TIDMGMS
RNS Number : 8646O
Gulf Marine Services PLC
13 October 2021
13 October 2021
Gulf Marine Services PLC
('Gulf Marine Services', 'GMS', 'the Company' or 'the
Group')
Interim results for the six months ended 30 June 2021
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 2021 (H1 2021).
Financial Overview
H1 2021 H1 2020 H1 2020
Restated as previously
(Refer to reported
note 3)
======== ==========
US$ m US$ m US$ m
======== ========== ==============
Revenue 51.4 49.8 49.8
======== ========== ==============
Gross profit 16.4 14.4 14.4
======== ========== ==============
General and Administrative Expenses 4.9 6.6 6.6
======== ========== ==============
EBITDA(1) 26.5 22.9 22.9
======== ========== ==============
Profit/(Loss) for the period after
tax 2.0 (25.9) (6.7)
======== ========== ==============
Adjusted net profit/(loss) for
the period(1) 3.7 (7.9) 1.8
======== ========== ==============
H1 Highlights
-- EBITDA forecast for 2021 set at US$ 63-67 million
o Secured utilisation of 92% for H2 supporting FY 21 EBITDA
forecast
-- H1 revenue increased 3% to US$ 51.4 million (H1 2020: US$ 49.8 million), reflecting:
o broadly flat utilisation and average day rates on established
contracts, combined with additional revenue from a manpower
services contract associated with an existing charter
-- H1 EBITDA increased by 16% to US$ 26.5 million (H1 2020: US$ 22.9 million)
o EBITDA margin (1) increasing to 52% (H1 2020: 46%), reflecting
cost savings, despite COVID
-- Annualised total cost saving increased to US$ 21 million, since 1 January 2020
-- G&A administrative expenses reduced to US$ 4.9million (H1 2020: US$ 6.6million)
-- Significant reduction in interest costs in 2021 / 22 through new bank deal
-- Net debt(1) reduction supported by successful US$ 27.8m equity raise in June 2021
-- First reported profit since 2016 at US$ 2.0 million (H1 2020: Net Loss US$ 25.9 million)
-- Technical downtime of 2% in vessels under contract in H1
(1) This represents an Adjusted Performance Measure (APM) as
defined in the Glossary which is included in Note 20 to the
Financial Statements.
Outlook
-- Contract awards announced in 2021, with a combined total charter period of 3.4 years
-- Secured backlog is US$ 215.4 million as at 30 June 2021, (H1 2020 US$ 238.6 million)
-- Strong pipeline of long-term contracts currently being tendered
Mansour Al Alami, Executive Chairman, GMS said:
"This solid performance in the first half, combined with higher
rates of utilisation already secured for the second half, give us
confidence that GMS will meet its full year EDITDA guidance. The
first half performance is a reflection of legacy contracts. As we
progress into the second half of the year and beyond, these
contracts will increasingly unwind and we will realise the benefits
of improved day rates achieved on more recently awarded contracts
that better reflect the improved market conditions. This, combined
with our continued focus on operational efficiency, on costs and
the benefits of the new debt deal and equity raise, is expected to
drive an improved performance in the second half and beyond and
support the accelerated deleveraging of the company's balance
sheet."
This announcement contains inside information and is provided in
accordance with the requirements of Article 17 of the EU Market
Abuse Regulation.
Andy Robertson
Chief Financial Officer
Gulf Marine Services PLC
13 October 2021
Enquiries:
Gulf Marine Services PLC Tel: +44 (0)20 7603
Mansour Al Alami 1515
Executive Chairman
Celicourt Communications Tel: +44 (0) 208
Mark Antelme 434 2643
Philip Dennis
Notes to Editors:
Gulf Marine Services PLC, a company listed on the London Stock
Exchange, was founded in Abu Dhabi in 1977 and has become a world
leading provider of advanced self-propelled self-elevating support
vessels (SESVs). The fleet serves the oil, gas and renewable energy
industries from its offices in the United Arab Emirates, Saudi
Arabia and Qatar. The Group's assets are capable of serving
clients' requirements across the globe, including those in the
Middle East, South East Asia, West Africa, North America, the Gulf
of Mexico and Europe.
The GMS fleet of 13 SESVs is amongst the youngest in the
industry, with an average age of eight 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
On the road to recovery
It was an exceptionally busy start to 2021 for GMS. We concluded
a new bank deal in March which lead us straight into a successful
equity raise during the second quarter. These two actions position
the company well for the future where we expect improved market
conditions to support an accelerated deleveraging of the company's
balance sheet.
Despite some operational challenges, as a result of quarantine
requirements and border closures restricting the movement of crew
on our vessels, I am pleased to report that the company did not
suffer any off-hire time as a result of the COVID-19 pandemic in
the period. Extended periods of quarantine, particularly in the
UAE, our largest market, did result in some additional costs being
incurred as well as prolonging mobilisations time for vessels going
onto new contracts. As restrictions now begin to ease, we
anticipate these costs reducing going forward and discussions are
ongoing with our clients around recovery of some of the additional
costs incurred.
Group performance
EBITDA was 16% higher than the same period last year. This was
driven by utilisation and day rates remaining broadly flat,
combined with additional contract revenue relating to an existing
charter for a K Class vessel and a reduction in General and Admin
expenses, through cost saving initiatives.
Revenue increased to US$ 51.4 million, (H1 2021: US$ 49.8
million), mainly from an increase in income from a manpower
contract linked to a K-Class vessel charter.
We anticipate a significant improvement to EBITDA in the second
half of the year. This is underpinned by secured utilisation, at
92% for the second half of 2021, which brings overall secured
utilisation for the year to 85%.
We also anticipate an improvement in day-rates going forward,
with all vessels currently on hire and a strong pipeline of
opportunities. This view is supported by two long-term contracts
awarded in the period for our E-Class vessels, where average day
rates were 40% or more than previous contracts.
GMS continued to benefit from cost savings implemented in the
last twelve months, through our cost reduction programme. This
helped mitigate an increase in costs as a result of quarantine
requirements and border restrictions in the period.
Our general and administration expenses were 26% lower than the
same period last year and the Company has now right sized its
organisation to support its business going forward.
GMS reported a profit for the first time since 2016 at US$ 2.0
million (H1 2020: Net Loss US$ 25.9 million). This is the result of
increased EBITDA and reduced finance expenses.
We secured 7 new contracts in the period with a combined value
of US$ 46.4 million and our orderbook at 30 June stands at US$
215.4 million.
Governance
We continued to strengthen the board in the year to date with
the appointment of three new Non-Executive directors. This includes
the appointment of two Independent Non-Executive Directors, Jyrki
Koskelo and Lord Anthony St John of Bletso, as well as Charbel El
Khoury, who is a representative of our second largest shareholder,
Mazrui Investments LLC. We continue to identify further candidates
for additional board positions going forward.
Outlook
The improvement in the Company's secured utilisation for the
remainder of 2021 coupled with an overall improvement in
utilisation being experienced within the wider market is leading to
a reduction in the oversupply of vessels that we have seen in
recent times. We believe that this positions us well to benefit
from an improvement on day rates, as contracts from our strong
pipeline of current tender opportunities are awarded.
Market demand is being supported by commodity prices, driving
renewed interest in capex work, combined with maintenance activity.
It is also being driven by windfarm installation and maintenance,
particularly in China, which is drawing capacity away from regional
markets, including our own. In the Middle East, there appears to be
no new capacity coming into the market, with supply constraints
being driven by legacy issues resulting from the downturn in the
commodity cycle, which we are now coming out of.
The high level of revenue already secured for the remainder of
2021 is expected to drive a significant improvement from our H1
2021 EBITDA and our Full Year EBITDA guidance is set at US$ [63-67]
million.
Financial Review
H1 2021 H1 2020 H1 2020
Restated as previously
(Refer to reported
Note 3)
======== ==========
US$ m US$ m US$ m
======== ========== ==============
Revenue 51.4 49.8 49.8
======== ========== ==============
Gross profit 16.4 14.4 14.4
======== ========== ==============
General and Administrative Expenses 4.9 6.6 6.6
======== ========== ==============
EBITDA(1) 26.5 22.9 22.9
======== ========== ==============
Profit/(Loss) for the period after
tax 2.0 (25.9) (6.7)
======== ========== ==============
Adjusted net profit/(loss) for
the period(1) 3.7 (7.9) 1.8
======== ========== ==============
Restatement of H1 2020 results
As previously reported in the Group's 2020 annual report, during
the second half of 2020, the Group identified certain adjustments
impacting the H1 2020 reported results. The comparatives for H1
2020 have been restated to reflect these adjustments. Details and
the impact of these adjustments are included in Note 3 of the
Condensed Consolidated Financial Statements. On the face of the
Statement of comprehensive income there were no adjustments which
impacted operating profit, however adjustments were made to finance
expenses relating to the judgements made at the time of signing the
June 2020 renegotiated bank terms. The adjustments increased the
loss for the period after tax to US$ 25.9 million.
Summary
EBITDA increased by 16% to US$ 26.5 million, (H1 2020: US$ 22.9
million), with the EBITDA margin increasing to 52% (H1 2020: 46%).
The increase to EBITDA comprises a 3% increase in revenue, a 1%
reduction in operating expenses and a 26% reduction in general and
administrative costs.
Revenue increased to US$ 51.4 million, (H1 2021: US$ 49.8
million), mainly due to an increase in income from a manpower
contract linked to a K-Class vessel charter. Otherwise, fleet
utilisation and day rates remained broadly flat in comparison with
H1 2020 levels.
Utilisation in the first half remained stable at 77% (H1 2020:
78%). This was due to a 1% increase in E-Class utilisation,
combined with a 3% increase in S-Class utilisation, which were both
offset by a 4% decrease in K-Class utilisation. Border restrictions
and quarantine requirements for crew delayed the mobilisation of
certain vessels onto new contracts impacting utilisation in the
period. All vessels in the fleet were under contract from August
2021. Secured utilisation for the second half of 2021 currently
stands at 92%, leading to a forecast utilisation of 85% for the
full year, driving an expected further improvement to EBITDA in the
second half.
(1) This represents an Adjusted Performance Measure (APM) as
defined in the Glossary which is included in Note 20 to the
Financial Statements.
Average day rates were US$ 25,474 for the period (H1 2020 US$
25,638), with improved day rates secured following recent awards
offsetting the continuing impact into 2021 of lower day rates
contracted in 2020. As these legacy contracts end, improved rates
will be realised from recent awards to further support an
improvement to EBITDA in the second half of 2021.
Cost of Sales remained fairly flat at US$ 35.0 million (H1 2020:
US$ 35.4 million). Extended periods of quarantine introduced during
2021 by our clients in the United Arab Emirates resulted in an
increase to crew costs during the period, whereas H1 2020 included
certain vessel relocation costs.
General and Administration expenses reduced by 26% to US$ 4.9
million (H1 2020: US$ 6.6 million). mainly as a result of headcount
reductions over the last year as the Company right sized the
organisation.
Net profit for the period was US$ 2.0 million (H1 2020: Net Loss
US$ 25.9 million). This is the first reported profit by the company
since 2016 and is the result of increased EBITDA, reduced finance
expenses and reduced borrowing rates, offset by a foreign exchange
loss of US$ 0.7 million (H1 2020: Gain US$ 0.2 million). Finance
expenses reduced to US$ 8.0 million (H1 2020: US$ 33.3 million),
reflecting revised banking terms following extinguishment of prior
debt facilities, in both June 2020 and March 2021. We have
therefore adjusted net profit to exclude the impact of them,
resulting in the adjusted net profit of US$ 3.7 million (H1 2020
loss: US$ 7.9 million).
Improved terms to the Group's bank facilities were agreed on 31
March 2021. Under the terms of the new agreement there was a 40%
reduction in margin payable in 2021 and 2022, with cash savings
being used to accelerate the repayment of the outstanding principal
amount. The new terms also deferred the application of
Payment-in-Kind (PIK) interest, which under the previous bank deal
was required to be charged from 2021 onwards. In addition, more
time was granted to the company to raise equity across two
tranches. The Company successfully met the equity raise requirement
of US$ 25million for the first tranche in June 2021 and has until
the end of 2022 to raise a further US$ 50 million to prevent the
requirement to issue warrants(1) , representing 20% of the equity
of the Company, vesting. The Group is also currently assessing if
secondary alternatives to the equity raise exist to prevent the
issuing of warrants if the second tranche of equity is not placed
by the end of 2022. This initiative is supported by the opportunity
to significantly reduce leverage levels, through improvements in
underlying trading results driven by the positive outlook.
Improved trading performance has resulted in cash generated from
operating activities of US$ 22.1 million (H1 2020: US$ 18.7
million). However, the net cash flow before debt service reduced to
US$ 13.3 million (H1 2020: US$ 15.5 million) following an increase
in capital expenditure, due to required upgrades on vessels
entering new contracts.
COVID-19
Whilst the company did not suffer any off hire time during the
period as a result of COVID-19. The Company did present some
logistical challenges around the movement of crew due to border
restrictions and increased quarantine requirements. The Company is
in dialogue with certain clients around the recovery of these
additional costs.
The awards of a number of tenders for long term contracts were
delayed in 2020 as clients assessed the impact of COVID-19 on their
operations. Whilst no awards have been made to date, these
opportunities are still live and we anticipate the majority of
awards will be made in the second half of 2021 with contracts
commencing in 2022.
Revenue and segmental profit
The table below shows the contribution to revenue and segment
gross profit or loss made by each vessel class during the
period.
(US$'000) Revenue Segmented gross profit/(loss)
Vessel Class
---------------- -------------------------------
H1 2021 H1 2020 H1 2021 H1 2020
E-Class vessels 15,000 13,186 1,821 (3,308)
S-Class vessels 16,168 16,200 7,174 8,160
K-Class vessels 20,225 20,407 7,449 9,627
Sundry rental income - 1 (58) (123)
--------------------- ------- ------- --------------- --------------
Total 51,393 49,794 16,386 14,356
--------------------- ------- ------- --------------- --------------
Revenue in H1 2021 was US$ 51.4 million (H1 2020: US$ 49.8
million) with utilisation and day rates remaining broadly flat
E-Class utilisation increased following the commencement in
January 2021 of a new contract for GMS Evolution, whereas in H1
2020 two E-Class vessels were unavailable for a period of time as
they relocated to MENA. S-Class utilisation increased from 92% to
95%, with all three vessels remaining under contract from 2020.
Although K-Class utilisation reduced to 82% (H1 2020 86%), five of
the six K-Class vessels were fully contracted in the period and the
sixth has recently commenced a new contract.
Day rates on E- and K-Class remained broadly unchanged although
we have seen an increase in E Class rates on more recent long term
contract awards. S-Class day rates dropped 4% as a result of a
discounted day rate offered on a contract extension during the
second half of 2020.
Cost of sales and general and administrative expenses
Cost of sales were US$ 35.0 million (H1 2020: US$ 35.4 million).
H1 2021 saw higher crew costs due to extended periods of quarantine
introduced by clients in the United Arab Emirates, and a full
period of costs, relating to the Manpower contract linked to a
K-Class vessel charter which commenced in March 2020, whereas H1
2020 included one-off costs associated with mobilising two vessels
to MENA.
General and Administration expenses reduced by 26% to US$ 4.9
million (H1 2020: US$ 6.6 million) mainly as a result of headcount
reductions over the last year as the Company right-sized the
organisation.
Other costs
Finance expenses in the period were US$ 8.0 million (H1 2020:
US$ 33.3 million). Interest costs on borrowings reduced to US$ 11.4
million (H1 2020 US$ 13.5 million), following the renegotiation of
the Company's debt facilities and lower Libor rates. Lower Libor
rates also impacted the interest rate swap the Company has entered
resulting in a net gain in the period of US$ 0.5 million (H1 2020:
Loss US$ 1.6 million). Finance expenses also reduced compared to
the prior period due to the lower costs to acquire the new bank
facility in March 2021 of US$ 3.2 million compared to costs to
acquire the previous bank facility in June 2020 of US$ 15.8
million.
A net foreign exchange loss of US$ 0.7 million in H1 2021 (H1
2020: Gain of US$ 0.2 million) arose from movements in exchange
rates of the Pound Sterling against the US Dollar.
Tax expense remained flat at US$ 0.9 million (H1 2020: US$ 0.9
million) with almost the same mix of revenue per region as the
prior period.
Cash flow and liquidity
The Group's net cash generated from operating activities
increased to US$ 22.1 million (H1 2020: US$ 18.7 million). The net
cash outflow from investing activities for H1 2021 increased to US$
8.9 million (H1 2020: US$ 3.1 million) resulting from costs
required to maintain the vessel classification and investment in
upgrades for vessels entering new contracts.
The Group's net cash flow from financing activities during the
period was an outflow of US$ 7.8 million (H1 2020: US$ 17.3
million) mainly comprising repayments to the bank of US$ 24.5
million and an interest charge of US$ 6.8 million, offset by
proceeds from shares following the equity raise of US$ 27.8
million.
Balance sheet
Total current assets at 30 June 2021 were US$ 41.1 million (31
December 2020: US$ 35.6 million). This mainly reflects an increase
to cash and cash equivalents of US$ 5.5 million. Total current
liabilities reduced to US$ 45.7 million (31 December 2020: US$ 61.0
million) primarily as a result of the Group's working capital
facility (US$ 21.5 million) now being recognised as a non-current
liability as it is available for utilisation until the end of the
term debt facility.
Total non-current assets at 30 June 2021 were US$ 612.6 million
(31 December 2020: US$ 618.8 million) as a result of a depreciation
and amortisation charges in the period of US$ 15.0 million, offset
by capital expenditure of US$ 8.9 million for class surveys and
upgrade requirements for new contracts. Total non-current
liabilities reduced to US$ 374.6 million (31 December 2020: US$
386.6 million) following the repayment of US$ 20.0 million from the
equity raise proceeds against the debt facility and other
accelerated payments following the revised debt terms. Both of
these were offset by US$ 21.5 million of the working capital
facility now being recognised as a non-current liability.
Total equity increased to US$ 233.5 million (31 December 2020:
US$ 206.9 million), attributable to the issuance of new equity and
movement in retained earnings during the period.
Going concern
The successful issuance of equity by 30 June 2021 removed a
potential event of default on the Group's bank facilities which in
turn removed the material uncertainty as to the Group's ability to
continue as a going concern that was reported in the full year 2020
results.
The Group's forecasts indicate that its revised debt facility
will provide sufficient liquidity for its requirements for at least
the next twelve months and accordingly the condensed consolidated
financial statements for the Group for the current period have been
prepared on the Going Concern basis. For further details please
refer to the Going Concern disclosure within the financial
statements.
Related party transactions
During the period there were related party transactions with our
Joint Venture partner in Saudi Arabia for the provision of safety
equipment on some of our vessels and office space totalling US$ 0.3
million (H1 2020: US$ 0.3 million).
Adjusting items
The Group uses Adjusted net profit/(loss), which represents the
net profit/(loss) after adding back impairment charges and the cost
of renegotiating the bank terms on 31 March 2021. This measure
provides additional information in assessing the Group's total
performance that management is more directly able to influence, and
on a comparable basis year on year. A reconciliation of this
measure is provided in Note 5 of these results.
A reconciliation between the adjusted non-GAAP and statutory
results is provided in Note 5.
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 2021. The financial risks have been updated to reflect
the successful completion of the amendment to the Group's debt and
equity structure. Otherwise, the Directors do not consider that
principal risks and uncertainties have materially changed since the
last publication of the Annual Report for the year ended 31
December 2020. A detailed explanation of the risks summarised
below, and how the Group seeks to mitigate the risks, can be found
on pages 21 to 25 of the 2020 annual report which is available at
www.gmsuae.com .
-- Financial - A continuing low share price may prevent GMS from
raising sufficient levels of equity to recapitalise the
business.
-- Strategic - Failure to secure contracts prevents GMS from deleveraging.
-- People - Losing skills or failing to attract new talent to
our business has the potential to undermine performance.
-- Commercial - The Group relies on a limited number of
blue-chip clients that may expose it to losses if these
relationships breakdown. MENA NOCs have introduced local content
requirements as part of their tender processes designed to giving
preference to suppliers that commit to improving their local
content and levels of spend which may prevent GMS from winning
contracts. There is a risk that the Group's fleet capabilities no
longer match with changing client requirements. Failure to deliver
the specifications and expected performance could lead to
reputational damage and impact our ability to win work.
-- Compliance and Regulation - The Group has to appropriately
identify and comply with laws and regulations and other regulatory
statutes.
-- Health, Safety, Security, Environment and Quality - The
Group's operations have an inherent safety risk due to our offshore
operations.
-- Operational - Changes in political landscapes could adversely
affect operations. The Group is at risk of loss through financial
cybercrime.
-- COVID-19 - There is a health and safety risk to staff, both
onshore and offshore, who come in contact with confirmed cases.
Offshore staff may be unable to board or leave Group vessels, given
restrictions on movement placed by the countries in which we
operate. Onshore staff may be unable to work as normal due to
mandatory health and safety restrictions, placed by Government,
including quarantine and travel restrictions. Disruption might be
caused to the supply chain, caused by the impact of COVID-19 on our
suppliers' operations. The impact of COVID-19 and the resultant
adverse impact on oil prices, on our Clients' financial position
might lead to loss of new business development opportunities, the
re-negotiation of existing contracts, or failure of clients to pay
on time.
RESPONSIBILITY STATEMENT
Financial information for the period ended 30 June 2021.
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 Andy Robertson
Executive Chairman Chief Financial Officer
13 October 2021 13 October 2021
INDEPENT REVIEW REPORT TO GULF MARINE SERVICES PLC
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2021 which comprises the condensed
consolidated statement of comprehensive income, the condensed
consolidated balance sheet, the condensed consolidated statement of
changes in equity, the condensed consolidated statement of cash
flows and related notes 1 to 20. We have read the other information
contained in the half-yearly financial report and considered
whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of
financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the
group will be prepared in accordance with United Kingdom adopted
International Financial Reporting Standards. The condensed set of
financial statements included in this half-yearly financial report
has been prepared in accordance with United Kingdom adopted
International Accounting Standard 34, "Interim Financial
Reporting".
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Financial Reporting Council for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2021 is not prepared, in all material respects, in accordance
with United Kingdom adopted International Accounting Standard 34
and the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Use of our report
This report is made solely to the company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council. Our work has been undertaken so that we might
state to the company those matters we are required to state to it
in an independent review report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company, for our review
work, for this report, or for the conclusions we have formed.
Deloitte LLP
Statutory Auditor
London, United Kingdom
13 October 2021
GULF MARINE SERVICES PLC
C ondensed Consolidated Statement of Comprehensive Income
for the period ended 30 June 2021
Six months period ended Year ended
30 June 31 December
---------------------------
2021 Restated* 2020
2020
US$'000 US$'000 US$'000
Notes (Unaudited) (Unaudited) (Audited)
Revenue 4 51,393 49,794 102,492
Cost of sales (35,007) (35,438) (70,864)
Impairment charge 9 - - (87,156)
Gross profit/(loss) 16,386 14,356 (55,528)
Restructuring costs - (330) (2,492)
Exceptional legal costs - (1,375) (3,092)
Other general and administrative
expenses (4,883) (4,944) (12,632)
------------- ------------ -------------
General and administrative
expenses (4,883) (6,649) (18,216)
Operating profit/(loss) 11,503 7,707 (73,744)
Finance income 6 7 15
Finance expenses 8 (7,986) (33,260) (46,740)
Other income 20 29 257
Loss on disposal of
property, plant and
equipment - (7) (2,073)
Gain on disposal of
assets held for sale - 328 259
Foreign exchange (loss)/gain,
net (698) 183 (993)
------------- ------------ -------------
Profit/(loss) for the
period/year before taxation 2,845 (25,013) (123,019)
Taxation charge for
the period/year 6 (851) (858) (1,285)
------------- ------------ -------------
Profit/(loss) for the
period/year 1,994 (25,871) (124,304)
============= ============ =============
Other comprehensive
income/(loss) - items
that may be reclassified
to profit or loss:
Net gain on changes
in fair value of hedging
instruments - 21 21
Net hedging gain/(loss)
reclassified to the
profit or loss 139 297 883
Exchange differences
on translating foreign
operations 89 (392) 425
Total comprehensive
profit/(loss) for the
period/year 2,222 (25,945) (122,975)
------------- ------------ -------------
Profit/(loss) attributable
to:
Owners of the Company 1,882 (25,859) (124,339)
Non-controlling interests 112 (12) 35
------------- ------------ -------------
1,994 (25,871) (124,304)
Total comprehensive
income/(loss) attributable
to:
Owners of the Company 2,110 (25,933) (123,010)
Non-controlling interests 112 (12) 35
------------- ------------ -------------
2,222 (25,945) (122,975)
------------- ------------ -------------
Earnings/(Loss) per
share
Basic (cents per share) 7 0.52 (7.38) (35.58)
------------- ------------ -------------
Diluted (cents per share) 7 0.51 (7.38) (35.58)
------------- ------------ -------------
Results in each period/year are derived from continuing
operations.
The accompanying notes form an integral part of these condensed
consolidated financial statements.
*Details of prior period restatements can be found in Note 3
GULF MARINE SERVICES PLC
Condensed Consolidated Balance Sheet
as at 30 June 2021
30 June 31 December
Notes 2021 2020
US$'000 US$'000
ASSETS
Non-current assets
Property, plant and equipment 9 599,843 605,077
Right-of-use assets 2,642 3,340
Dry docking expenditure 10,142 10,391
612,627 618,808
Total non-current assets
Current assets
Trade and other receivables 10 31,813 31,834
Cash and cash equivalents 9,263 3,798
Total current assets 41,076 35,632
Total assets 653,703 654,440
========= ============
EQUITY AND LIABILITIES
Capital and reserves
Share capital - Ordinary 11 30,117 58,057
Share capital - Deferred 11 46,445 -
Share premium account 99,105 93,080
Restricted reserve 272 272
Group restructuring reserve (49,710) (49,710)
Share based payment reserve 3,613 3,740
Capital contribution 9,177 9,177
Cash flow hedge reserve (697) (836)
Translation reserve (1,906) (1,995)
Retained earnings 95,267 93,385
--------- ------------
Attributable to the Owners of the
Company 231,683 205,170
Non-controlling interests 1,806 1,694
Total equity 233,489 206,864
--------- ------------
Current liabilities
Trade and other payables 21,666 23,370
Current tax liability 5,214 4,811
Bank borrowings - scheduled repayments
within one year 12 17,539 31,049
Lease liabilities 1,232 1,739
--------- ------------
Total current liabilities 45,651 60,969
--------- ------------
Non-current liabilities
Provision for employees' end of
service benefits 2,185 2,190
Bank borrowings - scheduled repayments
after more than one year 12 368,477 379,009
Lease liabilities 1,410 1,572
Derivative financial instruments 13 2,491 3,836
Total non-current liabilities 374,563 386,607
--------- ------------
Total liabilities 420,214 447,576
Total equity and liabilities 653,703 654,440
--------- ------------
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 2021
Attributable
Group to the Non-
Share capital Share premium Restricted restructuring Share based Capital Cash flow hedge Cost of hedging Translation Share capital - Retained owners of controlling Total
- Ordinary account reserve reserve payment reserve contribution reserve reserve reserve Deferred earnings the Company interests equity
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
As at 1 January
2021 58,057 93,080 272 (49,710) 3,740 9,177 (836) - (1,995) - 93,385 205,170 1,694 206,864
Capital
reorganisation
(Note 11) (46,445) - - - - - - - - 46,445 - - - -
Issue of share
capital (Note
11) 18,505 9,253 - - - - - - - - - 27,758 - 27,758
Share issue
costs (Note
11) - (3,228) - - - - - - - - - (3,228) - (3,228)
Profit for the
period - - - - - - - - - - 1,882 1,882 112 1,994
Net hedging
gain on
interest
hedges
reclassified
to the profit
or loss - - - - - - 139 - - - - 139 - 139
Share based
payment charge - - - - (53) - - - - - - (53) - (53)
Cash settlement
of LTIPs - - - - (74) - - - - - - (74) - (74)
Exchange
differences on
foreign
operations - - - - - - - - 89 - - 89 - 89
As at 30 June
2021 30,117 99,105 272 (49,710) 3,613 9,177 (697) - (1,906) 46,445 95,267 231,683 1,806 233,489
As at 1 January
2020 58,057 93,080 272 (49,710) 3,572 9,177 520 (2,260) (2,420) - 217,724 328,012 1,659 329,671
Loss for the
year - - - - - - - - - - (25,859) (25,859) (12) (25,871)
Gain on fair
value changes
of hedging
instruments - - - - - - - 21 - - - 21 - 21
Net hedging
gain/(loss) on
interest
hedges
reclassified
to the profit
or loss - - - - - - 315 (18) - - - 297 - 297
Gain/loss on
currency
hedges
reclassified
to profit or
loss - - - - - - (2,257) 2,257 - - - - - -
Exchange
differences on
foreign
operations - - - - - - - - (392) - - (392) - (392)
Share based
payment charge - - - - (11) - - - - - - (11) - (11)
As at 30 June
2020 58,057 93,080 272 (49,710) 3,561 9,177 (1,422) - (2,812) - 191,865 302,068 1,647 303,715
The accompanying notes form an integral part of these condensed
consolidated financial statements.
GULF MARINE SERVICES PLC
Condensed Consolidated Statement of Cash Flows
for the period ended 30 June 2021
Year ended
Six month period ended 31 December
30 June
--------------------------
2021 Restated* 2020
2020
US$'000 US$'000 US$'000
Net cash generated from operating
activities (Note 14) 22,114 18,674 44,268
Investing activities
Payments for property, plant and
equipment (6,130) (1,273) (5,623)
Proceeds from disposal of property,
plant and equipment - 173 299
Proceeds from disposal of assets
held for sale - 628 559
Dry docking expenditure incurred (2,740) (2,663) (7,600)
Interest received 6 7 15
Net cash used in investing activities (8,864) (3,128) (12,350)
Financing activities
Bank borrowings received 2,000 38,250 21,500
Repayment of bank borrowings (24,492) (27,326) (12,075)
Proceeds from issue of shares 27,758 - -
Share issue costs paid (1,431) - -
Principal elements of lease payments (1,087) (782) (1,871)
Cash settlement of LTIPs (74) - -
Payment of issue costs on borrowings (3,170) (10,274) (14,449)
Settlement of derivatives (537) (298) (883)
Dividends paid - - (650)
Interest paid (6,752) (16,890) (28,096)
Net cash used in financing activities (7,785) (17,320) (36,524)
Net increase/(decrease) in cash
and cash equivalents 5,465 (1,774) (4,606)
Cash and cash equivalents at the
beginning of the period/year 3,798 8,404 8,404
Cash and cash equivalents at the
end of the period/year 9,263 6,630 3,798
The accompanying notes form an integral part of these condensed
consolidated financial statements.
*Details of prior period restatements can be found in Note 3
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2021
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 Middle East, North Africa 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 Middle East and other regions.
The condensed consolidated financial statements of the Group for
the six month period ended 30 June 2021 were authorised for issue
on 13 October 2021. The condensed consolidated financial statements
do not comprise statutory accounts within the meaning of Section
434 of the Companies Act 2006. The condensed consolidated financial
statements have been reviewed, not audited.
The Company issued statutory financial statements for the year
ended 31 December 2020 which were prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by
the European Union. Those financial statements were approved by the
Board of Directors on 21 May 2021. The report of the auditor on
those accounts was unqualified but referred to the Company's
disclosures in respect of a material uncertainty relating to going
concern. The report of the auditor on those accounts did not
contain any statement under section 498(2) or 498(3) of the
Companies Act 2006. The information for the year to 31 December
2020 contained in these condensed consolidated accounts has been
extracted from the latest published audited financial statements. A
copy of the statutory accounts for year ended 31 December 2020 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 2020 as disclosed in the Annual Report, except for the
adoption of new standards and interpretations effective as of 1
January 2021.
The condensed consolidated financial statements have been
prepared on the historical cost basis, except for certain financial
instruments that are measured at revalued amounts or 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 2021 (continued)
2 Significant accounting policies (continued)
Basis of preparation
The annual consolidated financial statements of the Group will
be prepared in accordance with United Kingdom adopted International
Financial Reporting Standards. 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 2020. In addition, results for the six month period ended
30 June 2021 are not necessarily indicative of the results that may
be expected for the financial year ending 31 December 2020. The
condensed consolidated statement of comprehensive income for the
six month period ended 30 June 2021 is not affected significantly
by seasonality of results.
Going concern
The material uncertainty over going concern that existed when
the 31 December 2020 financial statements were approved on 21 May
2021 no longer exists due to the successful issuance of equity in
June 2021, which removed the potential event of default on the
Group's revised bank facilities, as renegotiated in March 2021.
The Group is expected to continue to generate positive operating
cash flows for the foreseeable future and has in place a committed
working capital facility of US$ 50.0 million, of which US$ 25.0
million can be utilised to support the issuance of performance
bonds and guarantees. The balance can be utilised to draw down
cash. US$ 23.5 million of this facility was utilised as at 30 June
2021.
The renegotiation of bank facilities also resulted in a 40%
reduction in margin payable in 2021 and 2022, with the surplus cash
generated from these savings used to accelerate repayment of the
loan principal.
The Group's forecasts, having taken into consideration
reasonable risks and downsides, indicate that its revised bank
facilities along with sufficient order book of contracted work and
a strong pipeline of near-term opportunities for additional work
will provide sufficient liquidity for its requirements for at least
the next twelve months and accordingly the condensed consolidated
financial statements for the Group for the current period have been
prepared on the Going Concern basis.
New and amended standards adopted by the Group
The accounting policies and methods of computation adopted in
the preparation of these condensed consolidated financial
statements are consistent with those followed in the preparation of
the Group's annual financial statements for the year ended 31
December 2020 as disclosed in the Annual Report, except for the
adoption of new standards and interpretations effective as of 1
January 2021.
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2021 (continued)
2 Significant accounting policies (continued)
New and amended standards adopted by the Group (continued)
The following new and revised IFRSs have been adopted in these
condensed consolidated financial statements.
-- Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS
9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)
-- COVID-19-Related Rent Concessions beyond 30 June 2021 (Amendment to IFRS 16)
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 2021
will be provided in the Group's annual financial statements for the
year ending 31 December 2021.
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2021 (continued)
3 Prior year restatements
As part of preparing the financial statements for the year ended
31 December 2020, the Group identified a number of errors in the
already published results for the 6 months ended 30 June 2020.
These errors related to management reassessing the accounting
treatment for certain transactions that were subsequently fully
reflected in the 2020 year end accounts. Details and the impact of
these adjustments are shown below:
Impact to the Condensed Consolidated Statement of Comprehensive
Income
6 months ended 6 months ended
30 June 2020 Adjustment Adjustment Adjustment 30 June 2020
1 2 3
US$'000 US$'000 US$'000 US$'000 US$'000
As reported Restated
Revenue 49,794 - - - 49,794
Cost of sales (35,438) - - - (35,438)
Gross profit 14,356 - - - 14,356
Restructuring costs (330) - - - (330)
Exceptional legal costs (1,375) - - - (1,375)
Other general and
administrative
expenses (4,944) - - - (4,944)
Operating profit 7,707 - - - 7,707
Finance income 7 - - - 7
Finance expenses (14,072) (16,245) (1,386) (1,557) (33,260)
Other income 29 - - - 29
Loss on disposal of
property,
plant and equipment (7) - - - (7)
Gain on disposal of assets
held for sale 328 - - - 328
Foreign exchange gain, net 183 - - - 183
Loss for the period before
taxation (5,825) (16,245) (1,386) (1,557) (25,013)
Taxation charge for the
period (858) - - - (858)
Loss for the period (6,683) (16,245) (1,386) (1,557) (25,871)
Loss per share
Basic (Cents per share) (1.90) (4.64) (0.40) (0.44) (7.38)
Diluted (Cents per share) (1.90) (4.64) (0.40) (0.44) (7.38)
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2021 (continued)
3 Prior year restatements (continued)
Impact to the Condensed Consolidated balance sheet
6 months ended 6 months
30 June 2020 ended 30
Adjustment Adjustment Adjustment June 2020
1 2 3
US$'000 US$'000 US$'000 US$'000 US$'000
As reported Restated
TOTAL ASSETS 752,640 - - - 752,640
--------------------- --------------------- ------------ ------------ --------------------
EQUITY AND
LIABILITIES
Capital and
reserves
Share capital 58,057 - - - 58,057
Share premium
account 93,080 - - - 93,080
Cash flow hedge
reserve (2,979) - 1,557 (1,422)
Other reserves (39,512) - - (39,512)
Retained earnings 211,053 (16,245) (1,386) (1,557) 191,865
---------------------
Attributable to
the Owners
of the Company 319,699 (16,245) (1,386) - 302,068
Non-controlling
interests 1,647 - - 1,647
321,436 (16,245) (1,386) - 303,715
Bank borrowings 385,904 15,160 - - 401,064
Lease liabilities 1,296 - - - 1,296
Provision for
employees' end
of service
benefits 2,322 - - - 2,322
Derivative
financial
instruments - - 1,386 2,979 4,365
Total non-current
liabilities 389,522 15,160 1,386 2,979 409,047
--------------------- --------------------- ------------ ------------ --------------------
Current
liabilities
Trade and other
payables 24,593 578 - - 25,171
Current tax
liability 4,487 - - - 4,487
Lease liabilities 1,220 - - - 1,220
Bank borrowings 8,493 507 - - 9,000
Derivative
financial
instruments 2,979 - - (2,979) -
Total current
liabilities 41,772 1,085 - - 39,878
Total equity and
liabilities 752,640 - - - 752,640
--------------------- --------------------- ------------ ------------ --------------------
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2021 (continued)
3 Prior year restatements (continued)
1) Adjustment 1 - Bank Borrowings
On 16 June 2020, the terms of the Group's bank facilities were
renegotiated. Under IFRS 9 whenever borrowings are modified a test
is required to compare the present value of cashflows under new
terms against the original loan terms to determine whether there is
a 'substantial modification' (greater than ten per cent difference
in the net cashflows between the old and new facility).
When there are contingent cash flows to be considered as part of
the 10 per cent test, an accounting policy choice is required to be
made when making a judgement on those contingent cash flows. The
contingent cash flows were based on the more likely outcome
occurring before 31 December 2020 between:
-- a US$ 75 million equity raise; or
-- warrants to be issued for 20% of the Group's ordinary share
capital and Payments in Kind (PIK) interest to be accrued.
The Board at the time of 16 June 2020, made a judgement that
raising US$ 75 million equity was the more likely scenario and PIK
interest would not apply in future cashflows. The Board, as at
signing the 2020 financial statements, believed this was an error
in judgement as it failed to take fully into account all relevant
conditions existing at the time of signing this agreement. The
prior period comparatives for H1 2020 have been restated in these
financial statements to reflect the renegotiation of the Group's
banking facilities as a substantial modification, and thus correct
the error in judgement amounting to US$ 15.1 million.
Additional costs of US$ 0.6 million incurred prior to 30 June
2020, relating to the bank deal have also been accrued.
2) Adjustment 2 - Recognition of embedded derivative
Following the restructuring of debt discussed above, the
modified debt terms included a requirement for GMS to issue
warrants to its lenders if certain conditions had not been met.
During the second half of the year, GMS determined that these terms
were separate and distinguishable from the underlying debt terms
and met the definition of a derivative to be separated and measured
at fair value through profit or loss and therefore the comparatives
for H1 2020 have been restated to reflect recognition of an
embedded derivative as a non-current liability (Note 13).
3) Adjustment 3 - Interest rate swap derivative and hedging
The Group uses an interest rate swap derivative to hedge
volatility in interest rates. This was previously designated into
hedge accounting relationships. GMS determined in the second half
of 2020 that cashflows of the hedging relationship were not highly
probable from 01 January 2020 and the hedge relationship should
have been discontinued in 2020. The comparative amounts for H1 2020
in relation to the interest rate swap have been reclassified to a
derivative financial instrument recognised at fair value through
profit and loss. The fair value movement during the year
accordingly was posted through the statement of profit or loss as
the hedge relationship was discontinued. The balance in equity
reserve will be amortised over the life of the instrument.
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2021 (continued)
3 Prior year restatements (continued)
3) Adjustment 3 - Interest rate swap derivative and hedging (continued)
Additionally, as the interest rate swap held by the Group is due
to be settled after 12 months, the balance has been reclassified to
a non-current liability.
Derivative settlements are now also shown separately in
financing activities in the condensed consolidated cashflow.
4) Adjustment 4 - Vessel relocation costs
During the second half of 2020 the Board reviewed a judgement in
relation to certain costs to transfer vessels to geographical
locations previously recorded as exceptional items in the first
half of 2020 and therefore excluded in the Adjusted EBITDA
calculation (non-statutory total).
The Board concluded that these costs were more appropriately
treated as a normal cost of operations as the Group markets its
fleet worldwide, therefore the strategic decision to relocate a
vessel could recur if a profitable opportunity presented itself. As
a result, vessel relocation costs previously excluded from adjusted
EBITDA in the H1 2020 comparatives have now been included as
follows:
Presentation of adjusted non-GAAP results
Six months ended 30 June Six months ended 30 June
2020 previously reported 2020 restated
Adjusted Adjusting Statutory Adjusted Adjusting Statutory
Non-GAAP Items total Non-GAAP items total
results results
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Revenue 49,794 - 49,794 49,794 - 49,794
Cost of sales
-Operating expenses (13,837) (6,794) (20,631) (20,631) - (20,631)
---------- -------- --------- ---------- ---------- ------------
Segmented Gross profit 35,957 (6,794) 29,163 29,163 - 29,163
* Depreciation and amortisation (14,807) - (14,807) (14,807) - (14,807)
Gross profit 21,150 (6,794) 14,356 14,356 - 14,356
General and administrative
-Depreciation and
amortisation (404) - (404) (404) - (404)
* Other administrative costs (4,540) - (4,540) (4,540) - (4,540)
Restructuring costs - (330) (330) - (330) (330)
Exceptional legal
costs - (1,375) (1,375) - (1,375) (1,375)
---------- -------- --------- ---------- ---------- ------------
Operating profit 16,206 (8,499) 7,707 9,412 (1,705) 7,707
Supplementary non-statutory
information
Operating profit 16,206 (8,499) 7,707 9,412 (1,705) 7,707
Add: Depreciation
and amortisation
charges 15,211 - 15,211 15,211 - 15,211
---------- -------- --------- ---------- ---------- ------------
Non-GAAP EBITDA 31,417 (8,499) 22,918 24,623 (1,705) 22,918
---------- -------- --------- ---------- ---------- ------------
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2021 (continued)
4 Segment reporting
The segment information provided to the chief operating decision
makers for the operating and reportable segments for the period
include the following:
Segment adjusted
Revenue gross profit/(loss)*
--------------------------------- -----------------------------------
6 months ended 31 December 6 months ended 31
30 June 30 June December
------------------- ------------ ----------------------- ----------
Restated Restated**
2021 2020 2020 2021 2020 2020
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
K-Class vessels 20,225 20,407 40,947 11,822 14,738 25,349
S-Class vessels 16,168 16,200 32,136 10,634 11,498 22,210
E-Class vessels 15,000 13,186 29,407 8,736 2,935 12,676
Other - 1 2 - (9) (10)
_______ _______ _______ _______ _______ _________
Total 51,393 49,794 102,492 31,192 29,162 60,225
_______ _______ _______ _______ _______ ________
Less:
Depreciation charged
to cost of sales (11,306) (12,761) (25,524)
Amortisation charged
to cost of sales (3,500) (2,045) (3,073)
Impairment charge - - (87,156)
_______ _______ _________
Gross profit/(loss) 16,386 14,356 (55,528)
Restructuring costs - (330) (2,492)
Exceptional legal costs - (1,375) (3,092)
Other general and administrative
expenses (4,883) (4,944) (12,632)
Finance income 6 7 15
Finance expense (7,986) (33,260) (46,740)
Other income 20 29 257
Loss on disposal of
property plant and equipment - (7) (2,073)
Gain on disposal of
assets held for sale - 328 259
Foreign exchange (loss)/gain,
net (698) 183 (993)
_______ _______ _________
Profit/(loss) before
taxation 2,845 (25,013) (123,019)
*See Glossary.
**Details of prior period restatements can be found in Note
3.
Segment revenue reported above represents revenue generated from
external customers. There were no inter-segment sales in either of
the periods. Segment assets and liabilities, including
depreciation, amortisation and additions to non-current assets, are
not reported to the chief operating decision makers on a segmental
basis and are therefore not disclosed.
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2021 (continued)
5 Presentation of adjusted non-GAAP results
The following table provides a reconciliation between the
statutory and non-statutory financial results:
Six months ended 30 June Restated Six months ended
2021 30 June 2020
Adjusted Adjusting Statutory Adjusted Adjusting Statutory
Non-GAAP Items Total Non-GAAP items total
results results
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Revenue 51,393 - 51,393 49,794 - 49,794
Cost of sales
-Operating expenses (20,201) - (20,201) (20,631) - (20,631)
---------- -------- --------- ---------- ---------- ------------
Segmented Gross profit 31,192 - 31,192 29,163 - 29,163
* Depreciation and amortisation (14,806) - (14,806) (14,807) - (14,807)
Gross profit 16,386 - 16,386 14,356 - 14,356
General and administrative
-Depreciation and
amortisation (227) - (227) (404) - (404)
* Other administrative costs (4,656) - (4,656) (4,540) - (4,540)
Restructuring costs(1) - - - - (330) (330)
Exceptional legal
costs(2) - - - - (1,375) (1,375)
---------- -------- --------- ---------- ---------- ------------
Operating profit 11,503 - 11,503 9,412 (1,705) 7,707
Finance income 6 - 6 7 - 7
Finance expense (6,261) - (6,261) (17,015) - (17,015)
Cost to acquire new
bank facility(3) - (3,165) (3,165) - (15,797) (15,797)
Fair value adjustment
on recognition of
new debt facility
(4) - 1,440 1,440 - (448) (448)
Other income 20 - 20 29 - 29
Loss on disposal
of property, plant
and equipment - - - (7) - (7)
Gain on disposal
of assets held for
sale - - - 328 - 328
Foreign exchange
(loss)/gain, net (698) - (698) 183 - 183
---------- -------- --------- ---------- ---------- ------------
Profit/(loss) before
taxation 4,570 (1,725) 2,845 (7,063) (17,950) (25,013)
Taxation charge (851) - (851) (858) - (858)
---------- -------- --------- ---------- ---------- ------------
Net profit/(loss)
after tax 3,719 (1,725) 1,994 (7,921) (17,950) (25,871)
Profit/(loss) attributable
to
Owners of the Company 3,607 (1,725) 1,882 (7,909) (17,950) (25,871)
Non-controlling interests 112 - 112 (12) - (12)
Profit/(loss) per
share 1,00 (0.48) 0.52 (2.26) (5.12) (7.38)
Supplementary non-statutory
information
Operating profit 11,503 - 11,503 9,412 (1,705) 7,707
Add: Depreciation
and amortisation
charges 15,033 - 15,033 15,211 - 15,211
---------- -------- --------- ---------- ---------- ------------
Non-GAAP EBITDA 26,536 - 26,536 24,623 (1,705) 22,918
---------- -------- --------- ---------- ---------- ------------
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2021 (continued)
5 Presentation of adjusted non-GAAP results (continued)
(1) Restructuring costs incurred are not considered part of the
regular underlying performance of the business and so have been
added back to arrive at adjusted loss for the period ended 30 June
2020. 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 period to period.
(2) Exceptional legal costs incurred are not considered part of
the regular underlying performance of the business and so have been
added back to arrive at adjusted loss for the period ended 30 June
2020. 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 period to period.
(Exceptional legal costs in the prior period were a result of the
non-binding proposed offer to buy the share capital of the Company
from the Group's largest shareholder, several requests for General
Meetings, and legal advice for Director disputes. Additional fees
had been incurred totalling US$ 1.4 million in HY 2020).
(3) Costs incurred to arrange a new bank facility have been
added back to Profit/(loss) before taxation to arrive at adjusted
loss for the period ended 30 June 2021 and 2020. 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 period to period.
(4) The fair value adjustment on recognition of the new loan has
been added back to loss before taxation to arrive at adjusted loss
for the period ended 30 June 2021 and 2020. 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 period to period.
6 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 9.13% for the
period ended June 2021 (Six months ended June 2020 1.3%). The
increase in the effective tax rate is mainly the result of the
Group incurring a loss in the prior period.
The current tax charge of US$ 0.9 million (six month period
ended June 2020: US$ 0.9 million) included withholding tax
amounting to US$ 0.6 million (six month period ended June 2020: US$
0.8 million).
7 Earnings/(loss) per share
6 months Restated 6 months ended 30
ended 30 June Year ended
June 31 December
2021 2020 2020
Earnings/(loss) for the purpose
of calculating the basic and
diluted earnings/(loss) per
share
being loss for the period
attributable to Owners of the
Company (US$'000) 1,882 (25,859) (124,339)
Earnings/(loss) for the purpose
of calculating the adjusted
basic and diluted loss per
share
(US$'000) (Note 5) 3,607 (7,909) (15,354)
Weighted average number of
shares ('000) 361,525 350,488 350,488
Weighted average diluted number
of shares ('000) 366,064 350,488 350,488
Basic earnings/(loss) per share
(cents) 0.52 (7.38) (35.48)
Diluted earnings/(loss) per
share (cents) 0.51 (7.38) (35.48)
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2021 (continued)
7 Earnings/(loss) per share (continued)
Adjusted earnings/(loss) per share (cents) 1.00 (2.26) (4.38)
Adjusted diluted earnings/(loss) per share (cents) 0.99 (2.26) (4.38)
----- -------- -------
Basic earnings/(loss) per share is calculated by dividing the
loss attributable to equity holders of the Company for the period
(as disclosed in the condensed consolidated statement of
comprehensive income) by the weighted average number of ordinary
shares in issue during the period. Deferred shares are not included
in the any of the Earnings/(loss) per share calculations as they do
not have a right to dividends.
Adjusted earnings/(loss) per share is calculated on the same
basis as basic earnings/(loss) but uses the adjusted profit/( loss)
attributable to equity holders of the company for the period (see
Note 5). 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/(loss) per share is calculated by dividing the
loss attributable to owners of the Company for the period by the
weighted average number of ordinary shares in issue during the
period adjusted for the weighted average effect of LTIP's during
the period. As the Group incurred a loss in 2020, diluted loss per
share is the same as loss per share for comparative periods, as the
effect of the share-based payment charge is anti-dilutive.
Adjusted diluted earnings per share is calculated on the same
basis but uses adjusted profit (Note 5) attributable to the equity
shareholders of the Company.
The contract to issue warrants has not been included in any of
the Earnings/(loss) per share calculations as although these have
been approved, they have not been issued as of 30 June 2021.
The following table shows a reconciliation between basic and
diluted average number of shares:
Restated
30 June 30 June 31 December
2020 2020
2021 000's 000's
000's
Weighted average basic number
of shares in issue 361,525 350,488 350,488
Weighted average effect of LTIP's 4,539 - -
Weighted average diluted number
of shares in issue 366,064 350,488 350,488
----------------------------------- -------- --------- ------------
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2021 (continued)
8 Finance expenses
30 June Restated
2021 30 June
US$'000 2020
US$'000
Interest on bank borrowings 11,411 13,487
Interest on finance leases 77 92
Other finance expenses 334 174
Recognition of embedded derivative
for contract to issue warrants* 926 1,386
Derecognition of embedded derivative (1,890) -
for contract to issue warrants
Net loss on changes in fair value 256 -
of embedded derivative for contract
to issue warrants
Loss on derivatives reclassified
through profit and loss 139 319
(Gain)/loss on revision of debt facility (6,332) 448
Net (gain)/loss on changes in fair
value of interest rate swap** (100) 1,557
Cost to acquire new bank facility*** 3,165 15,797
7,986 33,260
------------------------------- ---------
*Details of the prior period restatement relating to the
recognition of the embedded derivative can be found in Note 3.
**Details of the prior period restatement relating to the
(gain)/loss on changes in fair value of the interest rate swap can
be found in Note 3.
*** Costs incurred to acquire new loan facility including
arrangement, advisory and legal fees. Details of the prior period
restatement can be found in Note 3.
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2021 (continued)
9 Property, plant and equipment
Vessel spares,
Capital Land, building and fitting and other
Vessels work-in-progress improvements equipment Others Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Cost
Balance as at 1
January 2021 890,012 3,927 - 59,902 1,967 955,808
Additions - 6,119 - - - 6,119
Transfers 3,827 (3,994) - 167 - -
Balance as at 30
June 2021 893,839 6,052 - 60,069 1,967 961,927
-------- --------------------- -------------------- -------------------- -------- --------
Accumulated
Depreciation
Balance at 1 January
2021 331,405 2,845 - 14,774 1,707 350,731
Depreciation expense 9,685 - - 1,621 47 11,353
Balance as at 30
June 201 341,090 2,845 - 16,395 1,754 362,084
-------- --------------------- -------------------- -------------------- -------- --------
Net Book Value as at
30 June 2021 552,749 3,207 - 43,674 213 599,843
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2021 (continued)
9 Property, plant and equipment (continued)
Vessel spares,
Capital Land, building and fitting and other
Vessels work-in-progress improvements equipment Others Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Cost
Balance as at 1
January 2020 884,497 4,857 10,488 60,743 3,670 964,255
Additions - 6,208 - - - 6,208
Transfers 5,695 (7,138) - 1,163 280 -
Eliminated on
disposal (180) - (5,387) - (1,660) (7,227)
Write off - - (5,101) (2,004) (323) (7,428)
Balance as at 31
December 2020 890,012 3,927 - 59,902 1,967 955,808
-------- --------------------- -------------------- -------------------- -------- --------
Accumulated
Depreciation
Balance at 1 January
2020 221,805 2,845 8,014 13,823 3,534 250,021
Eliminated on
disposal - - (3,269) - (1,586) (4,855)
Depreciation expense 22,444 - 356 2,955 82 25,837
Impairment charge 87,156 - - - - 87,156
Write off - - (5,101) (2,004) (323) (7,428)
Balance as at 31
December 2020 331,405 2,845 - 14,774 1,707 350,731
-------- --------------------- -------------------- -------------------- -------- --------
Net Book Value as at
31 December 2020 558,607 1,082 - 45,128 260 605,077
-------- --------------------- -------------------- -------------------- -------- --------
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2021 (continued)
10 Trade and other receivables
30 June 31 December
2021 2020
US$'000 US$'000
Trade receivables 27,011 24,207
Less: Allowances for trade receivables (103) (133)
-------- ------------
Trade receivables, net 26,908 24,074
Accrued revenue 135 1,925
Prepayments 3,904 5,222
Deposits 40 95
Other receivables 826 518
31,813 31,834
-------- ------------
11 Share capital
Ordinary shares at GBP0.02 per share
Number of ordinary
shares
(Thousands) US$'000
At 1 January 2020 and 1 January 2021 350,488 58,057
Capital reorganisation - (46,445)
Placing of new shares 665,927 18,505
As at 30 June 2021 1,016,415 30,117
------------------- ---------
Deferred shares at GBP0.08 per share
Number of ordinary
shares
(Thousands) US$'000
At 1 January 2020 and 1 January 2021 - -
Capital reorganisation 350,488 46,445
As at 30 June 2021 350,488 46,445
------------------- --------
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2021 (continued)
11 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 have no voting rights and no right to the
profits generated by the Group. On winding-up or other return of
capital, the holders of deferred shares have extremely limited
rights. The Group has the right but not the obligation to buy back
all of the Deferred Shares for an amount not exceeding GBP1.00 in
aggregate without obtaining the sanction of the holder or holders
of the Deferred Shares. As there is no contractual obligation,
management do not consider there to be a liability.
As part of the equity raise on 28 June 2021 the company issued
665,926,795 new ordinary shares with a nominal value of 2 pence per
share at 3 pence per share with the additional pence per share
being recognised in the share premium account. Issue costs
amounting to US$ 3.2 million (31 December 2020: $nil) have been
deducted from the share premium account.
12 Bank borrowings
Bank borrowings relate to the bank facility provided by a group
of six banks, which comprises of term loans and amounts available
under revolving working capital facilities. Secured borrowings at
amortised cost are as follows:
30 June 31 December
2021 2020
US$'000 US$'000
Term loans 362,516 388,558
Working capital facility 23,500 21,500
386,016 410,058
--------- ------------
Bank borrowings are split between hedged and unhedged amounts as
follows:
30 June 31 December
2021 2020
US$'000 US$'000
Hedged bank borrowings 34,615 38,462
Unhedged bank borrowings 351,401 371,596
386,016 410,058
--------- ------------
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2021 (continued)
12 Bank Borrowings (continued)
Bank borrowings are presented in the condensed consolidated
balance sheet as follows:
30 June 31 December
2021 2020
US$'000 US$'000
Non-current
Bank borrowings - scheduled repayments
after more than one year 368,477 379,009
Current
Bank borrowings - scheduled repayments
within one year 17,539 31,049
386,016 410,058
--------- ------------
Net debt as at the end of the period/year was as follows:
30 June 31 December
2021 2020
US$'000 US$'000
Bank borrowings net of issue costs 386,016 410,058
Less: Cash and cash equivalents (9,263) (3,798)
Total 376,753 406,260
======== ============
As noted in the 2020 annual report, on 31 December 2020, the
Group's banking syndicate agreed to extend certain obligations on
the Group, which it was otherwise required to have met, including
the requirement to issue warrants to banks and accrue PIK
interest.
This meant the Group was not in an event of default as at 31
December 2020. This was further extended on 27 January 2021 and 25
February 2021. As the waivers received led to revisions to the
timing of payments, management assessed the fair value of the
remaining cashflows.
On 31 March 2021, the Group amended the terms of its loan
facility with its banking syndicate. The amended terms (see below)
were significantly different compared to the original loan.
Management determined that the Group's loan facility was
substantially modified and accordingly the old loan facility was
extinguished, and the new facility recognised.
A gain of US$ 6.3 million (2020: US$ 0.4 million) was recognised
in the profit and loss (Note 8) reflecting the waiver of PIK
interest otherwise payable during the first quarter of 2021, the
remeasurement of the debt to fair value as at the date of the
substantial modification, and the impact of a change in the
forecast voluntary repayment of the debt. US$ 3.2 million of costs
incurred in renegotiating the new facility were expensed.
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2021 (continued)
12 Bank Borrowings (continued)
The remeasurement of the bank borrowings was determined in
accordance with generally accepted principles based on a discounted
cash flow analysis, using appropriate effective interest rates.
The principal terms of the outstanding facility as at 30 June
2021 are as follows:
-- The facility's main currency is US$ and is repayable with a
margin at 3% up to 31 December 2022 at which point margin is based
on a ratchet depending on leverage levels (2020: margin ratchet
based on leverage levels) and final maturity in June 2025 (31
December 2020: June 2025).
-- The revolving working capital facility amounts to US$ 50.0
million. USD$ 25.0 million of the working capital facility is
allocated to performance bonds and guarantees and US$ 25.0 million
is allocated to cash of which US$ 23.5 million was drawn as at 30
June 2021 (31 December 2020: US$ 21.5 million), leaving US$ 1.5
million available for drawdown (31 December 2020: US$ 3.5
million).
-- The facility remains secured by mortgages over its whole
fleet, with a net book value at 30 June 2021 of US$ 548.9 million
(31 December 2020: US$ 558.6 million). Additionally, gross trade
receivables, amounting to US$ 27.0 million (31 December 2020: US$
24.2 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$ 9.3 million (31
December 2020: US$ 3.8 million) before the restricted amounts
related to visa deposits held with the Ministry of Labour in the
UAE of US$ 0.04 million (2020: US$ 0.09 million) included in trade
and other receivables (see deposits in Note 10), which have been
assigned as security against the loans extended by the Group's
banking syndicate.
-- The amended terms contain contingent conditions such that if
an equity raise of US $75.0 million in aggregate does not take
place by 31 December 2022, PIK interest would potentially accrue
and warrants would be due to the banking syndicate, refer to Note
13 for details of the valuation of the contract to issue
warrants.
The facility is subject to certain financial covenants
including; Debt Service Cover; Interest Cover; Net Leverage Ratio;
and Security Cover (loan to value). There are also additional
covenants relating to general and administrative costs and capital
expenditure. In addition, there are restrictions to payment of
dividends until the net leverage ratio falls below 4.0 times.
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2021 (continued)
13 Derivative financial instruments
Embedded derivatives - contract to issue warrants
In June 2020, the Group restructured the terms of its borrowings
with its lenders. These terms included warrants to be issued to its
lenders if GMS had not raised US$ 75.0 million of equity by no
later than 31 December 2020. As this term was not expected to be
met, an embedded derivative liability was recognised for the
obligation to issue the warrants. At 31 December 2020 these had a
value of US$ 1.4 million, which had increased to US$ 1.8 million by
March 2021.
In March 2021 the Group amended the terms of its loan facility,
as described above, and additional time was granted to raise equity
before warrants were required to be issued to its lenders. The
previous obligation to issue warrants to the bank was waived, and a
contingent requirement to issue warrants to banks was introduced.
The amended terms required US$ 25.0 million of Equity to be raised
by 30 June 2021 otherwise the Group would be in default, and a
further US$ 50.0 million to be raised by 31 December 2022. GMS was
subsequently successful with the requirement to raise the first
tranche of equity (Refer to Note 11).
As the new terms of the loan facility contained separate
distinguishable terms with a contingent requirement to issue
warrants to banks, management determined the debt facility to
contain an embedded derivative. The Group was required to recognise
the embedded derivative at fair value. Management commissioned an
independent valuation expert to measure the fair value of the
warrants, which was determined using Monte Carlo simulations. The
simulation considers sensitivity by building models of possible
results by substituting a range of values. This represents a Level
3 fair value measurement under the IFRS 13 hierarchy. The fair
value of the liability as at 30 June 2021 was US$ 0.7 million (31
December 2020 US$1.4 million). As the derivative was due to be
settled after 12 months, the balance is recognised as a non-current
liability.
Interest Rate Swap
The Group entered into an Interest Rate Swap (IRS) on 30 June
2018 to hedge a notional amount of US$ 50.0 million. The remaining
notional amount hedged under the IRS as at 30 June 2021 was US$
34.6 million (31 December 2020: US$ 38.4 million). The IRS hedges
the risk of variability in interest payments by converting a
floating rate liability to a fixed rate liability. The fair value
of the IRS as at 30 June 2021 was a liability value of US$ 1.8
million (31 December 2020: US$ 2.4 million). As cashflows of the
hedging relationship were not highly probable in 2020 hedge
accounting was discontinued. The net revaluation gain in the period
to 30 June 2021 of US$ 0.1 million was accordingly recognised in
the income statement, together with a $0.1m loss in respect of
amounts recycled from the cash flow hedge reserve (Note 8).
The fair value measurement of the interest rate swap was
determined by independent valuers with reference to quoted market
prices, discounted cash flow models and recognised pricing models
as appropriate. They represent Level 2 fair value measurements
under the IFRS 13 hierarchy.
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2021 (continued)
13 Derivative financial instruments (continued)
IFRS 13 fair value hierarchy
Apart from the contract to issue warrants, the Group has no
other financial instruments that are classified as Level 3 in the
fair value hierarchy in the current or previous period with fair
values that are determined by reference to significant unobservable
inputs. There have been no transfers of assets or liabilities
between levels of the fair value hierarchy. There are no
non-recurring fair value measurements.
Derivative financial instruments are made up as follows:
Cross currency
interest
Interest rate swap Embedded
rate swap derivative Total
US$'000 US$'000 US$'000 US$'000
At 1 January 2021 (2,387) - (1,449) (3,836)
Net gain on changes in
fair value of interest
rate swap 100 - - 100
Loss on settlement of
derivatives 537 - - 537
Derecognition of embedded
derivative warrants - - 1,890 1,890
Initial recognition of
embedded derivative - - (926) (926)
Net loss on changes in
fair value of embedded
derivative - - (256) (256)
As at 30 June 2021 (1,750) - (741) (2,491)
------------ --------------- ------------- --------
Cross currency
interest
Interest rate swap Embedded
rate swap derivative Total
US$'000 US$'000 US$'000 US$'000
At 1 January 2020 (1,737) (3) - (1,740)
Gain on fair value changes
of hedging instruments - 21 - 21
Net hedging gain/(loss)
on interest hedges reclassified
to the profit or loss 901 (18) - 883
Net loss on changes in
fair value of interest
rate swap (1,551) - - (1,551)
Initial recognition of
embedded derivative - - (1,386) (1,386)
Net loss on changes in
fair value of embedded
derivative - - (63) (63)
As at 31 December 2020 (2,387) - (1,449) (3,836)
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2021 (continued)
14 Notes to the Condensed Consolidated Statement of Cash Flows
Six month period ended Year ended
30 June 31 December
-------------------------
2021 Restated 2020
* 2020
US$'000 US$'000 US$'000
Profit/loss for the period 1,994 (25,871) (124,304)
Adjustments for:
Depreciation of property, plant
and equipment 11,353 12,907 25,837
Amortisation of dry docking expenditure 2,563 1,181 3,074
Amortisation of right-of-use asset 1,117 1,123 2,543
Impairment charge - - 87,156
Income tax expense 851 858 1,285
End of service benefits charge 350 289 527
End of service benefits paid (355) (247) (617)
Movement in ECL provision during
the period/year (30) 13 69
Recovery of ECL provision - (64) (64)
Share based payment charge (53) (11) 168
Interest income (6) (7) (15)
Finance expenses 7,986 33,260 46,740
Loss on disposal of property, plant
and
equipment - 7 2,073
Gain on disposal of assets held
for sale - (328) (259)
Hedging revenue adjustment - (21) (21)
Other income (20) (29) (257)
Cash flow from operating activities
before
movement in working capital 25,750 23,060 43,935
(Increase)/Decrease in trade and
other receivables (85) (592) 4,866
Decrease in trade and other payables (3,103) (3,134) (3,770)
Cash generated from operations 22,562 19,334 45,031
Taxation paid (448) (660) (763)
Net cash generated from operating
activities 22,114 18,674 44,268
*Details of prior period restatements can be found in Note
3.
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2021 (continued)
15 Contingent liabilities
At 30 June 2021, the banks acting for Gulf Marine Services FZE,
one of the subsidiaries of the Group, had issued performance bonds
amounting to US$ 11.6 million (31 December 2020: US$ 17.9
million).
16 Capital commitments
30 June 31 December
2021 2020
US$'000 US$'000
Contractual capital commitments 6,659 7,470
Capital commitments comprise mainly capital expenditure, which
has been contractually agreed with suppliers for future periods for
equipment or the refurbishment of existing vessels.
17 Long term incentive plans
The Group has Long Term Incentive Plans ("LTIPs") which were
granted to senior management, managers and senior offshore
officers.
From 2019 onwards the employment condition is that each eligible
employee of the Company must remain in employment during the
three-year vesting period. LTIPs have been aligned to the Company's
share performance therefore only financial metrics will be applied.
EPS ("Earnings Per Share") has been dropped as the financial metric
and TSR ("Total Shareholder Return") is now the sole financial
metric.
In the prior years, the release of these shares was conditional
upon continued employment, certain market vesting conditions and in
the case of senior management LTIP awards, performance against
three-year target EPS compound annual growth rates. Equity-settled
share-based payments were measured at fair value at the date of
grant. The fair value determined, using the Binomial Probability
Model together with Monte Carlo simulations, at the grant date of
equity-settled share-based payments, is expensed on a straight-line
basis over the vesting period, based on an estimate of the number
of shares that will ultimately vest. The fair value of each award
was determined by taking into account the market performance
condition, the term of the award, the share price at grant date,
the expected price volatility of the underlying share and the
risk-free interest rate for the term of the award.
Non-market vesting conditions, which for the Group mainly
related to the continual employment of the employee during the
vesting period, and in the case of the senior management LTIP
awards the achievement of EPS growth targets, 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.
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2021 (continued)
17 Long term incentive plans (continued)
To the extent that share-based payments are granted to employees
of the Group's subsidiaries without charge, the share-based payment
is capitalised as part of the cost of investment in
subsidiaries.
The number of share awards granted by the Group during the
period is given in the table below:
30 June 31 December
2021 2020
At the beginning of the period 6,573,229 8,768,294
Granted in the period - 2,661,388
Cash settled in the period (1,854,298) -
Forfeited in the period (2,109,921) (4,856,453)
Lapsed - -
At the end of the period 2,609,010 6,573,229
------------ ------------
The weighted average remaining contractual life for the vesting
period outstanding as at 30 June 2021 was 0.7 years (31 December
2020: 1.0 years). The weighted average fair value of shares granted
during the period to 30 June 2021 was US$ nil (31 December 2020:
US$ 0.10).
LTIP LTIP
Grant date 29 May 2020 15 November
2019
Share price GBP0.09 GBP0.08
Expected volatility 120% 102.79%
Risk-free rate 0.01% 0.48%
Expected dividend yield 0.00% 0.00%
Vesting period 3 years 3 years
Award life 3 years 3 years
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2021 (continued)
17 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.
On 15 March 2021, the Remuneration Committee determined that
awards granted on 28 March 2018 which were due to vest on 28 March
2021 would be settled in cash, not by the issue of shares as was
contractually stipulated, subject to the achievement of the
original performance conditions. For the purposes of IFRS 2, this
represented a reclassification of these awards from equity-settled
to cash-settled. In accordance with IFRS 2, at the date of
reclassification a balance of US$ 0.1 million (31 December 2020:
US$ nil) equal to the fair value of the awards at the modification
date was transferred from equity to financial liabilities. As the
fair value at the modification date was lower than the cumulative
equity-settled share-based payment charge at that date, no
adjustment was made to profit or loss as a result of the
modifications.
On 9 June 2021, the Company's Ordinary Shares of 10p each were
split into Ordinary Shares of 2p each and deferred shares of 8p
each. A consequence of this change will be that the share options
issued in prior years will be modified to such that the recipients
are granted Ordinary Shares of 2p each, not Ordinary Shares of 10p
each.
This charge represented a modification of the share-based
payments for the purposes of IFRS 2. However, as the modification
did not result in a favourable change for the employees, no
adjustments to the share-based payment charge was required as a
result of the change to the Company's share capital.
18 Related party transactions
Significant transactions with related parties during the period
were as follows:
30 June
2021 30 June
US$'000 2020
US$'000
Rentals of property from Abdulla Fouad 54 54
Rentals of breathing equipment from
Abdulla Fouad 241 278
Abdulla Fouad is a partner and Minority shareholder in GMS Saudi
Arabia Ltd, a subsidiary of the Group. Amounts due to Abdulla Fouad
as at 30 June 2021 was US$ 0.3 million (31 December 2020: US 0.2
million).
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2021 (continued)
19 Events after the reporting period
There were no subsequent events of impact to these Condensed
Consolidated Financial Statements after the reporting period.
20 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/(loss) per share - represents the
adjusted profit/(loss) attributable to equity holders of the
Company for the period divided by the weighted average number of
ordinary shares in issue during the period, adjusted for the
weighted average effect of share options outstanding during the
period. The adjusted profit/(loss) attributable to equity
shareholders of the Company is earnings used for the purpose of
basic earnings/(loss) per share adjusted by adding back costs to
acquire new bank facilities, refinancing items and impairment
charges. This measure provides additional information regarding
earnings per share attributable to the underlying activities of the
business. A reconciliation of this measure is provided in note
4.
Adjusted EBITDA - represents operating profit after adding back
depreciation, amortisation, non-operational items and impairment
charges. This measure provides additional information in assessing
the Group's underlying performance that management is more directly
able to influence in the short term and on a basis comparable from
year to year. A reconciliation of this measure is provided in note
5.
Adjusted EBITDA margin - represents adjusted EBITDA divided by
revenue. This measure provides additional information on underlying
performance as a percentage of total revenue derived from the
Group. A reconciliation of this measure is provided in note 5.
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2021 (continued)
20 Glossary (continued)
Adjusted gross profit - represents gross profit after 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 5.
Adjusted net profit/(loss) - represents net profit/(loss) after
adding back impairment charges and costs of renegotiating bank
terms. This measure provides additional information in assessing
the Group's total performance that management is more directly able
to influence and, on a basis, comparable from year to year. A
reconciliation of this measure is provided in note 5 of these
results.
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:
Restated
30 June 30 June
2021 2020
US$'000 US$'000
Statutory cost of sales 35,007 35,438
Less depreciation and amortisation (14,806) (14,807)
20,201 20,631
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
5.
Margin - revenue less operating expenses as identified in Note 5
of the condensed consolidated financial statements.
Net debt - represents the total bank borrowings less cash. This
measure provides additional information of the Group's financial
position. A reconciliation is shown below:
30 June 31 December
2021 2020
US$'000 US$'000
Statutory bank borrowings 386,016 410,058
Less cash and cash equivalents (9,263) (3,798)
376,753 406,260
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2021 (continued)
20 Glossary (continued)
Net cash flow before debt service - the sum of cash generated
from operations and investing activities.
Net debt to EBITDA - the ratio of net debt at year end to
earnings before interest, tax, depreciation and amortisation as
reported under the terms of our bank facility agreement.
Operational downtime - downtime due to technical failure.
Segment adjusted gross profit/loss - represents gross
profit/loss after adding back depreciation, amortisation and
impairment charges. This measure provides additional information on
the core profitability of the Group attributable to each reporting
segment. A reconciliation of this measure is provided in note
5.
Other Definitions
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.
DEPS/DLPS - Diluted earnings/losses per share.
E&P - exploration and production
Employee retention - percentage of staff who continued to be
employed during the year (excluding retirements and redundancies)
taken as number of resignations during the year divided by the
total number of employees as at 30 June.
EPC - engineering, procurement and construction.
ESG - environmental, social and governance.
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2021 (continued)
20 Glossary (continued)
Finance service - the aggregate of
a) Net finance charges for that period; and
b) All schedules payments of principal and any other schedule
payments in the nature of principal payable by the Group in that
period in respect of financing:
i) Excluding any amounts falling due in that period under any
overdraft, working capital or revolving facility which were
available for simultaneous redrawing under the terms of that
facility;
ii) Excluding any amount of PIK that accretes in that period;
iii) Including the amount of the capital element of any amounts
payable under any Finance Lease in respect of that period; and
iv) Adjusted as a result of any voluntary or mandatory prepayment
Finance service cover - represents the ratio of Adjusted EBITDA
to finance service
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 - International Oil Company.
KPIs - Key performance indicators.
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.
Net finance charges -- represents finance charges for that
period less interest income for that period.
Net leverage ratio - represents the ratio of net bank debt to
Adjusted EBITDA.
NOC - national oil company.
On hire daily vessel operating expenses - costs incurred to
ensure a vessel is operationally ready and capable of carrying out
work required to fulfil contract requirements. This excludes
mobilisation costs and bad debt provisions
OSW - Offshore Wind.
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2021 (continued)
20 Glossary (continued)
PIK - Payment In Kind. Under the banking documents dated 17 June
2020 and 31 March 2021, PIK is calculated at 5.0% per annum on the
total term facilities outstanding amount and reduces to:
a) 2.5% per annum when Net Leverage reduces below 5.0x
b) Nil when Net Leverage reduces below 4.0x
Under the documents dated 31 March 2021, PIK accrues on either 1
July 2021 if the US$ 25 million equity is not raised by 30 June
2021, or from 1 January 2023 if the US$ 50 million is not raised by
31 December 2022.
PIK stops accruing at the date on which all loans are paid or
discharged in full.
Secured backlog - represents firm contracts and extension
options held by clients. Backlog equals (charter day rate x
remaining days contracted) + ((estimated average Persons On Board x
daily messing rate)) x remaining days contracted) + contracted
remaining unbilled mobilisation and demobilisation fees. Includes
extension options.
Security Cover (loan to value) - the ratio (expressed as a
percentage) of Total Net Debt at that time to the Market Value of
the Secured Vessels.
SESV - Self-Elevating Support Vessels
SG&A spend - means that the selling, general and
administrative expenses calculated on an accruals basis should be
no more than the SG&A maximum spend for any relevant
period.
Total Recordable Injury Rate (TRIR) - calculated on the injury
rate per 200,000 man hours and includes all our onshore and
offshore personnel and subcontracted personnel. Offshore personnel
are monitored over a 24-hour period.
Underlying G&A - Underlying General and Administrative
(G&A) expenses excluding depreciation and amortisation,
exceptional and legal costs.
Utilisation - the percentage of available days in a relevant
period during which an SESV is under contract and in respect of
which a customer is paying a day rate for the charter of the
SESV.
Warrants - Under the banking documents dated 17 June 2020, if
GMS had not satisfied the US$ 75 million Equity Condition, GMS
shall issue warrants to the Banks, by no later than 31 December
2020, in accordance with the following terms:
-- Strike price at the lower of
o (i) average price over the 90 trading days preceding execution
of documents, or
o (ii) exercise price of the stock options granted to Senior
Management
-- Number of warrants that would give the Banks collectively 20% ownership of GMS
GULF MARINE SERVICES PLC
Notes to the Condensed Consolidated Financial Statements
for the period ended 30 June 2021 (continued)
20 Glossary (continued)
Warrants (continued)
-- Vesting:
o (i) 50% vest on 31 December 2021 and
o (ii) 50% vest on 30 June 2023, unless the Net Leverage ratio
is below 4.0x
-- If, at any time, GMS satisfies the US$ 100 million Equity
Condition any warrant not yet vested at such date will cease to
exist
-- Upon vesting, the warrants are
o (i) exercisable in whole or in part,
o (ii) allocated pro rata to each Bank and exercisable singly
and separately (i.e. not as a syndicate),
o (iii) payable either in cash or in the form of settling the
PIK outstanding at the time of exercise, and
o (iv) freely tradable
-- Anti-dilution mechanism
-- Price adjustment mechanism
-- Warrants to expire on 30 June 2025 (maturity date of the facilities)
Terms agreed under 31 March 2021 Bank deal:
-- Under the banking documents dated 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. If the US$ 50 million
equity raise is successful but the US$ 25 million is unsuccessful,
the balance of the unvested warrants issued on 1 July 2021 will
lapse. All warrants to expire on 30 June 2025 (maturity date of the
facilities). Once issued and vested, should the Banks choose to
exercise the warrants, they can do so by settling in cash or
offsetting against the principal of the loan.
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.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
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END
IR BIBDGGSBDGBD
(END) Dow Jones Newswires
October 13, 2021 02:00 ET (06:00 GMT)
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