision for employees' end of service
benefits 2,322 2,280
Total non-current liabilities 389,522 3,484
--------- ------------
Current liabilities
Trade and other payables 24,593 31,785
Current tax liability 4,487 4,289
Lease liabilities 1,220 750
Bank borrowings - scheduled repayments
within one year 13 8,493 89,284
Bank borrowings - scheduled repayments
more than one year 13 - 309,218
Derivative financial instruments 2,979 1,740
--------- ------------
Total current liabilities 41,772 437,066
Total liabilities 431,294 440,550
Total equity and liabilities 752,640 770,221
--------- ------------
The accompanying notes form an integral part of these condensed
consolidated financial statements.
GULF MARINE SERVICES PLC
Condensed Consolidated Statement of Changes in Equity
For the period ended 30 June 2020
Attributable
Group to the Non-
Share Share premium Restricted restructuring Share option Capital Cash flow hedge Cost of hedging Translation Retained owners of controlling Total
capital account reserve reserve reserve contribution reserve reserve reserve earnings the Company interests equity
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
As at 1
January 2020 58,057 93,080 272 (49,710) 3,572 9,177 520 (2,260) (2,420) 217,724 328,012 1,659 329,671
Total
comprehensive
(loss)/income
for the
period - - - - - - (3,499) 2,260 (392) (6,671) (8,302) (12) (8,314)
Share options
rights charge
(note 12) - - - - (11) - - - - - (11) - (11)
As at 30 June
2020 58,057 93,080 272 (49,710) 3,561 9,177 (2,979) - (2,812) 211,053 319,699 1,647 321,346
As at 1
January 2019 57,992 93,080 272 (49,710) 3,410 9,177 685 (923) (2,584) 303,319 414,718 1,346 416,064
Adjustment on
adoption of
IFRS 16 - - - - - - - - - 183 183 - 183
Total
comprehensive
(loss)/income
for the
period - - - - - - (165) (1,337) 164 (85,778) (87,116) 313 (86,803)
Share options
rights charge
(note 12) - - - - 227 - - - - - 227 - 227
Shares issued
under LTIP
schemes 65 - - - (65) - - - - - - - -
As at 31
December 2019 58,057 93,080 272 (49,710) 3,572 9,177 520 (2,260) (2,420) 217,724 328,012 1,659 329,671
The accompanying notes form an integral part of these condensed
consolidated financial statements.
GULF MARINE SERVICES PLC
Condensed Consolidated Statement of Cash Flows
for the period ended 30 June 2020
Year ended
Six month period ended 31 December
30 June
--------------------------
2020 Restated* 2019
2019
US$'000 US$'000 US$'000
Net cash generated from operating
activities (note 14) 18,376 20,043 51,344
Investing activities
Payments for property, plant and
equipment (1,273) (3,954) (4,641)
Proceeds from disposal of property,
plant and equipment 173 3 14
Proceeds from disposal of assets 628 -
held for sale -
Dry docking expenditure incurred (2,663) (2,013) (4,813)
Interest received 7 8 16
Net cash used in investing activities (3,128) (5,956) (9,424)
Financing activities
Bank borrowings received 38,250 5,000 5,000
Repayment of bank borrowings (27,326) (10,327) (18,329)
Payment of issue costs on borrowings (10,274) (92) (92)
Interest paid (16,890) (15,607) (27,708)
Principal element of lease payments (782) (1,183) (3,433)
Net cash used in financing activities (17,022) (22,209) (44,562)
Net decrease in cash and cash
equivalents (1,774) (8,122) (2,642)
Cash and cash equivalents at the
beginning of the period/year 8,404 11,046 11,046
Cash and cash equivalents at the
end of the period/year 6,630 2,924 8,404
Non-cash transactions
Shares issued under LTIP schemes - 65 65
The accompanying notes form an integral part of these condensed
consolidated financial statements.
*Details of the restatement relating to IFRS 16 'Leases'
adjustment can be found in note 2
GULF MARINE SERVICES PLC
Notes to the condensed consolidated financial statements
for the period ended 30 June 2020
1 Corporate information
Gulf Marine Services PLC ("GMS" or the "Company") is a Company
which was registered and was incorporated in England and Wales on
24 January 2014. The Company is a public limited liability company
with operations mainly in the Middle East, North Africa and Europe.
The address of the registered office of the Company 107 Hammersmith
Road, London, W14 0QH. The registered number of the Company is
08860816.
The principal activities of GMS and its subsidiaries (together
referred to as the "Group") are chartering and operating a fleet of
specially designed and built vessels. All information in the notes
relate to the Group, not the Company unless otherwise stated.
The Group is engaged in providing self-propelled, self-elevating
support vessels (SESVs) that present a stable platform for delivery
of a wide range of services throughout the total lifecycle of
offshore oil, gas and renewable energy activities, and which are
capable of operations in the Middle East, South East Asia, West
Africa, North America, the Gulf of Mexico and Europe.
The condensed consolidated financial statements of the Group for
the six month period ended 30 June 2020 were authorised for issue
on 04 August 2020. The condensed consolidated financial statements
do not comprise statutory accounts within the meaning of Section
434 of the Companies Act 2006. The condensed consolidated financial
statements have been reviewed, not audited.
The Company issued statutory financial statements for the year
ended 31 December 2019 which were prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by
the European Union. Those financial statements were approved by the
Board of Directors on 30 April 2020. The report of the auditor on
those accounts was unqualified but referred to the Company's
disclosures in respect of a material uncertainty relating to going
concern. The report of the auditor on those accounts did not
contain any statement under section 498(2) or 498(3) of the
Companies Act 2006. The information for the year to 31 December
2019 contained in these condensed consolidated accounts have been
extracted from the latest published audited financial statements. A
copy of the statutory accounts for year ended 31 December 2019 has
been delivered to the Registrar of Companies.
2 Significant accounting policies
The accounting policies and methods of computation adopted in
the preparation of these condensed consolidated financial
statements are consistent with those followed in the preparation of
the Group's annual financial statements for the year ended 31
December 2019 as disclosed in the Annual Report, except for the
adoption of new standards and interpretations effective as of 1
January 2020.
Basis of preparation
The annual consolidated financial statements of the Group are
prepared in accordance with IFRS as adopted by the European Union.
The interim set of condensed consolidated financial statements
included in this half-yearly financial report has been prepared in
accordance with the Disclosure Guidance and Transparency Rules of
the Financial Conduct Authority and with International Accounting
Standard (IAS) 34 Interim Financial Reporting as adopted by the
European Union.
GULF MARINE SERVICES PLC
Notes to the condensed consolidated financial statements
(continued)
for the period ended 30 June 2020
2 Significant accounting policies (continued)
Basis of preparation (continued)
The condensed consolidated financial statements do not include
all the information required for full annual consolidated financial
statements and should be read in conjunction with the Group's
audited consolidated financial statements for the year ended 31
December 2019. In addition, results for the six month period ended
30 June 2020 are not necessarily indicative of the results that may
be expected for the financial year ending 31 December 2020. The
condensed consolidated statement of comprehensive income for the
six month period ended 30 June 2020 is not affected significantly
by seasonality of results.
Going concern
The Company's Directors have assessed the Group's financial
position for a period of not less than 12 months from the date of
approval of the interim results. The Group has committed credit
facilities in place at 30 June 2020 (see note 13), comprising an
amended term loan facility with a balance of US$ 390.6 million of
which US$ 9.0 million is payable within 12 months, and a working
capital facility of US$ 50.0 million. USD$ 25.0 million of the
working capital facility is allocated to performance bonds and
guarantees and US$ 25.0 million is allocated to cash, of which US$
19.0 million was drawn as at 30 June 2020 with a further US$ 2.5
million drawn in July 2020, leaving US$ 3.5 million undrawn,
available for cash. The facility is subject to certain financial
covenants, none of which are to be tested at the 30 June 2020
reporting date. The next testing date for one of the covenants is
31 December 2020 (see note 13 for further details), with the
remaining covenants subject to testing at 30 June 2021.
The assessment has been made on the following assumptions:
-- The Group has a high level of committed contracts for its
vessels that underpins current revenue forecasts in the period
under review. These contracts provide the Group with relatively
high EBITDA margins from a core base of customers that typically
have a strong credit profile and a reliable payment track record,
which has continued during the COVID-19 pandemic and commodity
price drops in 2020. Whilst uncertainty exists over the Group's
ability to secure further contracts with customers for the
unsecured period in the coming 12 months, and despite the continued
downward pressure on charter rates, the Group has proven its
ability to win contract awards throughout a challenging 2020
period.
-- The Group has secured US$ 16.5 million in annualised savings
via cost reduction measures which have reduced the Group's cost
basis over the foreseeable future.
-- Liquidity and covenant compliance have been tested against
hypothetical downside scenarios, mainly driven by the potential
market risks to rates and the delivery of additional business.
Although the Directors cannot predict the extent and duration of
the COVID-19 pandemic and the impact that this will have,
particularly on commodity prices and associated market demand, as
above the Directors have undertaken a rigorous assessment of the
potential impacts for 12 months from the date of approval of these
interim statements. In conclusion, the stress testing and
sensitivity analysis on both the Group's liquidity and covenant
positions has indicated that the Group would still have sufficient
cash flow to meets its obligations as they fall due based on
available cash and the undrawn working capital facility available
to them.
GULF MARINE SERVICES PLC
Notes to the condensed consolidated financial statements
(continued)
for the period ended 30 June 2020
2 Significant accounting policies (continued)
Going concern (continued)
On the basis of their assessment of the Group's financial
position for a period of not less than 12 months from the date of
approval of the half year results, the Group's Directors have a
reasonable expectation that the Group will be able to continue in
operational existence for the foreseeable future. Thus, they have
adopted the going concern basis of accounting in preparing the
condensed consolidated financial statements.
New and amended standards adopted by the Group
The accounting policies and methods of computation adopted in
the preparation of these condensed consolidated financial
statements are consistent with those followed in the preparation of
the Group's annual financial statements for the year ended 31
December 2019 as disclosed in the Annual Report, except for the
adoption of new standards and interpretations effective as of 1
January 2020.
The following new and revised IFRSs have been adopted in these
condensed consolidated financial statements.
-- Amendments to References to the Conceptual Framework in IFRS Standards
-- Definition of Material (Amendments to IAS 1 and IAS 8)
-- Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7)
-- Classification of Liabilities as Current or Non-Current (Amendments to IAS 1)
-- Annual Improvements 2018-2020 Cycle
The application of these new and revised IFRSs has not had any
material impact on the amounts reported for the current and prior
periods and did not require any retrospective adjustments but may
affect the accounting for future transactions or arrangements. The
full revised accounting policies applicable from 1 January 2020
will be provided in the Group's annual financial statements for the
year ending 31 December 2020.
IFRS 16 'Leases' adjustment
During the second half of 2019, the Group identified certain
leases which met the criteria for recognition in accordance with
IFRS 16. As a result, the Group recognised additional right of use
assets and lease labilities for these leases. As required by IFRS
Standards, prior period comparatives have been restated to ensure
the comparatives reflect the updated values. The impact of this
adjustment is shown below.
GULF MARINE SERVICES PLC
Notes to the condensed consolidated financial statements
(continued)
for the period ended 30 June 2020
2 Significant accounting policies (continued)
IFRS 16 'Leases' adjustment (continued)
Impact to the Condensed Consolidated Statement of Comprehensive
Income
6 months ended 6 months ended
30 June 2019 30 June 2019
US$'000 US$'000 US$'000
As reported Adjustments Restated
Revenue 54,969 - 54,969
Cost of sales (40,903) 233 (40,670)
Impairment charge (4,561) - (4,561)
Gross profit 9,505 233 9,738
General and administrative
expenses (8,596) - (8,596)
Restructuring costs - - -
Operating profit 909 233 1,142
Finance income 8 - 8
Finance expense (16,437) (93) (16,530)
Loss/(gain) on disposal
of property, plant and
equipment 3 - 3
Gain on disposal of assets - - -
held for sale
Other income 75 - 75
Foreign exchange gain/(loss),
net (474) - (474)
Loss for the period before
taxation (15,916) 140 (15,776)
Taxation charge for the
period (959) - (959)
Loss for the period (16,875) 140 (16,735)
GULF MARINE SERVICES PLC
Notes to the condensed consolidated financial statements
(continued)
for the period ended 30 June 2020
2 Significant accounting policies (continued)
IFRS 16 'Leases' adjustment (continued)
Impact to the Condensed Consolidated Statement of Cashflows
6 months 6 months
ended 30 ended 30
June 2019 June 2019
US$'000 US$'000 US$'000
As reported Adjustments Restated
Net cash generated from operating
activities 18,939 1,104 20,043
Investing activities
Payments for property, plant and
equipment (3,954) - (3,954)
Proceeds from disposal of property,
plant and equipment 3 - 3
Proceeds from disposal of assets - - -
held for sale
Dry docking expenditure incurred (2,013) - (2,013)
Interest received 8 - 8
Net cash used in investing activities (5,956) - (5,956)
Financing activities
Bank borrowings received 5,000 - 5,000
Repayment of bank borrowings (10,327) - (10,327)
Payment of issue costs on borrowings (92) - (92)
Interest paid (15,607) - (15,607)
Principal element of lease payments (79) (1,104) (1,183)
Net cash used in financing activities (21,105) (1,104) (22,209)
Net decrease in cash and cash equivalents (8,122) - (8,122)
Cash and cash equivalents at the
beginning of the period 11,046 - 11,046
Cash and cash equivalents at the
end of the period 2,924 - 2,924
GULF MARINE SERVICES PLC
Notes to the condensed consolidated financial statements
(continued)
for the period ended 30 June 2020
3 Segment reporting
The segment information provided to the chief operating decision
makers for the operating and reportable segments for the period
include the following:
Segment adjusted
Revenue gross profit/(loss)*
--------------------------------- --------------------------------------
6 months ended 31 December 6 months ended 31
30 June 30 June December
------------------- ------------ -------------------------- ----------
Restated Restated
2020 2019 2019 2020 2019 2019
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
E-Class vessels 13,186 18,951 35,984 2,935 8,354 18,779
S-Class vessels 16,200 18,201 35,422 11,498 11,881 23,578
K-Class vessels 20,407 17,815 37,313 14,738 10,639 23,200
Other 1 2 2 (9) (26) (87)
_______ _______ _______ _______ _______ _________
Total 49,794 54,969 108,721 29,162 30,848 65,470
_______ _______ _______ _______ _______ ________
Less:
Depreciation charged
to cost of sales (12,761) (14,681) (29,045)
Amortisation charged
to cost of sales (2,045) (1,868) (2,274)
Impairment charge - (4,561) (59,125)
_______ _______ _________
Gross profit/(loss) 14,356 9,738 (24,974)
General and administrative
expenses (4,944) (8,596) (17,788)
Restructuring costs (330) - (6,322)
Seafox bid defence (1,375) -
costs -
Finance income 7 8 16
Finance expense (14,072) (16,530) (32,063)
(Loss)/Gain on disposal
of property plant
and equipment (7) 3 14
Gain on disposal of
assets held for sale 328 - -
Other income 29 75 529
Foreign exchange gain/(loss),
net 183 (474) (1,181)
_______ _______ _________
Loss before taxation (5,825) (15,776) (81,769)
*See Glossary.
Segment revenue reported above represents revenue generated from
external customers. There were no inter-segment sales in either of
the periods. Segment assets and liabilities, including
depreciation, amortisation and additions to non-current assets, are
not reported to the chief operating decision makers on a segmental
basis and are therefore not disclosed.
GULF MARINE SERVICES PLC
Notes to the condensed consolidated financial statements
(continued)
for the period ended 30 June 2020
4 Presentation of adjusted non-GAAP results
The following table provides a reconciliation between the
statutory and non-statutory financial results:
Six months ended 30 June Restated Six months ended
2020 30 June 2019
Adjusted Adjusting Statutory Adjusted Adjusting Statutory
Non-GAAP Items total Non-GAAP items total
results results
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Revenue 49,794 - 49,794 54,969 - 54,969
Cost of sales
-Operating expenses* (13,837) (6,794) (20,631) (24,121) - (24,121)
--------- ---------- ---------- ------------- ------------- ----------
Segmented Gross profit 35,957 (6,794) 29,163 30,848 - 30,848
* Depreciation and amortisation (14,807) - (14,807) (16,549) - (16,549)
* Impairment charge** - - - - (4,561) (4,561)
--------- ---------- ----------
Gross profit 21,150 (6,794) 14,356 14,299 (4,561) 9,738
General and administrative
-Depreciation and
amortisation (404) - (404) (1,131) - (1,131)
* Other administrative costs (4,540) - (4,540) (7,465) - (7,465)
Restructuring costs*** - (330) (330) - - -
Seafox bid defence
costs**** - (1,375) (1,375) - - -
--------- ---------- ---------- ------------- ------------- ----------
Operating profit 16,206 (8,499) 7,707 5,703 (4,561) 1,142
Finance income 7 - 7 8 - 8
Finance expense (14,072) - (14,072) (16,530) - (16,530)
(Loss)/Gain on disposal
of asset (7) - (7) 3 - 3
Gain on disposal
of assets held for
sale 328 - 328 - - -
Other income 29 - 29 75 - 75
Foreign exchange
gain/(loss), net 183 - 183 (474) - (474)
--------- ---------- ---------- ------------- ------------- ----------
Profit/(Loss) before
taxation 2,674 (8,499) (5,825) (11,215) (4,561) (15,776)
Taxation charge (858) - (858) (959) - (959)
--------- ---------- ---------- ------------- ------------- ----------
Net profit/(loss)
after tax 1,816 (8,499) (6,683) (12,174) (4,561) (16,735)
Profit/(loss) attributable
to
Owners of the Company 1,828 (8,499) (6,671) (12,394) (4,561) (16,955)
Non-controlling interests (12) - (12) 220 - 220
Profit/(Loss) per
share 0.52 (2.42) (1.90) (3.54) (1.30) (4.84)
Supplementary non-statutory
information
Operating profit 16,206 (8,499) 7,707 5,703 (4,561) 1,142
Add: Depreciation
and amortisation
charges 15,211 - 15,211 17,680 - 17,680
--------- ---------- ---------- ------------- ------------- ----------
Non-GAAP EBITDA 31,417 (8,499) 22,918 23,383 (4,561) 18,822
--------- ---------- ---------- ------------- ------------- ----------
*Costs to transfer vessels to geographical locations are not
considered part of the regular underlying performance of the
business and so have been added back to arrive at adjusted gross
profit for the period ended 30 June 2020.
** The impairment charge on property, plant and equipment had
been added back to operating profit to arrive at the adjusted loss
for the prior period.
***Restructuring costs incurred are not considered part of the
regular underlying performance of the business and so have been
added back to arrive at adjusted operating profit for the period
ended 30 June 2020.
**** Seafox bid defence costs incurred are non-routine and so
have been added back to arrive at adjusted operating profit for the
period ended 30 June 2020.
GULF MARINE SERVICES PLC
Notes to the condensed consolidated financial statements
(continued)
for the year ended 30 June 2020
5 Taxation
The effective tax rate was 14.7% for the year ended June 2020
(Six months ended June 2019: 6.0%) representing the best estimate
of the average annual effective tax rate expected to apply for the
full year, applied to the Group's pre-tax loss of the six month
period. The increase in the effective tax rate is the result of an
increase in Group revenue earned in taxable jurisdictions leading
to an increase in withholding tax and corporation tax.
The withholding tax included in the current tax charge amounted
to US$ 0.8 million (six month period ended June 2019: US$ 1.0
million).
6 Loss per share
6 months Restated 6 months ended 30
ended 30 June Year ended
June 31 December
2020 2019 2019
Loss for the purpose of basic
and diluted loss per share
being loss for the period
attributable
to Owners of the Company
(US$'000) (6,671) (16,955) (85,778)
Loss for the purpose of
adjusted basic and diluted
loss per share (US$'000) (note
4) 1,828 (12,394) (20,331)
Weighted average number of
shares ('000) 350,488 350,195 350,357
Weighted average diluted number
of shares ('000) 350,488 350,195 350,357
Basic loss per share (cents) (1.90) (4.84) (24.48)
Diluted loss per share (cents) (1.90) (4.84) (24.48)
Adjusted earnings/(loss) per
share (cents) 0.52 (3.54) (5.8)
Adjusted diluted
earnings/(loss) per share
(cents) 0.52 (3.54) (5.8)
GULF MARINE SERVICES PLC
Notes to the condensed consolidated financial statements
(continued)
for the period ended 30 June 2020
6 Loss per share (continued)
Basic loss per share is calculated by dividing the loss
attributable to equity holders of the Company for the period (as
disclosed in the condensed consolidated statement of comprehensive
income) by the weighted average number of ordinary shares in issue
during the period.
Adjusted loss per share is calculated on the same basis but uses
the loss for the purpose of basic earnings per share (shown above)
adjusted by adding back one off costs to transfer vessels to new
geographical locations (US$ 6.8 million), non-operational
restructuring costs (US$ 0.3 million) and Seafox bid defence costs
(US$ 1.4 million) which have been charged to the income statement
(see note 4). The adjusted earnings per share is presented as the
Directors consider it provides an additional indication of the
underlying performance of the Group.
Diluted loss per share is calculated by dividing the loss
attributable to owners of the Company for the period by the
weighted average number of ordinary shares in issue during the
period. As the Group incurred a loss for the periods ended 30 June
2020 and 30 June 2019 and for the year ended 31 December 2019, the
diluted loss per share is the same as loss per share, as the effect
of any share options is anti-dilutive.
Adjusted diluted earnings per share is calculated on the same
basis but uses adjusted profit (note 4) attributable to the equity
shareholders of the Company.
The following table shows a reconciliation between basic and
diluted average number of shares:
Restated
30 June 30 June 31 December
2019 2019
2020 000's 000's
000's
Weighted average basic number
of shares in issue 350,488 350,195 350,357
Weighted average diluted number
of shares in issue 350,488 350,195 350,357
--------------------------------- -------- --------- ------------
GULF MARINE SERVICES PLC
Notes to the condensed consolidated financial statements
(continued)
for the period ended 30 June 2020
7 Restructuring costs
During 2019, the organisational structure was simplified with a
number of management posts removed and not replaced. In addition,
the operational footprint was reviewed and certain operations in
the UK and MENA were closed. Consultancy costs incurred mainly
relate to legal advice on restructuring and Board changes. In 2020,
further restructuring occurred, with additional staff costs of US$
0.3 million (Six months ended June 2019: US$ nil).
The total estimated restructuring costs is expected to be US$
6.6 million, of which US$ 6.3 million was incurred in 2019 and US$
0.3 million was incurred in 2020 ( Six months ended June 2019: US$
nil ). At 30 June 2020 the remaining provision was US$ 0.9 million
( 31 December 2019: US$ 1.9 million ), which is expected to be
fully utilised over the next 6 months.
8 Seafox bid defence costs
During the current period, as a result of the non-binding
proposed offer to buy the share capital of the Company from our
largest shareholder, additional fees have been incurred totaling
US$ 1.4 million (Six months ended June 2019: US$ nil).
9 Finance expenses
30 June Restated
2020 30 June
US$'000 2019
US$'000
Interest on bank borrowings 13,806 16,141
Interest on finance leases * 92 173
Amortisation of issue costs and commitment
fees 174 216
14,072 16,530
------------------------------- ---------
*Details of the prior period restatement relating to IFRS 16
'Leases' adjustment can be found in note 2.
GULF MARINE SERVICES PLC
Notes to the condensed consolidated financial statements
(continued)
for the period ended 30 June 2020
10 Property, plant and equipment
Vessel spares,
Capital Land, building and fitting and other
Vessels work-in-progress improvements equipment Others Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Cost
Balance as at 1
January 2020 884,497 4,857 10,488 60,743 3,670 964,255
Additions - 1,710 - - - 1,710
Transfers 2,260 (3,373) - 1,113 - -
Eliminated on
disposal (180) - - - (100) (280)
Balance as at 30
June 2020 886,577 3,194 10,488 61,856 3,570 965,685
-------- --------------------- -------------------- -------------------- -------- --------
Accumulated
Depreciation
Balance at 1 January
2020 221,805 2,845 8,014 13,823 3,534 250,021
Eliminated on
disposal - - - - (100) (100)
Depreciation expense 11,320 - 198 1,359 30 12,907
Balance as at 30
June 2020 233,125 2,845 8,212 15,182 3,464 262,828
-------- --------------------- -------------------- -------------------- -------- --------
Net Book Value as at
30 June 2020 653,452 349 2,276 46,674 106 702,857
GULF MARINE SERVICES PLC
Notes to the condensed consolidated financial statements
(continued)
for the period ended 30 June 2020
10 Property, plant and equipment (continued)
Vessel spares,
Capital Land, building and fitting and other
Vessels work-in-progress improvements equipment Others Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Cost
Balance as at 1
January 2019 908,851 12,765 10,469 60,774 3,700 996,559
Additions - 4,913 - - - 4,913
Transfers 12,438 (12,821) 19 285 79 -
Eliminated on
disposal - - - (37) (49) (86)
Write off (1,597) - - (279) (60) (1,936)
Reclassification to
vessel held for
sale (35,195) - - - - (35,195)
Balance as at 31
December 2019 884,497 4,857 10,488 60,743 3,670 964,255
--------- -------------------- -------------------- ------------------- -------- ---------
Accumulated
Depreciation
Balance at 1 January
2019 176,274 - 7,167 11,002 3,521 197,964
Eliminated on
disposal - - - (37) (49) (86)
Depreciation expense 25,743 - 847 3,137 122 29,849
Impairment charge 56,280 2,845 - - - 59,125
Write off (1,597) - - (279) (60) (1,936)
Reclassification to
vessel held for
sale (34,895) - - - - (34,895)
Balance as at 31
December 2019 221,805 2,845 8,014 13,823 3,534 250,021
--------- -------------------- -------------------- ------------------- -------- ---------
Net Book Value as at
31 December 2019 662,692 2,012 2,474 46,920 136 714,234
--------- -------------------- -------------------- ------------------- -------- ---------
GULF MARINE SERVICES PLC
Notes to the condensed consolidated financial statements
(continued)
for the period ended 30 June 2020
11 Trade and other receivables
30 June 31 December
2020 2019
US$'000 US$'000
Trade receivables 23,139 25,107
Less: Allowances for trade receivables (77) (128)
-------- ------------
Trade receivables, net 23,062 24,979
Accrued revenue, net 1,585 48
Prepayments and deposits 6,865 12,465
Other receivables 1,157 1,693
32,669 39,185
-------- ------------
12 Share option reserve
Share based expenses for the period of US$ 0.0 million (Six
month period ended June 2019: US$ 0.7 million) relate to awards
granted to employees under the Group's LTIP. The charge is included
in cost of sales and general and administrative expenses in the
condensed consolidated statement of comprehensive income.
13 Bank borrowings
Bank borrowings relate to the bank facility provided by a group
of six banks, which comprises of term loans and amounts available
under revolving working capital facilities.
Secured borrowings at amortised cost are as follows:
30 June 31 December
2020 2019
US$'000 US$'000
Term loans 390,558 373,502
Working capital facility 19,000 25,000
Less unamortised issue costs (15,161) -
394,397 398,502
--------- ------------
GULF MARINE SERVICES PLC
Notes to the condensed consolidated financial statements
(continued)
for the period ended 30 June 2020
13 Bank Borrowings (continued)
Bank borrowings are presented in the condensed consolidated
balance sheet as follows:
30 June 31 December
2020 2019
US$'000 US$'000
Non-current
Bank borrowings - scheduled repayments 385,904 -
more than one year
Current
Bank borrowings - scheduled repayments
within one year 8,493 89,284
Bank borrowings - scheduled repayments
more than one year - 309,218
394,397 398,502
--------- ------------
The Group has undrawn loan facilities at the period/year end as
shown below:
30 June 31 December
2020 2019
US$'000 US$'000
Working capital facility available for cash 25,000 50,000
Less: Drawdown (19,000) (25,000)
--------- ------------
Undrawn working capital facility available
for cash 6,000 25,000
Working capital facility available for performance 25,000 -
bonds and guarantees
Less: Existing bonds in place (17,853) -
--------- ------------
Undrawn working capital facility available 7,147 -
for performance bonds and guarantees
Available working capital facility 13,147 25,000
========= ============
GULF MARINE SERVICES PLC
Notes to the condensed consolidated financial statements
(continued)
for the period ended 30 June 2020
13 Bank Borrowings (continued)
Net debt as at the end of the period/year was as follows:
30 June 31 December
2020 2019
US$'000 US$'000
Bank borrowings net of issue costs 394,397 398,502
Less: Cash and cash equivalents (6,630) (8,404)
Total 387,767 390,098
======== ============
The table below details changes in bank borrowings arising from
financing activities, including both cash and non-cash changes.
Bank borrowings
US$'000
At 1 January 2019 411,515
Financing cash flows
Proceeds from bank borrowings 5,000
Repayment of bank borrowings (18,329)
Non-cash changes:
Amortisation of discount on financial liabilities 316
At 31 December 2019 398,502
Financing cash flows
Proceeds from bank borrowings 38,250
Net repayment in bank borrowings (27,326)
Payment of issue costs on bank borrowings (10,274)
Non-cash changes:
Movement in prepaid/accrued issue costs (4,887)
Amortisation of discount on financial liabilities 132
At 30 June 2020 394,397
GULF MARINE SERVICES PLC
Notes to the condensed consolidated financial statements
(continued)
for the period ended 30 June 2020
13 Bank Borrowings (continued)
On 10 June 2020, the Group executed certain amendments to its
loan agreements to restructure its debt facilities. This
restructuring comprises renewed existing term loan facilities
totalling US$ 390.6 million with an extended maturity to 30 June
2025 and a rephased repayment profile. The cash interest margin is
consistent with the prior facilities and is indexed to the net
leverage of the Company. There is a new US $50 million working
capital facility that replaced the existing working capital
facilities. The term of this facility has also been extended to 30
June 2025.
If the Company meets certain conditions subsequent, including
raising at least US$ 75 million of net proceeds from an equity
capital raise by 31 December 2020, then no additional interest will
be payable by the Company and no equity linked instruments will be
issued to the lenders. If these conditions are not met, then PIK
interest and contingent warrants will become payable. PIK interest
accrues daily and capitalises quarterly based on a margin ratchet
starting at 5%, which reduces dependent on net leverage levels.
The facility is subject to certain financial covenants
including: Debt Service Cover; Interest Cover; Net Leverage Ratio;
and Security Cover (loan to value). There was also an additional
covenant relating to SG&A spend. None of the covenants are
required to be tested at the 30 June 2020 reporting date. The next
testing date for SG&A spend only is 31 December 2020. Please
refer to the going concern section in note 2 for further
details.
Vessels with a total net book value of US$ 653.5 million (2019:
US$ 662.7 million) have been mortgaged as security for the loans
extended by the Group's banking syndicate. Additionally, gross
trade receivables, amounting to US$ 23.1 million (2019: US$ 25.1
million) have been assigned as security against the loans extended
by the Group's banking syndicate.
Following the restructuring of the Group's debt facilities, the
Group has also provided security against gross cash balances, being
cash balances before restricted amounts included in trade and other
receivables, amounting to US$ 6.8 million, which have been assigned
as security against the loans extended by the Group's banking
syndicate.
The Company has assessed the changes to the Group's loan
facilities and concluded that it does not constitute a substantial
modification as defined in IFRS 9.
GULF MARINE SERVICES PLC
Notes to the condensed consolidated financial statements
(continued)
for the period ended 30 June 2020
14 Notes to the condensed consolidated statement of cash flows
Six month period ended Year ended
30 June 31 December
-------------------------
2020 Restated 2019
* 2019
US$'000 US$'000 US$'000
Loss for the period/year (6,683) (16,735) (85,465)
Adjustments for:
Depreciation of property, plant
and equipment 12,907 15,197 29,849
Amortisation of dry docking expenditure 1,181 997 2,275
Amortisation of right-of-use asset 1,123 1,486 2,891
Impairment charge - 4,561 59,125
Income tax expense 858 959 3,696
End of service benefits charge 289 236 537
End of service benefits paid (247) (615) (979)
Movement in ECL provision during
the period/year 13 - (30)
Allowance for provision for doubtful
trade receivables - 644 14
Allowance for provision for doubtful
accrued revenue - - (530)
Recovery of doubtful debts on accrued - (530) -
revenue
Recovery of doubtful debts of trade
receivables (64) (378) -
Loss/(Gain) on disposal of property,
plant and
equipment 7 (3) (14)
Gain on disposal of assets held (328) -
for sale -
Share options rights charge (11) 710 227
Interest income (7) (8) (16)
Interest expense 13,806 16,141 31,366
Interest of finance leases 92 260 284
Unrealised forex loss - - 77
Other income (29) (75) (513)
Amortisation of issue costs 174 216 413
Cash flow from operating activities
before
movement in working capital 23,081 23,063 43,207
Decrease in trade and other receivables (592) 1,305 2,875
(Decrease)/increase in trade and
other payables (3,453) (2,492) 8,320
Cash generated from operations 19,036 21,876 54,402
Taxation paid (660) (1,833) (3,058)
Net cash generated from operating
activities 18,376 20,043 51,344
*Details of the restatement relating to IFRS 16 'Leases'
adjustment can be found in note 2.
GULF MARINE SERVICES PLC
Notes to the condensed consolidated financial statements
(continued)
for the period ended 30 June 2020
15 Contingent liabilities
At 30 June 2020, the banks acting for Gulf Marine Services FZE,
one of the subsidiaries of the Group, had issued performance bonds
amounting to US$ 17.9 million (31 December 2019: US$ 16.7 million).
See note 12 for further details.
16 Fair value measurement of financial instruments
The Group entered into an Interest Rate Swap (IRS) on 30 June
2018 to hedge a notional amount of US$ 50.0 million. The remaining
notional amount hedged from the IRS as at 30 June 2020 was US$ 42.3
million (31 December 2019: US$ 46.2 million). The IRS hedges the
risk of variability in interest payments by converting a floating
rate liability to a fixed rate liability. The fair value of the IRS
as at 30 June 2020 was a liability value of US$ 3.0 million (31
December 2019: US$ 1.7 million).
The Group entered into a Cross Currency Interest Rate Swap
(CCIRS) on 5 July 2018 to hedge a notional amount of US$ 36.7
million. As at 30 June 2020, the amount of notional hedged from the
CCIRS was US$ nil (31 December 2019: US$ 2.5 million) and the fair
value of the CCIRS was US$ nil (2019: US$ 0.0 million) as the CCIRS
expired during the period.
For the purpose of applying hedge accounting, cash flow hedges
are defined as hedges of the exposure to variability in cash flows
that is attributable to a particular risk associated with a
recognised asset or liability or a highly probable transaction.
The effective portion of the gain or loss on the hedging
instrument is recognised in the condensed consolidated OCI in the
cash flow hedge reserve, while any ineffective portion is
recognised immediately in the condensed consolidated statement of
comprehensive income. The cash flow hedge reserve is adjusted to
the lower of the cumulative gain or loss on the hedging instrument
and the cumulative change in fair value of the hedged item.
The ineffective portion relating to cash flow hedges is
recognised in other operating income or other expenses.
The Group designates IRS and CCIRS as cash flow hedging
instruments. The Group designates the change in fair value of the
entire derivative contracts in its cash flow hedge relationships.
For a CCIRS derivative, upon adoption of the hedge accounting
requirements of IFRS 9, the Group designates forward points and
foreign currency basis points in other comprehensive income as a
separate component of equity and any fair value movement is
recognised in the cost of hedging reserve.
Hedge accounting is discontinued when the Group revokes the
hedging relationship, the hedging instrument expires or is sold,
terminated, or exercised, or no longer qualifies for hedge
accounting. If cash flow hedge accounting is discontinued, the
amount that has been accumulated in OCI must remain in accumulated
OCI if the hedged future cash flows are still expected to
occur.
GULF MARINE SERVICES PLC
Notes to the condensed consolidated financial statements
(continued)
for the period ended 30 June 2020
16 Fair value measurement of financial instruments (continued)
Otherwise, the amount will be immediately reclassified to profit
or loss as a reclassification adjustment. After discontinuation,
once the hedged cash flow occurs, any amount remaining in
accumulated OCI must be accounted for depending on the nature of
the underlying transaction as described above.
The fair value measurement of the derivative financial
instrument has been determined by independent valuers by reference
to quoted market prices, discounted cash flow models and recognised
pricing models as appropriate. They represent Level 2 fair value
measurements under the IFRS hierarchy.
The Group had no financial instruments in the current or
previous year with fair values that are determined by reference to
significant unobservable inputs i.e., those that would be
classified as level 3 in the fair value hierarchy, nor have there
been any transfers of assets or liabilities between levels of the
fair value hierarchy. There are no non-recurring fair value
measurements.
17 Glossary
Alternative Performance Measure (APMs) - An APM is a financial
measure of historical or future financial performance, financial
position, or cash flows, other than a financial measure defined or
specified in the applicable financial reporting framework.
APMs are non-GAAP measures that are presented to provide readers
with additional financial information that is regularly reviewed by
management, and the Directors consider that they provide a useful
indicator of underlying performance. Adjusted results are also an
important measure providing useful information as they form the
basis of calculations required for the Group's covenants. However,
this additional information presented is not uniformly defined by
all companies including those in the Group's industry. Accordingly,
it may not be comparable with similarly titled measures and
disclosures by other companies. Additionally, certain information
presented is derived from amounts calculated in accordance with
IFRS but is not itself an expressly permitted GAAP measure. Such
measures should not be viewed in isolation or as an alternative to
the equivalent GAAP measure. In response to the Guidelines on APMs
issued by the European Securities and Markets Authority (ESMA), we
have provided additional information on the APMs used by the
Group.
GULF MARINE SERVICES PLC
Notes to the condensed consolidated financial statements
(continued)
for the period ended 30 June 2020
17 Glossary (continued)
Adjusted diluted earnings/(loss) per share - represents the
adjusted profit/(loss) attributable to equity holders of the
Company for the period divided by the weighted average number of
ordinary shares in issue during the period, adjusted for the
weighted average effect of share options outstanding during the
period. The adjusted profit/(loss) attributable to equity
shareholders of the Company is earnings used for the purpose of
basic earnings/(loss) per share adjusted by adding back
non-operational items and impairment charges. This measure provides
additional information regarding earnings per share attributable to
the underlying activities of the business. A reconciliation of this
measure is provided in note 4.
Adjusted EBITDA - represents operating profit after adding back
depreciation, amortisation, non-operational items and impairment
charges. This measure provides additional information in assessing
the Group's underlying performance that management is more directly
able to influence in the short term and on a basis comparable from
year to year. A reconciliation of this measure is provided in note
4.
Adjusted EBITDA margin - represents adjusted EBITDA divided by
revenue. This measure provides additional information on underlying
performance as a percentage of total revenue derived from the
Group. A reconciliation of this measure is provided in note 4.
Adjusted gross profit - represents gross profit after adding
back non-operational items and impairment charges. This measure
provides additional information on the core profitability of the
Group. A reconciliation of this measure is provided in note 4.
Adjusted net profit/(loss) - represents net profit/(loss) after
adding back non-operational items and impairment charges. This
measure provides additional information in assessing the Group's
total performance that management is more directly able to
influence and, on a basis, comparable from year to year. A
reconciliation of this measure is provided in note 4 of these
results.
Cost of sales excluding depreciation, amortisation and
non-operational items - represents cost of sales excluding
depreciation and amortisation. This measure provides additional
information of the Group's cost for operating the vessels. A
reconciliation is shown below;
30 June 30 June
2020 2019
US$'000 US$'000
Statutory cost of sales 35,438 40,670
Less depreciation and amortisation (14,807) (16,549)
Less non-operational transfer costs (6,794)
13,837 24,121
GULF MARINE SERVICES PLC
Notes to the condensed consolidated financial statements
(continued)
for the period ended 30 June 2020
17 Glossary (continued)
EBITDA - represents Earnings before Interest, Tax, Depreciation
and Amortisation, which represents operating profit after adding
back depreciation and amortisation. This measure provides
additional information of the underlying operating performance of
the Group. A reconciliation of this measure is provided in note
4.
General and administrative expenses excluding depreciation and
amortisation -
represents general and administrative expenses excluding
depreciation and amortisation. This measure provides additional
information of the Group's real general and administrative expenses
excluding accounting entries for depreciation and amortisation. A
reconciliation is shown below:
30 June 31 December
2020 2019
US$'000 US$'000
Statutory general and administrative
expenses 4,944 8,596
Less depreciation and amortisation (404) (1,131)
4,540 7,465
Segment adjusted gross profit/loss - represents gross
profit/loss after adding back depreciation, amortisation and
impairment charges. This measure provides additional information on
the core profitability of the Group attributable to each reporting
segment. A reconciliation of this measure is provided in note
4.
Total net borrowings - represents the total bank borrowings less
issue costs and cash. This measure provides additional information
of the Group's financial position. A reconciliation is shown
below:
30 June 31 December
2020 2019
US$'000 US$'000
Statutory bank borrowings 409,558 398,502
Less issue costs (15,161) -
Less cash and cash equivalents (6,630) (8,404)
387,767 390,098
GULF MARINE SERVICES PLC
Notes to the condensed consolidated financial statements
(continued)
for the period ended 30 June 2020
17 Glossary (continued)
Other Definitions
Adjusted utilisation based on calendar days - actual number of
days a vessel is on hire divided by the number of calendar days in
a year.
Available days - the number of days during which an SESV is
available for hire. Periods during which the vessel is not
available for hire due to planned upgrade work, transit time for
long-term relocation to a new region or construction are excluded
from the available days. In calculating available days for each
SESV in a given year, we also subtract from a base of 365 days
those days spent on mobilisation and demobilisation, planned
refurbishment and, in the case of a newly constructed SESV,
delivery time.
Backlog - represents firm contracts and extension options held
by clients. Backlog equals (charter day rate x remaining days
contracted) + ((estimated average Persons On Board x daily messing
rate) x remaining days contracted) + contracted remaining unbilled
mobilisation and demobilisation fees. Includes extension
options.
Borrowing rate - LIBOR plus margin.
Calendar days - takes base days at 365 and only excludes periods
of time for construction and delivery time for newly constructed
vessels.
Costs capitalised - represent qualifying costs that are
capitalised as part of a cost of the vessel rather than being
expensed as they meet the recognition criteria of IAS 16 Property,
Plant and Equipment.
E&P - exploration and production
EPC - engineering, procurement and construction.
Finance service - the aggregate of
a) Net finance charges for that period; and
b) All schedules payments of principal and any other schedule
payments in the nature of principal payable by the Group in that
period in respect of financing:
i) Excluding any amounts falling due in that period under any
overdraft, working capital or revolving facility which were
available for simultaneous redrawing under the terms of that
facility;
ii) Excluding any amount of PIK that accretes in that period;
iii) Including the amount of the capital element of any amounts
payable under any Finance Lease in respect of that period; and
iv) Adjusted as a result of any voluntary or mandatory prepayment
Finance service cover - represents the ratio of Adjusted EBITDA
to finance service
Interest Cover - represents the ratio of Adjusted EBITDA to Net
finance charges.
GULF MARINE SERVICES PLC
Notes to the condensed consolidated financial statements
(continued)
for the period ended 30 June 2020
17 Glossary (continued)
GMS core fleet - consists of 13 SESVs, with an average age of
nine years.
IOC - International Oil Company.
LIBOR - London Interbank Offered Rate.
Net finance charges -- represents finance charges for that
period less interest income for that period.
Net leverage ratio - represents the ratio of net bank debt to
Adjusted EBITDA.
NOC - national oil company.
On hire daily vessel operating expenses - costs incurred to
ensure a vessel is operationally ready and capable of carrying out
work required to fulfil contract requirements. This excludes
mobilisation costs and bad debt provisions
OSW - Offshore Wind.
Proforma EBITDA - represents EBITDA for covenant testing
purposes being EBITDA (see definition above) for the trailing 12
months plus EBITDA contribution from new contracts, of at least six
months in duration that commence during a covenant testing period,
with the EBITDA contribution from these contracts annualised
(unless contract duration is less than 12 months when total
contract EBITDA contribution is applied).
Secured backlog - represents firm contracts and extension
options held by clients. Backlog equals (charter day rate x
remaining days contracted) + ((estimated average Persons On Board x
daily messing rate)) x remaining days contracted) + contracted
remaining unbilled mobilisation and demobilisation fees. Includes
extension options.
Security Cover (loan to value) - the ratio (expressed as a
percentage) of Total Net Debt at that time to the Market Value of
the Secured Vessels.
SESV - Self-Elevating Support Vessels
SG&A spend - means that the selling, general and
administrative expenses calculated on an accruals basis should be
no more than the SG&A maximum spend for any relevant
period.
Total Recordable Injury Rate (TRIR) - calculated on the injury
rate per 200,000 man hours and includes all our onshore and
offshore personnel and subcontracted personnel. Offshore personnel
are monitored over a 24-hour period.
Utilisation - the percentage of available days in a relevant
period during which an SESV is under contract and in respect of
which a customer is paying a day rate for the charter of the
SESV.
Cautionary Statement
This announcement includes statements that are forward-looking
in nature. All statements other than statements of historical fact
are capable of interpretation as forward-looking statements. These
statements may generally, but not always, be identified by the use
of words such as 'will', 'should', 'could', 'estimate', 'goals',
'outlook', 'probably', 'project', 'risks', 'schedule', 'seek',
'target', 'expects', 'is expected to', 'aims', 'may', 'objective',
'is likely to', 'intends', 'believes', 'anticipates', 'plans', 'we
see' or similar expressions. By their nature these forward-looking
statements involve numerous assumptions, risks and uncertainties,
both general and specific, as they relate to events and depend on
circumstances that might occur in the future.
Accordingly, the actual results, operations, performance or
achievements of the Company and its subsidiaries may be materially
different from any future results, operations, performance or
achievements expressed or implied by such forward-looking
statements, due to known and unknown risks, uncertainties and other
factors. Neither Gulf Marine Services PLC nor any of its
subsidiaries undertake any obligation to publicly update or revise
any forward-looking statement as a result of new information,
future events or other information. No part of this announcement
constitutes, or shall be taken to constitute, an invitation or
inducement to invest the Company or any other entity and must not
be relied upon in any way in connection with any investment
decision. All written and oral forward-looking statements
attributable to the Company or to persons acting on the Company's
behalf are expressly qualified in their entirety by the cautionary
statements referred to above.
[1] The Group presents adjusted results, in addition to the
statutory results, as the Directors consider that they provide a
useful indication of underlying performance. In 2020 the adjusting
items reflect US$ 6.8 million as the cost of transporting 2 E-Class
vessels from the North Sea to the Middle East, together with
restructuring costs of US$ 0.3 million and Seafox bid defence costs
of US$ 1.4 million. In 2019 they included a non-cash impairment
charge on property, plant and equipment of US$ 4.6 million. For
details and further information on Alternative Performance
Measures, refer to the Glossary.
[2] Net cash flow before debt service is the sum of cash
generated from operations and investing activities.
[3] The US$ 50 million working capital facility is split between
US$ 25 million cash and US$ 25 million for guarantees.
[4] Client staff on only two of our vessels have tested positive
for COVID-19 during 2020.
[5] The group of six banks with whom the facilities are
held.
([6]) UK Disclosure and Transparency Rule 7.1 ("DTR 7.1").
([7]) H1 2019 adjusted EBITDA of US$ 23.4 million. See note 4 of
the condensed consolidated financial statements for details.
([8]) Material uncertainties that existed at the time of the
issuance of the Group 2019 Annual Report.
([9]) As at 1 August 2020, comprising US$ 140.6 million firm and
US$ 84.5 million of options.
([10]) At the time of the issuance of the Half Year 2019 results
(29 September 2019).
[11] The Group presents adjusted results, in addition to the
statutory results, as the Directors consider that they provide a
useful indication of underlying performance. In 2020 the adjusting
items reflect US$ 6.8 million as the cost of transporting 2 E-Class
vessels from the North Sea to the Middle East, together with
restructuring costs of US$ 0.3 million and Seafox bid defence costs
of US$ 1.4 million. In 2019 they included a non-cash impairment
charge on property, plant and equipment of US$ 4.6 million. For
details and further information on Alternative Performance
Measures, refer to the Glossary.
[12] Net cash flow before debt service is the sum of cash
generated from operations and investing activities.
[13] Net cash flow before debt service is the sum of cash
generated from operations and investing activities.
[14] Contracted till Q4 2023 and Q3 2024 respectively.
[15] The Group presents adjusted results, in addition to the
statutory results, as the Directors consider that they provide a
useful indication of underlying performance. In 2020 the adjusting
items reflect US$ 6.8 million as the cost of transporting 2 E Class
vessels from the North Sea to the Middle East, together with
restructuring costs of US$ 0.3 million and Seafox bid defence costs
of US$ 1.4 million. In 2019 they included a non-cash impairment
charge on property, plant and equipment of US$ 4.6 million. For
details and further information on Alternative Performance
Measures, refer to the Glossary.
[16] Secured utilisation to end 2020 of 83% and for 2021 is 54%
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR BXLLBBVLZBBD
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