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Gulf Marine Services PLC announced its full year financial results for the year ended 31 December 2021. For 2021, the company reported a net profit of US$31.2 million, an increase from a net loss of US$124.3 million in 2020, with revenue rising by 12.3% to US$115.1 million. The company also reported a US$15.0 million impairment reversal and successfully issued US$27.8 million of equity by 30 June 2021, which removed the material uncertainty regarding its going concern status.
| Date | 13 May 2022 |
| Time | 07:10:24 |
| Category | Results |
| ID | 4144L |
13 May 2022
Gulf Marine Services PLC
('Gulf Marine Services', 'GMS', 'the Company' or 'the Group')
2021 Financial Results
Gulf Marine Services PLC ("GMS" or the "Company"), a leading provider of advanced self-propelled, self-elevating support vessels serving the offshore oil, gas and renewables industries, is pleased to announce its full year financial results for the year to 31 December 2021.
Financial Overview
|
|
2021 US$m |
2020 US$m |
2019 US$m |
|
Revenue |
115.1 |
102.5 |
108.7 |
|
Gross profit/(loss) |
60.6 |
(55.5) |
(25.0) |
|
Adjusted EBITDA[1] |
64.1 |
50.4 |
51.4 |
|
Impairment reversal/(impairment) |
15.0 |
(87.2) |
(59.1) |
|
Net profit/(loss) for the year |
31.2 |
(124.3) |
(85.5) |
|
Adjusted net profit/(loss)[2] |
18.0 |
(15.3) |
(20.0) |
· Revenue increased by 12.3% to US$ 115.1 million (2020: US$ 102.5 million) driven by increased utilisation in higher earning E- and S-Class vessels.
· Adjusted EBITDA1 increased to US$ 64.1 million (2020: US$ 50.4 million) and adjusted EBITDA margin improved to 56% (2020: 49%).
· Cost of sales excluding depreciation, amortisation and the reversal of impairment/impairment charge was US$ 41.2 million (2020: US$ 42.3 million) reflecting higher vessel utilisation and saving initiatives.
· General and administrative expenses decreased to US$ 12.3 million (2020: US$ 18.2 million) as a result of US$ 5.6 million of non-recurring costs incurred in the prior year (2021: nil).
· US$ 15.0 million reversal of prior years impairment compared to an impairment charge of US$ 87.2 million in 2020, reflecting Group's improved long-term outlook.
· First reported net profit since 2016 at US$ 31.2 million (2020: net loss of US$ 124.3 million). Adjusted net profit2 of US$ 18.0 million (2020: adjusted net loss of US$ 15.3 million).
· Interest on bank borrowings reduced by 37% to US$ 17.5 million (2020: US$ 27.6 million) following refinancing of the Group's debt facility and reduction in LIBOR with both margin and average LIBOR decreasing to 3.0% and 0.2% (2020: 5.0% and 1.0%).
· Net bank debt[3] reduced to US$ 371.2 million (2020: US$ 406.3 million). Net leverage ratio[4] reduced to 5.8 times (2020: 8.0 times).
· Successful issuance of equity by 30 June 2021 removed potential event of default, which in turn removed material uncertainty as to the Group's ability to continue as a Going Concern reported in 2020.
· Average fleet utilisation increased by 4 percentage points to 85% (2020: 81%) with notable improvements in both S- and E-Class vessels at 98% (2020: 92%) and 72% (2020: 65%) respectively. Average utilisation for K-Class vessels remained flat at 86% (2020: 86%).
· Average day rates marginally increased to US$ 25.7k (2020: US$ 25.3k) with recent awards in the second half of the year showing significant improvement.
· New charters and extensions secured in year totalled 9.6 years (2020: 6.6 years).
· Operational downtime remains low at 1.6% (2020: 1.5%).
· Border restrictions and quarantine requirements in relation to COVID-19 have shown signs of easing in latter part of 2021.
· Strengthening of Board with the appointment of two independent non-executive Directors in February 2021 and May 2021 and one non-executive Director in August 2021.
· Secured utilisation for 2022 currently stands at 88% against actual utilisation of 81% in 2021.
· Anticipate continued improvement on day rates as Middle East vessel demand outstrips supply on the back of a strong pipeline of opportunities.
· Average secured day rates over 12% higher than 2021 actual levels.
· Reversal of impairment recognised with a value of US$ 15.0 million indicative of improving long-term market conditions.
· EBITDA guidance of between US$ 70-US$ 80 million maintained for the current financial year.
· Group anticipates net leverage ratio to be below 4.0 times by the end of 2022.
Mansour Al Alami, Executive Chairman said:
"The primary aims of last year included reorganising the Company, to regain the trust of stakeholders and to build a business able to consistently provide value to its shareholders. These aims have been delivered on and we are proud of having made such significant progress in such a short period of time. GMS today is back to profitability, it is back to being on a growth path and continuing to deleverage. We look forward to continuing this journey and we thank you all for your patience."
"On behalf of the Board, I would like to thank all our staff for a year of hard work and for their continued commitment to GMS. I would also like to thank our stakeholders, including customers, suppliers, and lenders for their support during the past year".
This announcement contains inside information and is provided in accordance with the requirements of Article 17 of the Market Abuse Regulation (EU) No. 596/2014 (as it forms part of UK law by virtue of the European Union (Withdrawal) Act 2018, as amended).
|
Enquiries: Mansour Al Alami Executive Chairman |
Tel: +44 (0)20 7603 1515 |
|
Celicourt Communications Mark Antelme Philip Dennis |
Tel: +44 (0) 208 434 2643 |
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, Saudi Arabia and Qatar. The Group's assets are capable of serving clients' requirements across the globe, including those in the Middle East, Southeast 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 11 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.
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.
TURNING THE CORNER
2021 saw a number of positive steps being made by the Group as the business continues to turn around. A new bank deal and subsequent equity raise helped stabilise the balance sheet, removing a potential event of default with our banks. Improving demand for our vessels led to utilisation being the highest in the last six years, driving an increase in day rates for contracts awarded in the second half of the year, which we will see the benefit of in 2022. The Group reported improved margins driven by increased revenues leading to its first reported net profit since 2016.
Group Performance
Revenue increased by 12.3% to US$ 115.1 million (2020: US$ 102.5 million) with an increase in utilisation of 3 percentage points to 84% (2020: 81%) and with notable improvements in both S- and E-Class vessels at 98% (2020: 92%) and 72% (2020: 65%) respectively. K- Class vessels remained flat at 86% (2020: 86%). Average day rates across the fleet marginally increased to US$ 25.7k (2020: US$ 25.3k). Certain contracts awarded in the latter half of the year, which are due to commence in 2022, saw significant day rate improvements on legacy contracts.
Vessel operating expenses decreased by 2.6% to US$ 41.2 million (2020: $42.3 million), despite the increase in utilisation. General and administrative expenses reduced by US$ 5.9 million to US$ 12.3 million, of which US$ 5.6 million related to non-recurring adjusting items in 2020 and the balance reflecting savings from the final phase of the Group's cost-cutting exercise.
Adjusted EBITDA was US$ 64.1 million, up 27.2% from the previous year (2020: US$ 50.4 million) mainly driven by improved utilisation, particularly in the Group's higher earning E- and S-Class vessels.
During the year there was a reversal of previous impairment charges of US$ 15.0 million, indicative of improvements to long-term market conditions and non-operational finance expenses totalling US$ 1.7 million following the extinguishment of the old debt facility and recognition the new debt facility that completed in the year, (refer to Note 9 in the consolidated financial information).
The Group returned to profitability for the first time since 2016 with a net profit for the year of US$ 31.2 million (2020: loss for the year of US$ 124.3 million) and an adjusted net profit of US$ 18.0 million (2020: adjusted net loss of US$ 15.3 million).
Capital Structure and Liquidity
Net bank debt reduced to US$ 371.2 million (2020: US$ 406.3 million). A combination of reduced debt and improved adjusted EBITDA led to a 28% reduction in the net leverage ratio reducing from 8.0 times in 2020 to 5.8 times at the end of 2021. The Group will continue its focus on organically reducing leverage going forward.
The Group successfully concluded a US$ 27.8 million equity raise in June 2021 which prevented an event of default on its loan facilities. Under these facilities, the Group is required to raise a further US$ 50 million of equity by the end of 2022 or issue 87.6 million warrants entitling the Group's banks to acquire 132 million shares, or 11.5% of the share capital of the Company, for a total consideration of GBP £7.9 million, or 6.0 pence per share.
The Group is exploring the various contractual options available per the current bank terms to take place by the end of 2022. As disclosed, the two options available are the raise of US$ 50 million equity or the issuance of 87.6 million warrants giving potential rights to 132 million shares if exercised, which would result in cash proceeds to the Company of £ 7.9 million. As at 31 December 2021, neither of the two contractual scenarios had been ruled out. The Board however consider the issuance of warrants to have a slightly higher chance of occurrence.
Interest on bank borrowings reduced by 36.6% to US$ 17.5 million (2020: US$ 27.6 million) following the renegotiation of the Group's bank facility in March 2021, the reduction in net bank debt, following the successful equity raise and a reduction in average LIBOR to 0.2% (2020: 1.0%).
Commercial and Operations
The Group secured nine new contracts in the year, worth US$ 66.0 million (2020: seven contracts worth US$ 18.0 million). Tender and bid activity increased, with 2.6 vessel years of projects that are due to commence in 2022 currently in the pipeline. Evolution commenced its first long-term contract utilising its cantilever system.
Despite challenges brought by COVID the Group has achieved its best year for financial performance for many years. Average utilisation, particularly for K-Class vessels, has remained at its highest since 2016. New charters and extensions secured in year totalled 9.6 years. Operational downtime continued the trend of recent years of being low at 1.5% (2020: 1.6%).
Governance
Three new non-executive Directors joined the Board during 2021, with the appointment of Jyrki Koskelo, Anthony St John and Charbel El Khoury in February, May, and August 2021 respectively.
I currently hold the position of Chairman and Chief Executive, leading the business and the Board. Whilst holding the positions of both Chairman and Chief Executive is not recommended by the 2018 UK Corporate Governance Code (the Code), the Board has concluded that, at this stage in the Group's turnaround process, this continues to be appropriate. This recognises both the level and pace of change necessary for the Group and its relatively small scale. This will be regularly assessed by the Board as the Group progresses through its turnaround process.
Removal of Material Uncertainty
The Group is currently operating as a Going Concern without any material uncertainties. This is the first time the Group has been operating as Going Concern without any material uncertainties since 2017.
Safety
There were two recordable injuries in the early part of 2021. One Lost Time Injury and one Restricted Work Day Case. This led to an increase in our Total Recordable Injury Rate from 0.0 (2020) to 0.2 (2021), and an increase in our Lost Time Injury rate from 0.0 (2020) to 0.1 (2021). These levels remain significantly below industry average and in both cases have since returned to zero in early 2022. Two vessels celebrated safety milestones in the year, with both Evolution and Endeavour reaching five years without incident.
We continue to develop our systems and processes to ensure that our offshore operations are as safe as possible in line with the expectations of our customers and stakeholders.
Taskforce on Climate-related Financial Disclosures
This year the Annual Report includes our first Task Force on Climate-related Financial Disclosures (TCFD). This is a new requirement for premium listed companies on the London Stock Exchange. We welcome the introduction of this regulation, having previously committed to adopting the TCFD recommendations by 2022. GMS acknowledged climate change as an emerging risk in 2019, and in December 2021, recognised it as a principal risk.
The Group has complied with the requirements of LR 9.8.6(8)R, by reporting on a 'comply or explain' basis against the 11 recommended TCFD disclosures. As of 31 December 2021, the Group was unable to make disclosures that were consistent with those of the TCFD for ten out of the eleven disclosures. The Group aims to be fully compliant by 31st December 2022.
Outlook
Due to the strong pipeline of opportunities expected to come to the market, the Group anticipates seeing continued improvements in day rate and utilisation levels in 2022. Secured utilisation for 2022 currently stands at 88% (equivalent in 2021: 73%).
Secured backlog stands at US$ 179.2 million as at 1 April 2022 (US$ 207.3 million as at 1 April 2021) and average secured day rates at $28.9k, 12.6% higher than 2021 actual average day rates. Given the current high levels of utilisation secured, combined with higher day rates, the Group expects the financial performance to continue to improve and reiterates its EBITDA guidance of between US$ 70-US$ 80 million for 2022.
Mansour Al Alami
Executive Chairman
Financial Review
|
|
2021 US$m |
2020 US$m |
2019 US$m |
|
Revenue |
115.1 |
102.5 |
108.7 |
|
Gross profit/(loss) |
60.6 |
(55.5) |
(25.0) |
|
Adjusted EBITDA[5] |
64.1 |
50.4 |
51.4 |
|
Impairment reversal/(impairment) |
15.0 |
(87.2) |
(59.1) |
|
Net profit/(loss) for the year |
31.2 |
(124.3) |
(85.5) |
|
Adjusted net profit/(loss)[6] |
18.0 |
(15.3) |
(20.0) |
Introduction
Revenue increased by 12.3% to US$ 115.1 million (2020: US$ 102.5 million). Vessel utilisation increased to 84% (2020: 81%) mainly driven by an easing of operational restrictions, and a more positive outlook leading to increased demand and the re-activation of delayed EPC project contract awards in GMS' core markets. S-Class utilisation improved from 92% in 2020 to 98% in 2021, with vessels benefiting from long-term contracts. Our E-Class utilisation levels also increased to 72% (2020: 65%) whilst K-Class utilisation remained flat at 86% (2020: 86%). Average day rates increased to US$ 25.7k (2020: US$ 25.3k).
Adjusted EBITDA1 increased to US$ 64.1 million (2020: US$ 50.4 million) with an increase in adjusted EBITDA margin to 56% (2020: 49%) mainly driven by the increase in utilisation particularly in the Group's higher earning E- and S-Class vessels described above.
Vessel operating expenses[7] decreased by 2.6% to US$ 41.2 million (2020: US$ 42.3 million), despite the increase in utilisation and additional COVID-19 costs, as managing the Group's cost base continues to be an area of focus.
During 2021, the Group encountered further COVID-related logistical issues in relation to crew movement and delays in mobilisations due to border closures and challenging quarantine requirements. These requirements and the mobilisation delays mentioned at H1 2021 have shown significant signs of easing in the second half of 2021.
General and administrative expenses3 decreased by US$ 5.9 million (32%), to US$ 12.3 million mainly as a result of exceptional restructuring costs and legal costs of US$ 2.5 million and US$ 3.1 million incurred in the prior year which did not repeat in the current year. Underlying G&A4 remained broadly flat at US$ 9.8 million (2020: US$ 9.7 million).
The Group reported a net profit for the year of US$ 31.2 million (2020: net loss for the year of US$ 124.3 million). The significant increase in profit was mainly driven by the increase in adjusted EBITDA1 described above, a reduction in finance costs to US$ 14.5 million (2020: US$ 46.7 million) and a reversal of impairment recognised at US$ 15.0 million compared to an impairment charge booked in the previous year of US$ 87.2 million. Adjusted net profit2 which excludes impairment charges, exceptional finance costs and exceptional legal and restructuring costs in 2020 was US$ 18.0 million (2020: adjusted net loss of US$ 15.3 million).
Included in the Company only financial statements is an impairment against the carrying value of investments of US$ 16.8 million (2020: $327.7 million).
Finance expenses reduced mainly from a reduction in bank interest to US$ 17.5 million (2020: US$ 27.6 million) following the refinancing, which took place in March 2021, with both margin and average LIBOR decreasing to 3.0% and 0.2% (2020: 5.0% and 1.0%) and a reduction of costs to acquire the new debt facility in March 2021 of US$ 3.2 million, compared to US$ 15.8 million being expensed in 2020.
Net bank debt[8] reduced to US$ 371.2 million (2020: US$ 406.3 million). The net leverage ratio1 has significantly reduced to 5.8 times compared to 8.0 times in 2020 mainly as a result of the improved adjusted EBITDA and raising US$ 27.8 million of new equity in June 2021. The equity raise completed in June 2021removed a potential event of default under the Groups' debt facilities as at 31 December 2021.
|
|
Revenue US$'000 |
Revenue US$'000 |
Gross profit/(loss) US$'000 |
Gross profit/(loss) US$'000 |
Adjusted gross profit / (loss) US$'000* |
Adjusted gross profit / (loss) US$'000* |
|
Vessel Class |
2021 |
2020 |
2021 |
2020 |
2021 |
2020 |
|
E-Class vessels |
38,680 |
29,407 |
21,277 |
(26,047) |
11,170 |
(22) |
|
S-Class vessels |
33,420 |
32,136 |
15,897 |
15,797 |
15,897 |
15,797 |
|
K-Class vessels |
43,027 |
40,947 |
23,568 |
(45,076) |
18,716 |
16,055 |
|
Other vessels |
- |
2 |
(116) |
(202) |
(116) |
(202) |
|
Total |
115,127 |
102,492 |
60,626 |
(55,528) |
45,667 |
31,628 |
* See Glossary and note 9 of the consolidated financial information.
Revenue and segmental profit/loss
The table above shows the contribution to revenue, and segment gross profit or loss made by each vessel class during the year.
Utilisation in 2021 increased to 84% (2020: 81%). This is the highest level of utilisation achieved since 2015 and was facilitated by an easing of COVID-related operational restrictions and a more positive outlook leading to increased demand and the re-activation of delayed EPC project contract awards in GMS's core markets. S-Class utilisation improved from 92% in 2020 to 98% in 2021 mainly from long-term contracts which continued throughout the year. Our E-Class utilisation levels also saw an increase to 72% (2020: 65%) and K-Class utilisation remained flat at 86% (2020: 86%).
Average day rates marginally increased to US$ 25.7k (2020: US$ 25.3k). Vessel day rates for E-Class vessels increased by 7%, offset by marginal decreases to S-Class and K-Class rates of 2% and 3% respectively. New contracts awarded in the latter half of the year, which are due to commence in 2022, saw significant day rate improvements on legacy contracts.
The MENA region continues to be the largest geographical market representing 89% (2020: 88%) of total Group revenue. The remaining 11% (2020: 12%) of revenue was earned from Offshore Windfarms in the renewables market in Europe. National Oil Companies (NOCs) continue to be the Group's principal client representing 70% of 2021 total revenue (2020: 68%).
The UAE remains the largest revenue contributor in the MENA region, generating 50% of total revenue (2020: 52%). The remainder is split between Saudi Arabia and Qatar at 19% and 20% respectively (2020: 17% and 19%).
Cost of sales, reversal of impairment and administrative expenses
Cost of sales excluding impairment slightly decreased to US$ 69.5 million (2020: US$ 70.9 million) with operating expenses and depreciation decreasing by US$ 1.1 million and US$ 0.4 million respectively. Despite achieving a 12.3% increase in revenue, cost of sales excluding depreciation and amortisation fell by 2.6% to US$ 41.2 million (2020: US$ 42.3 million). Total depreciation and amortisation included in cost of sales amounted to US$ 28.2 million in 2021 (2020: US$ 28.6 million).
Following an improvement to general market conditions, stabilisation of the Group's capital structure and an increase in market capitalisation, management performed a formal impairment assessment of the Group's fleet, comparing the net book value to the recoverable amount as at 31 December 2021. Based on the assessment, the total recoverable amount of the fleet was computed at US$ 631.9 million (2020: US$ 664.0 million) resulting in an impairment reversal of US$ 15.0 million compared to an impairment charge of US$ 87.2 million in 2020. Refer to note 4 in the consolidated financial information for further details.
Overall general and administrative costs reduced from US$ 18.2 million in 2020 to US$ 12.3 million in 2021. There were no restructuring costs incurred in the financial year (2020: US$ 2.5 million). In 2020, one-off legal costs of US$ 3.1 million were incurred in relation to the Seafox proposed bid offer and governance and management changes which did not repeat in the current year. Underlying G&A remained broadly flat at US$ 9.8 million (2020: US$ 9.7 million).
Adjusted EBITDA
Adjusted EBITDA, which excludes the impact of reversal of impairment in 2021 and an impairment charge and one-off non-operational costs in 2020, increased to US$ 64.1 million (2020: US$ 50.4 million), mainly driven by the increase in utilisation particularly in the Group's higher earning E- and S-Class vessels described above. Adjusted EBITDA is considered an appropriate, comparable measure showing underlying performance, that management are able to influence. Please refer to Note 9 and Glossary for further details.
Finance costs
Finance costs reduced materially from US$ 46.7 million in 2020 to US$ 14.5 million in 2021, mainly as a result of a reduction in bank interest to US$ 17.5 million (2020: US$ 27.6 million). Costs to acquire the bank facility in 2021 were significantly lower than costs to acquire the previous refinance in 2020 at US$ 3.2 million (2020: US$ 15.8 million). A gain of US$ 6.3 million (2020: US$ 1.1 million) was recognised in the profit and loss in the current year, reflecting the waiver of PIK interest otherwise payable during the first quarter of 2021, the remeasurement of the debt to fair value as at the date of the substantial modification and the impact of a change in the forecast voluntary repayment of the debt. Refer to note 7 for further details.
Earnings
The Group achieved a profit of US$ 31.2 million (2020: loss of US$ 124.3 million), mainly driven by an increase in utilisation, decrease in finance expenses and the reversal of impairment booked in at US$ 15.0 million (2020: impairment charge of US$ 87.2 million) all described above.
After reflecting for adjusting items (impairment and finance expenses) the Group incurred an adjusted profit of US$ 18.0 million (2020: adjusted loss of US$ 15.3 million).
Capital expenditure
The Group's capital expenditure during the year reduced to US$ 12.2 million (2020: US$ 14.2 million). Expenditure mainly relating to upgrades made to vessels to meet client requirements. The Company continues to maintain capital expenditure at a level that ensures safe operations, in line with legal and regulatory obligations, and that meets client requirements, as it focuses on maximising its cash generation to continue reducing bank debt.
Cash flow and liquidity
During the year, the Group delivered operating cash flows of US$ 40.5 million (2020: US$ 44.3 million). This reduction is primarily as a result of the movement in trade and other receivables described below offset by increased profit. The net cash outflow from investing activities for 2021 decreased to US$ 11.5 million (2020: US$ 12.4 million) as the Group continues to limit capital expenditure to maintaining the fleet to a level that ensures safe operations and meets client requirements.
The Group's net cash flow from financing activities was an outflow of US$ 24.5 million during the year (2020: US$ 36.5 million) mainly comprising net repayments to the bank of US$ 31.0 million (2020: US$ 12.1 million) and interest paid of US$ 13.0 million (2020: US$ 27.9 million), offset by proceeds from shares following the equity raise of US$ 27.8 million (2020: nil).
Balance sheet
Total non-current assets at 31 December 2021 were US$ 617.2 million (2020: US$ 618.8 million), following a US$ 15.0 million reversal of impairment on some of the Group's vessels (2020: impairment charge of US$ 87.2 million).
Total current assets at 31 December 2021 were US$ 57.2 million (2020: US$ 35.6 million). Cash and cash equivalents increased to US$ 8.3 million (2020: US$ 3.8 million). Trade and other receivables increased to US$ 48.9 million (2020: US$ 31.8 million) of which US$ 41.9 million (2020: US$ 24.1 million) related to net trade receivables and US$ 7.0 million (2020: US$ 7.8 million) to other receivables. The increase in trade receivables was mainly driven by increased utilisation and client delays in processing receipts. Trade receivables are primarily with NOC, IOC and international EPC companies, with over 89% being aged between 0-60 days. Out of the year-end balance, over US$ 30 million has subsequently been collected.
Total current liabilities reduced to US$ 53.3 million at 31 December 2021 (2020: US$ 61.0 million), Trade payables decreased to US$ 10.5 million (2020: US$ 12.3 million) and other payables decreased to US$ 8.9 million (2020: US$ 11.1 million). There was a decrease in bank borrowings due within one year to US$ 26.1 million (2020: US$ 31.0 million) as a result of the Group's working capital facility (US$ 21.5 million) now being recognised as a non‐current liability as it is available for utilisation until the end of the term debt facility offset by an increase in loan repayments for the next 12 months compared to the previous year.
Net bank debt and borrowings
On 31 March 2021, the Group amended the terms of its loan facility with its banking syndicate. The amended terms were significantly different from the original loan. Management determined that the Group's loan facility was substantially modified and, accordingly, the old loan facility was extinguished and the new facility recognised. Refer to note 7 for further details.
Net bank debt as at 31 December 2021 reduced to US$ 371.2 million (2020: US$ 406.3 million) with US$ 20.0 million of the US$ 31.0 million total loan repayments being made following the equity raise in June 2021. The net leverage ratio has significantly reduced and was 5.8 times as at 31 December 2021 compared to 8.0 times in 2020, as a result of improved adjusted EBITDA and the equity raise in June 2021.
Going Concern
The successful issuance of equity by 30 June 2021 removed a potential event of default on the Group's bank facilities which in turn removed the material uncertainty as to the Group's ability to continue as a Going Concern that was reported in the full year 2020 results.
The Group's forecasts indicate that its revised debt facility will provide sufficient liquidity for its requirements for at least the next 12 months and accordingly, the consolidated financial information for the Group have been prepared on the Going Concern basis. For further details please refer the Going Concern disclosure in note 1 of the financial information. This is the first time the Group have been operating as Going Concern without any material uncertainties since 2017.
Related party transactions
During the year, there were related party transactions with our partner in Saudi Arabia for leases of breathing equipment for some of our vessels and office space totalling US$ 0.5 million (2020: US$ 0.5 million). In addition, there were related party transaction related to catering services for Vessel Pepper totalling to US$ 0.5 million (2020: US$ nil).
The Group has never had transactions with its largest shareholder, Seafox International (29.9%) and has agreed with its banks, in its latest agreement signed in March 2021, restrictions on any future transactions with them or their affiliates. During the year, the Group received catering services totalling US$ 0.5 million (2020: nil) on board one of its vessels provided by the National Catering Company, an affiliate of Mazrui International LLC, the Group's second largest shareholder (25.6%).
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. A reconciliation between the adjusted non-GAAP and statutory results is provided in Note 9 of the consolidated financial information with further information provided in the Glossary.
Consolidated statement of profit or loss and other comprehensive income for the year ended 31 December
|
|
Notes |
2021 |
|
2020 |
|
|
|
US$'000 |
|
US$'000 |
|
|
|
|
|
|
|
Revenue |
8,11 |
115,127 |
|
102,492 |
|
|
|
|
|
|
|
Cost of sales |
|
(69,460) |
|
(70,864) |
|
Reversal of impairment/(impairment loss) |
4 |
14,959 |
|
(87,156) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit/(loss) |
|
60,626 |
|
(55,528) |
|
|
|
|
|
|
|
Restructuring costs |
|
- |
|
(2,492) |
|
Exceptional legal costs |
|
- |
|
(3,092) |
|
Other general and administrative expenses |
|
(12,272) |
|
(12,632) |
|
General and administrative expenses |
|
(12,272) |
|
(18,216) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit/(loss) |
|
48,354 |
|
(73,744) |
|
|
|
|
|
|
|
Finance income |
|
9 |
|
15 |
|
Finance expense |
|
(14,463) |
|
(46,740) |
|
Foreign exchange loss, net |
|
(1,002) |
|
(993) |
|
Loss on disposal of property and equipment |
|
- |
|
(2,073) |
|
Gain on disposal of fixed assets held for sale |
|
- |
|
259 |
|
Other income |
|
28 |
|
257 |
|
|
|
|
|
|
|
Profit/(loss) for the year before taxation |
|
32,926 |
|
(123,019) |
|
|
|
|
|
|
|
Taxation charge for the year |
|
(1,707) |
|
(1,285) |
|
|
|
|
|
|
|
Net profit/(loss) for the year |
|
31,219 |
|
(124,304) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income/(expense) - items that may be reclassified to profit or loss: |
|
|
|
|
|
|
|
|
|
|
|
Net gain on changes in fair value of hedging instruments |
12 |
- |
|
21 |
|
Net hedging gain reclassified to the profit or loss |
12 |
278 |
|
883 |
|
Exchange differences on translation of foreign operations |
|
(91) |
|
425 |
|
|
|
|
|
|
|
Total comprehensive gain/(loss) for the year |
|
31,406 |
|
(122,975) |
|
|
|
|
|
|
|
Profit/(loss) attributable to: |
|
|
|
|
|
|
|
|
|
|
|
Owners of the Company |
|
31,001 |
|
(124,339) |
|
Non-controlling interests |
|
218 |
|
35 |
|
|
|
|
|
|
|
|
|
31,219 |
|
(124,304) |
|
|
|
|
|
|
|
Total comprehensive profit/(loss) attributable to: |
|
|
|
|
|
|
|
|
|
|
|
Owners of the Company |
|
31,188 |
|
(123,010) |
|
Non-controlling interests |
|
218 |
|
35 |
|
|
|
|
|
|
|
|
|
31,406 |
|
(122,975) |
|
|
|
|
|
|
|
Earnings/(loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
Basic (cents per share) |
10 |
4.48 |
|
(35.48) |
|
Diluted (cents per share) |
10 |
4.46 |
|
(35.48) |
|
|
|
|
|
|
All results are derived from continuing operations in each year. There are no discontinued operations in either years.
Consolidated statement of financial position as at 31 December
|
|
Notes |
2021 |
|
2020 |
|
|
|
US$'000 |
|
US$'000 |
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
Non-current assets |
|
|
|
|
|
Property and equipment |
4 |
605,526 |
|
605,077 |
|
Dry docking expenditure |
|
8,799 |
|
10,391 |
|
Right-of-use assets |
|
2,884 |
|
3,340 |
|
|
|
|
|
|
|
Total non-current assets |
|
617,209 |
|
618,808 |
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
Trade and other receivables |
|
48,917 |
|
31,834 |
|
Cash and cash equivalents |
5 |
8,271 |
|
3,798 |
|
|
|
|
|
|
|
Total current assets |
|
57,188 |
|
35,632 |
|
|
|
|
|
|
|
Total assets |
|
674,397 |
|
654,440 |
|
|
|
|
|
|
|
EQUITY AND LIABILITIES |
|
|
|
|
|
Capital and reserves |
|
|
|
|
|
Share capital - Ordinary |
6 |
30,117 |
|
58,057 |
|
Share capital - Deferred |
6 |
46,445 |
|
- |
|
Share premium account |
6 |
99,105 |
|
93,080 |
|
Restricted reserve |
|
272 |
|
272 |
|
Group restructuring reserve |
|
(49,710) |
|
(49,710) |
|
Share based payment reserve |
|
3,648 |
|
3,740 |
|
Capital contribution |
|
9,177 |
|
9,177 |
|
Cash flow hedge reserve |
|
(558) |
|
(836) |
|
Translation reserve |
|
(2,086) |
|
(1,995) |
|
Retained earnings |
|
124,386 |
|
93,385 |
|
|
|
|
|
|
|
Attributable to the owners of the Company |
|
260,796 |
|
205,170 |
|
Non-controlling interests |
|
1,912 |
|
1,694 |
|
|
|
|
|
|
|
Total equity |
|
262,708 |
|
206,864 |
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
Trade and other payables |
|
19,455 |
|
23,395 |
|
Current tax liability |
|
5,669 |
|
4,811 |
|
Bank borrowings - scheduled repayments within one year |
7 |
26,097 |
|
31,024 |
|
Lease liabilities |
|
1,817 |
|
1,739 |
|
|
|
|
|
|
|
Total current liabilities |
|
53,038 |
|
60,969 |
|
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
|
Provision for employees' end of service benefits |
|
2,322 |
|
2,190 |
|
Bank borrowings - scheduled repayments more than one year |
7 |
353,429 |
|
379,009 |
|
Lease liabilities |
|
1,107 |
|
1,572 |
|
Derivative financial instruments |
12 |
1,793 |
|
3,836 |
|
Total non-current liabilities |
|
358,651 |
|
386,607 |
|
|
|
|
|
|
|
Total liabilities |
|
411,689 |
|
447,576 |
|
|
|
|
|
|
|
Total equity and liabilities |
|
674,397 |
|
654,440 |
Consolidated statement of changes in equity for the year ended 31 December
|
|
Share capital - Ordinary |
|
Share capital - Deferred |
|
Share premium account |
|
Restricted reserve |
|
Group restructuring reserve |
|
Share based payment reserve |
|
Capital contribution |
|
Cash flow hedge reserve |
|
Cost of hedging reserve |
|
Translation reserve |
|
Retained earnings |
|
Attributable to the Owners of the Company |
|
Non-controlling interests |
|
Total 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$'000 |
|
US$'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)/profit for the year |
− |
|
− |
|
− |
|
− |
|
− |
|
− |
|
− |
|
− |
|
− |
|
− |
|
(124,339) |
|
(124,339) |
|
35 |
|
(124,304) |
|
Gain on fair value changes of hedging instruments |
− |
|
− |
|
− |
|
− |
|
− |
|
− |
|
− |
|
− |
|
21 |
|
− |
|
− |
|
21 |
|
− |
|
21 |
|
Net hedging gain/(loss) on interest hedges reclassified to the profit or loss |
− |
|
− |
|
− |
|
− |
|
− |
|
− |
|
− |
|
901 |
|
(18) |
|
− |
|
− |
|
883 |
|
− |
|
883 |
|
Exchange differences on foreign operations |
− |
|
− |
|
− |
|
− |
|
− |
|
− |
|
− |
|
− |
|
− |
|
425 |
|
− |
|
425 |
|
− |
|
425 |
|
Total comprehensive loss for the year |
− |
|
− |
|
− |
|
− |
|
− |
|
− |
|
− |
|
901 |
|
3 |
|
425 |
|
(124,339) |
|
(123,010) |
|
35 |
|
(122,975) |
|
Gain/loss on currency hedges reclassified to profit or loss |
− |
|
− |
|
− |
|
− |
|
− |
|
− |
|
− |
|
(2,257) |
|
2,257 |
|
− |
|
− |
|
− |
|
− |
|
− |
|
Share based payment charge |
− |
|
− |
|
− |
|
− |
|
− |
|
168 |
|
− |
|
− |
|
− |
|
− |
|
− |
|
168 |
|
− |
|
168 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2020 |
58,057 |
|
− |
|
93,080 |
|
272 |
|
(49,710) |
|
3,740 |
|
9,177 |
|
(836) |
|
− |
|
(1,995) |
|
93,385 |
|
205,170 |
|
1,694 |
|
206,864 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the year |
− |
|
− |
|
− |
|
− |
|
− |
|
− |
|
− |
|
- |
|
− |
|
− |
|
31,001 |
|
31,001 |
|
218 |
|
31,219 |
|
Net hedging gain on interest hedges reclassified to the profit or loss |
− |
|
− |
|
− |
|
− |
|
− |
|
− |
|
− |
|
278 |
|
− |
|
− |
|
− |
|
278 |
|
− |
|
278 |
|
Exchange differences on foreign operations |
− |
|
− |
|
− |
|
− |
|
− |
|
− |
|
− |
|
− |
|
− |
|
(91) |
|
− |
|
(91) |
|
− |
|
(91) |
|
Total comprehensive gain for the year |
− |
|
− |
|
− |
|
− |
|
− |
|
− |
|
− |
|
278 |
|
− |
|
(91) |
|
31,001 |
|
31,188 |
|
218 |
|
31,406 |
|
Share based payment charge (Note 12) |
− |
|
− |
|
− |
|
− |
|
− |
|
(18) |
|
− |
|
− |
|
− |
|
− |
|
− |
|
(18) |
|
− |
|
(18) |
|
Capital reorganisation |
(46,445) |
|
− |
|
− |
|
− |
|
− |
|
− |
|
− |
|
− |
|
− |
|
− |
|
− |
|
(46,445) |
|
− |
|
(46,445) |
|
Issue of share capital (Note 6) |
18,505 |
|
46,445 |
|
9,253 |
|
− |
|
− |
|
− |
|
− |
|
− |
|
− |
|
− |
|
− |
|
74,203 |
|
− |
|
74,203 |
|
Share issue costs |
− |
|
− |
|
(3,228) |
|
− |
|
− |
|
− |
|
− |
|
− |
|
− |
|
− |
|
− |
|
(3,228) |
|
− |
|
(3,228) |
|
Cash settlement of share- based payments |
− |
|
− |
|
− |
|
− |
|
− |
|
(74) |
|
− |
|
− |
|
− |
|
− |
|
− |
|
(74) |
|
− |
|
(74) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2021 |
30,117 |
|
46,445 |
|
99,105 |
|
272 |
|
(49,710) |
|
3,648 |
|
9,177 |
|
(558) |
|
− |
|
(2,086) |
|
124,386 |
|
260,796 |
|
1,912 |
|
262,708 |
Consolidated statement of cash flows for the year ended 31 December
|
|
Notes |
2021 |
|
2020 |
|
|
|
US$'000 |
|
US$'000 |
|
|
|
|
|
|
|
Net cash generated from operating activities |
14 |
40,511 |
|
44,268 |
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
Payments for additions of property and equipment |
|
(7,898) |
|
(5,623) |
|
Dry docking expenditure incurred |
|
(3,609) |
|
(7,600) |
|
Interest received |
|
9 |
|
15 |
|
Proceeds from disposal of property and equipment |
|
− |
|
299 |
|
Proceeds from disposal of assets held for sale |
|
− |
|
559 |
|
|
|
|
|
|
|
Net cash used in investing activities |
|
(11,498) |
|
(12,350) |
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
Proceeds from issue of shares |
|
27,758 |
|
− |
|
Bank borrowings received |
|
2,000 |
|
21,500 |
|
Repayment of bank borrowings |
|
(30,983) |
|
(12,075) |
|
Interest paid on bank borrowings |
|
(12,950) |
|
(27,903) |
|
Payment of issue costs on bank borrowings |
|
(3,615) |
|
(14,449) |
|
Share issue costs paid |
|
(3,228) |
|
− |
|
Principal elements of lease payments |
|
(2,342) |
|
(1,871) |
|
Settlement of derivatives |
|
(1,033) |
|
(883) |
|
Interest paid on leases |
|
(147) |
|
(193) |
|
Dividends paid |
|
− |
|
(650) |
|
|
|
|
|
|
|
Net cash used in financing activities |
|
(24,540) |
|
(36,524) |
|
|
|
|
|
|
|
Net increase/(decrease) in cash and cash equivalents |
|
4,473 |
|
(4,606) |
|
|
|
|
|
|
|
Cash and cash equivalents at the beginning of the year |
|
3,798 |
|
8,404 |
|
|
|
|
|
|
|
Cash and cash equivalents at the end of the year |
5 |
8,271 |
|
3,798 |
|
Non - cash transactions |
|
|
|
|
|
Recognition of deferred shares |
|
46,445 |
|
- |
|
Recognition of right-of-use asset |
|
1,955 |
|
3,239 |
|
Capital accruals |
|
408 |
|
585 |
|
Drydock accruals |
|
302 |
|
411 |
Notes to the consolidated financial information for the year ended 31 December 2021
1 Basis of preparation
Gulf Marine Services PLC ("GMS" or "the Company") is a company which is limited by shares and is registered and incorporated in England and Wales on 24 January 2014. The Company is a public limited company with operations mainly in the Middle East and North Africa (MENA), and Europe. The address of the registered office of the Company is 107 Hammersmith Road, London, United Kingdom, 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 Company and its subsidiaries are engaged in providing self-propelled, self-elevating support vessels, which provide 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 and other regions.
The financial information for the year ended 31 December 2020 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The independent auditor's report on the full financial statements for the year ended 31 December 2020 was unqualified, however included a material uncertainty in relation to the Company's ability to continue as a going concern. No other statement was made under section 498 of the Companies Act 2006.
The preliminary announcement does not constitute the Group's statutory accounts for the year ended 31 December 2021, but is derived from those accounts. Statutory accounts for the year ended 31 December 2021 were approved by the Directors on 12 May 2022 and will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The independent auditor's report on those financial statements was unqualified, did not draw attention to any matters by way of emphasis and did not include a statement under Section s498 (2) or (3) of the 2006 Companies Act.
The 2021 Annual Report will be posted to shareholders in advance of the Annual General Meeting.
While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards ("IFRSs‟), this announcement does not itself contain sufficient information to comply with the disclosure aspects of IFRSs.
The consolidated preliminary announcement of the Group has been prepared in accordance with IFRSs, IFRIC interpretations and the Companies Act 2006 applicable to companies reporting under IFRSs. The consolidated financial information has been prepared under the historical cost convention, as modified by the revaluation of certain financial assets and financial liabilities, including derivative instruments, at fair value.
Going concern
The Group's Directors have assessed the Group's financial position for a period through to June 2023 of not less than 12 months from the date of approval of the full year results and have a reasonable expectation that the Group will be able to continue in operational existence for the foreseeable future.
The material uncertainty over going concern that existed and was previously disclosed as a significant judgment when the 31 December 2020 financial statements were approved on 21 May 2021 no longer exists due to the successful issuance of equity in June 2021, which removed the potential event of default on the Group's revised bank facilities, as renegotiated in March 2021.
The renegotiation of bank facilities also resulted in a 40% reduction in margin payable in 2021 and 2022, with the surplus cash generated from these savings used to accelerate repayment of the loan principal (refer to Note 7 for further details on the revised terms of the bank facility).
As a result of the above refinancing in March 2021 and subsequent equity raise in June 2021, the Directors no longer consider going concern to be a critical accounting judgment as at 31 December 2021.
1 Basis of preparation (continued)
Going concern (continued)
The Group is exploring various contractual options available per the current bank terms to take place by the end of 2022. There are two options available which are either the raise of US$ 50 million equity or the issuance of 87.6 million warrants giving potential rights to 132 million shares if exercised. As at 31 December 2021, the Board consider the more likely outcome will be the issuance of warrants rather than the equity raise. PIK interest will potentially accrue, only if the net leverage ratio is above 4.0 times. Based on the latest Board approved projections, the net leverage ratio is expected to be below 4.0x and therefore no PIK interest is expected.
The forecast used for Going Concern reflects management's key assumptions including those around utilisation and vessel day rates on a vessel-by-vessel basis. Specifically, these assumptions are:
· Average day rates across the fleet are assumed to be US$ 28.6k for the 18-month period to 30 June 2023;
· 90% forecast utilisation for the 18-month period to 30 June 2023;
· Strong pipeline of tenders and opportunities for new contracts that would commence during the forecast period.
As noted above the impact of COVID-19 has also been considered in short-term forecasts approved by the Board which include additional hotel and testing costs for offshore crew whilst in quarantine. Terms and conditions of crew rotations have also been amended and costs updated to reflect this. Rotations have been extended for all crew to limit the number of times in quarantine and the number of changeouts on the crew which increases the risk of infection each time it occurs. All policies are in line with Government and client guidelines for offshore activities. Management note that the impact of COVID-19 has shown significant signs of easing in Q1 2022 and therefore this is not expected to be a long-term risk.
While the current situation regarding the war in Ukraine and Russian sanctions described in note 15 remains uncertain, the Directors believe the potential impact of the war, border closures and resulting sanctions will not have a significant impact on operations.
Brexit is not expected to have a significant effect on the Group's operations as 12 of 13 vessels are in the MENA region.
The Group is expected to continue to generate positive operating cash flows for the foreseeable future and has in place a committed working capital facility of US$ 50.0 million, of which US$ 25.0 million can be utilised to support the issuance of performance bonds and guarantees. The balance can be utilised to draw down cash. US$ 21.5 million of this facility was utilised as at 31 December 2021, leaving US$ 3.5 million available for drawdown (2020: US$ 3.5 million). There was a reduction to the cash element of the working capital facility by US$ 5 million to US$ 20 million on 31st March 2022. A payment of US$ 5 million was made by the Group on the same day reducing the amount utilised to US$ 16.5 million, leaving US$ 3.5 million available for drawdown. The working capital facility expires alongside the main debt facility in June 2025.
The principal borrowing facilities are subject to covenants and are measured bi-annually in June and December. Refer to note 7 for further details.
The Group's forecasts, having taken into consideration reasonable risks and downsides, indicate that its revised bank facilities along with sufficient order book of contracted work (currently secured 86% of revenue for FY 2022) and a strong pipeline of near-term opportunities for additional work (a further 6% is at an advanced stages of negotiation captured in the Group's backlog) will provide sufficient liquidity for its requirements for the foreseeable future and accordingly the consolidated financial information for the Group for the current period have been prepared on a going concern basis.
A downside case was prepared using the following assumptions:
· no work-to-win in 2022;
· a 22 percent reduction in work to win utilisation in H1 2023; and
· a reduction in day-rates for an E-Class vessel assumed to have the largest day rate, by 10% commencing from November 2022, i.e. after expiry of the current secured period.
1 Basis of preparation (continued)
Going concern (continued)
Based on the above scenario, the Group would not be in breach of its term loan facility, however, the net leverage ratio is forecast to exceed 4.0 times as at 31 December 2022 for a period of 6 months and therefore PIK interest of US$ 3.9 million would accrue in the assessment period and has been included in the above forecast. Such PIK would be settled as part of the bullet payment on expiry of the Group's term loan facility in June 2025. The downside case is considered to be severe but plausible and would still leave the Group with $10m of liquidity and in compliance with the covenants under the Group's banking facilities throughout the period until the end of May 2023.
In addition to the above reasonably plausible downside sensitivity, the Directors have also considered a reverse stress test, where adjusted EBITDA has been sufficiently reduced to breach the net leverage ratio as a result of a combination of reduced utilisation and day rates, as noted below:
· no work-to-win in 2022;
· a 40 percent and 25 percent reduction in options utilisation in 2022 and H1 2023 respectively;
· a 48 percent reduction in work to win utilisation in H1 2023; and
· a reduction in day-rates for an E-Class vessel assumed to have the largest day rate, by 10% commencing from November 2022, i.e. after expiry of the current secured period.
Based on the above scenario, net leverage ratio is forecast to exceed 4.0 times at 31 December 2022 for a period of 6 months and therefore PIK interest of US$ 3.9 million would accrue in the assessment period and has been included in the above forecast. Such PIK would be settled as part of the bullet payment on expiry of the Group's term loan facility in June 2025. The net leverage ratio is also breached at HY 2023.
Should circumstances arise that differ from the Group's projections, the Directors believe that a number of mitigating actions can be executed successfully in the necessary timeframe to meet debt repayment obligations as they become due (refer note 7 for maturity profiles) and in order to maintain liquidity. Potential mitigating actions include the following:
· Reduction in client specific capex due to no mobilisation of vessels of approximately US$ 4 million in 2022 and US$ 2.5 million in H1 2023;
· Vessels off hire for prolonged periods could be cold stacked to minimise operating costs on these vessels at the rate of US$ 35,000/month for K-Class and US$ 50,000/month for S-Class/E-Class;
· Reduction in overhead costs, particularly, bonus payments estimated at US$ 125k per month; and
· 2022 - H2 2024 voluntary payments could be deferred till H1 2025 when the bullet payment will be made as there would be less cash available to help deleverage on a voluntary basis.
GMS remains cognisant of the wider context in which it operates and the impact that climate change could have on the financial statements of the Group.
2 Significant accounting policies
The significant accounting policies and methods of computation adopted in the preparation of this financial information are consistent with those followed in the preparation of the Group's consolidated annual financial statements for the year ended 31 December 2020, except for the adoption of new standards and interpretations effective as at 1 January 2021.
3 Key sources of estimation uncertainty and critical accounting judgements
In the application of the Group's accounting policies, the Directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
In applying the Group's accounting policies during the year, there are no critical judgements.
3 Key sources of estimation uncertainty and critical accounting judgements (continued)
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
The key assumptions concerning the future, and other key sources of estimation uncertainty that may have a significant risk of causing a material adjustment to the carrying value of assets and liabilities within the next financial year are outlined below.
Impairment and reversal of previous impairment of property and equipment
Management carried out an impairment assessment of property and equipment for year ended 31 December 2021. Following this assessment management determined that the recoverable amounts of the cash generating units to which items of property and equipment were allocated, being vessels and related assets, were most sensitive to future day rates, vessel utilisation and discount rate. It is reasonably possible that changes to these assumptions within the next financial year could require a material adjustment of the carrying amount of the Group's vessels.
Whilst the Group has revised certain assumptions for certain vessels by more than 10% relative to prior year the average increase across all vessels was less than 10%. Management would not expect an assumption change of more than 10% across all vessels within the next financial year, and accordingly believes that a 10% sensitivity to day rates and utilisation is appropriate.
As at 31 December 2021, the total carrying amount of the property and equipment, drydocking expenditure, and right of use assets subject to estimation uncertainty was US$ 602.3 million (2020: US$ 706.0 million). Refer to Note 5 for further details including sensitivity analysis.
4 Property and equipment
|
|
Vessels |
|
Capital work-in-progress |
|
Land, building and improvements |
|
Vessel spares, fitting and other equipment |
|
Others |
|
Total |
|
|
US$'000 |
|
US$'000 |
|
US$'000 |
|
US$'000 |
|
US$'000 |
|
US$'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost |
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2020 |
884,497 |
|
4,857 |
|
10,488 |
|
60,743 |
|
3,670 |
|
964,255 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions |
− |
|
6,208 |
|
− |
|
− |
|
− |
|
6,208 |
|
Transfers |
5,695 |
|
(7,138) |
|
− |
|
1,163 |
|
280 |
|
− |
|
Disposals |
(180) |
|
− |
|
(5,387) |
|
− |
|
(1,660) |
|
(7,227) |
|
Write offs |
− |
|
− |
|
(5,101) |
|
(2,004) |
|
(323) |
|
(7,428) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2020 |
890,012 |
|
3,927 |
|
− |
|
59,902 |
|
1,967 |
|
955,808 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions |
− |
|
8,306 |
|
− |
|
− |
|
− |
|
8,306 |
|
Transfers |
6,859 |
|
(7,191) |
|
− |
|
332 |
|
− |
|
− |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2021 |
896,871 |
|
5,042 |
|
− |
|
60,234 |
|
1,967 |
|
964,114 |
|
|
|
|
|
|
|
|
|
|
|
|
|
4 Property and equipment (continued)
|
|
Vessels |
|
Capital work-in-progress |
|
Land, building and improvements |
|
Vessel spares, fitting and other equipment |
|
Others |
|
Total |
|
|
US$'000 |
|
US$'000 |
|
US$'000 |
|
US$'000 |
|
US$'000 |
|
US$'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation |
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2020 |
221,805 |
|
2,845 |
|
8,014 |
|
13,823 |
|
3,534 |
|
250,021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eliminated on disposal of assets |
− |
|
− |
|
(3,269) |
|
- |
|
(1,586) |
|
(4,855) |
|
Write off |
− |
|
− |
|
(5,101) |
|
(2,004) |
|
(323) |
|
(7,428) |
|
Depreciation expense |
22,444 |
|
− |
|
356 |
|
2,955 |
|
82 |
|
25,837 |
|
Impairment |
87,156 |
|
− |
|
− |
|
− |
|
− |
|
87,156 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2020 |
331,405 |
|
2,845 |
|
− |
|
14,774 |
|
1,707 |
|
350,731 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense |
19,492 |
|
− |
|
− |
|
3,244 |
|
80 |
|
22,816 |
|
Reversal of impairment |
(14,959) |
|
− |
|
− |
|
− |
|
− |
|
(14,959) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2021 |
335,938 |
|
2,845 |
|
− |
|
18,018 |
|
1,787 |
|
358,588 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amount |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2021 |
560,933 |
|
2,197 |
|
− |
|
42,216 |
|
180 |
|
605,526 |
|
At 31 December 2020 |
558,607 |
|
1,082 |
|
− |
|
45,128 |
|
260 |
|
605,077 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation amounting to US$ 22.8 million (2020: US$ 25.8 million) has been charged to the profit and loss, of which US$ 22.7 million (2020: US$ 25.5 million) was allocated to cost of sales. The remaining balance of the depreciation charge is included in general and administrative expenses.
Vessels with a total net book value of US$ 560.9 million (2020: US$ 558.6 million), have been mortgaged as security for the loans extended by the Group's banking syndicate (Note 7).
4 Property and equipment (continued)
Impairment
In accordance with the requirements of IAS 36 - Impairment of Assets, the Group assesses at each reporting period if there is any indication an additional impairment would need to be recognised for its vessels and related assets, or if the impairment loss recognised in prior periods no longer exist or had decreased in quantum. Such indicators can be from either internal or external sources. In circumstances in which any indicators of impairment or impairment reversal are identified, the Group performs a formal impairment assessment to evaluate the carrying amounts of the Group's vessels and their related assets, by comparing against the recoverable amount to identify any impairments or reversals. The recoverable amount is the higher of the vessels and related assets' fair value less costs to sell and value in use.
During the years ended 31 December 2019 and 31 December 2020, the market capitalisation of the Group continued to be lower than the net asset value as the Group had been unable to achieve the recovery previously anticipated following ongoing challenging market conditions and uncertainty in respect of the Group's capital structure. These conditions and specifically the continued low share price were identified as indicators of potential impairment of the Group's vessels and their related assets. As such a full impairment review of each vessel and their related assets was undertaken in both those years. Based on such review, management had recognised an impairment loss of US$ 59.1 million and US$ 87.2 million on certain of the Group's vessels during the years ended 2019 and 2020 respectively. Of the 13 vessels in existence as at 31 December 2021, impairment losses had been recognised on 9 vessels while no impairment loss had been recognised on the remaining 4 vessels. The recoverable values in both the years were measured using value in use computations. As permitted under IAS 36.105, none of the above impairment losses were allocated to the assets related to the vessels as management concluded that doing so would have reduced their carrying values to an amount below their respective recoverable values on a standalone basis.
During the year ended 31 December 2021, external factors, such as the improvement in general market conditions and the sustained increase in oil prices/related activity; and internal factors, specifically, the further increase in management's assumptions in relation to long-term day rates beyond that previously assumed in the prior year impairment assessments, suggested that there were indications that the value of assets may have increased as at 31 December 2021 leading to potential reversals of historic impairment losses. Management's view of the further improvement in the long-term market outlook was supported by a recent independent market and fleet valuation report that management obtained from a leading consultant with extensive experience of the subsea equipment support vessel markets in which the Group operates.
Additionally, management identified certain indicators of possible additional impairment, such as a higher discount rate assumption, a market capitalisation that remains below the Group's net assets, and lower actual revenues than prior year forecasts for some vessels.
As a result of the above factors and as required by IAS 36, management performed a formal impairment assessment as at 31 December 2021 for all vessels.
Management has again obtained an independent broker valuation of its vessels as at 2 February 2022 for the purpose of its banking covenant compliance requirements. However, consistent with prior years, management does not consider these broker valuations to represent a reliable estimate of the fair value for the purpose of assessing the recoverable value of the Group's vessels, noting that there have been limited "willing buyer and willing seller" transactions in the current offshore vessel market on which such values could reliably be based. Due to these inherent limitations, management has again concluded that recoverable amount should be based on value in use.
The impairment review was performed for each cash-generating unit, by identifying the value in use of each vessel and associated spares fittings, capitalised dry-docking expenditure and right-of-use assets relating to operating equipment used on the fleet, based on management's projections of future utilisation, day rates and associated cash flows.
4 Property and equipment (continued)
Impairment (continued)
The projection of cash flows related to vessels and their related assets is complex and requires the use of a number of estimates, the primary ones being future day rates, vessel utilisation and discount rate.
In estimating the value in use, management estimated the future cash inflows and outflows to be derived from continuing use of each vessel and its related assets for the first four years based on its approved budgets and forecasts. The terminal value cash flows (i.e., those beyond the 4-year period) were estimated based on terminal value mid-cycle day rates and utilisation levels calculated by looking back as far as 2014, when the market was at the top of the cycle through to current levels as the industry starts to emerge out of the bottom of the cycle, adjusted for anomalies. Such long-term forecasts also took account of the outlook for each vessel having regard to their specifications relative to expected customer requirements, as well as new information obtained from recent external publications and reports and about broader long-term trends including climate change.
The near-term assumptions used to derive future cash flows reflect contracted rates where applicable and thereafter the market recovery from the COVID-19 pandemic and current oil price environment. Though the Group also operates in the North Sea, its core market in the long term is expected to remain in the Middle East which, in turn, is expected to continue to benefit from the low production costs for oil and gas in the region, the current appetite of NOCs to increase production and the reliance the local governments have on revenues derived from oil and gas.
At the same time, as an operator of state-of-the-art Subsea Equipment Support Vessels in both the oil and gas and renewables industries (offshore wind market) with experience in multiple geographical areas, the Group's fleet offers significant operational flexibility. Any increased demand in offshore renewables in the long-term as a result of climate change concerns will present the Group future opportunities to deploy more of its fleet into this market without any major additional capital expenditure on the vessels. Hence, the Group believes that it will not face any significant impact on the demand for its vessels due to climate change implications beyond the extent reflected in management's assumptions and sensitivities.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate. The discount rate of 12.6% (2020: 10.56%) is computed on the basis of the Group's weighted average cost of capital. The cost of equity incorporated in the computation of the discount rate is based on risk-free rate, equity risk premium and industry sector average betas, and reflects specific adjustments for country risk in the countries the Group operates in, the Group's relatively small size and a Group specific risk premium reflecting any additional risk factors relevant to the Group. The cost of debt is based on the Group's actual cost of debt. The weighted average is computed based on the industry capital structure. In concurrence with external advisors, management reviewed and narrowed down the peer companies used to compute the discount rate and measured the overall impact of existing and additional risks related to the Group, resulting in an increase of the WACC to 12.6% as noted above. Whilst this exceeded the reasonably possible sensitivity disclosed in the prior year, for the reasons disclosed in the key assumptions sensitivity section on page 25 onwards, management still consider a 1% sensitivity on discount rate to be appropriate.
The impairment review led to the recognition of an aggregate impairment reversal of US$ 14.96 million. The key reason for the reversal is an increase in management's long-term assumptions for day rates compared to prior year. This increase is partially offset by an overall decrease in long-term utilisation assumptions and an increase in discount rate from 10.56% to 12.6%, which is computed on the basis explained in earlier paragraph.
In accordance with the Companies Act 2006, section 841(4), the following has been considered:
a) the directors have considered the value of some/all of the fixed assets of the Group without revaluing them; and
b) the Directors are satisfied that the aggregate value of those assets are not less than the aggregate amount at which they were stated in the Group's accounts.
4 Property and equipment (continued)
Impairment (continued)
Details of the impairment reversal by cash-generating unit, along with the associated recoverable amount reflecting its value in use, are provided below:
|
Cash Generating Unit (CGUs) |
Vessel class |
Impairment Reversal 2021 US$'000 |
Recoverable Amount 2021 US$'000 |
Impairment Amount 2020 US$'000 |
Recoverable Amount 2020 US$'000 |
|
Endurance |
E-Class |
9,013 |
66,289 |
25,472 |
56,605 |
|
Endeavour |
E-Class |
558 |
73,144 |
- |
74,771 |
|
Enterprise |
E-Class |
536 |
78,007 |
554 |
77,322 |
|
Evolution |
E-Class |
- |
83,481 |
- |
88,012 |
|
E-class |
|
10,107 |
300,921 |
26,026 |
296,710 |
|
Shamal |
S-Class |
- |
62,614 |
- |
70,214 |
|
Scirocco |
S-Class |
- |
65,140 |
- |
71,545 |
|
Sharqi |
S-Class |
- |
68,431 |
- |
79,276 |
|
S-class |
|
- |
196,185 |
- |
221,035 |
|
Kamikaze |
K-Class |
244 |
21,193 |
258 |
19,124 |
|
Kikuyu |
K-Class |
910 |
14,735 |
13,401 |
12,050 |
|
Kawawa |
K-Class |
1,373 |
13,597 |
9,009 |
12,891 |
|
Kudeta |
K-Class |
409 |
13,967 |
13,722 |
14,230 |
|
Keloa |
K-Class |
1,916 |
13,225 |
24,740 |
12,463 |
|
Pepper |
K-Class |
- |
58,084 |
- |
75,518 |
|
K-class |
|
4,852 |
134,801 |
61,130 |
146,276 |
|
Total |
|
14,959 |
631,907 |
87,156 |
664,021 |
The below table compares the long-term day rate and utilisation assumptions used to forecast future cash flows from 2026 for the remainder of each vessel's useful economic life against those secured for 2022:
|
Vessels class |
Day rate change % on 2022 levels |
Utilisation change % on 2022 levels |
|
E-Class CGUs |
48% |
(10%) |
|
S-Class CGUs |
23% |
(3%) |
|
K-Class CGUs |
7% |
(15%) |
The below table compares the long-term day rate and utilisation assumptions used to forecast future cash flows during the year ended 31 December 2021 against the Group's long-term assumptions in the impairment assessment performed as at 31 December 2020:
|
Vessels class |
Long term day rate change % on 2020 assumptions |
Long term utilisation change % on 2020 assumptions |
|
E-Class CGUs |
29% |
(6%) |
|
S-Class CGUs |
2% |
(4%) |
|
K-Class CGUs |
(5%) |
(2%) |
4 Property and equipment (continued)
Impairment (continued)
The impairment reversals recognised on the Group's K-Class fleet (excluding Pepper which was never impaired) primarily reflect a modest increase in short-term forecast day rates and utilisation for these vessels as the market begins to recover and the Group experiences increased demand. The NOCs have indicated a preference for vessels that are larger, and in some cases, particularly in Qatar and Saudi Arabia, able to work in deeper water than the K-Class are capable of. As a result, the main use of these vessels is now expected to be on contracts for engineering, procurement and construction ("EPC") clients, which are typically shorter in duration which is likely to impact utilisation with short gaps expected between contracts and only modest improvements, if any, in day rates due to a smaller pipeline of future opportunities. These factors are reflected in the long-term forecasts of day rates and utilisation for these vessels, similar to prior year.
The impairment reversals recognised on three E-Class vessels reflect further increases primarily in long-term assumptions on day rates relative to the Group's previous forecasts, informed by the recent independent market and fleet valuation report obtained by the Group, as described above. The forecast 48% increase in rates relative to 2022 reflects improving long-term market conditions coupled with a lack of supply of vessels with the capabilities of the E-Class such as their large crane capacities and superior leg length. As these vessels are the most capable of all the vessels in the fleet it is anticipated they will be able to demand higher day rates going forward.
No impairment or reversals have been identified for the remaining five cash-generating units i.e., one K-Class vessel, one E-class and three S-Class vessels.
Key assumption sensitivities
The Group has conducted an analysis of the sensitivity of the impairment test to reasonably possible changes in the key assumptions (long-term day rates, utilisation and pre-tax discount rates) used to determine the recoverable amount for each vessel as follows:
Day rates
|
|
Day rates higher by 10% |
Day rates lower by 10% |
||
|
|
|
|
|
|
|
Vessels class |
Impact (in US$ millions) |
Number of vessels impacted |
Impact (in US$ millions) |
Number of vessels impacted |
|
|
Impairment reversal of* |
|
(Impairment) of* |
|
|
|
|
|
|
|
|
E-Class CGUs |
43.9 |
3 |
(33.2) |
4 |
|
S-Class CGUs |
- |
- |
(6.3) |
1 |
|
K-Class CGUs |
20.6 |
4 |
(16.7) |
6 |
|
Total fleet |
64.5 |
7 |
(56.2) |
11 |
*This reversal of impairment / (impairment) is calculated on carrying values before the adjustment for impairment reversals in 2021.
The total recoverable amounts of the Group's vessels as at 31 December 2021 would have been US$ 733.5 million under the increased long-term day rates sensitivity and US$ 530.3 million for the reduced day rate sensitivity.
4 Property and equipment (continued)
Impairment (continued)
Key assumption sensitivities (continued)
Utilisation
|
|
Utilisation higher by 10% |
Utilisation lower by 10% |
||
|
|
|
|
|
|
|
Vessels class |
Impact (US$m) |
Number of vessels impacted |
Impact (US$m) |
Number of vessels impacted |
|
|
Impairment reversal of* |
|
(Impairment) of* |
|
|
|
|
|
|
|
|
E-Class CGUs |
38.8 |
3 |
(33.2) |
4 |
|
S-Class CGUs |
- |
- |
(7.9) |
2 |
|
K-Class CGUs |
19.9 |
4 |
(16.7) |
6 |
|
Total fleet |
58.7 |
7 |
(57.8) |
12 |
*This reversal of impairment / (impairment) is calculated on carrying values before the adjustment for impairment reversals in 2021.
The total recoverable amounts of the Group's vessels as at 31 December 2021 would have been US$ 701.5 million under the increased utilisation sensitivity and US$ 530.3 million for the reduced utilisation sensitivity.
Whilst the Group has revised certain assumptions for certain vessels by more than 10% relative to prior year the average increase across all vessels was less than 10%. Management would not expect an assumption change of more than 10% across all vessels within the next financial year, and accordingly believes that a 10% sensitivity to day rates and utilisation is appropriate.
Discount rate
A further sensitivity was conducted where a 1% increase and decrease was applied to the pre-tax discount rate. As mentioned in Note 3 management reviewed and narrowed down the peer companies used to compute the discount rate following consultation with external advisors. The same companies will be used going forward as these are deemed to be more specific to GMS's capital structure and therefore management does not anticipate significant changes beyond 1% to the discount rate going forward.
|
|
Discount rate higher by 1% |
Discount rate lower by 1% |
||
|
|
|
|
|
|
|
Vessels class |
Impact (US$m) |
Number of vessels impacted |
Impact (US$m) |
Number of vessels impacted |
|
|
(Impairment)/ impairment reversal of* |
|
Impairment reversal of* |
|
|
|
|
|
|
|
|
E-Class CGUs |
(9.1) |
4 |
26.9 |
3 |
|
S-Class CGUs |
(1.1) |
1 |
- |
- |
|
K-Class CGUs |
0.5 |
5 |
8.2 |
4 |
|
Total fleet |
(9.7) |
10 |
35.1 |
7 |
*This (impairment) / impairment reversal is calculated on carrying values before the adjustment for impairment reversals in 2021.
The total recoverable amounts of the vessels as at 31 December 2021 would have been US$ 679.6 million under the reduced discount rate sensitivity and US$ 589.7 million for the increased discount rate sensitivity.
5 Cash and cash equivalents
|
|
2021 |
|
2020 |
|
|
US$'000 |
|
US$'000 |
|
|
|
|
|
|
Interest bearing |
|
|
|
|
Held in UAE banks |
639 |
|
55 |
|
|
|
|
|
|
Non-interest bearing |
|
|
|
|
Held in UAE banks |
778 |
|
1,026 |
|
Held in banks outside UAE |
6,854 |
|
2,717 |
|
Total cash at bank and in hand |
8,271 |
|
3,798 |
|
|
|
|
|
6 Share capital
Ordinary shares at £0.02 per share
|
|
Number of ordinary shares |
|
Ordinary shares |
|
|
(Thousands) |
|
US$'000 |
|
At 1 January 2020 and 1 January 2021 |
350,488 |
|
58,057 |
|
Placing of new shares |
665,927 |
|
18,505 |
|
Capital reorganisation |
- |
|
(46,445) |
|
|
|
|
|
|
|
|
|
|
|
As at 31 December 2021 |
1,016,415 |
|
30,117 |
Deferred shares at £0.08 per share
|
|
Number of ordinary shares |
|
Ordinary shares |
|
|
(Thousands) |
|
US$'000 |
|
At 1 January 2020 and 1 January 2021 |
- |
|
- |
|
Capital reorganisation |
350,488 |
|
46,445 |
|
|
|
|
|
|
|
|
|
|
|
As at 31 December 2021 |
350,488 |
|
46,445 |
Prior to an equity raise on 28 June 2021, the Group underwent a capital reorganisation where all existing ordinary shares with a nominal value of 10 pence per share were subdivided and re-designated into 1 ordinary share with a nominal value of 2 pence and 1 deferred share with a nominal value of 8 pence each. The previously recognised share capital balance relating to the old 10p ordinary shares was allocated pro rata to the new subdivided 2p ordinary shares and 8p deferred shares.
The deferred shares have no voting rights and no right to the profits generated by the Group. On winding-up or other return of capital, the holders of deferred shares have extremely limited rights. The Group has the right but not the obligation to buy back all of the Deferred Shares for an amount not exceeding £1.00 in aggregate without obtaining the sanction of the holder or holders of the Deferred Shares. As there is no contractual obligation, management do not consider there to be a liability.
As part of the equity raise on 28 June 2021, the Company issued 665,926,795 new ordinary shares with a nominal value of 2 pence per share at 3 pence per share with the additional pence per share being recognised in the share premium account. Issue costs amounting to US$ 3.2 million (31 December 2020: $nil) have been deducted from the share premium account.
7 Bank borrowings
Secured borrowings at amortised cost are as follows:
|
|
2021 |
|
2020 |
|
|
US$'000 |
|
US$'000 |
|
|
|
|
|
|
Term loans |
358,026 |
|
388,533 |
|
Working capital facility |
21,500 |
|
21,500 |
|
|
|
|
|
|
|
379,526 |
|
410,033 |
Bank borrowings are split between hedged and unhedged amounts as follows;
|
|
2021 |
|
2020 |
|
|
US$'000 |
|
US$'000 |
|
|
|
|
|
|
Hedged bank borrowing via Interest Rate Swap* |
30,769 |
|
38,462 |
|
Unhedged bank borrowings |
348,757 |
|
371,571 |
|
|
|
|
|
|
|
379,526 |
|
410,033 |
*This is an economic hedge and not accounted for in accordance with IFRS 9, Financial Instruments. The Group uses an IRS to hedge a portion of the Group's floating rate liability by converting LIBOR to a fixed rate.
Bank borrowings are presented in the consolidated statement of financial position as follows:
|
|
2021 |
|
2020 |
|
|
US$'000 |
|
US$'000 |
|
Non-current portion |
|
|
|
|
Bank borrowings |
353,429 |
|
379,009 |
|
|
|
|
|
|
Current portion |
|
|
|
|
Bank borrowings - scheduled repayments within one year |
26,097 |
|
31,024 |
|
|
|
|
|
|
|
379,526 |
|
410,033 |
As noted in the 2020 annual report, on 31 December 2020, the Group's banking syndicate agreed to extend certain obligations on the Group, which it was otherwise required to have met, including the requirement to issue warrants to banks and accrue Payment in Kind (PIK) interest.
This meant the Group was not in an event of default as at 31 December 2020. This was further extended on 27 January 2021 and 25 February 2021. As the waivers received led to revisions to the timing of payments, management assessed the fair value of the remaining cashflows.
On 31 March 2021, the Group amended the terms of its loan facility with its banking syndicate. The amended terms (see below) were significantly different compared to the original loan. Management determined that the Group's loan facility was substantially modified and accordingly the old loan facility was extinguished, and the new facility recognised.
A gain of US$ 6.3 million (2020: US$ 1.1 million) was recognised in the profit and loss reflecting the waiver of PIK interest otherwise payable during the first quarter of 2021, the remeasurement of the debt to fair value as at the date of the substantial modification, and the impact of a change in the forecast voluntary repayment of the debt. US$ 3.2 million of costs incurred in renegotiating the new facility were expensed (2020: US$ 15.8 million).
The remeasurement of the bank borrowings was determined in accordance with generally accepted principles based on a discounted cash flow analysis, using appropriate effective interest rates.
7 Bank borrowings (continued)
The principal terms of the outstanding facility as at 31 December 2021 are as follows:
• The facility's main currency is US$ and is repayable with a margin at 3% up to 31 December 2022 at which point margin is based on a ratchet depending on leverage levels (2020: margin ratchet based on leverage levels) and final maturity in June 2025 (31 December 2020: June 2025).
• The revolving working capital facility amounts to 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$ 21.5 million was drawn as at 31 December 2021 (31 December 2020: US$ 21.5 million), leaving US$ 3.5 million available for drawdown (31 December 2020: US$ 3.5 million).
• The facility remains secured by mortgages over its whole fleet, with a net book value at 31 December 2021 of US$ 560.9 million (31 December 2020: US$ 558.6 million) (Note 4). Additionally, gross trade receivables, amounting to US$ 43.0 million (31 December 2020: US$ 24.2 million) have been assigned as security against the loans extended by the Group's banking syndicate (Note 7).
• The Group has also provided security against gross cash balances, being cash balances amounting to US$ 8.3 million (31 December 2020: US$ 3.8 million) (Note 5) before the restricted amounts related to visa deposits held with the Ministry of Labour in the UAE of US$ 39K (2020: US$ 95K) included in trade and other receivables, which have been assigned as security against the loans extended by the Group's banking syndicate.
• The amended terms contain contingent conditions such that if an equity raise of US $75.0 million in aggregate does not take place by 31 December 2022, PIK interest would potentially accrue, only if leverage is above 4.0x and warrants would be due to the banking syndicate, refer to Note 12 for details of the valuation of the contract to issue warrants.
The facility is subject to certain financial covenants including; Debt Service Cover; Interest Cover; and Net Leverage Ratio; which are tested bi-annually in June and December. As at 31 December 2021 the Group were required to achieve a net leverage ratio lower than 6.1x, interest cover with a minimum ratio of 1.2x and service cover with a minimum ratio of 2.5x. There are also additional covenants relating to general and administrative costs, capital expenditure and Security Cover (loan to value) which are tested annually in December. In addition, there are restrictions to payment of dividends until the net leverage ratio falls below 4.0 times. All financial covenants assigned to the Group's debt facility, described above were met as of 31 December 2021.
Management considers the carrying amount of the Group's bank borrowings approximates its fair value as at 31 December 2021.
7 Bank borrowings (continued)
|
|
Outstanding amount |
|
|
|
|
|
||||
|
|
Current |
|
Non-current |
|
Total |
|
|
Security |
|
Maturity |
|
|
US$'000 |
|
US$'000 |
|
US$'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 December 2021: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term loan - scheduled repayments within one year |
26,097 |
|
- |
|
26,097 |
|
|
Secured |
|
June 2025 |
|
Term loan - scheduled repayments within more than one year |
- |
|
331,929 |
|
331,929 |
|
|
Secured |
|
June 2025 |
|
Working capital facility - scheduled repayment more than one year |
- |
|
21,500 |
|
21,500 |
|
|
Secured |
|
June 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,097 |
|
353,429 |
|
379,526 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 December 2020: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term loan - scheduled repayments within one year |
9,524 |
|
- |
|
9,524 |
|
|
Secured |
|
June 2025 |
|
Term loan - scheduled repayments within more than one year |
- |
|
379,009 |
|
379,009 |
|
|
Secured |
|
June 2025 |
|
Working capital facility - scheduled repayment within one year |
21,500 |
|
- |
|
21,500 |
|
|
Secured |
|
June 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,024 |
|
379,009 |
|
410,033 |
|
|
|
|
|
8 Segment reporting
Management have identified that the Directors and senior management team are the chief operating decision makers in accordance with the requirements of IFRS 8 'Operating Segments'. Segment performance is assessed based upon adjusted gross profit/(loss), which represents gross profit/(loss) before depreciation and amortisation and loss on impairment of assets. The reportable segments have been identified by Directors and senior management based on the size and type of asset in operation.
The operating and reportable segments of the Group are (i) K-Class vessels, which include the Kamikaze, Kikuyu, Kawawa, Kudeta, Keloa and Pepper vessels (ii) S-Class vessels, which include the Shamal, Scirocco and Sharqi vessels, (iii) E-Class vessels, which include the Endeavour, Endurance, Enterprise and Evolution vessels, and (iv) Other vessels, considered non-core assets, which does not form part of the K, S or E Class vessels segments. The composition of the Other vessels segment, which are non-core assets, was amended in 2018.
All of these operating segments earn revenue related to the hiring of vessels and related services including charter hire income, messing and accommodation services, personnel hire and hire of equipment. The accounting policies of the operating segments are the same as the Group's accounting policies described in Note 2.
|
|
Revenue |
|
Segment adjusted gross profit/(loss) |
||||||||
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
||||
|
|
US$'000 |
|
US$'000 |
|
US$'000 |
|
US$'000 |
||||
|
K-Class vessels |
43,027 |
|
40,947 |
|
26,214 |
|
25,349 |
||||
|
E-Class vessels |
38,680 |
|
29,407 |
|
25,104 |
|
12,676 |
||||
|
S-Class vessels |
33,420 |
|
32,136 |
|
22,590 |
|
22,210 |
||||
|
Other vessels |
- |
|
2 |
|
- |
|
(10) |
||||
|
|
115,127 |
|
102,492 |
|
73,908 |
|
60,225 |
||||
|
Less: |
|
|
|
|
|
|
|
||||
|
Depreciation charged to cost of |
|
|
|
|
(22,738) |
|
(25,524) |
||||
|
Amortisation charged to cost of |
|
|
|
|
(5,503) |
|
(3,073) |
||||
|
Reversal of impairment/(impairment |
|
|
|
|
14,959 |
|
(87,156) |
||||
|
Gross profit/ (loss) |
|
|
|
|
60,626 |
|
(55,528) |
||||
|
|
|
|
|
|
|
|
|
||||
|
Other general and administrative expenses |
|
|
|
|
(12,272) |
|
(12,632) |
||||
|
Finance expense |
|
|
|
|
(14,463) |
|
(46,740) |
||||
|
Foreign exchange loss, net |
|
|
|
|
(1,002) |
|
(993) |
||||
|
Other income |
|
|
|
|
28 |
|
257 |
||||
|
Finance income |
|
|
|
|
9 |
|
15 |
||||
|
Restructuring costs |
|
|
|
|
- |
|
(2,492) |
||||
|
Exceptional legal costs |
|
|
|
|
- |
|
(3,092) |
||||
|
Loss on disposal of property and |
|
|
|
|
- |
|
(2,073) |
||||
|
Gain on disposal of assets held for |
|
|
|
|
- |
|
259 |
||||
|
Profit/(loss) for the year before |
|
|
|
|
32,926 |
|
(123,019) |
||||
The total revenue from reportable segments which comprises the K-, S- and E-Class vessels was US$ 115.1 million (2020: US$ 102.5 million). The Other vessels segment does not constitute a reportable segment per IFRS 8 Operating Segments.
Segment revenue reported above represents revenue generated from external customers. There were no inter-segment sales in the years.
8 Segment reporting (continued)
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.
Information about major customers
During the year, four customers (2020: two) individually accounted for more than 10% of the Group's revenues. The related revenue figures for these major customers, the identity of which may vary by year was US$ 13.4 million, US$ 16.6 million, US$ 42.0 million and US$ 18.6 million (2020: US$ 39.3 million and US$ 17.7 million). The revenue from these customers is attributable to the E-Class vessels, S-Class vessels and K-Class vessels reportable segments.
Geographical segments
Revenue by geographical segment is based on the geographical location of the customer as shown below.
|
|
2021 |
|
2020 |
|
|
US$'000 |
|
US$'000 |
|
|
|
|
|
|
United Arab Emirates |
58,019 |
|
53,363 |
|
Saudi Arabia |
21,376 |
|
17,745 |
|
Qatar |
22,591 |
|
19,047 |
|
|
|
|
|
|
Total - Middle East and North Africa |
101,986 |
|
90,155 |
|
|
|
|
|
|
United Kingdom |
10,392 |
|
5,353 |
|
Rest of Europe |
2,749 |
|
6,984 |
|
|
|
|
|
|
Total - Europe |
13,141 |
|
12,337 |
|
|
|
|
|
|
Worldwide Total |
115,127 |
|
102,492 |
Type of work
The Group operates in both the oil and gas and renewables sector. Oil and gas revenues are driven from both client operating cost expenditure and capex expenditure. Renewables are primarily driven by windfarm developments from client expenditure. Details are shown below.
|
|
2021 |
|
2020 |
|
|
US$'000 |
|
US$'000 |
|
|
|
|
|
|
Oil and Gas |
101,986 |
|
90,196 |
|
Renewables |
13,141 |
|
12,296 |
|
|
|
|
|
|
Total |
115,127 |
|
102,492 |
8 Segment reporting (continued)
Type of work (continued)
A reversal of impairment of US$ 15.0 million (2020: impairment of US$ 87.2 million) was recognised in respect of property and equipment (Note 4). These (reversals of impairment)/impairment charge were attributable to the following reportable segments:
|
|
2021 |
|
2020 |
|
|
US$'000 |
|
US$'000 |
|
|
|
|
|
|
K-Class vessels |
(4,852) |
|
61,130 |
|
S-Class vessels |
- |
|
- |
|
E-Class vessels |
(10,107) |
|
26,026 |
|
Other vessels |
- |
|
- |
|
|
(14,959) |
|
87,156 |
|
|
K-Class vessels |
S-Class vessels |
E-Class vessels |
Other vessels |
Total
|
|
|
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
|
|
|
|
|
|
|
|
2021 |
|
|
|
|
|
|
Depreciation charged to cost of sales |
4,739 |
5,842 |
12,037 |
120 |
22,738 |
|
Amortisation charged to cost of sales |
2,759 |
848 |
1,896 |
- |
5,503 |
|
Reversal of impairment charge |
(4,852) |
- |
(10,107) |
- |
(14,959) |
|
|
|
|
|
|
|
|
2020 |
|
|
|
|
|
|
Depreciation charged to cost of sales |
7,432 |
5,807 |
12,092 |
193 |
25,524 |
|
Amortisation charged to cost of sales |
1,863 |
605 |
605 |
- |
3,073 |
|
Impairment charge |
61,130 |
- |
26,026 |
- |
87,156 |
|
|
|
|
|
|
|
9 Presentation of adjusted non-GAAP results
The following table provides a reconciliation between the Group's adjusted non-GAAP and statutory financial results:
|
|
Year ended 31 December 2021 |
|
Year ended 31 December 2020 |
||||||||||||||||||
|
|
Adjusted non-GAAP results |
|
Adjusting items |
|
Statutory total |
|
Adjusted non-GAAP results |
|
Adjusting items |
|
Statutory total |
||||||||||
|
|
US$'000 |
|
US$'000 |
|
US$'000 |
|
US$'000 |
|
US$'000 |
|
US$'000 |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Revenue |
115,127 |
|
- |
|
115,127 |
|
102,492 |
|
- |
|
102,492 |
||||||||||
|
Cost of sales |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
- Cost of sales before |
(41,219) |
|
- |
|
(41,219) |
|
(42,267) |
|
- |
|
(42,267) |
||||||||||
|
- Depreciation and amortisation |
(28,241) |
|
- |
|
(28,241) |
|
(28,597) |
|
- |
|
(28,597) |
||||||||||
|
Reversal of impairment/ (impairment loss)* |
- |
|
14,959 |
|
14,959 |
|
- |
|
(87,156) |
|
(87,156) |
||||||||||
|
Gross profit/(loss) |
45,667 |
|
14,959 |
|
60,626 |
|
31,628 |
|
(87,156) |
|
(55,528) |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
- Amortisation of IFRS 16, Leases |
(2,410) |
|
- |
|
(2,410) |
|
(2,543) |
|
- |
|
(2,543) |
||||||||||
|
- Depreciation |
(78) |
|
- |
|
(78) |
|
(313) |
|
- |
|
(313) |
||||||||||
|
- Other administrative costs |
(9,784) |
|
- |
|
(9,784) |
|
(9,776) |
|
- |
|
(9,776) |
||||||||||
|
Restructuring costs** |
- |
|
- |
|
- |
|
- |
|
(2,492) |
|
(2,492) |
||||||||||
|
Exceptional legal costs*** |
- |
|
- |
|
- |
|
- |
|
(3,092) |
|
(3,092) |
||||||||||
|
Operating profit/(loss) |
33,395 |
|
14,959 |
|
48,354 |
|
18,996 |
|
(92,740) |
|
(73,744) |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Finance income |
9 |
|
- |
|
9 |
|
15 |
|
- |
|
15 |
|
|||||||||
|
Finance expense |
(12,737) |
|
- |
|
(12,737) |
|
(30,495) |
|
- |
|
(30,495) |
|
|||||||||
|
Cost to acquire new bank facility**** |
- |
|
(3,165) |
|
(3,165) |
|
- |
|
(15,797) |
|
(15,797) |
|
|||||||||
|
Fair value adjustment on recognition of new debt facility***** |
- |
|
1,439 |
|
1,439 |
|
- |
|
(448) |
|
(448) |
|
|||||||||
|
Other income |
28 |
|
- |
|
28 |
|
257 |
|
- |
|
257 |
|
|||||||||
|
Loss on disposal of property plant and equipment |
- |
|
- |
|
- |
|
(2,073) |
|
- |
|
(2,073) |
|
|||||||||
|
Gain on disposal of assets held for sale |
- |
|
- |
|
- |
|
259 |
|
- |
|
259 |
|
|||||||||
|
Foreign exchange loss, net |
(1,002) |
|
- |
|
(1,002) |
|
(993) |
|
- |
|
(993) |
|
|||||||||
|
Profit/(loss) before taxation |
19,693 |
|
13,233 |
|
32,926 |
|
(14,034) |
|
(108,985) |
|
(123,019) |
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Taxation charge |
(1,707) |
|
- |
|
(1,707) |
|
(1,285) |
|
- |
|
(1,285) |
|
|||||||||
|
Profit/(loss) for the year |
17,986 |
|
13,233 |
|
31,219 |
|
(15,319) |
|
(108,985) |
|
(124,304) |
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Profit/(loss) attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Owners of the Company |
17,768 |
|
13,233 |
|
31,001 |
|
(15,354) |
|
(108,985) |
|
(124,339) |
|
|||||||||
|
Non-controlling interests |
218 |
|
- |
|
218 |
|
35 |
|
- |
|
35 |
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Gain/(loss) per share (basic) |
2.57 |
|
1.91 |
|
4.48 |
|
(4.38) |
|
(31.10) |
|
(35.48) |
|
|||||||||
|
Gain/(loss) per share (diluted) |
2.55 |
|
1.91 |
|
4.46 |
|
(4.38) |
|
(31.10) |
|
(35.48) |
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Supplementary non statutory information |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Operating profit/ (loss) |
33,395 |
|
14,959 |
|
48,354 |
|
18,996 |
|
(92,740) |
|
(73,744) |
|
|||||||||
|
Add: Depreciation and amortisation |
30,729 |
|
- |
|
30,729 |
|
31,453 |
|
- |
|
31,453 |
|
|||||||||
|
Adjusted EBITDA |
64,124 |
|
14,959 |
|
79,083 |
|
50,449 |
|
(92,740) |
|
(42,291) |
|
|||||||||
9 Presentation of adjusted non-GAAP results (continued)
* The reversal of impairment credit/impairment charge on certain vessels and related assets have been added back to gross profit/(loss) to arrive at adjusted gross profit for the year ended 31 December 2021 and 2020 (refer to Note 4 for further details). Management have adjusted this due to the nature of the transaction which management believe is not directly related to operations management are able to influence. This measure provides additional information on the core profitability of the Group.
** 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 loss for the year ended 31 December 2020. Management have adjusted this due to them being one off in nature. 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.
*** Exceptional legal costs incurred are not considered part of the regular underlying performance of the business and so have been added back to arrive at adjusted loss for the year ended 31 December 2020. Management have adjusted this due to them being one off in nature. 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.
**** Costs incurred to arrange a new bank facility have been added back to loss before taxation to arrive at adjusted profit/(loss) for the year ended 31 December 2021 and 31 December 2020. Management have adjusted this due to both the nature of the transaction and the incidence of these transactions occurring. Costs incurred to arrange a new bank facility are not related to the profitability of the Group which management are able to influence and are typically only incurred when a refinance takes place. 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.
***** The fair value adjustment on recognition of the new loan has been added back to profit/(loss) before taxation to arrive at adjusted loss for the year ended 31 December 2021 and 2020. Management have adjusted this due to them being one off in nature. 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.
9 Presentation of adjusted non-GAAP results (continued)
|
|
Year ended 31 December 2021 |
|
Year ended 31 December 2020 |
||||||||
|
|
Adjusted non-GAAP results |
|
Adjusting items |
|
Statutory total |
|
Adjusted non-GAAP results |
|
Adjusting items |
|
Statutory total |
|
|
US$'000 |
|
US$'000 |
|
US$'000 |
|
US$'000 |
|
US$'000 |
|
US$'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cashflow reconciliation: |
|
|
|
|
|
|
|
|
|
|
|
|
Profit/(loss) for the year |
17,986 |
|
13,233 |
|
31,219 |
|
(15,319) |
|
(108,985) |
|
(124,304) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments for: |
|
|
|
|
|
|
|
|
|
|
|
|
(Reversal of impairment)/ impairment loss (Note 4)* |
- |
|
(14,959) |
|
(14,959) |
|
- |
|
87,156 |
|
87,156 |
|
Cost to acquire new bank facility** |
- |
|
3,165 |
|
3,165 |
|
- |
|
15,797 |
|
15,797 |
|
Fair value adjustment on recognition of new debt facility*** |
- |
|
(1,439) |
|
(1,439) |
|
- |
|
448 |
|
448 |
|
Finance expenses |
12,737 |
|
- |
|
12,737 |
|
30,495 |
|
- |
|
30,495 |
|
Other adjustments (Note 14) |
32,502 |
|
- |
|
32,502 |
|
34,343 |
|
- |
|
34,343 |
|
Cash flow from operating activities before movement in working capital |
63,225 |
|
- |
|
63,225 |
|
49,519 |
|
(5,584) |
|
43,935 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in trade and other receivables |
(17,090) |
|
- |
|
(17,090) |
|
4,866 |
|
- |
|
4,866 |
|
Change in trade and other payables |
(4,773) |
|
- |
|
(4,773) |
|
(1,973) |
|
(1,797) |
|
(3,770) |
|
Cash generated from operations (Note 14) |
41,362 |
|
- |
|
41,362 |
|
52,412 |
|
(7,381) |
|
45,031 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax paid |
(849) |
|
- |
|
(849) |
|
(763) |
|
- |
|
(763) |
|
Net cash flows generated from operating activities |
40,513 |
|
- |
|
40,513 |
|
51,649 |
|
(7,381) |
|
44,268 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows used in investing activities |
(11,498) |
|
- |
|
(11,498) |
|
(12,350) |
|
- |
|
(12,350) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment of issue costs on bank borrowings |
(450) |
|
(3,165) |
|
(3,615) |
|
(115) |
|
(14,334) |
|
(14,449) |
|
Other cash flows used in financing activities |
(20,927) |
|
- |
|
(20,927) |
|
(22,075) |
|
|
|
(22,075) |
|
Net cash flows used in financing activities |
(21,377) |
|
(3,165) |
|
(24,542) |
|
(22,190) |
|
(14,334) |
|
(36,524) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents |
7,638 |
|
(3,165) |
|
4,473 |
|
17,109 |
|
(21,715) |
|
(4,606) |
* The reversal of impairment credit/impairment charge on certain vessels and related assets have been added back to Cash flow from operating activities before movement in working capital for the year ended 31 December 2021 and 2020 (refer to Note 4 for further details).
** Costs incurred to arrange a new bank facility have been added back to Cash flow from operating activities before movement in working capital for the year ended 31 December 2021 and 31 December 2020.
*** The fair value adjustment on recognition of the new loan has been added back to Cash flow from operating activities before movement in working capital for the year ended 31 December 2021 and 2020.
10 Earnings/(loss) per share
|
|
2021 |
|
2020 |
|
|
|
|
|
|
Profit/(loss) for the purpose of basic and diluted earnings/(loss) per share being profit/(loss) for the year attributable to Owners of the Company (US$'000) |
31,001 |
|
(124,339) |
|
|
|
|
|
|
Profit/(loss) for the purpose of adjusted basic and diluted earnings/(loss) per share (US$'000) |
17,768 |
|
(15,354) |
|
|
|
|
|
|
Weighted average number of shares ('000) |
691,661 |
|
350,488 |
|
|
|
|
|
|
Weighted average diluted number of shares in issue ('000) |
695,753 |
|
350,488 |
|
|
|
|
|
|
Basic earnings/(loss) per share (cents) |
4.48 |
|
(35.48) |
|
Diluted earnings/(loss) per share (cents) |
4.46 |
|
(35.48) |
|
Adjusted earnings/(loss) per share (cents) |
2.57 |
|
(4.38) |
|
Adjusted diluted earnings/(loss) per share (cents) |
2.55 |
|
(4.38) |
Basic earnings/(loss) per share is calculated by dividing the profit/(loss) attributable to equity holders of the Company (as disclosed in the statement of comprehensive income) by the weighted average number of ordinary shares in issue during the year.
Adjusted earnings/(loss) per share is calculated on the same basis but uses the profit/(loss) for the purpose of basic earnings/(loss) per share (shown above) adjusted by adding back the non-operational items, which were recognised in the consolidated statement of profit or loss and other comprehensive income in the prior year. The adjusted earnings/(loss) per share is presented as the Directors consider it provides an additional indication of the underlying performance of the Group.
Diluted earnings/(loss) per share is calculated by dividing the profit/(loss) attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year, adjusted for the weighted average effect of share-based payment charge outstanding during the year. As the Group incurred a loss in 2020, diluted earnings/(loss) per share is the same as loss per share, as the effect of share-based payment charge was anti-dilutive.
Adjusted diluted earnings/(loss) per share is calculated on the same basis but uses adjusted profit/(loss) (Note 9) attributable to equity holders of the Company.
The following table shows a reconciliation between the basic and diluted weighted average number of shares:
|
|
2021 |
|
2020 |
|
|
'000s |
|
'000s |
|
|
|
|
|
|
Weighted average basic number of shares in issue |
691,661 |
|
350,488 |
|
Weighted average effect of LTIP's |
4,092 |
|
- |
|
Weighted average diluted number of shares in issue |
695,753 |
|
350,488 |
11 Revenue
|
|
2021 |
|
2020 |
|
|
US$'000 |
|
US$'000 |
|
|
|
|
|
|
Charter hire |
63,525 |
|
60,797 |
|
Lease income |
38,824 |
|
33,252 |
|
Messing and accommodation |
7,971 |
|
5,506 |
|
Maintenance service |
2,865 |
|
1,267 |
|
Mobilisation and demobilisation |
1,077 |
|
1,030 |
|
Sundry income |
865 |
|
640 |
|
|
|
|
|
|
|
115,127 |
|
102,492 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue recognised - over time |
113,931 |
|
101,683 |
|
Revenue recognised - point in time |
1,196 |
|
809 |
|
- |
|
|
|
|
|
115,127 |
|
102,492 |
Included in mobilisation and demobilisation income is an amount of US$ 0.1 million (2020 US$ 0.3 million) that was included as deferred revenue at the beginning of the financial year.
Lease income:
|
|
2021 |
|
2020 |
|
Maturity analysis: |
|
|
|
|
Year 1 |
47,994 |
|
40,529 |
|
Year 2 |
21,306 |
|
22,856 |
|
Year 3 - 5 |
4,305 |
|
21,175 |
|
Onwards |
- |
|
- |
|
|
73,605 |
|
84,559 |
|
Split between: |
|
|
|
|
Current |
47,994 |
|
40,529 |
|
Non - current |
25,611 |
|
44,030 |
|
|
73,605 |
|
84,559 |
12 Derivative financial instruments
Embedded derivatives - contract to issue warrants
In June 2020, the Group restructured the terms of its borrowings with its lenders. These terms included warrants to be issued to its lenders if GMS had not raised US$ 75.0 million of equity by no later than 31 December 2020. As this term was not expected to be met, an embedded derivative liability was recognised for the obligation to issue the warrants. At 31 December 2020, this had a value of US$ 1.4 million, which had increased to US$ 1.8 million by March 2021.
12 Derivative financial instruments (continued)
In March 2021, the Group amended the terms of its loan facility, as mentioned in note 7, and additional time was granted to raise equity before warrants were required to be issued to its lenders. The previous obligation to issue warrants to the bank was waived, and a contingent requirement to issue warrants to banks was introduced. The amended terms required US$ 25.0 million of equity to be raised by 31 December 2021 otherwise the Group would be in default, and a further US$ 50.0 million to be raised by 31 December 2022. GMS was subsequently successful with the requirement to raise the first tranche of equity (Refer to Note 6).
As the new terms of the loan facility contained separate distinguishable terms with a contingent requirement to issue warrants to banks, management determined the debt facility to contain an embedded derivative. The Group was required to recognise the embedded derivative at fair value. Management commissioned an independent valuation expert to measure the fair value of the warrants, which was determined using Monte Carlo simulations. The simulation considers sensitivity by building models of possible results by substituting a range of values. This represents a Level 3 fair value measurement under the IFRS 13 hierarchy. The fair value of the liability as at 31 December 2021 was US$ 0.7 million (31 December 2020 US$ 1.4 million). As the derivative was due to be settled after 12 months, the balance is recognised as a non-current liability.
The Group successfully concluded a US$ 27.8 million equity raise in June 2021 which prevented an event of default on its loan facilities. Under these facilities, the Group is required to raise a further US$ 50 million of equity by the end of 2022 or issue 87 million warrants entitling the Group's banks to acquire 132 million shares, or 11.5% of the share capital of the Company, for a total consideration of GBP £7.9 million, or 6.0 pence per share. Warrant holders will have the right to exercise their warrants up to the end of the term of the loan facility being 30 June 2025.
The loan facility was a tri-partite agreement between the Company, a subsidiary of the Group and the Groups banking syndicate. As the embedded derivative was over the Company's equity, the balance has been recorded on the Company's balance sheet.
Interest Rate Swap
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 under the IRS as at 31 December 2021 was US$ 30.8 million (31 December 2020: US$ 38.4 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 31 December 2021 was a liability value of US$ 1.1 million (31 December 2020: US$ 2.4 million). As cashflows of the hedging relationship were not highly probable in 2020 hedge accounting was discontinued. The net revaluation gain in the period to 31 December 2021 of US$ 0.1 million was accordingly recognised in the income statement, together with a $0.1m loss in respect of amounts recycled from the cash flow hedge reserve.
The fair value measurement of the interest rate swap was determined by independent valuers with reference to quoted market prices, discounted cash flow models and recognised pricing models as appropriate. They represent Level 2 fair value measurements under the IFRS 13 hierarchy.
IFRS 13 fair value hierarchy
Apart from the contract to issue warrants, the Group has no other financial instruments that are classified as Level 3 in the fair value hierarchy in the current or previous period with fair values that are determined by reference to significant unobservable inputs. There have been no transfers of assets or liabilities between levels of the fair value hierarchy. There are no non-recurring fair value measurements.
12 Derivative financial instruments (continued)
Derivative financial instruments are made up as follows:
|
|
Interest rate swap |
|
Cross currency interest rate swap |
|
Embedded derivative |
|
Total |
|
|
US$'000 |
|
US$'000 |
|
US$'000 |
|
US$'000 |
|
|
|
|
|
|
|
|
|
|
At 1 January 2021 |
(2,387) |
|
- |
|
(1,449) |
|
(3,836) |
|
Loss on settlement of derivatives |
1,033 |
|
- |
|
- |
|
1,033 |
|
Net gain on changes in fair value of interest rate swap |
278 |
|
- |
|
- |
|
278 |
|
Derecognition of embedded derivative warrants |
- |
|
- |
|
1,890 |
|
1,890 |
|
Initial recognition of embedded derivative |
- |
|
- |
|
(926) |
|
(926) |
|
Net loss on changes in fair value of embedded derivative |
- |
|
- |
|
(232) |
|
(232) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at 31 December 2021 |
(1,076) |
|
- |
|
(717) |
|
(1,793) |
|
|
Interest rate swap |
|
Cross currency interest rate swap |
|
Embedded derivative |
|
Total |
|
|
US$'000 |
|
US$'000 |
|
US$'000 |
|
US$'000 |
|
|
|
|
|
|
|
|
|
|
At 1 January 2020 |
(1,737) |
|
(3) |
|
- |
|
(1,740) |
|
Gain on fair value changes of hedging instruments |
- |
|
21 |
|
- |
|
21 |
|
Gain/(loss) on settlement of derivatives |
901 |
|
(18) |
|
- |
|
883 |
|
Net loss on changes in fair value of interest rate swap |
(1,551) |
|
- |
|
- |
|
(1,551) |
|
Initial recognition of embedded derivative |
- |
|
- |
|
(1,386) |
|
(1,386) |
|
Net loss on changes in fair value of embedded derivative |
- |
|
- |
|
(63) |
|
(63) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at 31 December 2020 |
(2,387) |
|
- |
|
(1,449) |
|
(3,836) |
|
|
|
|
|
|
|
|
|
This financial information includes the cost of hedging reserve and cash flow hedge reserve, which are detailed further in the consolidated statement of changes in equity. These reserves are non- distributable.
13 Long term incentive plans
The Group has Long Term Incentive Plans ("LTIPs") which were granted to senior management, managers and senior offshore officers.
From 2019 onwards the employment condition is that each eligible employee of the Company must remain in employment during the three-year vesting period. LTIPs have been aligned to the Company's share performance therefore only financial metrics will be applied. EPS ("Earnings Per Share") has been dropped as the financial metric.
In the prior years until 2018, the release of these shares was conditional upon continued employment, certain market vesting conditions and in the case of senior management LTIP awards, performance against three-year target EPS compound annual growth rates. Equity-settled share-based payments were measured at fair value at the date of grant. The fair value determined, using the Binomial Probability Model together with Monte Carlo simulations, at the grant date of equity-settled share-based payments, is expensed on a straight-line basis over the vesting period, based on an estimate of the number of shares that will ultimately vest. The fair value of each award was determined by taking into account the market performance condition, the term of the award, the share price at grant date, the expected price volatility of the underlying share and the risk-free interest rate for the term of the award.
Non-market vesting conditions, which for the Company mainly related to the continual employment of the employee during the vesting period, and in the case of the senior management, until 2018 as noted above, achievement of EPS growth targets, were taken into account by adjusting the number of equity instruments expected to vest at each balance sheet date. The cumulative amount recognised over the vesting period was based on the number of awards that eventually vest. Any market vesting conditions were factored into the fair value of the share-based payment granted.
To the extent that share-based payments are granted to employees of the Group's subsidiaries without charge, the share-based payment is capitalised as part of the cost of investment in subsidiaries.
The number of share awards granted by the Group during the year is given in the table below:
|
|
2021 |
|
2020 |
|
|
000's |
|
000's |
|
At the beginning of the year |
6,573,229 |
|
8,768,294 |
|
Granted in the year |
- |
|
2,661,388 |
|
Cash settled in the year |
(1,854,298) |
|
- |
|
Forfeited in the year |
(2,219,217) |
|
(4,856,453) |
|
Lapsed |
- |
|
- |
|
|
|
|
|
|
At the end of the year |
2,499,714 |
|
6,573,229 |
The weighted average remaining contractual life for the vesting period outstanding as at 31 December 2021 was 0.5 years (31 December 2020: 1.0 years). The weighted average fair value of shares granted during the year ended 31 December 2021 was US$ nil (31 December 2020: US$ 0.10).
13 Long term incentive plans (continued)
|
|
|
LTIP |
|
LTIP |
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant date |
|
29 May 2020 |
|
15 November 2019 |
|
|
|
|
|
|
|
Share price |
|
£0.09 |
|
£0.08 |
|
|
|
|
|
|
|
Expected volatility |
|
120% |
|
102.79% |
|
|
|
|
|
|
|
Risk-free rate |
|
0.01% |
|
0.48% |
|
|
|
|
|
|
|
Expected dividend yield |
|
0.00% |
|
0.00% |
|
|
|
|
|
|
|
Vesting period |
|
3 years |
|
3 years |
|
|
|
|
|
|
|
Award life |
|
3 years |
|
3 years |
The expected share price volatility of Gulf Marine Services PLC shares was determined taking into account the historical share price movements for a three-year period up to the grant date (and of each of the companies in the comparator group). The risk-free return was determined from similarly dated zero coupon UK government bonds at the time the share awards were granted, using historical information taken from the Bank of England's records.
On 15 March 2021, the Remuneration Committee determined that awards granted on 28 March 2018 which were due to vest on 28 March 2021 would be settled in cash, not by the issue of shares as was contractually stipulated, subject to the achievement of the original performance conditions. For the purposes of IFRS 2, this represented a reclassification of these awards from equity-settled to cash-settled. In accordance with IFRS 2, at the date of reclassification a balance of US$ 0.1 million equal to the fair value of the awards at the modification date was deducted from equity. As the fair value at the modification date was lower than the cumulative equity-settled share-based payment charge at that date, no adjustment was made to profit or loss as a result of the modifications.
On 9 June 2021, the Company's Ordinary Shares of 10p each were split into Ordinary Shares of 2p each and deferred shares of 8p each. A consequence of this change will be that the share options issued in prior years will be modified to such that the recipients are granted Ordinary Shares of 2p each, not Ordinary Shares of 10p each.
This change represented a modification of the share-based payments for the purposes of IFRS 2. However, as the modification did not result in a favourable change for the employees, no adjustments to the share-based payment charge was required as a result of the change to the Company's share capital.
14 Notes to the consolidated statement of cash flows
|
|
2021 |
|
2020 |
|
|
US$'000 |
|
US$'000 |
|
|
|
|
|
|
Operating activities |
|
|
|
|
Profit/(loss) for the year |
31,219 |
|
(124,304) |
|
Adjustments for: |
|
|
|
|
Depreciation of property and equipment (Note 4) |
22,816 |
|
25,837 |
|
Finance expenses |
14,463 |
|
46,740 |
|
Amortisation of dry docking expenditure |
5,503 |
|
3,074 |
|
Depreciation of right-of-use assets |
2,411 |
|
2,543 |
|
Income tax expense |
1,707 |
|
1,285 |
|
Movement in ECL provision during the year |
62 |
|
69 |
|
End of service benefits charge |
678 |
|
527 |
|
(Reversal of impairment)/impairment loss (Note 4) |
(14,959) |
|
87,156 |
|
End of service benefits paid |
(546) |
|
(617) |
|
Share-based payment charge |
(18) |
|
168 |
|
Interest income |
(9) |
|
(15) |
|
Recovery of ECL provision |
- |
|
(64) |
|
Loss on disposal of property and equipment |
- |
|
2,073 |
|
Gain on disposal of assets held for sale |
- |
|
(259) |
|
Hedging revenue adjustment (Note 12) |
- |
|
(21) |
|
Other income |
(28) |
|
(257) |
|
|
|
|
|
|
Cash flow from operating activities before movement in working capital |
63,299 |
|
43,935 |
|
|
|
|
|
|
(Increase)/decrease in trade and other receivables |
(17,090) |
|
4,866 |
|
Decrease in trade and other payables |
(4,849) |
|
(3,770) |
|
Cash generated from operations |
41,360 |
|
45,031 |
|
|
|
|
|
|
Taxation paid |
(849) |
|
(763) |
|
|
|
|
|
|
Net cash generated from operating activities |
40,511 |
|
44,268 |
14 Notes to the consolidated statement of cash flows (continued)
Changes in liabilities arising from financing activities
The table below details changes in the Group's liabilities arising from financing activities, including both cash and non-cash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the Group's consolidated statement of cash flows as cash flows from financing activities.
|
|
Derivatives (Note 12) |
|
Lease liabilities |
|
Bank borrowings (Note 7) |
|
|
US$'000 |
|
US$'000 |
|
US$'000 |
|
At 1 January 2020 |
1,740 |
|
1,954 |
|
401,955 |
|
Financing cash flows |
|
|
|
|
|
|
Bank borrowings received |
- |
|
- |
|
21,500 |
|
Repayment of bank borrowings |
- |
|
- |
|
(12,075) |
|
Principal elements of lease payments |
- |
|
(1,871) |
|
- |
|
Settlement of derivatives |
(883) |
|
- |
|
- |
|
Interest paid |
- |
|
(193) |
|
(27,903) |
|
Total financing cashflows |
(883) |
|
(2,064) |
|
(18,478) |
|
|
|
|
|
|
|
|
Non-cash changes: |
|
|
|
|
|
|
Recognition of new lease liability additions |
- |
|
3,239 |
|
- |
|
Interest on leases |
- |
|
182 |
|
- |
|
Interest on bank borrowings |
- |
|
- |
|
27,626 |
|
Gain on fair value changes of hedging instruments |
(21) |
|
- |
|
- |
|
Net loss on change in fair value of IRS |
1,551 |
|
- |
|
- |
|
Loss on fair value changes on the embedded derivative (Note 12) |
1,449 |
|
- |
|
- |
|
Gain on revision of debt facility |
- |
|
- |
|
(1,070) |
|
Total non-cash changes |
2,979 |
|
3,421 |
|
26,556 |
|
At 31 December 2020 |
3,836 |
|
3,311 |
|
410,033 |
|
|
|
|
|
|
|
|
Financing cash flows |
|
|
|
|
|
|
Bank borrowings received |
- |
|
- |
|
2,000 |
|
Repayment of bank borrowings |
- |
|
- |
|
(30,983) |
|
Principal elements of lease payments |
- |
|
(2,342) |
|
- |
|
Settlement of derivatives |
(1,033) |
|
- |
|
- |
|
Interest paid |
- |
|
(147) |
|
(12,737) |
|
Total financing cashflows |
(1,033) |
|
(2,489) |
|
(41,720) |
|
|
|
|
|
|
|
|
Non-cash changes: |
|
|
|
|
|
|
Recognition of new lease liability additions |
- |
|
1,955 |
|
- |
|
Interest on leases |
- |
|
147 |
|
- |
|
Interest on bank borrowings |
- |
|
- |
|
17,545 |
|
Bank commitment fees |
- |
|
- |
|
- |
|
Gain on revision of debt facility |
- |
|
- |
|
(6,332) |
|
Net gain on change in fair value of IRS |
(278) |
|
- |
|
- |
|
Loss on fair value changes on the embedded derivative |
(732) |
|
- |
|
- |
|
The expensing of unamortised issue costs in relation to previous loan |
- |
|
- |
|
- |
|
Revaluation gain on revision of debt cash flows at the date of modification |
- |
|
- |
|
- |
|
Total non-cash changes |
(1,010) |
|
2,102 |
|
11,213 |
|
At 31 December 2021 |
1,793 |
|
2,924 |
|
379,526 |
15 Events after the reporting period
Russia-Ukraine conflict
On 24th February 2022, Russia launched ground and air attacks on Ukraine which led to the closure of airports and land borders. This developing situation has the potential to impact Group's operations and presents a risk to the health, safety and welfare of certain GMS' employees living in Ukraine. The Group has implemented procedures to provide required support should employees be affected as well as ensure continuity across the business. In response to military action launched by Russia, western countries and other global allies imposed an unprecedented package of coordinated sanctions against Russia. The Group has minimal activity with suppliers in Russia and continues to manage its supply chain and has robust procedures in place to avoid any disruption to operations. Overall, the Group does not expect the war in Ukraine and resulting sanctions to have a significant impact on operations.
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.
Adjusted diluted earnings/loss per share - represents the adjusted earnings/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 earnings/loss attributable to equity shareholders of the Company is used for the purpose of basic gain/loss per share adjusted by adding back impairment charges (deduction of reversal of impairment during the year 2021), restructuring charges, exceptional legal costs and costs to acquire new bank facilities. 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 9.
Adjusted EBITDA - represents operating profit after adding back depreciation (deduction for reversal of impairment during 2021), 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 9.
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.
Adjusted gross profit/(loss) - represents gross profit/loss after deducting reversal of impairment/adding back impairment charges. This measure provides additional information on the core profitability of the Group. A reconciliation of this measure is provided in note 9.
Adjusted net profit/(loss) - represents net profit/(loss) after adding back impairment charges and costs of renegotiating bank terms. 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 9 of these results.
Average fleet utilisation - represents the percentage of available days in a relevant period during which the fleet of SESVs is under contract and in respect of which a customer is paying a day rate for the charter of the SESVs.
Average fleet utilisation is calculated by adding the total contracted days in the period of each SESV, divided by the total number of days in the period multiplied by the number of SESVs in the fleet.
Cost of sales excluding depreciation and amortisation- 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:
|
|
|
|
|
|
|
2021 |
|
2020 |
|
|
US$'000 |
|
US$'000 |
|
|
|
|
|
|
Statutory cost of sales |
69,460 |
|
70,864 |
|
Less: depreciation and amortisation |
(28,241) |
|
(28,597) |
|
|
41,219 |
|
42,267 |
|
|
|
|
|
EBITDA - represents earnings before interest, tax, depreciation and amortisation, which represents operating profit after adding back depreciation and amortisation. This measure provides additional information of the underlying operating performance of the Group. A reconciliation of this measure is provided in Note 9.
Margin - revenue less cost of sales before depreciation, amortisation and impairment as identified in Note 9 of the consolidated financial information.
Net bank debt - represents the total bank borrowings less cash and cash equivalents. This measure provides additional information of the Group's financial position. A reconciliation is shown below:
|
|
|
|
|
|
|
2021 |
|
2020 |
|
|
US$'000 |
|
US$'000 |
|
|
|
|
|
|
Statutory bank borrowings |
379,526 |
|
410,033 |
|
Less: cash and cash equivalents |
(8,271) |
|
(3,798) |
|
|
371,255 |
|
406,235 |
|
|
|
|
|
Finance leases are excluded from net bank debt to ensure consistency with definition of the Group's banking covenants.
Net cash flow before debt service - the sum of cash generated from operations and investing activities.
Net leverage ratio - the ratio of net bank debt at year end to adjusted EBITDA which is further adjusted for items including but are not limited to reversal of impairment credits/(impairment charges), restructuring costs, exceptional legal costs and non-operational finance related costs in alignment with the terms of our bank facility agreement. This has no impact for the current or prior periods. The reconciliation is shown below:
|
|
|
|
|
|
|
2021 |
|
2020 |
|
|
US$'000 |
|
US$'000 |
|
|
|
|
|
|
A: Net bank debt, as identified above |
371,255 |
|
406,235 |
|
|
|
|
|
|
B: Adjusted EBITDA, as disclosed in Note 9 |
64,124 |
|
50,449 |
|
|
|
|
|
|
Net leverage ratio (A/B): |
5.78 |
|
8.1 |
|
|
|
|
|
Non-operational finance expenses - this pertains to the following items below:
|
|
|
|
|
|
|
2021 |
|
2020 |
|
|
US$'000 |
|
US$'000 |
|
|
|
|
|
|
Cost to acquire new bank facility |
(3,165) |
|
(15,797) |
|
Fair value adjustment on recognition of new debt facility |
1,439 |
|
(448) |
|
|
|
|
|
|
|
(1,726) |
|
(16,245) |
Operational downtime - downtime due to technical failure.
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 9.
Underlying performance - day to day trading performance that management are directly able to influence in the short term
OTHER DEFINITIONS
|
Average day rates |
we calculate the average day rates by dividing total charter hire revenue per month by total hire days per month throughout the year and then calculating a monthly average. |
|
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. |
|
Day rates |
rate per day charge to customers per hire of vessel as agreed in the contract. |
|
Demobilisation |
fee paid for the vessel re-delivery at the end of a contract, in which client is allowed to offload equipment and personnel. |
|
DEPS/DLPS |
diluted earnings/losses per share. |
|
Employee retention |
percentage of staff who continued to be employed during the year (excluding retirements and redundancies) taken as number of resignations during the year divided by the total number of employees as at 31 December. |
|
EPC |
engineering, procurement and construction. |
|
ESG |
environmental, social and governance. |
|
Finance service |
the aggregate of a) Net finance charges for that period; and b) All scheduled 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 |
|
Debt Service Cover |
represents the ratio of Adjusted EBITDA to debt service. |
|
GMS core fleet |
consists of 13 SESVs, with an average age of ten years. |
|
Interest Cover |
represents the ratio of Adjusted EBITDA to Net finance charges. |
|
IOC |
Independent Oil Company. |
|
KPIs |
Key performance indicators. |
|
Lost Time Injuries |
any workplace injuries sustained by an employee while on the job that prevents them from being able to perform their job for a period of one or more days. |
|
Lost Time Injury Rate (LTIR) |
the lost time injury rate per 200,000 man hours which is a measure of the frequency of injuries requiring employee absence from work for a period of one or more days. |
|
LIBOR |
London Interbank Offered Rate. |
|
Mobilisation |
fee paid for the vessel readiness at the start of a contract, in which client is allowed to load equipment and personnel. |
|
Net finance charges |
represents finance charges as defined by the terms of the Group's banking facility 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. |
|
OSW |
Offshore Wind. |
|
PIK |
Payment In Kind. Under the banking documents dated 17 June 2020 and 31 March 2021, PIK is calculated at 5.0% per annum on the total term facilities outstanding amount and reduces to: a 2.5% per annum when Net Leverage reduces below 5.0x b Nil when Net Leverage reduces below 4.0x
Under the documents dated 31 March 2021, PIK accrues on either 1 July 2021 if the US$ 25 million equity is not raised by 30 June 2021, or from 1 January 2023 if the US$ 50 million is not raised by 31 December 2022.
PIK stops accruing at the date on which all loans are paid or discharged in full. |
|
Restricted work day case (RWDC) |
any work-related injury other than a fatality or lost work day case which results in a person being unfit for full performance of the regular job on any day after the occupational injury. |
|
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. |
|
Secured day rates |
day rates from signed contracts firm plus options held by clients. |
|
Secured utilisation |
contracted days of firm plus option periods of charter hire from existing signed contracts. |
|
Security Cover (loan to value) |
the ratio (expressed as a percentage) of Total Net Bank 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. |
|
Underlying G&A |
underlying general and administrative (G&A) expenses excluding depreciation and amortisation, restructuring costs, and exceptional legal costs. |
|
Utilisation |
the percentage of calendar 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. |
|
Vessel operating expense |
Cost of sales before depreciation, amortisation and impairment, refer to note 9. |
|
Warrants |
Under the banking documents date 31 March 2021, if Warrants are issued on 1 July 2021 because of the failure to raise US$ 25 million by 30 June 2021, half of the issued warrants vest on that date. The other half will only vest on 2 January 2023 if there is a failure to raise US$ 50 million. If warrants are issued on 2 January 2023 because of the failure to raise US$ 50 million, all of the issued warrants vest on the same date. All warrants to expire on 30 June 2025 (maturity date of the facilities). |
[1] Represents operating profit/(loss) after adding back depreciation, amortisation and the reversal of impairment in 2021 and depreciation, amortisation, an impairment charge and adjusting items in 2020. This measure provides additional information in assessing the Group's underlying performance that management can more directly influence in the short term and is comparable from year to year. A reconciliation of this measure is provided in note 30.
[2] Represents net profit/(loss) after adding back depreciation, amortisation the reversal of impairment and adjusting items in 2021 and depreciation, amortisation, an impairment charge and adjusting items in 2020. This measure provides additional information in assessing the Group's total performance that management can more directly influence and is comparable from year to year. A reconciliation of this measure is provided in note 30.
[3] Represents total bank borrowings less cash.
[4] Represents the ratio of net bank debt to adjusted EBITDA.
[5] Represents operating profit/(loss) after adding back depreciation, amortisation and the reversal of impairment in 2021 and depreciation, amortisation, an impairment charge and adjusting items in 2020. This measure provides additional information in assessing the Group's underlying performance that management can more directly influence in the short term and is comparable from year to year. A reconciliation of this measure is provided in note 9.
[6] Represents net profit/(loss) after adding back depreciation, amortisation the reversal of impairment and adjusting items in 2021 and depreciation, amortisation, an impairment charge and adjusting items in 2020. This measure provides additional information in assessing the Group's total performance that management can more directly influence and is comparable from year to year. A reconciliation of this measure is provided in note 9.
[7] A reconciliation of this measure is provided in note 9 and is also defined in Glossary.
4 Refer to Glossary for definition of Underlying G&A.
[8]Refer to Glossary for definition