August 31, 2023
Gulf Marine Services PLC
('Gulf Marine Services', 'GMS', 'the Company' or 'the Group')
Listed on the London Stock Exchange
Announcement of Interim results for the six months ended 30 June 2023
GMS, a leading provider of advanced self-propelled, self-elevating support vessels serving the offshore oil, gas and renewables industries, is pleased to announce its Interim results for the six months ended 30 June 2023 (H1 2023).
Overview
| H1 2023 | H1 2022 | |
| US$ m | US$ m | Change |
Revenue | 74.3 | 66.4 | +12% |
Gross profit | 34.8 | 27.4 | +27% |
EBITDA1 | 44.3 | 37.3 | +19% |
Profit for the period after tax | 8.7 | 13.1 | -34% |
Net Leverage Ratio2 | 3.75:1 | 4.56:1 | -18% |
H1 Financial and Operational Highlights:
· Net leverage ratio on June 30, 2023 at 3.75:1 (31 December 2022: 4.42:1).
· The company achieved revenue of US$ 74.3 million for the first half of 2023, reflecting an increase of 12% compared to the same period last year (H1 2022: US$ 66.4 million). The increase in revenue is driven by:
o An increased utilisation for H1 2023 to 93% (H1 2022: 89%) with notable improvements in K-Class vessels at 95% (H1 2022: 85%).
o An increased H1 2023 average day rates to $30.3k (H1 2022: US$ 27.2k) driven mainly by our E-Class vessels.
· Gross profit margin improved to 47% (H1 2022: 41%) as cost of sales and G&A remained relatively flat.
· H1 2023 EBITDA increased 19% to US$ 44.3 million (H1 2022: US$ 37.3 million) driven by the increase in revenue.
· Net profit attributable to shareholders for the first half of 2023 amounted to US$ 8.7 million, reflecting a reduction of 34% year-on-year, (H1 2022 US$ 13.1 million), as increase in financing costs of US$ 10.9 million more than offset the results obtained from operations.
· Basic Earnings Per Share (EPS): The Basic earnings per share for the period stood at US$ 0.82, as compared to US$ 1.29 in the first half of 2022.
· Net debt1 lowered by US$ 21.5 million to US$ 294.3 million (31 December 2022: US$ 315.8 million) as the Group continues its focus on deleveraging.
1 This represents an Adjusted Performance Measure (APM) as defined in the Glossary which is included in Note 23 to the interim consolidated Financial Statements.
2 This represents an Adjusted Performance Measure (APM) as defined in the Glossary.
Outlook:
· EBITDA guidance for 2023 is projected to be in the range of US$ 77 - 85 million, being USD 2.0 million higher on both the lower and the higher ends of the previous estimate, supported by an improved forecasted utilisation for H2.
· Demand in the market remains strong due to a combination of high market activity and limited vessel availability. As such, The Group anticipates utilisation levels to improve in the second half of 2023.
· Secured backlog was US$ 301.4 million on 30 June 2023 (30 June 2022: US$ 163.3 million), which reflects the additional contract awards announced over the last 12 months.
· Contract awards announced in H1 2023 have a combined total charter period of 2.4 years (H1 2022: 2.6 years), the Group is currently working on new potential contracts to improve the backlog.
Mansour Al Alami, Executive Chairman, GMS said:
"We are pleased to forecast an increased EBITDA guidance for the current year, driven by robust utilization, enhanced rates and a solid performance in the first half of the year. It is worth noting that these positive prospects coexist with the risks we face daily, being operational challenges, inflationary pressures, and the burden of debt service charges, all of which are being monitored closely. The Group reiterates its commitment to continue its deleveraging journey."
Alex Aclimandos
Chief Financial Officer
Gulf Marine Services PLC
Enquiries: Mansour Al Alami Executive Chairman
|
Tel: +44 (0)20 7603 1515 |
Celicourt Communications Mark Antelme Philip Dennis Ali AlQahtani | Tel: +44 (0) 20 7770 6424 |
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 GCC, 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 eleven 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.gmsplc.com
Disclaimer
The content of the Gulf Marine Services PLC website should not be considered to form a part of or be incorporated into this announcement.
Chairman's Review
Group performance
Revenue for the period increased 12% to US$ 74.3 million (H1 2022: US$ 66.4 million), driven by an 11% increase in average day rates to US$ 30.3k/day (H1 2022: US$ 27.2k/day) and by an increase in overall utilisation to 93% (H1 2022: 89%).
Vessel operating expenses increased to US$ 24.7 million (H1 2022: US$ 23.5 million), mainly driven by increased utilisation during the period. Cost of sales marginally decreased by US$ 0.1 million to US$ 39.0 million (H1 2022: US$ 39.1 million), as a reduction in depreciation and amortisation expense to US$ 14.8 million (H1 2022: US$ 15.5 million) offset increase in operating expenses.
General and administrative expenses were at US$ 6.1 million (H1 2022: US$ 5.8 million).
We were able to deliver a 19% increase in H1 2023 EBITDA to US$ 44.3 million (H1 2022: US$ 37.3 million), which was driven by an increase in utilisation and improved day rates.
Profit after tax during H1 2023 was US$ 8.7 million (H1 202 2: US$ 13.1 million) as the increase in interest expense of US$ 10.9 million more than offset the increase in EBITDA.
During H1 2023, contract awards were announced by the Group for both E-Class and K-Class vessels reflecting the continuing demand for our vessels.
Capital structure and liquidity
The net leverage ratio on 30 June 2023 again declined to 3.75 times (31 December 2022: 4.42 times), driven by a reduction in the net debt to US$ 294.3 million (31 December 2022: US$ 315.8 million) combined with improved trailing twelve months EBITDA. The Group remains dedicated to its deleveraging journey.
As described in the 2022 Annual Report, as the Group elected not to raise US$ 50.0 million of equity by the end of 2022, it issued on 2 January 2023 87.6 million warrants giving potential rights to 137 million shares if exercised, as per the terms of its agreement with the Lenders. The strike price was determined by an external Calculation Agent to be at 5.75 pence per share.
Outlook
The Group anticipates continued strong demand for its vessels in the second half of the year. Secured backlog increased to US$ 301.4 million on 30 June 2023 (30 June 2022: US$ 163.3 million).
We are now projecting a higher EBITDA than previously indicated and we are changing the EBITDA guidance for 2023 to be in the range of US$ 77 - 85 million.
Mansour Al Alami
Executive Chairman
30 August 2023
Financial Review
| H1 2023 | H1 2022 | |
| US$ m | US$ m | Change |
Revenue | 74.3 | 66.4 | +12% |
Gross profit | 34.8 | 27.4 | +27% |
EBITDA1 | 44.3 | 37.3 | +19% |
Profit for the period after tax | 8.7 | 13.1 | -34% |
Net Leverage Ratio2 | 3.75 | 4.56 | -18% |
Summary
Revenue increased 12% to US$ 74.3 million, (H1 2022: US$ 66.4 million), driven by an increase in both utilisation and average day rates.
EBITDA increased by 19% to US$ 44.3 million, (H1 2022: US$ 37.3 million), with the EBITDA margin increasing to 60% (H1 2022: 56%) driven by the increase in utilisation and day rates.
Pressure on Net profit remained high in H1 2023. Despite a 19% growth in EBITDA, net profit was down 34% to US$ 8.7 million (H1 2022: US$ 13.1 million), attributable to increase in finance expenses. Interest expense increased firstly due to an increase in LIBOR rates on our bank loan, secondly due to PIK interest costs that was an obligation to our Lenders due to the net leverage ratio exceeding 4.0 times as at 31 December 2022, and also due to an increase in margin rate on the loan from 3% to 4% effective from the first quarter of 2023. As of the second quarter of 2023, PIK ceased to accrue.
Net debt1 was reduced by US$ 21.5 million to US$ 294.3 million (31 December 2022: US$ 315.8 million) as the Group continues its journey of deleveraging.
Cash generated from operating activities of US$ 42.1 million remained almost flat versus the same period a year ago (H1 2022: US$ 42.2 million). Net cash outflows from financing activities saw an increase of 27% to US$ 46.7 million (H1 2022: US$ 36.7 million) due to higher interest paid on borrowings, higher quarterly repayment of the loan, along with prepayments made towards the bank loan.
1 This represents an Adjusted Performance Measure (APM) as defined in the Glossary which is included in Note 23 to the interim consolidated Financial Statements
2 This represents an Adjusted Performance Measure (APM) as defined in the Glossary
Revenue and segmental profit
The table below shows the contribution to revenue and segment gross profit made by each vessel class during the period.
(US$'000) Vessel Class | Revenue | Segmental gross profit * | ||
H1 2023 | H1 2022 | H1 2023 | H1 2022 | |
E-Class vessels | 28,813 | 26,751 | 19,850 | 17,355 |
S-Class vessels | 17,691 | 17,037 | 12,407 | 11,890 |
K-Class vessels | 27,781 | 22,609 | 17,305 | 13,708 |
Total revenue | 74,285 | 66,397 |
|
|
* Before depreciation and amortization
Revenue in H1 2023 increased by 12% to US$ 74.3 million (H1 2022: US$ 66.4 million) following an increase in overall utilisation to 93% (H1 2022: 89%). There was a 22.8% increase in the revenue generated from K-Class vessels achieving 95% utilisation in the period (H1 2022: 85%), which was due to downtime of certain vessels in H1 2022 for contracts that went back-on hire in the second half of 2022. Benefiting from improved day rates, revenue from S-Class increased 4% despite S-Class utilisation marginally decreasing to 96% (H1 2022: 99%), due to off-hire time for scheduled maintenance in H1 2023. Also benefiting from improved day rates, revenue from E-Class increased 8% despite utilisation remaining unchanged at 87% (H1 2022: 87%).
Average charter day rates also saw an increase by 11% in the period to US$ 30.3k (H1 2022: US$ 27.2k). This increase is mainly attributable to a 22% increase in our E-Class average day rate from H1 2022, with 7% and 5% increases in average day rates for our K-Class and S-Class vessels respectively from H1 2022.
Cost of sales and general and administrative expenses
Cost of sales marginally decreased by US$ 0.1 million to US$ 39.0 million (H1 2022: US$ 39.1 million), of which operating expenses comprises US $24.7 million (H1 2022: US$ 23.5 million) which reflects higher utilisation levels in H1 2023. This was mostly offset by the other component of cost of sales being a reduction in depreciation and amortisation expense to US$ 14.8 million (H1 2022: US$ 15.6 million).
Included in operating expenses is an expense provision for expected credit losses of US$ 0.5 million (H1 2022: credit US$ 0.1 million) for some of our GCC based customers.
General and Administration expenses remained steady at US$ 6.1 million (H1 2022: US$ 5.8 million) reflecting the Group's continuous aim to manage its costs.
Other costs
Finance expenses in the period were US$ 18.2 million (H1 2022: US$ 7.3 million). Interest costs on borrowings increased to US$ 16.5 million (H1 2022 US$ 6.8 million), mainly as a result of the increase in LIBOR interest rate from the second half of 2022 to date, PIK interest costs of US$ 2.0 million, and an increase in margin rate on the loan from 3% to 4% effective from the first quarter of 2023. Moving forward, our margin rate is lowered to 3.1% and PIK will not accrue. Finance expenses in the comparative period were reduced by a gain of US$ 1.1 million on changes in fair value of our interest rate swap arrangement on our loan.
A net foreign exchange loss of US$ 0.6 million in H1 2023 (H1 2022: gain of US$ 0.2 million) arose from unfavorable movements in exchange rates of the Pound Sterling against the US Dollar.
Tax expense decreased to US$ 1.3 million (H1 2022: US$ 1.5 million), of which US$ 0.1 million decrease is attributable to a lower withholding tax charge and US$ 0.1 million reduction is attributable to a decrease in activity in taxable jurisdictions.
Cash flow and liquidity
The Group's net cash generated from operating activities remained steady at US$ 42.1 million (H1 2022: US$ 42.2 million). The net cash outflow from investing activities for H1 2023 decreased to US$ 2.6 million
(H1 2022: US$ 3.7 million).
The Group's net cash outflow from financing activities during the period increased to US$ 46.7 million
(H1 2022: US$ 36.7 million). The Group made debt repayments of US$ 28.6 million (H1 2022: US$ 28.0 million). Interest on bank borrowings during H1 2023 amounted to US$ 16.3 million (H1 2022: US$ 6.9 million), which included US$ 2.0 million for PIK interest. The increase in interest on bank borrowings was due to the increase in LIBOR interest rate compared to the prior period as well as the increase in term margin.
Balance sheet
Total current assets at 30 June 2023 were US$ 52.7 million (31 December 2022: US$ 53.6 million). Trade receivables increased in line with increase in revenue and stood at US$ 37.6m (31 December 2022: US$ 33.2 million), emphasizing our continuing efforts on cash collection. Trade receivables are net of the recognition of a charge during 2022 of US$ 1.9 million for the bankruptcy of a client. The Group has reassessed the position of the client which remains the same as of the prior year end. Prepayments have increased to US$ 5.4m (31 December 2022: US$ 3.1 million). The aggregate increase in trade receivables and prepayments of US$ 6.7 million was offset by the decrease of cash and cash equivalents of US$ 7.2 million.
Total current liabilities increased to US$ 88.7 million (31 December 2022: US$ 69.3 million) partly due to an increase in trade payables, an increase in accrued expenses and deferred revenue. As per our contractual obligation with our Lenders repayment of our bank borrowings due within one year increased by US$ 10.0 million. Further, the Group's derivative financial instrument was revalued to US$ 3.9 million (31 December 2022: US$ 3.2 million). While the current assets are lower than current liabilities, the group expects to honour all its liabilities as they fall due and the accounts have been prepared on a going concern basis. For further details please refer to the Going Concern disclosure within Note 2 of the interim condensed consolidated financial statements.
Total non-current assets as at 30 June 2023 were US$ 596.2 million (31 December 2022: US$ 605.3 million). The decline is due to US$ 15.5 million depreciation and amortisation charges on non-current assets (year ended 31 December 2022: US$ 31.9 million). This was offset by capital expenditure of US$ 5.4 million comprising expenses for equipment upgrades for the vessels and dry-docking expenditure. Total non-current liabilities reduced to US$ 263.3 million (31 December 2022: US$ 301.9 million) primarily due to the repayment of US$ 28.6 million (H1 2022: US$ 28.0 million) towards bank borrowings and US$ 10.0 million (H1 2022: US$ nil) reclassified to current liabilities as per our contractual obligation with our Lenders for repayment of our bank borrowings.
As of June 30, 2023, net leverage ratio reached 3.75 times (31 December 2022: 4.42 times).
Going concern
The Group's Directors have assessed the Group's financial position for a period of not less than 12 months from the date of approval of the half year results and have a reasonable expectation that the Group will be able to continue in operational existence for the foreseeable future.
The Group was in a net current liability position as 30 June 2023 amounting to US$ 36.0 million
(31 December 2022: US$ 15.8 million). The Group is aware that the increase in debt servicing will continue to be a hurdle, closely monitors its liquidity and expects to meet its short-term obligations. During the period, the Group made a loan prepayment of US$ 23.2 million which reduced the current assets (cash) and the non-current liabilities (bank loan) at the period end, leading to a reduction in the current ratio. The loan prepayment was made after taking into account the forecast net cashflows in the foreseeable future.
The Group's forecasts, having taken into consideration reasonable risks and downsides, indicate that its current bank facilities along with the secured backlog and a strong pipeline of near-term opportunities for additional work will provide sufficient liquidity for its requirements for the foreseeable future and accordingly these condensed consolidated financial statements for the Group for the current period have been prepared on a going concern basis. For further details please refer to the Going Concern disclosure within Note 2 of the interim condensed consolidated financial statements.
Related party transactions
During the period there were related party transactions with National Catering Company Limited WLL, an affiliate of a significant shareholder of the Company, for Catering services totaling US$ 0.4 million (H1 2022: US$ 0.3 million) and with Sigma Enterprise Company LLC, an affiliate of a significant shareholder of the Company, for the provision of equipment and overhaul services totaling US$ 0.2 million (H1 2022: nil).
Risks and uncertainties
There are a number of risks and uncertainties which could have a material impact on the Group's performance over the remaining six months of 2023. The Directors do not consider that the principal risks and uncertainties have materially changed since the publication of the Annual Report for the year ended 31 December 2022. A detailed explanation of the risks summarised below, and how the Group seeks to mitigate the risks, can be found on pages 26 to 30 of the 2022 Annual Report which is available at www.gmsplc.com.
· Utilisation and Local content requirement - The Group relies on a limited number of clients that may expose it to losses if these relationships breakdown. GCC region NOCs have local content requirements as part of their tender processes designed to giving preference to suppliers that commit to improving their local content and levels of spend which may prevent GMS from winning contracts or lead to financial loss and/or a reduction in margins on existing contracts, which will ultimately impact operating cash flows and net profitability.
· Inability to secure an appropriate capital structure - The Group is subject to increasing cost of debt due to increase in interest rates global benchmark which will impact the liquidity in the business and the ability to deleverage. This can impact the share price.
· Inability to deliver safe and reliable operations - The Group may suffer commercial and reputational damage from an environmental or safety incident involving employees, visitors or contractors. Inadequate preparation for situations, such as sudden equipment failure, inability to fulfil client requirements and unpredictable weather could have a negative impact on the business.
Risks and uncertainties (continued)
· Liquidity and covenant compliance - The business is exposed to short-term liquidity management risks due to potential increases in interest rates and inflation, which could impact the debt service obligations and the Group's bank facilities' covenants. The increase in interest charges will lead to reduced liquidity in the business as more cash will be required to meet our banking requirements. Reduced liquidity could impact future operations and lead to an event of default. This would give lenders the right to accelerate repayment of the outstanding loans, and then exercise security over the Group's assets. All bank covenants are closely monitored as the headroom remains narrow, which is due to the Group's performance being very sensitive to many internal and external factors such as utilisation, operational downtime, interest rates and other variables.
· People - Losing skilled workforce or failing to attract new talent into our business has the potential to undermine performance.
· Legal, economic and political conditions - Political instability in the regions in which GMS operates (and recruit from) may adversely affect its operations in terms of recruitment, retention and deployment of personnel. The business is exposed to sudden changes in tax compliance requirements or changes in legislation which could lead to fines, financial loss or adversely impact liquidity. Economic conditions such as interest rate and inflation increases will also have an impact on the Groups' liquidity and profitability.
· Compliance and Regulation - Failure to appropriately identify and comply with laws and regulations, and other regulatory statutes in new and existing markets, could lead to regulatory investigations. Non-compliance with laws and regulations could be detrimental to stakeholder relations leading to reputational and financial loss.
· Cyber-crime - security and integrity - Phishing attempts result in inappropriate transactions, data leakage and financial loss. The Group is at risk of loss and reputational damage through financial cyber-crime.
· Climate change - Climate change poses both transition and physical risks to the Group. Transition risks come from the decarbonisation of the global economy which could result in changing investor sentiment making new investors harder to find. It may bring changing client preferences leading to reduced demand for our services. New legislation could require us to increase reporting and possibly substitute our products and vessels for greener alternatives. Physical risks include rising temperatures, which could further impact working hours, and rising sea levels, which could affect where our vessels can operate.
RESPONSIBILITY STATEMENT
Financial information for the period ended 30 June 2023.
We confirm to the best of our knowledge:
a) the condensed set of financial statements, which has been prepared in accordance with the applicable set of accounting standards, gives a true and fair view of the assets, liabilities, financial position and profit or loss of Gulf Marine Services plc and its undertakings, included in the consolidation as a whole as required by DTR 4.2.4R;
b) the interim management report includes a fair review of the information required by DTR 4.2.7R; and
c) the interim management report includes a fair review of the information required by DTR 4.2.8R.
By order of the Board
Mansour Al Alami Alex Aclimandos
Executive Chairman Chief Financial Officer
30 August 2023 30 August 2023
Independent Review Report to Gulf Marine Services PLC ("the Entity")
Conclusion
We have been engaged by the Entity to review the Entity's condensed set of consolidated financial statements in the half-yearly financial report for the six months ended 30 June 2023 which comprises the condensed consolidated statement of comprehensive income, the condensed consolidated balance sheet, the condensed consolidated statement of changes in equity, the condensed consolidated statement of cash flows, a summary of significant accounting policies and other explanatory notes.
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of consolidated financial statements in the half-yearly financial report for the six months ended 30 June 2023 is not prepared, in all material respects in accordance with International Accounting Standard 34 Interim Financial Reporting ("IAS 34") as contained in the UK adopted International Accounting Standards and the Disclosure Guidance and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA").
Basis for conclusion
We conducted our review in accordance with International Standard on Review Engagements (UK) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity ("ISRE (UK) 2410") issued for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
We read the other information contained in the half-yearly financial report to identify material inconsistencies with the information in the condensed set of consolidated financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the review. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis for conclusion section of this report, nothing has come to our attention that causes us to believe that the directors have inappropriately adopted the going concern basis of accounting, or that the directors have identified material uncertainties relating to going concern that have not been appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with ISRE (UK) 2410. However, future events or conditions may cause the Entity to cease to continue as a going concern, and the above conclusions are not a guarantee that the Entity will continue in operation.
INDEPENDENT REVIEW REPORT TO GULF MARINE SERVICES PLC (THE "ENTITY") (continued)
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors.The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA.
The directors are responsible for preparing the condensed set of consolidated financial statements included in the half-yearly financial report in accordance with IAS 34 as adopted for use in the UK.
As disclosed in note 1, the annual financial statements of the Entity for the year ended 31 December 2022 are prepared in accordance with UK-adopted international accounting standards.
In preparing the condensed set of consolidated financial statements, the directors are responsible for assessing the Entity's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Entity or to cease operations, or have no realistic alternative but to do so.
Our responsibility
Our responsibility is to express to the Entity a conclusion on the condensed set of consolidated financial statements in the half-yearly financial report based on our review.
Our conclusion, including our conclusions relating to going concern, are based on procedures that are less extensive than audit procedures, as described in the Basis for conclusion section of this report.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the Entity in accordance with the terms of our engagement to assist the Entity in meeting the requirements of the DTR of the UK FCA. Our review has been undertaken so that we might state to the Entity those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Entity for our review work, for this report, or for the conclusions we have reached.
KPMG 30 August 2023
Chartered Accountants
1 Harbourmaster place,
IFSC,
Dublin 1,
Ireland.
GULF MARINE SERVICES PLC
Condensed Consolidated Statement of Comprehensive Income
for the period ended 30 June 2023
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| Six months period ended 30 June | | Year ended | ||
|
|
| | 31 December | ||
|
| 2023 | | 2022 | | 2022 |
|
| US$'000 | | US$'000 | | US$'000 |
| Notes | (Unaudited) | | (Unaudited) | | (Audited) |
|
|
|
| |
| |
Revenue | 3,7 | 74,285 | | 66,397 | | 133,157 |
Cost of sales |
| (38,954) | | (39,084) | | (78,587) |
Impairment loss |
| - | | - | | (13,192) |
Reversal of impairment losses | 9 | - | | - | | 20,980 |
Expected credit losses - net of recoveries |
| (548) | | 63 | | (1,824) |
|
| | | | | |
Gross profit |
| 34,783 | | 27,376 | | 60,534 |
|
|
|
| |
| |
|
|
| | | | |
General and administrative expenses |
| (6,098) | | (5,819) | | (13,212) |
|
|
| | | | |
|
|
| | | | |
Operating profit |
| 28,685 | | 21,557 | | 47,322 |
|
|
| | | | |
Finance income |
| 74 | | 8 | | 11 |
Finance expenses | 8 | (18,187) | | (7,290) | | (20,137) |
Foreign exchange gain/(loss), net |
| (617) | | 240 | | (138) |
Other income |
| 12 | | 66 | | 68 |
|
| | | | | |
Profit for the period/year before taxation |
| 9,967 | | 14,581 | | 27,126 |
|
|
| | | | |
Taxation charge for the period/year | 5 | (1,256) | | (1,471) | | (1,724) |
|
|
| | | | |
Profit for the period/year |
| 8,711 | | 13,110 | | 25,402 |
|
|
|
| |
| |
Other comprehensive income/(expense) - items that may be reclassified to profit or loss: |
|
|
| |
| |
|
|
| | | | |
Net hedging gain reclassified to the profit or loss |
| 279 | | 140 | | 279 |
Exchange differences on translating foreign operations |
| 305 | | (1,031) | | (799) |
|
|
| | | | |
Total comprehensive income for the year |
| 9,295 | | 12,219 | | 24,882 |
|
|
| | | | |
Profit attributable to: |
|
| | | | |
Owners of the Company |
| 8,336 | | 13,097 | | 25,326 |
Non-controlling interests |
| 375 | | 13 | | 76 |
|
|
| | | | |
|
| 8,711 | | 13,110 | | 25,402 |
Total comprehensive income attributable to: |
|
| | | | |
Owners of the Company |
| 8,920 | | 12,206 | | 24,806 |
Non-controlling interests |
| 375 | | 13 | | 76 |
|
|
| | | | |
|
| 9,295 | | 12,219 | | 24,882 |
|
|
| | | | |
Earnings per share |
|
| | | | |
Basic (cents per share) | 6 | 0.82 | | 1.29 | | 2.49 |
|
|
| | | | |
Diluted (cents per share) | 6 | 0.82 | | 1.28 | | 2.47 |
|
| | | | | |
All results are derived from continuing operations in each period/year. There are no discontinued operations in either period/year.
The accompanying notes form an integral part of these condensed consolidated financial statements.
GULF MARINE SERVICES PLC
Condensed Consolidated Balance Sheet
as at 30 June 2023
|
| 30 June | | 31 December |
|
| 2023 | | 2022 |
| | US$'000 | | US$'000 |
| Notes | (Unaudited) | | (Audited) |
ASSETS | |
| | |
| |
| | |
Non-current assets | |
| | |
Property and equipment | 9 | 582,970 | | 592,955 |
Dry docking expenditure | 10 | 10,089 | | 8,931 |
Right-of-use assets | | 3,165 | | 3,371 |
| |
| | |
Total non-current assets | | 596,224 | | 605,257 |
| |
| | |
Current assets | |
| | |
Trade receivables | 11 | 37,557 | | 33,179 |
Prepayments, advances and other receivables | 12 | 10,033 | | 7,722 |
Derivative financial instruments | 16 | - | | 386 |
Cash and cash equivalents | | 5,119 | | 12,275 |
| |
| | |
| |
| | |
Total current assets | | 52,709 | | 53,562 |
| |
| | |
Total assets | | 648,933 | | 658,819 |
| |
| | |
EQUITY AND LIABILITIES | |
| | |
Capital and reserves | |
| | |
Share capital - Ordinary | 13 | 30,117 | | 30,117 |
Capital redemption reserve | 14 | 46,445 | | 46,445 |
Share premium account | | 99,105 | | 99,105 |
Group restructuring reserve | | (49,710) | | (49,710) |
Restricted reserve | | 272 | | 272 |
Share based payment reserve | | - | | 3,632 |
Capital contribution | | 9,177 | | 9,177 |
Cash flow hedge reserve | | - | | (279) |
Translation reserve | | (2,580) | | (2,885) |
Retained earnings | | 161,694 | | 149,712 |
| |
| | |
Attributable to the Owners of the Company | | 294,520 | | 285,586 |
Non-controlling interests | | 2,363 | | 1,988 |
| |
| | |
Total equity | | 296,883 | | 287,574 |
| |
| | |
Current liabilities | |
| | |
Trade and other payables | | 36,632 | | 27,979 |
Current tax liability | | 6,625 | | 6,321 |
Bank borrowings - scheduled repayments within one year | 15 | 40,000 | | 30,000 |
Lease liabilities | | 1,600 | | 1,845 |
Derivative financial instruments | 16 | 3,850 | | 3,198 |
Total current liabilities | | 88,707 | | 69,343 |
| |
| | |
Non-current liabilities | |
| | |
Provision for employees' end of service benefits | | 2,303 | | 2,140 |
Bank borrowings - scheduled repayments more than one year | 15 | 259,434 | | 298,085 |
Lease liabilities | | 1,606 | | 1,677 |
Total non-current liabilities | | 263,343 | | 301,902 |
| |
| | |
Total liabilities | | 352,050 | | 371,245 |
| |
| | |
Total equity and liabilities | | 648,933 | | 658,819 |
The accompanying notes form an integral part of these condensed consolidated financial statements.
GULF MARINE SERVICES PLC
Condensed Consolidated Statement of Changes in Equity
For the period ended 30 June 2023 | Share capital - Ordinary | Share capital - Deferred |
Capital redemption Reserve | Share premium account | Group restructuring reserve |
Restricted reserve | Share based payment reserve | Capital contribution | Cash flow hedge 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$'000 | US$'0-00 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at 1 January 2023 | 30,117 | - | 46,445 | 99,105 | (49,710) | 272 | 3,632 | 9,177 | (279) | (2,885) | 149,712 | 285,586 | 1,988 | 287,574 |
|
|
|
|
| | | |
|
|
| | | | |
Profit for the period | - | - | - | - | - | - | - | - | - | - | 8,336 | 8,336 | 375 | 8,711 |
Other comprehensive income for the period | | | | | | | | | | | | | | |
Net hedging gain on interest hedges reclassified to the profit or loss |
- |
- |
- |
- |
- |
- |
- |
- |
279 |
- |
- |
279 |
- |
279 |
Exchange differences on foreign operations |
- |
- |
- |
- |
- |
- |
- |
- |
- |
305 |
- |
305 |
- |
305 |
Total comprehensive income for the period |
- |
- |
- |
- |
- |
- |
- |
- |
279 |
305 |
8,336 |
8,920 |
375 |
9,295 |
Transactions with owners of the Company |
|
|
|
|
|
|
|
| |
|
|
|
|
|
Share based payment charge | - | - | - | - | - | - | 14 | - | - | - | | 14 | - | 14 |
Transfer of share option reserve | - | - | - | - | - | - | (3,646) | - | - | - | 3,646 | - | - | - |
Total transactions with owners of the Company | - | - | - | - | - | - | (3,632) | - | - | - | 3,646 | 14 | - | 14 |
As at 30 June 2023 | 30,117 | - | 46,445 | 99,105 | (49,710) | 272 | - | 9,177 | - | (2,580) | 161,694 | 294,520 | 2,363 | 296,883 |
| | | | | | | | | | | | | | |
As at 1 January 2022 | 30,117 | 46,445 | - | 99,105 | (49,710) | 272 | 3,648 | 9,177 | (558) | (2,086) | 124,386 | 260,796 | 1,912 | 262,708 |
| | | | | | | | | | | | | | |
Profit for the period | - | - | - | - | - | - | - | - | - | - | 13,097 | 13,097 | 13 | 13,110 |
Other comprehensive income for the period | | | | | | | | | | | | | | |
Net hedging gain on interest hedges reclassified to the profit or loss |
- |
- |
- |
- |
- |
- |
- |
- |
140 |
- |
- |
140 |
- |
140 |
Exchange differences on foreign operations |
- |
- |
- |
- |
- |
- |
- |
- |
- |
(1,031) |
- |
(1,031) |
- |
(1,031) |
Total comprehensive income for the period |
- |
- |
- |
- |
- |
- |
- |
- |
140 |
(1,031) |
13,097 |
12,206 |
13 |
12,219 |
Transactions with owners of the Company |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share based payment charge | - | - | - | - | - | - | 43 | - | - | - | - | 43 | - | 43 |
Buyback and cancellation of deferred shares (Note 13, 14) |
- |
(46,445) |
46,445 |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
Total transactions with owners of the Company |
- |
(46,445) |
46,445 |
- |
- |
- |
43 |
- |
- |
- |
- |
43 |
- |
43 |
As at 30 June 2022 | 30,117 | - | 46,445 | 99,105 | (49,710) | 272 | 3,691 | 9,177 | (418) | (3,117) | 137,483 | 273,045 | 1,925 | 274,970 |
The accompanying notes form an integral part of these condensed consolidated financial statements.
·
GULF MARINE SERVICES PLC
Condensed Consolidated Statement of Cash Flows
for the period ended 30 June 2023
|
| Year ended | |
| 2023 | 2022 | 2022 |
| US$'000 | US$'000 | US$'000 |
| (Unaudited) | (Unaudited) | (Audited) |
| | | |
Net cash generated from operating activities (Note 17) | 42,069 | 42,205 | 82,565 |
|
|
|
|
Investing activities | | | |
Payments for additions of property and equipment | (2,127) | (1,885) | (3,345) |
Dry docking expenditure paid | (521) | (1,831) | (2,970) |
Interest received | 74 | 8 | 11 |
|
|
|
|
|
| | |
Net cash used in investing activities | (2,574) | (3,708) | (6,304) |
|
|
|
|
|
| | |
Financing activities |
| | |
Repayment of bank borrowings | (28,601) | (28,049) | (51,445) |
Principal elements of lease payments | (1,828) | (1,174) | (2,524) |
Cash settlement of LTIPs | - | - | (61) |
Payment of costs associated with borrowings | (148) | (148) | (148) |
Settlement of derivatives (Note 16) | 327 | (369) | (384) |
Interest paid on bank borrowings | (16,264) | (6,920) | (17,525) |
Interest paid on leases | (137) | (51) | (170) |
|
|
|
|
|
| | |
Net cash used in financing activities | (46,651) | (36,711) | (72,257) |
|
|
|
|
|
| | |
Net (decrease) / increase in cash and cash equivalents |
(7,156) |
1,786 | 4,004 |
|
| | |
Cash and cash equivalents at the beginning of the period/year | 12,275 | 8,271 | 8,271 |
|
|
|
|
Cash and cash equivalents at the end of the period/year | 5,119 | 10,057 | 12,275 |
|
|
|
|
| | | |
|
| | |
The accompanying notes form an integral part of these condensed consolidated financial statements.
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2023
1 Corporate information
Gulf Marine Services PLC ("GMS" or the "Company") is a Company which is registered and was incorporated in England and Wales on 24 January 2014. The Company is a public limited liability company with operations mainly in the Gulf Cooperation Council (GCC) and Europe. The address of the registered office of the Company is 107 Hammersmith Road, London, W14 0QH. The registered number of the Company is 08860816.
The principal activities of GMS and its subsidiaries (together referred to as the "Group") are chartering and operating a fleet of specially designed and built vessels. All information in the notes relate to the Group, not the Company unless otherwise stated.
The Group is engaged in providing self-propelled, self-elevating support vessels (SESVs) that present a stable platform for delivery of a wide range of services throughout the total lifecycle of offshore oil, gas and renewable energy activities, and which are capable of operations in the GCC and other regions.
The condensed consolidated financial statements of the Group for the six-month period ended
30 June 2023 were authorised for issue on 30 August 2023. The condensed consolidated financial statements do not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. The condensed consolidated financial statements have been reviewed, not audited.
The Group issued statutory consolidated financial statements for the year ended 31 December 2022, which were prepared in accordance with UK adopted International Accounting Standards in conformity with requirements of the Companies Act 2006. Those consolidated financial statements were approved by the Board of Directors on 23 April 2023. The report of the auditor on those consolidated financial statements did not contain any statement under section 498(2) or 498(3) of the Companies Act 2006. A copy of the statutory consolidated financial statements for year ended 31 December 2022 has been delivered to the Registrar of Companies.
2 Significant accounting policies
The accounting policies and methods of computation adopted in the preparation of these condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2022 as disclosed in the Annual Report, except for the adoption of new standards and interpretations effective as of 01 January 2023, which are described in more details below.
The condensed consolidated financial statements have been prepared on the historical cost basis, except for certain financial instruments that are measured at fair values at the end of each reporting period. The Group's management considers that the fair value of financial assets, financial liabilities and lease liabilities approximates their carrying amounts.
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2023 (continued)
2 Significant accounting policies (continued)
Basis of preparation
The annual consolidated financial statements of the Group will be prepared in accordance with
UK adopted International Accounting Standards in conformity with requirements of the Companies Act 2006. The interim set of condensed consolidated financial statements included in this half-yearly financial report has been prepared in accordance with the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority and with International Accounting Standard (IAS) 34 Interim Financial Reporting as adopted by the United Kingdom.
The condensed consolidated financial statements do not include all the information required for full annual consolidated financial statements and should be read in conjunction with the Group's audited consolidated financial statements for the year ended 31 December 2022. In addition, results for the six-month period ended 30 June 2023 are not necessarily indicative of the results that may be expected for the financial year ending 31 December 2023. The condensed consolidated statement of comprehensive income for the six-month period ended 30 June 2023 is not affected significantly by seasonality of results.
Going concern
The Group's Directors have assessed the Group's financial position for a period of not less than
12 months from the date of approval of the half year results and have a reasonable expectation that the Group will be able to continue in operational existence for the foreseeable future.
The Group was in a net current liability position as at 30 June 2023 amounting to US$ 36.0 million
(31 December 2022: US$ 15.8 million). The Group closely monitors its liquidity and is expected to meet its short-term obligations. During the period, the Group made a loan prepayment of
US$ 23.2 million. The loan prepayment was made after taking into account the forecast cashflows in the second half of 2023.
The Group has US$ 5.1 million of available resources comprising cash and cash equivalents at the reporting date and it has an available undrawn working capital facility of US$ 15.0 million
(31 December 2022: US$ 20.0 million) as at the at the reporting date. During the period, the working capital facility was reduced by US$ 5 million. The working capital facility expires alongside the main debt facility in June 2025 (refer Note 15).
The Group has been successful in achieving a drop in net leverage ratio to below 4.0 and the PIK has stopped to accrue as of the second quarter of 2023. Consequently, going forward, the cost of bank borrowings will witness a reduction of 340 basis points. The interest cost savings and improved profitability resulting from the lower interest expenses will positively impact the Group's financial position. Further, with enhanced cash flow and debt servicing capability, the Group can meet its financial obligations more efficiently, reducing the risk of liquidity constraints.
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2023 (continued)
2 Significant accounting policies (continued)
Going concern (continued)
GMS continues to remain cognisant of the wider context in which it operates and the impact that climate change could have on the financial statements of the Group. The impact of climate change is expected to be insignificant in the going concern assessment period.
The Group's forecasts, having taken into consideration reasonable risks and downsides, indicate that its current bank facilities along with the secured backlog and a strong pipeline of near-term opportunities for additional work will provide sufficient liquidity for its requirements for the foreseeable future and accordingly these condensed consolidated financial statements for the Group for the current period have been prepared on a going concern basis.
New and amended standards adopted by the Group
The following new and revised IFRSs have been adopted in these condensed consolidated financial statements.
· Classification of liabilities as current or non-current (Amendments to IAS 1), effective for annual periods beginning on or after 1 January 2023.
· IFRS 17 Insurance Contracts, effective for annual periods beginning on or after 1 January 2023.
· Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality Judgements - Disclosure of Accounting Policies, effective for annual periods beginning on or after 1 January 2023.
· Amendments to IAS 8 Accounting Policies Changes in Accounting Estimates and Errors-Definition of Accounting Estimates, effective for annual periods beginning on or after 1 January 2023.
· Amendments to IAS 12 Income Taxes - Deferred Tax related to Assets and Liabilities arising from a Single Transaction, effective for annual periods beginning on or after 1 January 2023.
The application of these new and revised IFRSs has not had any material impact on the amounts reported for the current and prior periods and did not require any retrospective adjustments but may affect the accounting for future transactions or arrangements. The full revised accounting policies applicable from 1 January 2023 will be provided in the Group's annual financial statements for the year ending 31 December 2023.
At the date of the condensed consolidated interim financial statements, the following other standards, amendments and Interpretations have not been effective and have not been early adopted by the Group:
· Amendments to IAS 1 Presentation of Financial Statements - Classification of Liabilities as Current or Non-current, , effective for annual periods beginning on or after 1 January 2024.
· Amendments to IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures - Sale or Contribution of Assets between an Investor and its Associate or Joint Venture
These new and amended standards are not expected to have a significant impact on the Group's condensed consolidated interim financial information.
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2023 (continued)
3 Segment reporting
The segment information provided to the chief operating decision makers for the operating and reportable segments for the period include the following:
|
Revenue | Segment adjusted gross profit* | ||||
| 6 months ended 30 June | 31 December | 6 months ended 30 June | 31 December | ||
| 2023 | 2022 | 2022 | 2023 | 2022 | 2022 |
| US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 |
|
| | |
| | |
K-Class vessels | 27,781 | 22,609 | 48,036 | 17,305 | 13,708 | 27,827 |
S-Class vessels | 17,691 | 17,037 | 51,135 | 12,407 | 11,890 | 23,899 |
E-Class vessels | 28,813 | 26,751 | 33,986 | 19,850 | 17,355 | 30,200 |
|
| | |
| | |
| _______
| _______ | _______
|
| | |
Total revenue | 74,285 _______ | 66,397 _______ | 133,157 _______ |
| | |
|
| | |
| | |
Less: |
| | |
| | |
Depreciation charged to cost of sales | |
|
| (12,032) | (11,787) | (23,567) |
Amortisation charged to cost of sales | |
|
| (2,747) | (3,790) | (5,613) |
Impairment loss | |
|
| - | - | (13,192) |
Reversal of impairment (refer Note 9) | |
|
| - | - | 20,980 |
| | | | _______ | _______ | _______ |
| |
|
|
| | |
Gross profit | |
|
| 34,783 | 27,376 | 60,534 |
| |
|
|
| | |
General and administrative expenses | |
|
| (6,098) | (5,819) | (13,212) |
Finance income | |
|
| 74 | 8 | 11 |
Finance expense (refer Note 8) | |
|
| (18,187) | (7,290) | (20,137) |
Foreign exchange (loss)/gain, net | |
|
| (617) | 240 | (138) |
Other income | |
|
| 12 | 66 | 68 |
| | | | _______ | _______ | _______ |
| | | |
| | |
Profit before taxation | |
|
| 9,967 | 14,581 | 27,126 |
| | | |
|
|
|
*See Glossary.
Segment revenue reported above represents revenue generated from external customers. There were no inter-segment sales in either of the periods. Segment assets and liabilities, including depreciation, amortisation and additions to non-current assets, are not reported to the chief operating decision maker on a segmental basis and, therefore, are not disclosed.
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2023 (continued)
4 Presentation of non-GAAP results
The following table provides a reconciliation between the statutory and non-statutory financial results:
| Six months ended 30 June | |
|
2023 |
2022 |
| US$'000 | US$'000 |
| | |
Revenue | 74,285 | 66,397 |
Cost of sales |
| |
- Cost of sales before depreciation, amortisation and impairment | (24,723) | (23,444) |
Gross profit before depreciation, amortization & impairment | 49,562 | 42,953 |
|
| |
-Depreciation and amortisation | (14,779) | (15,577) |
Gross profit | 34,783 | 27,376 |
|
| |
General and administrative |
| |
-Depreciation and amortisation | (801) | (186) |
-Other administrative costs | (5,297) | (5,633) |
Operating profit | 28,685 | 21,557 |
Finance income | 74 | 8 |
Finance expense | (18,187) | (7,290) |
Other income | 12 | 66 |
Foreign exchange (loss)/gain, net |
(617) |
240 |
Profit before taxation | 9,967 | 14,581 |
|
| |
Taxation charge | (1,256) | (1,471) |
Net profit after tax | 8,711 | 13,110 |
|
| |
Profit attributable to |
| |
Owners of the Company | 8,336 | 13,097 |
Non-controlling interests | 375 | 13 |
|
| |
|
| |
Earnings per share (Basic) | 0.82 | 1.29 |
|
| |
Supplementary non-statutory information |
| |
Operating profit | 28,685 | 21,557 |
Add: Depreciation and amortisation charges |
15,580 |
15,763 |
EBITDA1 | 44,265 | 37,320 |
1Please see Glossary for definition.
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2023 (continued)
5 Taxation
Tax is calculated at the rates prevailing in the respective jurisdictions in which the Group operates. The overall effective rate is the weighted average of the expected taxes to be paid in each jurisdiction. Income is subject to tax including withholding tax on Revenue and Corporation tax on Profit for the year in each taxable jurisdiction (being principally Qatar, the United Kingdom and Saudi Arabia). The Group effective tax rate was 12.6% for the period ended June 2023 (Six months ended June 2022: 14.8%).
The current tax charge of US$ 1.3 million (six-month period ended June 2022: US$ 1.5 million) included withholding tax amounting to US$ 1 million (six-month period ended June 2022: US$ 0.9 million).
A subsidiary of the Group received a tax assessment from the Saudi tax authorities (ZATCA) for an amount of US$ 7.3 million related to the transfer pricing of our inter-group bareboat agreement, for the period from 2017 to 2019. The Group has filed an appeal with the Tax Violations and Dispute Resolution Committee (TVDRC) against the assessment raised by ZATCA. The Directors have considered the claim, including consideration of third-party tax advice received. Noticing the claim retrospectively applied from 2010 in respect of a law which was issued in 2019, which applied a "tested party" assessment different to that supported by their tax advisors and using an approach which the Directors (supported by their tax advisors) consider to be inconsistent with the principles set out in the KSA transfer price guidelines, the Directors believe that the Group has complied with the relevant tax legislation. On that basis, the Directors have not made a provision for the current or any future potential assessments of a similar nature.
On 9 December 2022, the UAE Ministry of Finance released the Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (the Law) to enact a Federal corporate tax (CT) regime in the UAE. The CT regime will become effective for accounting periods beginning on or after 1 June 2023.
The Cabinet of Ministers Decision No. 116/2022 effective from 2023, specifies the threshold of income over which the 9% tax rate would apply and accordingly, the Law is now considered to be substantively enacted. A rate of 9% will apply to taxable income exceeding AED 375,000, a rate of 0% will apply to taxable income not exceeding AED 375,000 and a rate of 0% on qualifying income of free zone entities.
GMS has considered deferred tax implications in the preparation of these condensed consolidated financial statements in respect of property, plant and equipment and potential timing differences that could give rise to a deferred tax liability. There are currently no UAE tax laws that would impact treatment of depreciation and amortization of property, plant and equipment, that would result in such a timing difference.
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2023 (continued)
6 Earnings per share
| 6 months ended 30 June |
| 6 months ended 30 June | | Year ended 31 December |
| 2023 |
| 2022 | | 2022 |
Earnings for the purpose of calculating the basic and diluted earnings per share being profit for the period attributable to Owners of the Company (US$'000) | 8,336 |
| 13,097 | | 25,326 |
|
| | | | |
Earnings for the purpose of calculating the adjusted basic and diluted profit per share (US$'000) (Note 4) | 8,336 |
| 13,097 | | 17,538 |
|
|
| | | |
Weighted average number of shares ('000) | 1,016,415 |
| 1,016,415 | | 1,016,415 |
Weighted average diluted number of shares ('000) | 1,016,415 |
| 1,019,646 | | 1,024,124 |
|
|
| | | |
Basic earnings per share (cents) | 0.82 |
| 1.29 | | 2.49 |
Diluted earnings per share (cents) | 0.82 |
| 1.28 | | 2.47 |
Adjusted earnings per share (cents) | 0.82 |
| 1.29 | | 1.73 |
Adjusted diluted earnings per share (cents) | 0.82 |
| 1.28 | | 1.71 |
Basic earnings per share is calculated by dividing the earnings attributable to equity holders of the Company for the period (as disclosed in the condensed consolidated statement of comprehensive income) by the weighted average number of ordinary shares in issue during the period. For the comparative period/year, the deferred shares were not included in any of the Earnings per share calculations as they did not have a right to dividends.
Adjusted earnings per share is calculated on the same basis as basic earnings but uses the adjusted profit attributable to equity holders of the Company for the period (refer Note 4). The adjusted earnings per share is presented as the Directors consider it provides an additional indication of the underlying performance of the Group.
Diluted earnings per share is calculated by dividing the earnings attributable to owners of the Company for the period by the weighted average number of ordinary shares in issue during the period adjusted for the weighted average effect of LTIP's during the period.
Adjusted diluted earnings per share is calculated on the same basis but uses adjusted profit (refer Note 4) attributable to the equity shareholders of the Company.
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2023 (continued)
6 Earnings per share (continued)
The following table shows a reconciliation between basic and diluted average number of shares:
| 30 June 2023 000's | 30 June 2022 000's | 31 December 2022 000's |
|
| | |
Weighted average basic number of shares in issue | 1,016,415 | 1,016,415 | 1,016,415 |
Weighted average effect of LTIP's | - | 3,231 | 7,709 |
|
| | |
Weighted average diluted number of shares in issue | 1,016,415 | 1,019,646 | 1,024,124 |
The warrants are excluded from the calculation due to their anti-dilutive nature, which stems from the fact that the Group's average share price over the six-month period has remained lower than the warrants' exercise price.
7 Revenue
| 30 June US$'000 | | 30 June US$'000 |
|
| | |
Charter hire | 36,759 | | 34,433 |
Lease income | 28,305 | | 22,492 |
Messing and accommodation | 4,640 | | 6,705 |
Maintenance service | 2,709 | | 1,677 |
Mobilisation and demobilization | 820 | | 670 |
Sundry income | 1,052 | | 420 |
| | | |
|
| | |
| 74,285 | | 66,397 |
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2023 (continued)
8 Finance expenses
| 30 June US$'000 | | 30 June US$'000 |
|
| | |
Interest on bank borrowings | 16,493 | | 6,796 |
Interest on finance leases | 137 | | 51 |
Other finance expenses | 567 | | 413 |
Net loss on changes in fair value warrants (Note 16) | 652 | | 667 |
Loss on derivatives reclassified through profit and loss | 279 | | 140 |
Net (loss) / gain on changes in fair value of interest rate swap (Note 16) |
59 | |
(777) |
| | | |
|
| | |
| 18,187 | | 7,290 |
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2023 (continued)
9 Property and equipment
| Vessels | Vessel spares, fitting and other equipment | Others | Capital work-in-progress | Total |
| US$'000 | US$'000 | US$'000 | US$'000 | US$'000 |
Cost |
|
|
|
|
|
Balance as at 1 January 2023 | 898,200 | 60,234 | 2,250 | 6,766 | 967,450 |
Additions | - | - | - | 2,117 | 2,117 |
Balance as at 30 June 2023 | 898,200 | 60,234 | 2,250 | 8,883 | 969,567 |
|
|
|
|
|
|
Accumulated Depreciation and impairment |
|
|
|
|
|
Balance at 1 January 2023 | 348,515 | 21,219 | 1,916 | 2,845 | 374,495 |
Depreciation expense | 10,450 | 1,579 | 73 | - | 12,102 |
Balance as at 30 June 2023 | 358,965 | 22,798 | 1,989 | 2,845 | 386,597 |
|
|
|
|
|
|
Net Book Value as at 30 June 2023 | 539,235 | 37,436 | 261 | 6,038 | 582,970 |
|
|
|
|
|
|
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2023 (continued)
9 Property and equipment (continued)
| Vessels | Vessel spares, fitting and other equipment | Others | Capital work-in-progress | Total |
| US$'000 | US$'000 | US$'000 | US$'000 | US$'000 |
Cost |
|
|
|
|
|
Balance as at 1 January 2022 | 896,871 | 60,234 | 1,967 | 5,042 | 964,114 |
Additions | - | - | - | 3,336 | 3,336 |
Transfers | 1,329 | - | 283 | (1,612) | - |
Balance as at 31 December 2022 | 898,200 | 60,234 | 2,250 | 6,766 | 967,450 |
|
|
|
|
|
|
Accumulated Depreciation and impairment |
|
|
|
|
|
Balance at 1 January 2022 | 335,938 | 18,018 | 1,787 | 2,845 | 358,588 |
Depreciation expense | 20,365 | 3,201 | 129 | - | 23,695 |
Impairment charge | 13,192 | - | - | - | 13,192 |
Reversal of impairment | (20,980) | - | - | - | (20,980) |
Balance as at 31 December 2022 | 348,515 | 21,219 | 1,916 | 2,845 | 374,495 |
|
|
|
|
|
|
Net Book Value as at 31 December 2022 | 549,685 | 39,015 | 334 | 3,921 | 592,955 |
|
|
|
|
|
|
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2023 (continued)
10 Dry docking expenditure
| 30 June | | 31 December |
| US$'000 | | US$'000 |
At 1 January | 8,931 | | 8,799 |
Expenditure incurred during the period/year | 3,296 | | 5,745 |
Amortised during the period/year | (2,138) | | (5,613) |
|
| | |
| 10,089 | | 8,931 |
11 Trade receivables
| 30 June | | 31 December |
| US$'000 | | US$'000 |
|
| | |
Trade receivables | 40,124 | | 35,198 |
Less: Allowances for bad and doubtful debt provision | (2,452) | | (1,921) |
Less: Allowance for expected credit losses | (115) | | (98) |
|
| | |
Net trade receivables | 37,557 | | 33,179 |
12 Prepayments, advances and other receivables
| 30 June | | 31 December |
| US$'000 | | US$'000 |
|
| | |
Prepayments | 5,353 | | 3,137 |
Advances to suppliers | 2,944 | | 3,197 |
Accrued revenue | 1,651 | | 1,303 |
Deposits | 85 | | 85 |
|
| | |
| 10,033 | | 7,722 |
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2023 (continued)
13 Share capital
Ordinary shares at £0.02 per share
| Number of ordinary shares |
|
|
| ('000) |
| US$'000 |
|
|
|
|
At 1 January 2023 | 1,016,415 |
| 30,117 |
|
|
|
|
|
|
|
|
As at 30 June 2023 | 1,016,415 |
| 30,117 |
| Number of ordinary shares | | |
| ('000) | | US$'000 |
| | | |
At 1 January 2022 | 1,016,415 | | 30,117 |
| | | |
| | | |
As at 30 June 2022 | 1,016,415 | | 30,117 |
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. As a result, total equity of US$ 27.76 million (GBP £19.98 million) was raised of which $18.51 million (GBP £13.32 million) was recognised in the share capital account and $9.25 million (GBP £6.66 million) was recognised in share premium account. Issue costs amounting to US$ 3.2 million had been deducted from the share premium account.
Deferred shares at £0.08 per share
| Number of ordinary shares |
|
|
| ('000) |
| US$'000 |
| Number of ordinary shares | | |
| | | |
| ('000) | | US$'000 |
At 1 January 2022 | 350,488 | | 46,445 |
Buyback and cancellation of deferred shares | (350,488) | | (46,445) |
| | | |
| | | |
At 30 June 2022 and 2023 | - | | - |
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2023 (continued)
13 Share capital (continued)
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 had 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 had extremely limited rights. The Group had the right but not the obligation to buyback all of the Deferred Shares for an amount not exceeding £1.00 in aggregate.
During the 2022 AGM, shareholders approved an agreement describing the buyback and cancellation of the Deferred shares of the Company pursuant to which, for the aggregate consideration of £1.00, the Company purchased all of the deferred shares arising from its 2021 capital reorganization. Under the Companies Act a share buy‑back by a public company (such as the Company) can only be financed through distributable reserves or the proceeds of a fresh issue of shares made for the purpose of financing a share buyback. The Company had sufficient reserves to purchase the Deferred shares for £1.00.
On 30 June 2022, following the buyback, 350,487,787 deferred shares were cancelled. Following the cancellation of the Deferred shares on 30 June 2022, a transfer of $46.4 million was made from Share capital - Deferred to a Capital redemption reserve (refer Note 14).
14 Capital redemption reserve
The capital redemption reserve with a value of US$ 46.4 million was created on 30 June 2022 when the Company purchased and then cancelled 350,487,787 deferred ordinary shares (refer Note 13). The capital redemption reserve is not distributable.
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2023 (continued)
15 Bank borrowings
Bank borrowings relate to the bank facility provided by a group of six banks, which comprises of term loans and amounts available under revolving working capital facilities. Secured borrowings at amortised cost are as follows:
| 30 June US$'000 | | 31 December US$'000 |
|
| | |
Term loans | 299,434 | | 328,085 |
Working capital facility* | - | | - |
|
| | |
| 299,434 | | 328,085 |
*The revolving working capital facility amounts to US$ 40.0 million (31 December 2022: US$ 45.0 million). US$ 25.0 million (31 December 2022: US$ 25.0 million) of the working capital facility is allocated to performance bonds and guarantees and US$ 15.0 million (31 December 2022: US$ 20 million) is allocated to cash which was repaid in full during 2022, leaving US$ 15.0 million available for drawdown (31 December 2022: US$ 20.0 million). The working capital facility expires alongside the main debt facility in June 2025.
Bank borrowings are split between hedged and unhedged amounts as follows:
| 30 June US$'000 | | 31 December US$'000 |
|
| | |
Economically hedged bank borrowings | - | | 23,077 |
Unhedged bank borrowings | 299,434 | | 305,008 |
|
| | |
| 299,434 | | 328,085 |
Bank borrowings are presented in the condensed consolidated balance sheet as follows:
| 30 June US$'000 | | 31 December US$'000 |
Non-current | | | |
Bank borrowings | 259,434 | | 298,085 |
|
| | |
Current |
| | |
Bank borrowings - scheduled repayments within one year | 40,000 | | 30,000 |
|
| | |
| 299,434 | | 328,085 |
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2023 (continued)
15 Bank Borrowings (continued)
Net debt as at the end of the period/year was as follows:
| 30 June | 31 December |
| US$'000 | US$'000 |
|
| |
Bank borrowings net of issue costs | 299,434 | 328,085 |
Less: Cash and cash equivalents | (5,119) | (12,275) |
|
| |
Total | 294,315 | 315,810 |
The principal terms of the outstanding facility as at 30 June 2023 are as follows:
· The facility's main currency is US$ and is repayable with three months LIBOR plus a margin based on a ratchet depending on leverage levels.
· As of the second quarter of 2023, the Group has achieved a reduction in the net leverage ratio to below 4.0, and PIK is no longer accrued. Moving forward, the margin rate on the loan has been decreased to from 4% to 3.1%.
· Following the cessation of the LIBOR on 30 June 2023, the reference rate in the Common Terms Agreement will be the Secured Overnight Financing Rate (SOFR) as the new benchmark rate. While the decision has been primarily agreed upon with the banks, the formal documentation is still underway.
· The facility remains secured by mortgages over its whole fleet with a net book value at
30 June 2023 of US$ 539.2 million (31 December 2022: US$ 549.7 million) (Note 5). Additionally, gross trade receivables, amounting to US$ 40.1 million (31 December 2022: US$ 35.2 million) have been assigned as security against the loans extended by the Group's banking syndicate.
· The Group has also provided security against gross cash balances, being cash balances amounting to US$ 5.2 million (31 December 2022: US$ 12.3 million) before the restricted amounts related to visa deposits held with the Ministry of Labour in the UAE, which are included in other receivables. These have been assigned as security against the loans extended by the Group's banking syndicate.
· As an equity raise of US $50.0 million did not take place by 31 December 2022, 87.6 million warrants were issued on 2 January 2023, giving right to 137,075,773 million shares at a strike price of 5.75 pence per share.
The facility is subject to certain financial covenants including; Debt Service Cover; Interest Cover; and Net Leverage Ratio; which are tested bi-annually in June and December. As at 30 June 2023 the Group were required to achieve a net leverage ratio lower than 5.4x, interest cover with
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2023 (continued)
15 Bank Borrowings (continued)
a minimum ratio of 2.5x and service cover with a minimum ratio of 1.2x. All applicable financial covenants assigned to the Group's debt facility were met as of 30 June 2023.
Management considers the carrying amount of the Group's bank borrowings approximates its fair value as at 30 June 2023.
The Group is exposed to cash flow interest rate risk on its bank borrowings which are subject to floating interest rates. The sensitivity analyses below have been determined based on the exposure to interest rates for non-derivative instrument at the end of the reporting period. For floating rate liabilities, the analysis is prepared assuming the amount of liability outstanding at the end of the reporting period was outstanding for the whole period.
If interest rates had been 100 basis points higher/lower and all other variables were held constant, the profit for the period ended 30 June 2023 would decrease/increase by US$ 1.5 million. This is mainly attributable to the Group's exposure to interest rates on its variable rate borrowings.
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2023 (continued)
16 Derivative financial instruments
Warrants
Under the terms of the Group's loan facility, the Group was required to issue warrants to its lenders as GMS had not raised US$ 50.0 million of equity by 31 December 2022.
On 2 January 2023, as the US$ 50.0 million equity raise did not take place, therefore 87,621,947 warrants were issued to the lenders. Based on the final report prepared by a Calculation Agent, the warrants give right to their holders to acquire 137,075,773 shares at an exercise price of 5.75 pence per share for a total consideration of GBP £7.9 million. 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.
Management commissioned an independent valuation expert to measure the fair value of the warrants, which was determined using Monte Carlo statistical method. The simulation considers sensitivity by building models of possible results by substituting a range of values. Warrants valuation represents a Level 3 fair value measurement under the IFRS 13 hierarchy. The fair value of the derivative as at 30 June 2023 was US$ 3.8 million (31 December 2022 US$ 3.2 million). A 10% change in share price will increase or decrease the valuation by US$ 0.4 million.
Interest Rate Swap
The Group had an Interest Rate Swap (IRS) arrangement, originally in place, to hedge a notional amount of US$ 50.0 million. The remaining notional amount hedged under the IRS as at 30 June 2023 was US$ nil (31 December 2022: US$ 23.1 million). The IRS hedges the risk of variability in interest payments by converting a floating rate liability to a fixed rate liability. As the IRS arrangement was closed before the period end, the fair value of the IRS as at 30 June 2023 was US$ nil (31 December 2022: asset value of US$ 0.4 million). In 2020 cash flows of the hedging relationship for the IRS were not highly probable and, therefore, hedge accounting was discontinued from that point.
Historically, 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 represented Level 2 fair value measurements under the IFRS 13 hierarchy.
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2023 (continued)
16 Derivative financial instruments (continued)
Interest Rate Swap (continued)
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 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.
Derivative financial instruments are made up as follows:
|
Interest rate swap |
|
|
Warrants |
|
Total |
| US$'000 |
|
| US$'000 |
| US$'000 |
| | | | | | |
At 1 January 2023 | 386 |
|
| (3,198) |
| (2,812) |
Net gain on changes in fair value of interest rate swap | (59) | | | - | | (59) |
Final settlement of derivatives | (327) | | | - | | (327) |
Net loss on changes in fair value of warrants | - | | | (652) | | (652) |
| | | | | | |
|
|
|
|
|
|
|
At 30 June 2023 | - |
|
| (3,850) |
| (3,850) |
|
Interest rate swap |
|
|
Warrants |
|
Total |
| US$'000 |
|
| US$'000 |
| US$'000 |
|
|
|
|
|
|
|
At 1 January 2022 | (1,076) |
|
| (717) |
| (1,793) |
Net gain on changes in fair value of interest rate swap | 1,078 | | | - | |
1,078 |
Settlement of derivatives | 384 | | | - | | 384 |
Net loss on changes in fair value of warrants | - | | | (2,481) | | (2,481) |
| | | | | | |
|
|
|
|
|
|
|
At 31 December 2022 | 386 |
|
| (3,198) |
| (2,812) |
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2023 (continued)
17 Notes to the Condensed Consolidated Statement of Cash Flows
| Six-month period ended 30 June | Year ended 31 December | ||
| 2023 | | 2022 | 2022 |
| US$'000 | | US$'000 | US$'000 |
|
|
|
| |
Profit for the period | 8,711 | | 13,110 | 25,402 |
Adjustments for: |
| | | |
Depreciation of property and equipment (Note 9) | 12,102 | | 11,843 | 23,695 |
Amortisation of dry-docking expenditure (Note 10) | 2,138 | | 2,768 | 5,613 |
Amortisation of right-of-use asset | 1,340 | | 1,152 | 2,635 |
Impairment loss | - | | - | 13,192 |
Reversal of impairment (Note 9) | - | | - | (20,980) |
Income tax expense (Note 5) | 1,256 | | 1,471 | 1,724 |
End of service benefits charge | 336 | | 48 | 270 |
Movement in ECL provision during the period/year | 531 | | (63) | 1,921 |
Recovery of ECL provision | 17 | | - | (96) |
Share based payment credit/(charge) | 14 | | 43 | 45 |
Finance income | (74) | | (8) | (11) |
Finance expenses (Note 8) | 18,187 | | 7,290 | 20,137 |
Other income | (12) | | (66) | (68) |
|
| |
|
|
| | | | |
Cash flow from operating activities before movement in working capital |
44,546 | | 37,588 | 73,479 |
Changes in trade receivables | (4,926) | | 6,571 | 5,610 |
Changes in prepayments, advances and other receivables |
(2,120) | |
(1,538) |
- |
Changes in trade and other payables | 5,693 | | 142 | 5,005 |
|
| |
|
|
|
|
| | |
Cash generated from operations | 43,193 | | 42,763 | 84,094 |
Taxation paid | (952) | | (439) | (1,077) |
End of service benefits paid | (172) | | (119) | (452) |
|
| |
|
|
|
|
| | |
Net cash generated from operating activities | 42,069 | | 42,205 | 82,565 |
|
| |
|
|
| | | | |
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2023 (continued)
18 Contingent liabilities
At 30 June 2023, the banks acting for Gulf Marine Services FZE, one of the subsidiaries of the Group, had issued performance bonds amounting to US$ 19 million (31 December 2022:
US$ 18 million), all of which were counter-indemnified by other subsidiaries of the Group.
19 Capital commitments
| 30 June | 31 December |
| US$'000 | US$'000 |
|
| |
Contractual capital commitments | 6,567 | 6,221 |
Capital commitments comprise mainly capital expenditure, which has been contractually agreed with suppliers for future periods for equipment or the refurbishment of existing vessels.
20 Long term incentive plans
The Group had Long Term Incentive Plans ("LTIPs") which were granted to senior management, managers and senior offshore officers.
The employment condition attached to the Groups LTIP's was that each eligible employee of the Company must remain in employment during the three-year vesting period. For 2019 and 2020 awards, LTIPs were aligned to Company's share performance. The release of these shares was conditional upon continued employment and market vesting conditions. There were no LTIP awards granted during 2021.
During the period ended 30 June 2023, the market vesting conditions for the LTIP awards granted in 2020 were not met, and all LTIP awards issued in 2020 were forfeited.
During the year ended 31 December 2022, additional LTIPs awards were granted to the Chairman and Senior Management. The awards were to vest over three years subject to the same employment conditions described above and performance conditions being met in 2024 based on defined ranges. There was an underpin condition such that no awards would vest if the debt leverage in the Group exceeded 4.0 times EBITDA at 31 December 2022. As this criterion had not been met all LTIP awards issued in 2022 were forfeited.
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 statistical method, 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 performance conditions, 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.
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2023 (continued)
20 Long term incentive plans (continued)
Non-market vesting conditions were taken into account by adjusting the number of equity instruments expected to vest at each balance sheet date so that, ultimately, 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.
The movement of the share awards of the Group during the period is given in the table below:
| 30 June | | 31 December |
At the beginning of the period | 1,176,014 | | 2,499,714 |
Granted in the period | - | | 9,460,000 |
Cash settled in the period | - | | (921,310) |
Forfeited in the period | (1,176,014) | | (9,862,390) |
|
| | |
At the end of the period | - | | 1,176,014 |
The weighted average remaining contractual life for the vesting period outstanding as at 30 June 2023 was nil years (31 December 2022: 0.1 years). The weighted average fair value of shares granted during the period to 30 June 2023 was US$ nil (31 December 2022: US$ 0.057 million).
| | LTIP | | LTIP | | LTIP |
|
|
|
|
| | |
| | | | | | |
Grant date | | 14 Jun 2022 | | 29 May 2020 | | 15 Nov 2019 |
| | | | | | |
Share price | | £0.06 | | £0.09 | | £0.08 |
| | | | | | |
Exercise price | | £0.00 | | £0.00 | | £0.00 |
| | | | | | |
Expected volatility | | 102% | | 120% | | 102.79% |
| | | | | | |
Risk-free rate | | 2.17% | | 0.01% | | 0.48% |
| | | | | | |
Expected dividend yield | | 0.00% | | 0.00% | | 0.00% |
| | | | | | |
Vesting period | | 3 years | | 3 years | | 3 years |
| | | | | | |
Award life | | 3 years | | 3 years | | 3 years |
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2023 (continued)
20 Long term incentive plans (continued)
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.
21 Related party transactions
Significant transactions with related parties during the period were as follows:
| 30 June 2023 US$'000 | | 30 June 2022 US$'000 |
|
| | |
Catering services for vessel Pepper from |
402 | |
281 |
Vessel maintenance and overhaul services from Sigma Enterprise Company LLC |
156 | |
- |
|
| | |
Related party balances included in trade and other payables are as follows:
| 30 June 2023 US$'000 | | 31 December 2022 US$'000 |
|
| | |
National Catering Company Limited WLL | 1,020 | | 820 |
Sigma Enterprise Company LLC | 719 | | 1,849 |
Aman Integrated Solutions LLC | 14 | | - |
22 Events after the reporting period
There were no subsequent events of impact to these Condensed Consolidated Financial Statements after the reporting period.
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2023 (continued)
23 Glossary
Alternative Performance Measure (APMs) - An APM is a financial measure of historical or future financial performance, financial position, or cash flows, other than a financial measure defined or specified in the applicable financial reporting framework.
APMs are non-GAAP measures that are presented to provide readers with additional financial information that is regularly reviewed by management and the Directors consider that they provide a useful indicator of underlying performance. Adjusted results are also an important measure providing useful information as they form the basis of calculations required for the Group's covenants. However, this additional information presented is not uniformly defined by all companies including those in the Group's industry. Accordingly, it may not be comparable with similarly titled measures and disclosures by other companies. Additionally, certain information presented is derived from amounts calculated in accordance with IFRS but is not itself an expressly permitted GAAP measure. Such measures should not be viewed in isolation or as an alternative to the equivalent GAAP measure. In response to the Guidelines on APMs issued by the European Securities and Markets Authority (ESMA), we have provided additional information on the APMs used by the Group.
Adjusted diluted earnings per share - represents the adjusted earnings 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 attributable to equity shareholders of the Company is used for the purpose of basic gain per share adjusted by adding back impairment charges or writeback of impairment loss, 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 4 and 6.
Adjusted net profit - represents net profit after adding back 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 4 of these results.
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2023 (continued)
23 Glossary (continued)
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.
Adjusted EBITDA - represents operating profit after adding back depreciation, amortisation, non-operational items, impairment charges or reversal of 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.
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 4.
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:
|
| | |
| 30 June | | 30 June |
| US$'000 | | US$'000 |
| | | |
Statutory cost of sales | 38,954 | | 39,084 |
Less: depreciation and amortisation (Note 4) | (14,779) | | (15,577) |
| 24,175 | | 23,507 |
|
| | |
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2023 (continued)
23 Glossary (continued)
EBITDA - represents earnings before interest, tax, depreciation and amortisation, which represents operating profit after adding back depreciation and amortisation. This measure provides additional information of the underlying operating performance of the Group. A reconciliation of this measure is provided in Note 4.
In the current and comparative six months period there were no non-operational items or impairment charges or reversal of impairment charges and therefore EBITDA is equivalent to adjusted EBITDA.
Margin - revenue less cost of sales before depreciation, amortization and impairment as identified in Note 4 of the consolidated interim financial statements.
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: |
| | |
| 30 June | | 31 December |
| US$'000 | | US$'000 |
| | | |
Bank borrowings | 299,434 | | 328,085 |
Less: cash and cash equivalents | (5,119) | | (12,275) |
| 294,315 | | 315,810 |
|
| | |
Net cash flow before debt service - the sum of cash generated from operations and investing activities.
Segment adjusted gross profit - represents gross profit after adding back depreciation, amortisation and impairment charges or reversal of 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 3.
Underlying performance - day to day trading performance that management are directly able to influence in the short term.
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2023 (continued)
23 Glossary (continued)
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 period/ year divided by the total number of employees at the period/year end. |
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. |
GCC | Gulf Cooperation Council |
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 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 is between 4.0X and 5.0x b Nil when Net Leverage reduces below 4.0x
PIK stops accruing at the PIK end date which is the earlier of leverage falling below 4.0X or loans being discharged. |
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 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 4. |
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). |
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.
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