TIDMGMS
RNS Number : 4144L
Gulf Marine Services PLC
13 May 2022
13 May 2022
Gulf Marine Services PLC
('Gulf Marine Services', 'GMS', 'the Company' or 'the
Group')
2021 Financial Results
Gulf Marine Services PLC ("GMS" or the "Company"), a leading
provider of advanced self-propelled, self-elevating support vessels
serving the offshore oil, gas and renewables industries, is pleased
to announce its full year financial results for the year to 31
December 2021.
Financial Overview
2021 2020 2019
US$m US$m US$m
--------------------------------- ----- ------- ------
Revenue 115.1 102.5 108.7
--------------------------------- ----- ------- ------
Gross profit/(loss) 60.6 (55.5) (25.0)
--------------------------------- ----- ------- ------
Adjusted EBITDA[1] 64.1 50.4 51.4
--------------------------------- ----- ------- ------
Impairment reversal/(impairment) 15.0 (87.2) (59.1)
--------------------------------- ----- ------- ------
Net profit/(loss) for the year 31.2 (124.3) (85.5)
--------------------------------- ----- ------- ------
Adjusted net profit/(loss)[2] 18.0 (15.3) (20.0)
--------------------------------- ----- ------- ------
2021 Financial Highlights
-- Revenue increased by 12.3% to US$ 115.1 million (2020: US$
102.5 million) driven by increased utilisation in higher earning E-
and S-Class vessels.
-- Adjusted EBITDA(1) increased to US$ 64.1 million (2020: US$
50.4 million) and adjusted EBITDA margin improved to 56% (2020:
49%).
-- Cost of sales excluding depreciation, amortisation and the
reversal of impairment/impairment charge was US$ 41.2 million
(2020: US$ 42.3 million) reflecting higher vessel utilisation and
saving initiatives.
-- General and administrative expenses decreased to US$ 12.3
million (2020: US$ 18.2 million) as a result of US$ 5.6 million of
non-recurring costs incurred in the prior year (2021: nil).
-- US$ 15.0 million reversal of prior years impairment compared
to an impairment charge of US$ 87.2 million in 2020, reflecting
Group's improved long-term outlook.
-- First reported net profit since 2016 at US$ 31.2 million
(2020: net loss of US$ 124.3 million). Adjusted net profit(2) of
US$ 18.0 million (2020: adjusted net loss of US$ 15.3 million).
-- Interest on bank borrowings reduced by 37% to US$ 17.5
million (2020: US$ 27.6 million) following refinancing of the
Group's debt facility and reduction in LIBOR with both margin and
average LIBOR decreasing to 3.0% and 0.2% (2020: 5.0% and
1.0%).
-- Net bank debt [3] reduced to US$ 371.2 million (2020: US$
406.3 million). Net leverage ratio [4] reduced to 5.8 times (2020:
8.0 times).
-- Successful issuance of equity by 30 June 2021 removed
potential event of default, which in turn removed material
uncertainty as to the Group's ability to continue as a Going
Concern reported in 2020.
2021 Operational Highlights
-- Average fleet utilisation increased by 4 percentage points to
85% (2020: 81%) with notable improvements in both S- and E-Class
vessels at 98% (2020: 92%) and 72% (2020: 65%) respectively.
Average utilisation for K-Class vessels remained flat at 86% (2020:
86%).
-- Average day rates marginally increased to US$ 25.7k (2020:
US$ 25.3k) with recent awards in the second half of the year
showing significant improvement.
-- New charters and extensions secured in year totalled 9.6 years (2020: 6.6 years).
-- Operational downtime remains low at 1.6% (2020: 1.5%).
-- Border restrictions and quarantine requirements in relation
to COVID-19 have shown signs of easing in latter part of 2021.
-- Strengthening of Board with the appointment of two
independent non-executive Directors in February 2021 and May 2021
and one non-executive Director in August 2021.
2022 Highlights and Outlook
-- Secured utilisation for 2022 currently stands at 88% against
actual utilisation of 81% in 2021.
-- Anticipate continued improvement on day rates as Middle East
vessel demand outstrips supply on the back of a strong pipeline of
opportunities.
-- Average secured day rates over 12% higher than 2021 actual levels.
-- Reversal of impairment recognised with a value of US$ 15.0
million indicative of improving long-term market conditions.
-- EBITDA guidance of between US$ 70-US$ 80 million maintained for the current financial year.
-- Group anticipates net leverage ratio to be below 4.0 times by the end of 2022.
Mansour Al Alami, Executive Chairman said:
"The primary aims of last year included reorganising the
Company, to regain the trust of stakeholders and to build a
business able to consistently provide value to its shareholders.
These aims have been delivered on and we are proud of having made
such significant progress in such a short period of time. GMS today
is back to profitability, it is back to being on a growth path and
continuing to deleverage. We look forward to continuing this
journey and we thank you all for your patience."
"On behalf of the Board, I would like to thank all our staff for
a year of hard work and for their continued commitment to GMS. I
would also like to thank our stakeholders, including customers,
suppliers, and lenders for their support during the past year".
This announcement contains inside information and is provided in
accordance with the requirements of Article 17 of the Market Abuse
Regulation (EU) No. 596/2014 (as it forms part of UK law by virtue
of the European Union (Withdrawal) Act 2018, as amended).
Enquiries:
Gulf Marine Services PLC Tel: +44 (0)20 7603
Mansour Al Alami 1515
Executive Chairman
Celicourt Communications Tel: +44 (0) 208 434
Mark Antelme 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, Southeast Asia, West Africa, North America, the Gulf
of Mexico and Europe.
The GMS fleet of 13 SESVs is amongst the youngest in the
industry, with an average age of 11 years. The vessels support
GMS's clients in a broad range of offshore oil and gas platform
refurbishment and maintenance activities, well intervention work
and offshore wind turbine maintenance work (which are opex-led
activities), as well as offshore oil and gas platform installation
and decommissioning and offshore wind turbine installation (which
are capex-led activities).
The SESVs are categorised by size - K-Class (Small), S-Class
(Mid) and E-Class (Large) - with these capable of operating in
water depths of 45m to 80m depending on leg length. The vessels are
four-legged and are self-propelled, which means they do not require
tugs or similar support vessels for moves between locations in the
field; this makes them significantly more cost-effective and
time-efficient than conventional offshore support vessels without
self-propulsion. They have a large deck space, crane capacity and
accommodation facilities (for up to 300 people) that can be adapted
to the requirements of the Group's clients.
Gulf Marine Services PLC's Legal Entity Identifier is
213800IGS2QE89SAJF77
www.gmsuae.com
Disclaimer
The content of the Gulf Marine Services PLC website should not
be considered to form a part of or be incorporated into this
announcement.
Cautionary Statement
This announcement includes statements that are forward-looking
in nature. All statements other than statements of historical fact
are capable of interpretation as forward-looking statements. These
statements may generally, but not always, be identified by the use
of words such as 'will', 'should', 'could', 'estimate', 'goals',
'outlook', 'probably', 'project', 'risks', 'schedule', 'seek',
'target', 'expects', 'is expected to', 'aims', 'may', 'objective',
'is likely to', 'intends', 'believes', 'anticipates', 'plans', 'we
see' or similar expressions. By their nature these forward-looking
statements involve numerous assumptions, risks and uncertainties,
both general and specific, as they relate to events and depend on
circumstances that might occur in the future.
Accordingly, the actual results, operations, performance or
achievements of the Company and its subsidiaries may be materially
different from any future results, operations, performance or
achievements expressed or implied by such forward-looking
statements, due to known and unknown risks, uncertainties and other
factors. Neither Gulf Marine Services PLC nor any of its
subsidiaries undertake any obligation to publicly update or revise
any forward-looking statement as a result of new information,
future events or other information. No part of this announcement
constitutes, or shall be taken to constitute, an invitation or
inducement to invest the Company or any other entity and must not
be relied upon in any way in connection with any investment
decision. All written and oral forward-looking statements
attributable to the Company or to persons acting on the Company's
behalf are expressly qualified in their entirety by the cautionary
statements referred to above.
Chairman's Review
TURNING THE CORNER
2021 saw a number of positive steps being made by the Group as
the business continues to turn around. A new bank deal and
subsequent equity raise helped stabilise the balance sheet,
removing a potential event of default with our banks. Improving
demand for our vessels led to utilisation being the highest in the
last six years, driving an increase in day rates for contracts
awarded in the second half of the year, which we will see the
benefit of in 2022. The Group reported improved margins driven by
increased revenues leading to its first reported net profit since
2016.
Group Performance
Revenue increased by 12.3% to US$ 115.1 million (2020: US$ 102.5
million) with an increase in utilisation of 3 percentage points to
84% (2020: 81%) and with notable improvements in both S- and
E-Class vessels at 98% (2020: 92%) and 72% (2020: 65%)
respectively. K- Class vessels remained flat at 86% (2020: 86%).
Average day rates across the fleet marginally increased to US$
25.7k (2020: US$ 25.3k). Certain contracts awarded in the latter
half of the year, which are due to commence in 2022, saw
significant day rate improvements on legacy contracts.
Vessel operating expenses decreased by 2.6% to US$ 41.2 million
(2020: $42.3 million), despite the increase in utilisation. General
and administrative expenses reduced by US$ 5.9 million to US$ 12.3
million, of which US$ 5.6 million related to non-recurring
adjusting items in 2020 and the balance reflecting savings from the
final phase of the Group's cost-cutting exercise.
Adjusted EBITDA was US$ 64.1 million, up 27.2% from the previous
year (2020: US$ 50.4 million) mainly driven by improved
utilisation, particularly in the Group's higher earning E- and
S-Class vessels.
During the year there was a reversal of previous impairment
charges of US$ 15.0 million, indicative of improvements to
long-term market conditions and non-operational finance expenses
totalling US$ 1.7 million following the extinguishment of the old
debt facility and recognition the new debt facility that completed
in the year, (refer to Note 9 in the consolidated financial
information).
The Group returned to profitability for the first time since
2016 with a net profit for the year of US$ 31.2 million (2020: loss
for the year of US$ 124.3 million) and an adjusted net profit of
US$ 18.0 million (2020: adjusted net loss of US$ 15.3 million).
Capital Structure and Liquidity
Net bank debt reduced to US$ 371.2 million (2020: US$ 406.3
million). A combination of reduced debt and improved adjusted
EBITDA led to a 28% reduction in the net leverage ratio reducing
from 8.0 times in 2020 to 5.8 times at the end of 2021. The Group
will continue its focus on organically reducing leverage going
forward.
The Group successfully concluded a US$ 27.8 million equity raise
in June 2021 which prevented an event of default on its loan
facilities. Under these facilities, the Group is required to raise
a further US$ 50 million of equity by the end of 2022 or issue 87.6
million warrants entitling the Group's banks to acquire 132 million
shares, or 11.5% of the share capital of the Company, for a total
consideration of GBP GBP7.9 million, or 6.0 pence per share.
The Group is exploring the various contractual options available
per the current bank terms to take place by the end of 2022. As
disclosed, the two options available are the raise of US$ 50
million equity or the issuance of 87.6 million warrants giving
potential rights to 132 million shares if exercised, which would
result in cash proceeds to the Company of GBP 7.9 million. As at 31
December 2021, neither of the two contractual scenarios had been
ruled out. The Board however consider the issuance of warrants to
have a slightly higher chance of occurrence.
Interest on bank borrowings reduced by 36.6% to US$ 17.5 million
(2020: US$ 27.6 million) following the renegotiation of the Group's
bank facility in March 2021, the reduction in net bank debt,
following the successful equity raise and a reduction in average
LIBOR to 0.2% (2020: 1.0%).
Commercial and Operations
The Group secured nine new contracts in the year, worth US$ 66.0
million (2020: seven contracts worth US$ 18.0 million). Tender and
bid activity increased, with 2.6 vessel years of projects that are
due to commence in 2022 currently in the pipeline. Evolution
commenced its first long-term contract utilising its cantilever
system.
Despite challenges brought by COVID the Group has achieved its
best year for financial performance for many years. Average
utilisation, particularly for K-Class vessels, has remained at its
highest since 2016. New charters and extensions secured in year
totalled 9.6 years. Operational downtime continued the trend of
recent years of being low at 1.5% (2020: 1.6%).
Governance
Three new non-executive Directors joined the Board during 2021,
with the appointment of Jyrki Koskelo, Anthony St John and Charbel
El Khoury in February, May, and August 2021 respectively.
I currently hold the position of Chairman and Chief Executive,
leading the business and the Board. Whilst holding the positions of
both Chairman and Chief Executive is not recommended by the 2018 UK
Corporate Governance Code (the Code), the Board has concluded that,
at this stage in the Group's turnaround process, this continues to
be appropriate. This recognises both the level and pace of change
necessary for the Group and its relatively small scale. This will
be regularly assessed by the Board as the Group progresses through
its turnaround process.
Removal of Material Uncertainty
The Group is currently operating as a Going Concern without any
material uncertainties. This is the first time the Group has been
operating as Going Concern without any material uncertainties since
2017.
Safety
There were two recordable injuries in the early part of 2021.
One Lost Time Injury and one Restricted Work Day Case. This led to
an increase in our Total Recordable Injury Rate from 0.0 (2020) to
0.2 (2021), and an increase in our Lost Time Injury rate from 0.0
(2020) to 0.1 (2021). These levels remain significantly below
industry average and in both cases have since returned to zero in
early 2022. Two vessels celebrated safety milestones in the year,
with both Evolution and Endeavour reaching five years without
incident.
We continue to develop our systems and processes to ensure that
our offshore operations are as safe as possible in line with the
expectations of our customers and stakeholders.
Taskforce on Climate-related Financial Disclosures
This year the Annual Report includes our first Task Force on
Climate-related Financial Disclosures (TCFD). This is a new
requirement for premium listed companies on the London Stock
Exchange. We welcome the introduction of this regulation, having
previously committed to adopting the TCFD recommendations by 2022.
GMS acknowledged climate change as an emerging risk in 2019, and in
December 2021, recognised it as a principal risk.
The Group has complied with the requirements of LR 9.8.6(8)R, by
reporting on a 'comply or explain' basis against the 11 recommended
TCFD disclosures. As of 31 December 2021, the Group was unable to
make disclosures that were consistent with those of the TCFD for
ten out of the eleven disclosures. The Group aims to be fully
compliant by 31st December 2022.
Outlook
Due to the strong pipeline of opportunities expected to come to
the market, the Group anticipates seeing continued improvements in
day rate and utilisation levels in 2022. Secured utilisation for
2022 currently stands at 88% (equivalent in 2021: 73%).
Secured backlog stands at US$ 179.2 million as at 1 April 2022
(US$ 207.3 million as at 1 April 2021) and average secured day
rates at $28.9k, 12.6% higher than 2021 actual average day rates.
Given the current high levels of utilisation secured, combined with
higher day rates, the Group expects the financial performance to
continue to improve and reiterates its EBITDA guidance of between
US$ 70-US$ 80 million for 2022.
Mansour Al Alami
Executive Chairman
Financial Review
2021 2020 2019
US$m US$m US$m
--------------------------------- ----- ------- ------
Revenue 115.1 102.5 108.7
--------------------------------- ----- ------- ------
Gross profit/(loss) 60.6 (55.5) (25.0)
--------------------------------- ----- ------- ------
Adjusted EBITDA[5] 64.1 50.4 51.4
--------------------------------- ----- ------- ------
Impairment reversal/(impairment) 15.0 (87.2) (59.1)
--------------------------------- ----- ------- ------
Net profit/(loss) for the year 31.2 (124.3) (85.5)
--------------------------------- ----- ------- ------
Adjusted net profit/(loss)[6] 18.0 (15.3) (20.0)
--------------------------------- ----- ------- ------
Introduction
Revenue increased by 12.3% to US$ 115.1 million (2020: US$ 102.5
million). Vessel utilisation increased to 84% (2020: 81%) mainly
driven by an easing of operational restrictions, and a more
positive outlook leading to increased demand and the re-activation
of delayed EPC project contract awards in GMS' core markets.
S-Class utilisation improved from 92% in 2020 to 98% in 2021, with
vessels benefiting from long-term contracts. Our E-Class
utilisation levels also increased to 72% (2020: 65%) whilst K-Class
utilisation remained flat at 86% (2020: 86%). Average day rates
increased to US$ 25.7k (2020: US$ 25.3k).
Adjusted EBITDA (1) increased to US$ 64.1 million (2020: US$
50.4 million) with an increase in adjusted EBITDA margin to 56%
(2020: 49%) mainly driven by the increase in utilisation
particularly in the Group's higher earning E- and S-Class vessels
described above.
Vessel operating expenses[7] decreased by 2.6% to US$ 41.2
million (2020: US$ 42.3 million), despite the increase in
utilisation and additional COVID-19 costs, as managing the Group's
cost base continues to be an area of focus.
During 2021, the Group encountered further COVID-related
logistical issues in relation to crew movement and delays in
mobilisations due to border closures and challenging quarantine
requirements. These requirements and the mobilisation delays
mentioned at H1 2021 have shown significant signs of easing in the
second half of 2021.
General and administrative expenses3 decreased by US$ 5.9
million (32%), to US$ 12.3 million mainly as a result of
exceptional restructuring costs and legal costs of US$ 2.5 million
and US$ 3.1 million incurred in the prior year which did not repeat
in the current year. Underlying G&A(4) remained broadly flat at
US$ 9.8 million (2020: US$ 9.7 million).
The Group reported a net profit for the year of US$ 31.2 million
(2020: net loss for the year of US$ 124.3 million). The significant
increase in profit was mainly driven by the increase in adjusted
EBITDA (1) described above, a reduction in finance costs to US$
14.5 million (2020: US$ 46.7 million) and a reversal of impairment
recognised at US$ 15.0 million compared to an impairment charge
booked in the previous year of US$ 87.2 million. Adjusted net
profit2 which excludes impairment charges, exceptional finance
costs and exceptional legal and restructuring costs in 2020 was US$
18.0 million (2020: adjusted net loss of US$ 15.3 million).
Included in the Company only financial statements is an
impairment against the carrying value of investments of US$ 16.8
million (2020: $327.7 million).
Finance expenses reduced mainly from a reduction in bank
interest to US$ 17.5 million (2020: US$ 27.6 million) following the
refinancing, which took place in March 2021, with both margin and
average LIBOR decreasing to 3.0% and 0.2% (2020: 5.0% and 1.0%) and
a reduction of costs to acquire the new debt facility in March 2021
of US$ 3.2 million, compared to US$ 15.8 million being expensed in
2020.
Net bank debt[8] reduced to US$ 371.2 million (2020: US$ 406.3
million). The net leverage ratio1 has significantly reduced to 5.8
times compared to 8.0 times in 2020 mainly as a result of the
improved adjusted EBITDA and raising US$ 27.8 million of new equity
in June 2021. The equity raise completed in June 2021removed a
potential event of default under the Groups' debt facilities as at
31 December 2021.
Adjusted Adjusted
gross profit gross profit
Revenue Revenue Gross profit/(loss) Gross profit/(loss) / (loss) / (loss)
US$'000 US$'000 US$'000 US$'000 US$'000* US$'000*
---------------- -------- -------- ------------------- ------------------- ------------- -------------
Vessel Class 2021 2020 2021 2020 2021 2020
---------------- -------- -------- ------------------- ------------------- ------------- -------------
E-Class vessels 38,680 29,407 21,277 (26,047) 11,170 (22)
---------------- -------- -------- ------------------- ------------------- ------------- -------------
S-Class vessels 33,420 32,136 15,897 15,797 15,897 15,797
---------------- -------- -------- ------------------- ------------------- ------------- -------------
K-Class vessels 43,027 40,947 23,568 (45,076) 18,716 16,055
---------------- -------- -------- ------------------- ------------------- ------------- -------------
Other vessels - 2 (116) (202) (116) (202)
---------------- -------- -------- ------------------- ------------------- ------------- -------------
Total 115,127 102,492 60,626 (55,528) 45,667 31,628
---------------- -------- -------- ------------------- ------------------- ------------- -------------
* See Glossary and note 9 of the consolidated financial
information.
Revenue and segmental profit/loss
The table above shows the contribution to revenue, and segment
gross profit or loss made by each vessel class during the year.
Utilisation in 2021 increased to 84% (2020: 81%). This is the
highest level of utilisation achieved since 2015 and was
facilitated by an easing of COVID-related operational restrictions
and a more positive outlook leading to increased demand and the
re-activation of delayed EPC project contract awards in GMS's core
markets. S-Class utilisation improved from 92% in 2020 to 98% in
2021 mainly from long-term contracts which continued throughout the
year. Our E-Class utilisation levels also saw an increase to 72%
(2020: 65%) and K-Class utilisation remained flat at 86% (2020:
86%).
Average day rates marginally increased to US$ 25.7k (2020: US$
25.3k). Vessel day rates for E-Class vessels increased by 7%,
offset by marginal decreases to S-Class and K-Class rates of 2% and
3% respectively. New contracts awarded in the latter half of the
year, which are due to commence in 2022, saw significant day rate
improvements on legacy contracts.
The MENA region continues to be the largest geographical market
representing 89% (2020: 88%) of total Group revenue. The remaining
11% (2020: 12%) of revenue was earned from Offshore Windfarms in
the renewables market in Europe. National Oil Companies (NOCs)
continue to be the Group's principal client representing 70% of
2021 total revenue (2020: 68%).
The UAE remains the largest revenue contributor in the MENA
region, generating 50% of total revenue (2020: 52%). The remainder
is split between Saudi Arabia and Qatar at 19% and 20% respectively
(2020: 17% and 19%).
Cost of sales, reversal of impairment and administrative
expenses
Cost of sales excluding impairment slightly decreased to US$
69.5 million (2020: US$ 70.9 million) with operating expenses and
depreciation decreasing by US$ 1.1 million and US$ 0.4 million
respectively. Despite achieving a 12.3% increase in revenue, cost
of sales excluding depreciation and amortisation fell by 2.6% to
US$ 41.2 million (2020: US$ 42.3 million). Total depreciation and
amortisation included in cost of sales amounted to US$ 28.2 million
in 2021 (2020: US$ 28.6 million).
Following an improvement to general market conditions,
stabilisation of the Group's capital structure and an increase in
market capitalisation, management performed a formal impairment
assessment of the Group's fleet, comparing the net book value to
the recoverable amount as at 31 December 2021. Based on the
assessment, the total recoverable amount of the fleet was computed
at US$ 631.9 million (2020: US$ 664.0 million) resulting in an
impairment reversal of US$ 15.0 million compared to an impairment
charge of US$ 87.2 million in 2020. Refer to note 4 in the
consolidated financial information for further details.
Overall general and administrative costs reduced from US$ 18.2
million in 2020 to US$ 12.3 million in 2021. There were no
restructuring costs incurred in the financial year (2020: US$ 2.5
million). In 2020, one-off legal costs of US$ 3.1 million were
incurred in relation to the Seafox proposed bid offer and
governance and management changes which did not repeat in the
current year. Underlying G&A remained broadly flat at US$ 9.8
million (2020: US$ 9.7 million).
Adjusted EBITDA
Adjusted EBITDA, which excludes the impact of reversal of
impairment in 2021 and an impairment charge and one-off
non-operational costs in 2020, increased to US$ 64.1 million (2020:
US$ 50.4 million), mainly driven by the increase in utilisation
particularly in the Group's higher earning E- and S-Class vessels
described above. Adjusted EBITDA is considered an appropriate,
comparable measure showing underlying performance, that management
are able to influence. Please refer to Note 9 and Glossary for
further details.
Finance costs
Finance costs reduced materially from US$ 46.7 million in 2020
to US$ 14.5 million in 2021, mainly as a result of a reduction in
bank interest to US$ 17.5 million (2020: US$ 27.6 million). Costs
to acquire the bank facility in 2021 were significantly lower than
costs to acquire the previous refinance in 2020 at US$ 3.2 million
(2020: US$ 15.8 million). A gain of US$ 6.3 million (2020: US$ 1.1
million) was recognised in the profit and loss in the current year,
reflecting the waiver of PIK interest otherwise payable during the
first quarter of 2021, the remeasurement of the debt to fair value
as at the date of the substantial modification and the impact of a
change in the forecast voluntary repayment of the debt. Refer to
note 7 for further details.
Earnings
The Group achieved a profit of US$ 31.2 million (2020: loss of
US$ 124.3 million), mainly driven by an increase in utilisation,
decrease in finance expenses and the reversal of impairment booked
in at US$ 15.0 million (2020: impairment charge of US$ 87.2
million) all described above.
After reflecting for adjusting items (impairment and finance
expenses) the Group incurred an adjusted profit of US$ 18.0 million
(2020: adjusted loss of US$ 15.3 million).
Capital expenditure
The Group's capital expenditure during the year reduced to US$
12.2 million (2020: US$ 14.2 million). Expenditure mainly relating
to upgrades made to vessels to meet client requirements. The
Company continues to maintain capital expenditure at a level that
ensures safe operations, in line with legal and regulatory
obligations, and that meets client requirements, as it focuses on
maximising its cash generation to continue reducing bank debt.
Cash flow and liquidity
During the year, the Group delivered operating cash flows of US$
40.5 million (2020: US$ 44.3 million). This reduction is primarily
as a result of the movement in trade and other receivables
described below offset by increased profit. The net cash outflow
from investing activities for 2021 decreased to US$ 11.5 million
(2020: US$ 12.4 million) as the Group continues to limit capital
expenditure to maintaining the fleet to a level that ensures safe
operations and meets client requirements.
The Group's net cash flow from financing activities was an
outflow of US$ 24.5 million during the year (2020: US$ 36.5
million) mainly comprising net repayments to the bank of US$ 31.0
million (2020: US$ 12.1 million) and interest paid of US$ 13.0
million (2020: US$ 27.9 million), offset by proceeds from shares
following the equity raise of US$ 27.8 million (2020: nil).
Balance sheet
Total non-current assets at 31 December 2021 were US$ 617.2
million (2020: US$ 618.8 million), following a US$ 15.0 million
reversal of impairment on some of the Group's vessels (2020:
impairment charge of US$ 87.2 million).
Total current assets at 31 December 2021 were US$ 57.2 million
(2020: US$ 35.6 million). Cash and cash equivalents increased to
US$ 8.3 million (2020: US$ 3.8 million). Trade and other
receivables increased to US$ 48.9 million (2020: US$ 31.8 million)
of which US$ 41.9 million (2020: US$ 24.1 million) related to net
trade receivables and US$ 7.0 million (2020: US$ 7.8 million) to
other receivables. The increase in trade receivables was mainly
driven by increased utilisation and client delays in processing
receipts. Trade receivables are primarily with NOC, IOC and
international EPC companies, with over 89% being aged between 0-60
days. Out of the year-end balance, over US$ 30 million has
subsequently been collected.
Total current liabilities reduced to US$ 53.3 million at 31
December 2021 (2020: US$ 61.0 million), Trade payables decreased to
US$ 10.5 million (2020: US$ 12.3 million) and other payables
decreased to US$ 8.9 million (2020: US$ 11.1 million). There was a
decrease in bank borrowings due within one year to US$ 26.1 million
(2020: US$ 31.0 million) as a result of the Group's working capital
facility (US$ 21.5 million) now being recognised as a non--current
liability as it is available for utilisation until the end of the
term debt facility offset by an increase in loan repayments for the
next 12 months compared to the previous year.
Net bank debt and borrowings
On 31 March 2021, the Group amended the terms of its loan
facility with its banking syndicate. The amended terms were
significantly different from the original loan. Management
determined that the Group's loan facility was substantially
modified and, accordingly, the old loan facility was extinguished
and the new facility recognised. Refer to note 7 for further
details.
Net bank debt as at 31 December 2021 reduced to US$ 371.2
million (2020: US$ 406.3 million) with US$ 20.0 million of the US$
31.0 million total loan repayments being made following the equity
raise in June 2021. The net leverage ratio has significantly
reduced and was 5.8 times as at 31 December 2021 compared to 8.0
times in 2020, as a result of improved adjusted EBITDA and the
equity raise in June 2021.
Going Concern
The successful issuance of equity by 30 June 2021 removed a
potential event of default on the Group's bank facilities which in
turn removed the material uncertainty as to the Group's ability to
continue as a Going Concern that was reported in the full year 2020
results.
The Group's forecasts indicate that its revised debt facility
will provide sufficient liquidity for its requirements for at least
the next 12 months and accordingly, the consolidated financial
information for the Group have been prepared on the Going Concern
basis. For further details please refer the Going Concern
disclosure in note 1 of the financial information. This is the
first time the Group have been operating as Going Concern without
any material uncertainties since 2017.
Related party transactions
During the year, there were related party transactions with our
partner in Saudi Arabia for leases of breathing equipment for some
of our vessels and office space totalling US$ 0.5 million (2020:
US$ 0.5 million). In addition, there were related party transaction
related to catering services for Vessel Pepper totalling to US$ 0.5
million (2020: US$ nil).
The Group has never had transactions with its largest
shareholder, Seafox International (29.9%) and has agreed with its
banks, in its latest agreement signed in March 2021, restrictions
on any future transactions with them or their affiliates. During
the year, the Group received catering services totalling US$ 0.5
million (2020: nil) on board one of its vessels provided by the
National Catering Company, an affiliate of Mazrui International
LLC, the Group's second largest shareholder (25.6%).
Adjusting items
The Group presents adjusted results, in addition to the
statutory results, as the Directors consider that they provide a
useful indication of underlying performance. A reconciliation
between the adjusted non-GAAP and statutory results is provided in
Note 9 of the consolidated financial information with further
information provided in the Glossary.
Consolidated statement of profit or loss and other comprehensive
income for the year ended 31 December
Notes 2021 2020
US$'000 US$'000
Revenue 8,11 115,127 102,492
Cost of sales (69,460) (70,864)
Reversal of impairment/(impairment
loss) 4 14,959 (87,156)
Gross profit/(loss) 60,626 (55,528)
Restructuring costs - (2,492)
Exceptional legal costs - (3,092)
Other general and administrative
expenses (12,272) (12,632)
--------- ----------
General and administrative expenses (12,272) (18,216)
Operating profit/(loss) 48,354 (73,744)
Finance income 9 15
Finance expense (14,463) (46,740)
Foreign exchange loss, net (1,002) (993)
Loss on disposal of property and
equipment - (2,073)
Gain on disposal of fixed assets
held for sale - 259
Other income 28 257
Profit/(loss) for the year before
taxation 32,926 (123,019)
Taxation charge for the year (1,707) (1,285)
Net profit/(loss) for the year 31,219 (124,304)
========= ==========
Other comprehensive income/(expense)
- items that may be reclassified
to profit or loss:
Net gain on changes in fair value
of hedging instruments 12 - 21
Net hedging gain reclassified to
the profit or loss 12 278 883
Exchange differences on translation
of foreign operations (91) 425
Total comprehensive gain/(loss)
for the year 31,406 (122,975)
========= ==========
Profit/(loss) attributable to:
Owners of the Company 31,001 (124,339)
Non-controlling interests 218 35
31,219 (124,304)
========= ==========
Total comprehensive profit/(loss)
attributable to:
Owners of the Company 31,188 (123,010)
Non-controlling interests 218 35
31,406 (122,975)
========= ==========
Earnings/(loss) per share:
Basic (cents per share) 10 4.48 (35.48)
Diluted (cents per share) 10 4.46 (35.48)
All results are derived from continuing operations in each year.
There are no discontinued operations in either years.
Consolidated statement of financial position as at 31
December
Notes 2021 2020
US$'000 US$'000
ASSETS
Non-current assets
Property and equipment 4 605,526 605,077
Dry docking expenditure 8,799 10,391
Right-of-use assets 2,884 3,340
Total non-current assets 617,209 618,808
Current assets
Trade and other receivables 48,917 31,834
Cash and cash equivalents 5 8,271 3,798
Total current assets 57,188 35,632
Total assets 674,397 654,440
========= =========
EQUITY AND LIABILITIES
Capital and reserves
Share capital - Ordinary 6 30,117 58,057
Share capital - Deferred 6 46,445 -
Share premium account 6 99,105 93,080
Restricted reserve 272 272
Group restructuring reserve (49,710) (49,710)
Share based payment reserve 3,648 3,740
Capital contribution 9,177 9,177
Cash flow hedge reserve (558) (836)
Translation reserve (2,086) (1,995)
Retained earnings 124,386 93,385
--------- ---------
Attributable to the owners of the
Company 260,796 205,170
Non-controlling interests 1,912 1,694
Total equity 262,708 206,864
--------- ---------
Current liabilities
Trade and other payables 19,455 23,395
Current tax liability 5,669 4,811
Bank borrowings - scheduled repayments
within one year 7 26,097 31,024
Lease liabilities 1,817 1,739
Total current liabilities 53,038 60,969
--------- ---------
Non-current liabilities
Provision for employees' end of service
benefits 2,322 2,190
Bank borrowings - scheduled repayments
more than one year 7 353,429 379,009
Lease liabilities 1,107 1,572
Derivative financial instruments 12 1,793 3,836
Total non-current liabilities 358,651 386,607
--------- ---------
Total liabilities 411,689 447,576
--------- ---------
Total equity and liabilities 674,397 654,440
--------- ---------
Consolidated statement of changes in equity for the year ended
31 December
Attributable
Share Share Share Cash Cost to the
capital capital Share Group based flow of Owners
- - premium Restricted restructuring payment Capital hedge hedging Translation Retained of the Non-controlling Total
Ordinary Deferred account reserve reserve reserve contribution reserve reserve reserve earnings 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
At 1 January
2020 58,057 - 93,080 272 (49,710) 3,572 9,177 520 (2,260) (2,420) 217,724 328,012 1,659 329,671
(Loss)/profit
for the year - - - - - - - - - - (124,339) (124,339) 35 (124,304)
Gain on fair
value changes
of hedging
instruments - - - - - - - - 21 - - 21 - 21
Net hedging
gain/(loss)
on interest
hedges
reclassified
to the profit
or loss - - - - - - - 901 (18) - - 883 - 883
Exchange
differences
on foreign
operations - - - - - - - - - 425 - 425 - 425
--------- --------- -------- ----------- -------------- -------- ------------- -------- -------- ------------ ---------- ------------- ---------------- ----------
Total
comprehensive
loss for
the year - - - - - - - 901 3 425 (124,339) (123,010) 35 (122,975)
--------- --------- -------- ----------- -------------- -------- ------------- -------- -------- ------------ ---------- ------------- ---------------- ----------
Gain/loss
on currency
hedges
reclassified
to profit
or loss - - - - - - - (2,257) 2,257 - - - - -
Share based
payment charge - - - - - 168 - - - - - 168 - 168
---------
At 31 December
2020 58,057 - 93,080 272 (49,710) 3,740 9,177 (836) - (1,995) 93,385 205,170 1,694 206,864
Profit for
the year - - - - - - - - - - 31,001 31,001 218 31,219
Net hedging
gain on
interest
hedges
reclassified
to the profit
or loss - - - - - - - 278 - - - 278 - 278
Exchange
differences
on foreign
operations - - - - - - - - - (91) - (91) - (91)
--------- --------- -------- ----------- -------------- -------- ------------- -------- -------- ------------ ---------- ------------- ---------------- ----------
Total
comprehensive
gain for
the year - - - - - - - 278 - (91) 31,001 31,188 218 31,406
--------- --------- -------- ----------- -------------- -------- ------------- -------- -------- ------------ ---------- ------------- ---------------- ----------
Share based
payment charge
(Note 12) - - - - - (18) - - - - - (18) - (18)
Capital
reorganisation (46,445) - - - - - - - - - - (46,445) - (46,445)
Issue of
share capital
(Note 6) 18,505 46,445 9,253 - - - - - - - - 74,203 - 74,203
Share issue
costs - - (3,228) - - - - - - - - (3,228) - (3,228)
Cash settlement
of share-
based payments - - - - - (74) - - - - - (74) - (74)
At 31 December
2021 30,117 46,445 99,105 272 (49,710) 3,648 9,177 (558) - (2,086) 124,386 260,796 1,912 262,708
========= ========= ======== =========== ============== ======== ============= ======== ======== ============ ========== ============= ================ ==========
Consolidated statement of cash flows for the year ended 31
December
Notes 2021 2020
US$'000 US$'000
Net cash generated from operating
activities 14 40,511 44,268
Investing activities
Payments for additions of property
and equipment (7,898) (5,623)
Dry docking expenditure incurred (3,609) (7,600)
Interest received 9 15
Proceeds from disposal of property
and equipment - 299
Proceeds from disposal of assets
held for sale - 559
Net cash used in investing activities (11,498) (12,350)
Financing activities
Proceeds from issue of shares 27,758 -
Bank borrowings received 2,000 21,500
Repayment of bank borrowings (30,983) (12,075)
Interest paid on bank borrowings (12,950) (27,903)
Payment of issue costs on bank borrowings (3,615) (14,449)
Share issue costs paid (3,228) -
Principal elements of lease payments (2,342) (1,871)
Settlement of derivatives (1,033) (883)
Interest paid on leases (147) (193)
Dividends paid - (650)
Net cash used in financing activities (24,540) (36,524)
Net increase/(decrease) in cash
and cash equivalents 4,473 (4,606)
Cash and cash equivalents at the
beginning of the year 3,798 8,404
Cash and cash equivalents at the
end of the year 5 8,271 3,798
========= =========
Non - cash transactions
Recognition of deferred shares 46,445 -
Recognition of right-of-use asset 1,955 3,239
Capital accruals 408 585
Drydock accruals 302 411
Notes to the consolidated financial information for the year
ended 31 December 2021
1 Basis of preparation
Gulf Marine Services PLC ("GMS" or "the Company") is a company
which is limited by shares and is registered and incorporated in
England and Wales on 24 January 2014. The Company is a public
limited company with operations mainly in the Middle East and North
Africa (MENA), and Europe. The address of the registered office of
the Company is 107 Hammersmith Road, London, United Kingdom, W14
0QH. The registered number of the Company is 08860816.
The principal activities of GMS and its subsidiaries (together
referred to as "the Group") are chartering and operating a fleet of
specially designed and built vessels. All information in the notes
relate to the Group, not the Company unless otherwise stated.
The Company and its subsidiaries are engaged in providing
self-propelled, self-elevating support vessels, which provide a
stable platform for delivery of a wide range of services throughout
the total lifecycle of offshore oil, gas and renewable energy
activities and which are capable of operations in the Middle East
and other regions.
The financial information for the year ended 31 December 2020
does not constitute statutory accounts as defined in section 434 of
the Companies Act 2006. A copy of the statutory accounts for that
year has been delivered to the Registrar of Companies. The
independent auditor's report on the full financial statements for
the year ended 31 December 2020 was unqualified, however included a
material uncertainty in relation to the Company's ability to
continue as a going concern. No other statement was made under
section 498 of the Companies Act 2006.
The preliminary announcement does not constitute the Group's
statutory accounts for the year ended 31 December 2021, but is
derived from those accounts. Statutory accounts for the year ended
31 December 2021 were approved by the Directors on 12 May 2022 and
will be delivered to the Registrar of Companies following the
Company's Annual General Meeting. The independent auditor's report
on those financial statements was unqualified, did not draw
attention to any matters by way of emphasis and did not include a
statement under Section s498 (2) or (3) of the 2006 Companies
Act.
The 2021 Annual Report will be posted to shareholders in advance
of the Annual General Meeting.
While the financial information included in this preliminary
announcement has been prepared in accordance with the recognition
and measurement criteria of International Financial Reporting
Standards ("IFRSs"), this announcement does not itself contain
sufficient information to comply with the disclosure aspects of
IFRSs.
The consolidated preliminary announcement of the Group has been
prepared in accordance with IFRSs, IFRIC interpretations and the
Companies Act 2006 applicable to companies reporting under IFRSs.
The consolidated financial information has been prepared under the
historical cost convention, as modified by the revaluation of
certain financial assets and financial liabilities, including
derivative instruments, at fair value.
Going concern
The Group's Directors have assessed the Group's financial
position for a period through to June 2023 of not less than 12
months from the date of approval of the full year results and have
a reasonable expectation that the Group will be able to continue in
operational existence for the foreseeable future.
The material uncertainty over going concern that existed and was
previously disclosed as a significant judgment when the 31 December
2020 financial statements were approved on 21 May 2021 no longer
exists due to the successful issuance of equity in June 2021, which
removed the potential event of default on the Group's revised bank
facilities, as renegotiated in March 2021.
The renegotiation of bank facilities also resulted in a 40%
reduction in margin payable in 2021 and 2022, with the surplus cash
generated from these savings used to accelerate repayment of the
loan principal (refer to Note 7 for further details on the revised
terms of the bank facility).
As a result of the above refinancing in March 2021 and
subsequent equity raise in June 2021, the Directors no longer
consider going concern to be a critical accounting judgment as at
31 December 2021.
1 Basis of preparation (continued)
Going concern (continued)
The Group is exploring various contractual options available per
the current bank terms to take place by the end of 2022. There are
two options available which are either the raise of US$ 50 million
equity or the issuance of 87.6 million warrants giving potential
rights to 132 million shares if exercised. As at 31 December 2021,
the Board consider the more likely outcome will be the issuance of
warrants rather than the equity raise. PIK interest will
potentially accrue, only if the net leverage ratio is above 4.0
times. Based on the latest Board approved projections, the net
leverage ratio is expected to be below 4.0x and therefore no PIK
interest is expected.
The forecast used for Going Concern reflects management's key
assumptions including those around utilisation and vessel day rates
on a vessel-by-vessel basis. Specifically, these assumptions
are:
-- Average day rates across the fleet are assumed to be US$
28.6k for the 18-month period to 30 June 2023;
-- 90% forecast utilisation for the 18-month period to 30 June 2023;
-- Strong pipeline of tenders and opportunities for new
contracts that would commence during the forecast period.
As noted above the impact of COVID-19 has also been considered
in short-term forecasts approved by the Board which include
additional hotel and testing costs for offshore crew whilst in
quarantine. Terms and conditions of crew rotations have also been
amended and costs updated to reflect this. Rotations have been
extended for all crew to limit the number of times in quarantine
and the number of changeouts on the crew which increases the risk
of infection each time it occurs. All policies are in line with
Government and client guidelines for offshore activities.
Management note that the impact of COVID-19 has shown significant
signs of easing in Q1 2022 and therefore this is not expected to be
a long-term risk.
While the current situation regarding the war in Ukraine and
Russian sanctions described in note 15 remains uncertain, the
Directors believe the potential impact of the war, border closures
and resulting sanctions will not have a significant impact on
operations.
Brexit is not expected to have a significant effect on the
Group's operations as 12 of 13 vessels are in the MENA region.
The Group is expected to continue to generate positive operating
cash flows for the foreseeable future and has in place a committed
working capital facility of US$ 50.0 million, of which US$ 25.0
million can be utilised to support the issuance of performance
bonds and guarantees. The balance can be utilised to draw down
cash. US$ 21.5 million of this facility was utilised as at 31
December 2021, leaving US$ 3.5 million available for drawdown
(2020: US$ 3.5 million). There was a reduction to the cash element
of the working capital facility by US$ 5 million to US$ 20 million
on 31st March 2022. A payment of US$ 5 million was made by the
Group on the same day reducing the amount utilised to US$ 16.5
million, leaving US$ 3.5 million available for drawdown. The
working capital facility expires alongside the main debt facility
in June 2025.
The principal borrowing facilities are subject to covenants and
are measured bi-annually in June and December. Refer to note 7 for
further details.
The Group's forecasts, having taken into consideration
reasonable risks and downsides, indicate that its revised bank
facilities along with sufficient order book of contracted work
(currently secured 86% of revenue for FY 2022) and a strong
pipeline of near-term opportunities for additional work (a further
6% is at an advanced stages of negotiation captured in the Group's
backlog) will provide sufficient liquidity for its requirements for
the foreseeable future and accordingly the consolidated financial
information for the Group for the current period have been prepared
on a going concern basis.
A downside case was prepared using the following
assumptions:
-- no work-to-win in 2022;
-- a 22 percent reduction in work to win utilisation in H1 2023; and
-- a reduction in day-rates for an E-Class vessel assumed to
have the largest day rate, by 10% commencing from November 2022,
i.e. after expiry of the current secured period.
1 Basis of preparation (continued)
Going concern (continued)
Based on the above scenario, the Group would not be in breach of
its term loan facility, however, the net leverage ratio is forecast
to exceed 4.0 times as at 31 December 2022 for a period of 6 months
and therefore PIK interest of US$ 3.9 million would accrue in the
assessment period and has been included in the above forecast. Such
PIK would be settled as part of the bullet payment on expiry of the
Group's term loan facility in June 2025. The downside case is
considered to be severe but plausible and would still leave the
Group with $10m of liquidity and in compliance with the covenants
under the Group's banking facilities throughout the period until
the end of May 2023.
In addition to the above reasonably plausible downside
sensitivity, the Directors have also considered a reverse stress
test, where adjusted EBITDA has been sufficiently reduced to breach
the net leverage ratio as a result of a combination of reduced
utilisation and day rates, as noted below:
-- no work-to-win in 2022;
-- a 40 percent and 25 percent reduction in options utilisation
in 2022 and H1 2023 respectively;
-- a 48 percent reduction in work to win utilisation in H1 2023; and
-- a reduction in day-rates for an E-Class vessel assumed to
have the largest day rate, by 10% commencing from November 2022,
i.e. after expiry of the current secured period.
Based on the above scenario, net leverage ratio is forecast to
exceed 4.0 times at 31 December 2022 for a period of 6 months and
therefore PIK interest of US$ 3.9 million would accrue in the
assessment period and has been included in the above forecast. Such
PIK would be settled as part of the bullet payment on expiry of the
Group's term loan facility in June 2025. The net leverage ratio is
also breached at HY 2023.
Should circumstances arise that differ from the Group's
projections, the Directors believe that a number of mitigating
actions can be executed successfully in the necessary timeframe to
meet debt repayment obligations as they become due (refer note 7
for maturity profiles) and in order to maintain liquidity.
Potential mitigating actions include the following:
-- Reduction in client specific capex due to no mobilisation of
vessels of approximately US$ 4 million in 2022 and US$ 2.5 million
in H1 2023;
-- Vessels off hire for prolonged periods could be cold stacked
to minimise operating costs on these vessels at the rate of US$
35,000/month for K-Class and US$ 50,000/month for
S-Class/E-Class;
-- Reduction in overhead costs, particularly, bonus payments
estimated at US$ 125k per month; and
-- 2022 - H2 2024 voluntary payments could be deferred till H1
2025 when the bullet payment will be made as there would be less
cash available to help deleverage on a voluntary basis.
GMS remains cognisant of the wider context in which it operates
and the impact that climate change could have on the financial
statements of the Group.
2 Significant accounting policies
The significant accounting policies and methods of computation
adopted in the preparation of this financial information are
consistent with those followed in the preparation of the Group's
consolidated annual financial statements for the year ended 31
December 2020, except for the adoption of new standards and
interpretations effective as at 1 January 2021.
3 Key sources of estimation uncertainty and critical accounting judgements
In the application of the Group's accounting policies, the
Directors are required to make judgements, estimates and
assumptions about the carrying amounts of assets and liabilities
that are not readily apparent from other sources. The estimates and
associated assumptions are based on historical experience and other
factors that are considered to be relevant. Actual results may
differ from these estimates.
In applying the Group's accounting policies during the year,
there are no critical judgements.
3 Key sources of estimation uncertainty and critical accounting judgements (continued)
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period, or in the period of the revision and future
periods if the revision affects both current and future
periods.
The key assumptions concerning the future, and other key sources
of estimation uncertainty that may have a significant risk of
causing a material adjustment to the carrying value of assets and
liabilities within the next financial year are outlined below.
Impairment and reversal of previous impairment of property and
equipment
Management carried out an impairment assessment of property and
equipment for year ended 31 December 2021. Following this
assessment management determined that the recoverable amounts of
the cash generating units to which items of property and equipment
were allocated, being vessels and related assets, were most
sensitive to future day rates, vessel utilisation and discount
rate. It is reasonably possible that changes to these assumptions
within the next financial year could require a material adjustment
of the carrying amount of the Group's vessels.
Whilst the Group has revised certain assumptions for certain
vessels by more than 10% relative to prior year the average
increase across all vessels was less than 10%. Management would not
expect an assumption change of more than 10% across all vessels
within the next financial year, and accordingly believes that a 10%
sensitivity to day rates and utilisation is appropriate.
As at 31 December 2021, the total carrying amount of the
property and equipment, drydocking expenditure, and right of use
assets subject to estimation uncertainty was US$ 602.3 million
(2020: US$ 706.0 million). Refer to Note 5 for further details
including sensitivity analysis.
4 Property and equipment
Vessel spares,
Capital Land, building fitting and
Vessels work-in-progress and improvements other equipment Others Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Cost
At 1 January 2020 884,497 4,857 10,488 60,743 3,670 964,255
Additions - 6,208 - - - 6,208
Transfers 5,695 (7,138) - 1,163 280 -
Disposals (180) - (5,387) - (1,660) (7,227)
Write offs - - (5,101) (2,004) (323) (7,428)
At 31 December
2020 890,012 3,927 - 59,902 1,967 955,808
Additions - 8,306 - - - 8,306
Transfers 6,859 (7,191) - 332 - -
At 31 December
2021 896,871 5,042 - 60,234 1,967 964,114
-------- ------------------ ------------------ ----------------- -------- --------
4 Property and equipment (continued)
Vessel spares,
Capital Land, building fitting and
Vessels work-in-progress and improvements other equipment Others Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Accumulated
depreciation
At 1 January 2020 221,805 2,845 8,014 13,823 3,534 250,021
Eliminated on
disposal of
assets - - (3,269) - (1,586) (4,855)
Write off - - (5,101) (2,004) (323) (7,428)
Depreciation
expense 22,444 - 356 2,955 82 25,837
Impairment 87,156 - - - - 87,156
At 31 December
2020 331,405 2,845 - 14,774 1,707 350,731
Depreciation
expense 19,492 - - 3,244 80 22,816
Reversal of
impairment (14,959) - - - - (14,959)
At 31 December
2021 335,938 2,845 - 18,018 1,787 358,588
--------- ----------------- ------------------ ----------------- -------- ---------
Carrying amount
At 31 December
2021 560,933 2,197 - 42,216 180 605,526
--------- ----------------- ------------------ ----------------- -------- ---------
At 31 December
2020 558,607 1,082 - 45,128 260 605,077
--------- ----------------- ------------------ ----------------- -------- ---------
Depreciation amounting to US$ 22.8 million (2020: US$ 25.8
million) has been charged to the profit and loss, of which US$ 22.7
million (2020: US$ 25.5 million) was allocated to cost of sales.
The remaining balance of the depreciation charge is included in
general and administrative expenses.
Vessels with a total net book value of US$ 560.9 million (2020:
US$ 558.6 million), have been mortgaged as security for the loans
extended by the Group's banking syndicate (Note 7).
4 Property and equipment (continued)
Impairment
In accordance with the requirements of IAS 36 - Impairment of
Assets, the Group assesses at each reporting period if there is any
indication an additional impairment would need to be recognised for
its vessels and related assets, or if the impairment loss
recognised in prior periods no longer exist or had decreased in
quantum. Such indicators can be from either internal or external
sources. In circumstances in which any indicators of impairment or
impairment reversal are identified, the Group performs a formal
impairment assessment to evaluate the carrying amounts of the
Group's vessels and their related assets, by comparing against the
recoverable amount to identify any impairments or reversals. The
recoverable amount is the higher of the vessels and related assets'
fair value less costs to sell and value in use.
During the years ended 31 December 2019 and 31 December 2020,
the market capitalisation of the Group continued to be lower than
the net asset value as the Group had been unable to achieve the
recovery previously anticipated following ongoing challenging
market conditions and uncertainty in respect of the Group's capital
structure. These conditions and specifically the continued low
share price were identified as indicators of potential impairment
of the Group's vessels and their related assets. As such a full
impairment review of each vessel and their related assets was
undertaken in both those years. Based on such review, management
had recognised an impairment loss of US$ 59.1 million and US$ 87.2
million on certain of the Group's vessels during the years ended
2019 and 2020 respectively. Of the 13 vessels in existence as at 31
December 2021, impairment losses had been recognised on 9 vessels
while no impairment loss had been recognised on the remaining 4
vessels. The recoverable values in both the years were measured
using value in use computations. As permitted under IAS 36.105,
none of the above impairment losses were allocated to the assets
related to the vessels as management concluded that doing so would
have reduced their carrying values to an amount below their
respective recoverable values on a standalone basis.
During the year ended 31 December 2021, external factors, such
as the improvement in general market conditions and the sustained
increase in oil prices/related activity; and internal factors,
specifically, the further increase in management's assumptions in
relation to long-term day rates beyond that previously assumed in
the prior year impairment assessments, suggested that there were
indications that the value of assets may have increased as at 31
December 2021 leading to potential reversals of historic impairment
losses. Management's view of the further improvement in the
long-term market outlook was supported by a recent independent
market and fleet valuation report that management obtained from a
leading consultant with extensive experience of the subsea
equipment support vessel markets in which the Group operates.
Additionally, management identified certain indicators of
possible additional impairment, such as a higher discount rate
assumption, a market capitalisation that remains below the Group's
net assets, and lower actual revenues than prior year forecasts for
some vessels.
As a result of the above factors and as required by IAS 36,
management performed a formal impairment assessment as at 31
December 2021 for all vessels.
Management has again obtained an independent broker valuation of
its vessels as at 2 February 2022 for the purpose of its banking
covenant compliance requirements. However, consistent with prior
years, management does not consider these broker valuations to
represent a reliable estimate of the fair value for the purpose of
assessing the recoverable value of the Group's vessels, noting that
there have been limited "willing buyer and willing seller"
transactions in the current offshore vessel market on which such
values could reliably be based. Due to these inherent limitations,
management has again concluded that recoverable amount should be
based on value in use.
The impairment review was performed for each cash-generating
unit, by identifying the value in use of each vessel and associated
spares fittings, capitalised dry-docking expenditure and
right-of-use assets relating to operating equipment used on the
fleet, based on management's projections of future utilisation, day
rates and associated cash flows.
4 Property and equipment (continued)
Impairment (continued)
The projection of cash flows related to vessels and their
related assets is complex and requires the use of a number of
estimates, the primary ones being future day rates, vessel
utilisation and discount rate.
In estimating the value in use, management estimated the future
cash inflows and outflows to be derived from continuing use of each
vessel and its related assets for the first four years based on its
approved budgets and forecasts. The terminal value cash flows
(i.e., those beyond the 4-year period) were estimated based on
terminal value mid-cycle day rates and utilisation levels
calculated by looking back as far as 2014, when the market was at
the top of the cycle through to current levels as the industry
starts to emerge out of the bottom of the cycle, adjusted for
anomalies. Such long-term forecasts also took account of the
outlook for each vessel having regard to their specifications
relative to expected customer requirements, as well as new
information obtained from recent external publications and reports
and about broader long-term trends including climate change.
The near-term assumptions used to derive future cash flows
reflect contracted rates where applicable and thereafter the market
recovery from the COVID-19 pandemic and current oil price
environment. Though the Group also operates in the North Sea, its
core market in the long term is expected to remain in the Middle
East which, in turn, is expected to continue to benefit from the
low production costs for oil and gas in the region, the current
appetite of NOCs to increase production and the reliance the local
governments have on revenues derived from oil and gas.
At the same time, as an operator of state-of-the-art Subsea
Equipment Support Vessels in both the oil and gas and renewables
industries (offshore wind market) with experience in multiple
geographical areas, the Group's fleet offers significant
operational flexibility. Any increased demand in offshore
renewables in the long-term as a result of climate change concerns
will present the Group future opportunities to deploy more of its
fleet into this market without any major additional capital
expenditure on the vessels. Hence, the Group believes that it will
not face any significant impact on the demand for its vessels due
to climate change implications beyond the extent reflected in
management's assumptions and sensitivities.
In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate.
The discount rate of 12.6% (2020: 10.56%) is computed on the basis
of the Group's weighted average cost of capital. The cost of equity
incorporated in the computation of the discount rate is based on
risk-free rate, equity risk premium and industry sector average
betas, and reflects specific adjustments for country risk in the
countries the Group operates in, the Group's relatively small size
and a Group specific risk premium reflecting any additional risk
factors relevant to the Group. The cost of debt is based on the
Group's actual cost of debt. The weighted average is computed based
on the industry capital structure. In concurrence with external
advisors, management reviewed and narrowed down the peer companies
used to compute the discount rate and measured the overall impact
of existing and additional risks related to the Group, resulting in
an increase of the WACC to 12.6% as noted above. Whilst this
exceeded the reasonably possible sensitivity disclosed in the prior
year, for the reasons disclosed in the key assumptions sensitivity
section on page 25 onwards, management still consider a 1%
sensitivity on discount rate to be appropriate.
The impairment review led to the recognition of an aggregate
impairment reversal of US$ 14.96 million. The key reason for the
reversal is an increase in management's long-term assumptions for
day rates compared to prior year. This increase is partially offset
by an overall decrease in long-term utilisation assumptions and an
increase in discount rate from 10.56% to 12.6%, which is computed
on the basis explained in earlier paragraph.
In accordance with the Companies Act 2006, section 841(4), the
following has been considered:
a) the directors have considered the value of some/all of the
fixed assets of the Group without revaluing them; and
b) the Directors are satisfied that the aggregate value of those
assets are not less than the aggregate amount at which they were
stated in the Group's accounts.
4 Property and equipment (continued)
Impairment (continued)
Details of the impairment reversal by cash-generating unit,
along with the associated recoverable amount reflecting its value
in use, are provided below:
Impairment Recoverable Impairment Recoverable
Reversal Amount Amount Amount
Cash Generating Vessel 2021 2021 2020 2020
Unit (CGUs) class US$'000 US$'000 US$'000 US$'000
------------------- ---------- ----------- ------------ ----------- ------------
Endurance E-Class 9,013 66,289 25,472 56,605
Endeavour E-Class 558 73,144 - 74,771
Enterprise E-Class 536 78,007 554 77,322
Evolution E-Class - 83,481 - 88,012
------------------- ---------- ----------- ------------ ----------- ------------
E-class 10,107 300,921 26,026 296,710
------------------------------- ----------- ------------ ----------- ------------
Shamal S-Class - 62,614 - 70,214
Scirocco S-Class - 65,140 - 71,545
Sharqi S-Class - 68,431 - 79,276
------------------- ---------- ----------- ------------ ----------- ------------
S-class - 196,185 - 221,035
------------------------------- ----------- ------------ ----------- ------------
Kamikaze K-Class 244 21,193 258 19,124
Kikuyu K-Class 910 14,735 13,401 12,050
Kawawa K-Class 1,373 13,597 9,009 12,891
Kudeta K-Class 409 13,967 13,722 14,230
Keloa K-Class 1,916 13,225 24,740 12,463
Pepper K-Class - 58,084 - 75,518
------------------- ---------- ----------- ------------ ----------- ------------
K-class 4,852 134,801 61,130 146,276
------------------------------- ----------- ------------ ----------- ------------
Total 14,959 631,907 87,156 664,021
------------------------------- ----------- ------------ ----------- ------------
The below table compares the long-term day rate and utilisation
assumptions used to forecast future cash flows from 2026 for the
remainder of each vessel's useful economic life against those
secured for 2022:
Day rate change Utilisation
Vessels class % on 2022 levels change %
on 2022 levels
----------------- ------------------ ----------------
E-Class CGUs 48% (10%)
S-Class CGUs 23% (3%)
K-Class CGUs 7% (15%)
----------------- ------------------ ----------------
The below table compares the long-term day rate and utilisation
assumptions used to forecast future cash flows during the year
ended 31 December 2021 against the Group's long-term assumptions in
the impairment assessment performed as at 31 December 2020:
Long term Long term utilisation
day rate change change % on 2020
Vessels class % on 2020 assumptions assumptions
----------------- ----------------------- ----------------------
E-Class CGUs 29% (6%)
S-Class CGUs 2% (4%)
K-Class CGUs (5%) (2%)
----------------- ----------------------- ----------------------
4 Property and equipment (continued)
Impairment (continued)
The impairment reversals recognised on the Group's K-Class fleet
(excluding Pepper which was never impaired) primarily reflect a
modest increase in short-term forecast day rates and utilisation
for these vessels as the market begins to recover and the Group
experiences increased demand. The NOCs have indicated a preference
for vessels that are larger, and in some cases, particularly in
Qatar and Saudi Arabia, able to work in deeper water than the
K-Class are capable of. As a result, the main use of these vessels
is now expected to be on contracts for engineering, procurement and
construction ("EPC") clients, which are typically shorter in
duration which is likely to impact utilisation with short gaps
expected between contracts and only modest improvements, if any, in
day rates due to a smaller pipeline of future opportunities. These
factors are reflected in the long-term forecasts of day rates and
utilisation for these vessels, similar to prior year.
The impairment reversals recognised on three E-Class vessels
reflect further increases primarily in long-term assumptions on day
rates relative to the Group's previous forecasts, informed by the
recent independent market and fleet valuation report obtained by
the Group, as described above. The forecast 48% increase in rates
relative to 2022 reflects improving long-term market conditions
coupled with a lack of supply of vessels with the capabilities of
the E-Class such as their large crane capacities and superior leg
length. As these vessels are the most capable of all the vessels in
the fleet it is anticipated they will be able to demand higher day
rates going forward.
No impairment or reversals have been identified for the
remaining five cash-generating units i.e., one K-Class vessel, one
E-class and three S-Class vessels.
Key assumption sensitivities
The Group has conducted an analysis of the sensitivity of the
impairment test to reasonably possible changes in the key
assumptions (long-term day rates, utilisation and pre-tax discount
rates) used to determine the recoverable amount for each vessel as
follows:
Day rates
Day rates higher Day rates lower by
by 10% 10%
Impact (in Number Impact (in Number of
US$ millions) of vessels US$ millions) vessels
Vessels class impacted impacted
--------------- --------------- ------------ --------------- ----------
Impairment (Impairment)
reversal of*
of*
E-Class CGUs 43.9 3 (33.2) 4
S-Class CGUs - - (6.3) 1
K-Class CGUs 20.6 4 (16.7) 6
--------------- --------------- ------------ --------------- ----------
Total fleet 64.5 7 (56.2) 11
--------------- --------------- ------------ --------------- ----------
*This reversal of impairment / (impairment) is calculated on
carrying values before the adjustment for impairment reversals in
2021.
The total recoverable amounts of the Group's vessels as at 31
December 2021 would have been US$ 733.5 million under the increased
long-term day rates sensitivity and US$ 530.3 million for the
reduced day rate sensitivity.
4 Property and equipment (continued)
Impairment (continued)
Key assumption sensitivities (continued)
Utilisation
Utilisation higher Utilisation lower
by 10% by 10%
Impact (US$m) Number Impact (US$m) Number
of vessels of vessels
Vessels class impacted impacted
--------------- -------------- ------------ -------------- ------------
Impairment (Impairment)
reversal of*
of*
E-Class CGUs 38.8 3 (33.2) 4
S-Class CGUs - - (7.9) 2
K-Class CGUs 19.9 4 (16.7) 6
--------------- -------------- ------------ -------------- ------------
Total fleet 58.7 7 (57.8) 12
--------------- -------------- ------------ -------------- ------------
* This reversal of impairment / (impairment) is calculated on
carrying values before the adjustment for impairment reversals in
2021.
The total recoverable amounts of the Group's vessels as at 31
December 2021 would have been US$ 701.5 million under the increased
utilisation sensitivity and US$ 530.3 million for the reduced
utilisation sensitivity.
Whilst the Group has revised certain assumptions for certain
vessels by more than 10% relative to prior year the average
increase across all vessels was less than 10%. Management would not
expect an assumption change of more than 10% across all vessels
within the next financial year, and accordingly believes that a 10%
sensitivity to day rates and utilisation is appropriate.
Discount rate
A further sensitivity was conducted where a 1% increase and
decrease was applied to the pre-tax discount rate. As mentioned in
Note 3 management reviewed and narrowed down the peer companies
used to compute the discount rate following consultation with
external advisors. The same companies will be used going forward as
these are deemed to be more specific to GMS's capital structure and
therefore management does not anticipate significant changes beyond
1% to the discount rate going forward.
Discount rate higher Discount rate lower
by 1% by 1%
Impact (US$m) Number Impact (US$m) Number
of vessels of vessels
Vessels class impacted impacted
--------------- -------------- ------------ -------------- ------------
(Impairment)/ Impairment
impairment reversal of*
reversal
of*
E-Class CGUs (9.1) 4 26.9 3
S-Class CGUs (1.1) 1 - -
K-Class CGUs 0.5 5 8.2 4
--------------- -------------- ------------ -------------- ------------
Total fleet (9.7) 10 35.1 7
--------------- -------------- ------------ -------------- ------------
*This (impairment) / impairment reversal is calculated on
carrying values before the adjustment for impairment reversals in
2021.
The total recoverable amounts of the vessels as at 31 December
2021 would have been US$ 679.6 million under the reduced discount
rate sensitivity and US$ 589.7 million for the increased discount
rate sensitivity.
5 Cash and cash equivalents
2021 2020
US$'000 US$'000
Interest bearing
Held in UAE banks 639 55
Non-interest bearing
Held in UAE banks 778 1,026
Held in banks outside UAE 6,854 2,717
-------- --------
Total cash at bank and in hand 8,271 3,798
-------- --------
6 Share capital
Ordinary shares at GBP0.02 per share
Number of ordinary Ordinary
shares shares
(Thousands) US$'000
At 1 January 2020 and 1 January 2021 350,488 58,057
Placing of new shares 665,927 18,505
Capital reorganisation - (46,445)
As at 31 December 2021 1,016,415 30,117
------------------- ---------
Deferred shares at GBP0.08 per share
Number of ordinary Ordinary
shares shares
(Thousands) US$'000
At 1 January 2020 and 1 January 2021 - -
Capital reorganisation 350,488 46,445
As at 31 December 2021 350,488 46,445
------------------- ---------
Prior to an equity raise on 28 June 2021, the Group underwent a
capital reorganisation where all existing ordinary shares with a
nominal value of 10 pence per share were subdivided and
re-designated into 1 ordinary share with a nominal value of 2 pence
and 1 deferred share with a nominal value of 8 pence each. The
previously recognised share capital balance relating to the old 10p
ordinary shares was allocated pro rata to the new subdivided 2p
ordinary shares and 8p deferred shares.
The deferred shares have no voting rights and no right to the
profits generated by the Group. On winding-up or other return of
capital, the holders of deferred shares have extremely limited
rights. The Group has the right but not the obligation to buy back
all of the Deferred Shares for an amount not exceeding 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: $nil) have been
deducted from the share premium account.
7 Bank borrowings
Secured borrowings at amortised cost are as follows:
2021 2020
US$'000 US$'000
Term loans 358,026 388,533
Working capital facility 21,500 21,500
379,526 410,033
-------- ---------
Bank borrowings are split between hedged and unhedged amounts as
follows;
2021 2020
US$'000 US$'000
Hedged bank borrowing via Interest Rate Swap* 30,769 38,462
Unhedged bank borrowings 348,757 371,571
379,526 410,033
-------- --------
*This is an economic hedge and not accounted for in accordance
with IFRS 9, Financial Instruments. The Group uses an IRS to hedge
a portion of the Group's floating rate liability by converting
LIBOR to a fixed rate.
Bank borrowings are presented in the consolidated statement of
financial position as follows:
2021 2020
US$'000 US$'000
Non-current portion
Bank borrowings 353,429 379,009
Current portion
Bank borrowings - scheduled repayments within
one year 26,097 31,024
379,526 410,033
-------- --------
As noted in the 2020 annual report, on 31 December 2020, the
Group's banking syndicate agreed to extend certain obligations on
the Group, which it was otherwise required to have met, including
the requirement to issue warrants to banks and accrue Payment in
Kind (PIK) interest.
This meant the Group was not in an event of default as at 31
December 2020. This was further extended on 27 January 2021 and 25
February 2021. As the waivers received led to revisions to the
timing of payments, management assessed the fair value of the
remaining cashflows.
On 31 March 2021, the Group amended the terms of its loan
facility with its banking syndicate. The amended terms (see below)
were significantly different compared to the original loan.
Management determined that the Group's loan facility was
substantially modified and accordingly the old loan facility was
extinguished, and the new facility recognised.
A gain of US$ 6.3 million (2020: US$ 1.1 million) was recognised
in the profit and loss reflecting the waiver of PIK interest
otherwise payable during the first quarter of 2021, the
remeasurement of the debt to fair value as at the date of the
substantial modification, and the impact of a change in the
forecast voluntary repayment of the debt. US$ 3.2 million of costs
incurred in renegotiating the new facility were expensed (2020: US$
15.8 million).
The remeasurement of the bank borrowings was determined in
accordance with generally accepted principles based on a discounted
cash flow analysis, using appropriate effective interest rates.
7 Bank borrowings (continued)
The principal terms of the outstanding facility as at 31
December 2021 are as follows:
-- The facility's main currency is US$ and is repayable with a
margin at 3% up to 31 December 2022 at which point margin is based
on a ratchet depending on leverage levels (2020: margin ratchet
based on leverage levels) and final maturity in June 2025 (31
December 2020: June 2025).
-- The revolving working capital facility amounts to US$ 50.0
million. USD$ 25.0 million of the working capital facility is
allocated to performance bonds and guarantees and US$ 25.0 million
is allocated to cash of which US$ 21.5 million was drawn as at 31
December 2021 (31 December 2020: US$ 21.5 million), leaving US$ 3.5
million available for drawdown (31 December 2020: US$ 3.5
million).
-- The facility remains secured by mortgages over its whole
fleet, with a net book value at 31 December 2021 of US$ 560.9
million (31 December 2020: US$ 558.6 million) (Note 4).
Additionally, gross trade receivables, amounting to US$ 43.0
million (31 December 2020: US$ 24.2 million) have been assigned as
security against the loans extended by the Group's banking
syndicate (Note 7).
-- The Group has also provided security against gross cash
balances, being cash balances amounting to US$ 8.3 million (31
December 2020: US$ 3.8 million) (Note 5) before the restricted
amounts related to visa deposits held with the Ministry of Labour
in the UAE of US$ 39K (2020: US$ 95K) included in trade and other
receivables, which have been assigned as security against the loans
extended by the Group's banking syndicate.
-- The amended terms contain contingent conditions such that if
an equity raise of US $75.0 million in aggregate does not take
place by 31 December 2022, PIK interest would potentially accrue,
only if leverage is above 4.0x and warrants would be due to the
banking syndicate, refer to Note 12 for details of the valuation of
the contract to issue warrants.
The facility is subject to certain financial covenants
including; Debt Service Cover; Interest Cover; and Net Leverage
Ratio; which are tested bi-annually in June and December. As at 31
December 2021 the Group were required to achieve a net leverage
ratio lower than 6.1x, interest cover with a minimum ratio of 1.2x
and service cover with a minimum ratio of 2.5x. There are also
additional covenants relating to general and administrative costs,
capital expenditure and Security Cover (loan to value) which are
tested annually in December. In addition, there are restrictions to
payment of dividends until the net leverage ratio falls below 4.0
times. All financial covenants assigned to the Group's debt
facility, described above were met as of 31 December 2021.
Management considers the carrying amount of the Group's bank
borrowings approximates its fair value as at 31 December 2021.
7 Bank borrowings (continued)
Outstanding amount
---------------------------------
Current Non-current Total Security Maturity
-------- ------------ --------- --------- ----------
US$'000 US$'000 US$'000
31 December 2021:
Term loan - scheduled repayments within one
year 26,097 - 26,097 Secured June 2025
Term loan - scheduled repayments within more
than one year - 331,929 331,929 Secured June 2025
Working capital facility - scheduled repayment
more than one year - 21,500 21,500 Secured June 2025
26,097 353,429 379,526
-------- ------------ ---------
31 December 2020:
Term loan - scheduled repayments within one
year 9,524 - 9,524 Secured June 2025
Term loan - scheduled repayments within more
than one year - 379,009 379,009 Secured June 2025
Working capital facility - scheduled repayment
within one year 21,500 - 21,500 Secured June 2025
31,024 379,009 410,033
-------- ------------ ---------
8 Segment reporting
Management have identified that the Directors and senior
management team are the chief operating decision makers in
accordance with the requirements of IFRS 8 'Operating Segments'.
Segment performance is assessed based upon adjusted gross
profit/(loss), which represents gross profit/(loss) before
depreciation and amortisation and loss on impairment of assets. The
reportable segments have been identified by Directors and senior
management based on the size and type of asset in operation.
The operating and reportable segments of the Group are (i)
K-Class vessels, which include the Kamikaze, Kikuyu, Kawawa,
Kudeta, Keloa and Pepper vessels (ii) S-Class vessels, which
include the Shamal, Scirocco and Sharqi vessels, (iii) E-Class
vessels, which include the Endeavour, Endurance, Enterprise and
Evolution vessels, and (iv) Other vessels, considered non-core
assets, which does not form part of the K, S or E Class vessels
segments. The composition of the Other vessels segment, which are
non-core assets, was amended in 2018.
All of these operating segments earn revenue related to the
hiring of vessels and related services including charter hire
income, messing and accommodation services, personnel hire and hire
of equipment. The accounting policies of the operating segments are
the same as the Group's accounting policies described in Note
2.
Segment adjusted
Revenue gross profit/(loss)
-------------------------------------------------------------------- ------------------------------------------
2021 2020 2021 2020
US$'000 US$'000 US$'000 US$'000
K-Class vessels 43,027 40,947 26,214 25,349
E-Class vessels 38,680 29,407 25,104 12,676
S-Class vessels 33,420 32,136 22,590 22,210
Other vessels - 2 - (10)
115,127 102,492 73,908 60,225
-------------- -------------- --------------- -------------------------
Less:
Depreciation charged
to cost of
sales (22,738) (25,524)
Amortisation charged
to cost of
sales (5,503) (3,073)
Reversal of
impairment/(impairment
loss) 14,959 (87,156)
Gross profit/ (loss) 60,626 (55,528)
Other general and
administrative
expenses (12,272) (12,632)
Finance expense (14,463) (46,740)
Foreign exchange loss,
net (1,002) (993)
Other income 28 257
Finance income 9 15
Restructuring costs - (2,492)
Exceptional legal costs - (3,092)
Loss on disposal of
property and
equipment - (2,073)
Gain on disposal of
assets held for
sale - 259
Profit/(loss) for
the year before
taxation 32,926 (123,019)
--------------- ----------------
The total revenue from reportable segments which comprises the
K-, S- and E-Class vessels was US$ 115.1 million (2020: US$ 102.5
million). The Other vessels segment does not constitute a
reportable segment per IFRS 8 Operating Segments.
Segment revenue reported above represents revenue generated from
external customers. There were no inter-segment sales in the
years.
8 Segment reporting (continued)
Segment assets and liabilities, including depreciation,
amortisation and additions to non-current assets, are not reported
to the chief operating decision makers on a segmental basis and are
therefore not disclosed.
Information about major customers
During the year, four customers (2020: two) individually
accounted for more than 10% of the Group's revenues. The related
revenue figures for these major customers, the identity of which
may vary by year was US$ 13.4 million, US$ 16.6 million, US$ 42.0
million and US$ 18.6 million (2020: US$ 39.3 million and US$ 17.7
million). The revenue from these customers is attributable to the
E-Class vessels, S-Class vessels and K-Class vessels reportable
segments.
Geographical segments
Revenue by geographical segment is based on the geographical
location of the customer as shown below.
2021 2020
US$'000 US$'000
United Arab Emirates 58,019 53,363
Saudi Arabia 21,376 17,745
Qatar 22,591 19,047
Total - Middle East and North Africa 101,986 90,155
-------------- --------------
United Kingdom 10,392 5,353
Rest of Europe 2,749 6,984
Total - Europe 13,141 12,337
-------------- --------------
Worldwide Total 115,127 102,492
-------------- --------------
Type of work
The Group operates in both the oil and gas and renewables
sector. Oil and gas revenues are driven from both client operating
cost expenditure and capex expenditure. Renewables are primarily
driven by windfarm developments from client expenditure. Details
are shown below.
2021 2020
US$'000 US$'000
Oil and Gas 101,986 90,196
Renewables 13,141 12,296
Total 115,127 102,492
-------------- --------------
8 Segment reporting (continued)
Type of work (continued)
A reversal of impairment of US$ 15.0 million (2020: impairment
of US$ 87.2 million) was recognised in respect of property and
equipment (Note 4). These (reversals of impairment)/impairment
charge were attributable to the following reportable segments:
2021 2020
US$'000 US$'000
K-Class vessels (4,852) 61,130
S-Class vessels - -
E-Class vessels (10,107) 26,026
Other vessels - -
(14,959) 87,156
--------------- --------------
K-Class S-Class E-Class Other Total
vessels vessels vessels vessels
US$'000 US$'000 US$'000 US$'000 US$'000
2021
Depreciation charged
to cost of sales 4,739 5,842 12,037 120 22,738
Amortisation charged
to cost of sales 2,759 848 1,896 - 5,503
Reversal of impairment
charge (4,852) - (10,107) - (14,959)
2020
Depreciation charged
to cost of sales 7,432 5,807 12,092 193 25,524
Amortisation charged
to cost of sales 1,863 605 605 - 3,073
Impairment charge 61,130 - 26,026 - 87,156
9 Presentation of adjusted non-GAAP results
The following table provides a reconciliation between the
Group's adjusted non-GAAP and statutory financial results:
Year ended 31 December Year ended 31 December
2021 2020
----------------------------------------- --------------------------------------
Adjusted Adjusted
non-GAAP Adjusting Statutory non-GAAP Adjusting Statutory
results items total results items total
--------- -------------- -------------- ---------- ---------- -------------
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Revenue 115,127 - 115,127 102,492 - 102,492
Cost of sales
- Cost of sales
before
depreciation,
amortisation
and
impairment (41,219) - (41,219) (42,267) - (42,267)
* Depreciation and amortisation (28,241) - (28,241) (28,597) - (28,597)
Reversal of
impairment/
(impairment
loss)* - 14,959 14,959 - (87,156) (87,156)
--------- -------------- -------------- ---------- ---------- -------------
Gross profit/(loss) 45,667 14,959 60,626 31,628 (87,156) (55,528)
General and
administrative
* Amortisation of IFRS 16, Leases (2,410) - (2,410) (2,543) - (2,543)
* Depreciation (78) - (78) (313) - (313)
* Other administrative costs (9,784) - (9,784) (9,776) - (9,776)
Restructuring
costs** - - - - (2,492) (2,492)
Exceptional
legal costs*** - - - - (3,092) (3,092)
--------- -------------- -------------- ---------- ---------- -------------
Operating profit/(loss) 33,395 14,959 48,354 18,996 (92,740) (73,744)
Finance income 9 - 9 15 - 15
Finance expense (12,737) - (12,737) (30,495) - (30,495)
Cost to acquire
new bank facility**** - (3,165) (3,165) - (15,797) (15,797)
Fair value adjustment
on
recognition
of new debt
facility***** - 1,439 1,439 - (448) (448)
Other income 28 - 28 257 - 257
Loss on disposal
of property
plant and equipment - - - (2,073) - (2,073)
Gain on disposal
of assets held
for sale - - - 259 - 259
Foreign exchange
loss, net (1,002) - (1,002) (993) - (993)
Profit/(loss)
before taxation 19,693 13,233 32,926 (14,034) (108,985) (123,019)
Taxation charge (1,707) - (1,707) (1,285) - (1,285)
--------- -------------- -------------- ---------- ---------- ----------
Profit/(loss)
for the year 17,986 13,233 31,219 (15,319) (108,985) (124,304)
Profit/(loss)
attributable
to:
Owners of the
Company 17,768 13,233 31,001 (15,354) (108,985) (124,339)
Non-controlling
interests 218 - 218 35 - 35
Gain/(loss)
per share (basic) 2.57 1.91 4.48 (4.38) (31.10) (35.48)
--------- -------------- -------------- ---------- ---------- ----------
Gain/(loss)
per share (diluted) 2.55 1.91 4.46 (4.38) (31.10) (35.48)
--------- -------------- -------------- ---------- ---------- ----------
Supplementary
non
statutory information
Operating profit/
(loss) 33,395 14,959 48,354 18,996 (92,740) (73,744)
Add: Depreciation
and
amortisation 30,729 - 30,729 31,453 - 31,453
--------- ---------- ---------- --------- ---------- ----------
Adjusted EBITDA 64,124 14,959 79,083 50,449 (92,740) (42,291)
--------- ---------- ---------- --------- ---------- ----------
9 Presentation of adjusted non-GAAP results (continued)
* The reversal of impairment credit/impairment charge on certain
vessels and related assets have been added back to gross
profit/(loss) to arrive at adjusted gross profit for the year ended
31 December 2021 and 2020 (refer to Note 4 for further details).
Management have adjusted this due to the nature of the transaction
which management believe is not directly related to operations
management are able to influence. This measure provides additional
information on the core profitability of the Group.
** Restructuring costs incurred are not considered part of the
regular underlying performance of the business and so have been
added back to arrive at adjusted loss for the year ended 31
December 2020. Management have adjusted this due to them being one
off in nature. This measure provides additional information in
assessing the Group's total performance that management is more
directly able to influence and on a basis comparable from year to
year.
*** Exceptional legal costs incurred are not considered part of
the regular underlying performance of the business and so have been
added back to arrive at adjusted loss for the year ended 31
December 2020. Management have adjusted this due to them being one
off in nature. This measure provides additional information in
assessing the Group's total performance that management is more
directly able to influence and on a basis comparable from year to
year.
**** Costs incurred to arrange a new bank facility have been
added back to loss before taxation to arrive at adjusted
profit/(loss) for the year ended 31 December 2021 and 31 December
2020. Management have adjusted this due to both the nature of the
transaction and the incidence of these transactions occurring.
Costs incurred to arrange a new bank facility are not related to
the profitability of the Group which management are able to
influence and are typically only incurred when a refinance takes
place. This measure provides additional information in assessing
the Group's total performance that management is more directly able
to influence and on a basis comparable from year to year.
***** The fair value adjustment on recognition of the new loan
has been added back to profit/(loss) before taxation to arrive at
adjusted loss for the year ended 31 December 2021 and 2020.
Management have adjusted this due to them being one off in nature.
This measure provides additional information in assessing the
Group's total performance that management is more directly able to
influence and on a basis comparable from year to year.
9 Presentation of adjusted non-GAAP results (continued)
Year ended 31 December Year ended 31 December
2021 2020
Adjusted Adjusted
non-GAAP Adjusting Statutory non-GAAP Adjusting Statutory
results items total results items total
----------------- -------------------- ------------------- -------------------- ------------------- ---------------------- ------------------
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
----------------- -------------------- ------------------- -------------------- ------------------- ---------------------- ------------------
Cashflow
reconciliation:
Profit/(loss)
for the year 17,986 13,233 31,219 (15,319) (108,985) (124,304)
Adjustments
for:
(Reversal of
impairment)/
impairment
loss
(Note 4)* - (14,959) (14,959) - 87,156 87,156
Cost to acquire
new bank
facility** - 3,165 3,165 - 15,797 15,797
Fair value
adjustment
on
recognition
of new debt
facility*** - (1,439) (1,439) - 448 448
Finance expenses 12,737 - 12,737 30,495 - 30,495
Other
adjustments
(Note 14) 32,502 - 32,502 34,343 - 34,343
-------------------- ------------------- -------------------- ------------------- ---------------------- ------------------
Cash flow from
operating
activities
before movement
in working
capital 63,225 - 63,225 49,519 (5,584) 43,935
Change in
trade
and
other
receivables (17,090) - (17,090) 4,866 - 4,866
Change in
trade
and
other
payables (4,773) - (4,773) (1,973) (1,797) (3,770)
-------------------- ------------------- -------------------- ------------------- ---------------------- ------------------
Cash generated
from
operations
(Note
14) 41,362 - 41,362 52,412 (7,381) 45,031
Income tax paid (849) - (849) (763) - (763)
-------------------- ------------------- -------------------- ------------------- ---------------------- ------------------
Net cash flows
generated
from operating
activities 40,513 - 40,513 51,649 (7,381) 44,268
-------------------- ------------------- -------------------- ------------------- ---------------------- ------------------
Net cash flows
used in
investing
activities (11,498) - (11,498) (12,350) - (12,350)
-------------------- ------------------- -------------------- ------------------- ---------------------- ------------------
Payment of issue
costs on bank
borrowings (450) (3,165) (3,615) (115) (14,334) (14,449)
Other cash
flows
used in
financing
activities (20,927) - (20,927) (22,075) (22,075)
-------------------- ------------------- -------------------- ------------------- ---------------------- ------------------
Net cash flows
used in
financing
activities (21,377) (3,165) (24,542) (22,190) (14,334) (36,524)
-------------------- ------------------- -------------------- ------------------- ---------------------- ------------------
Net change
in cash and
cash
equivalents 7,638 (3,165) 4,473 17,109 (21,715) (4,606)
-------------------- ------------------- -------------------- ------------------- ---------------------- ------------------
* The reversal of impairment credit/impairment charge on certain
vessels and related assets have been added back to Cash flow from
operating activities before movement in working capital for the
year ended 31 December 2021 and 2020 (refer to Note 4 for further
details).
** Costs incurred to arrange a new bank facility have been added
back to Cash flow from operating activities before movement in
working capital for the year ended 31 December 2021 and 31 December
2020.
*** The fair value adjustment on recognition of the new loan has
been added back to Cash flow from operating activities before
movement in working capital for the year ended 31 December 2021 and
2020.
10 Earnings/(loss) per share
2021 2020
Profit/(loss) for the purpose of basic and
diluted earnings/(loss) per share being profit/(loss)
for the year attributable to Owners of the
Company (US$'000) 31,001 (124,339)
-------- ----------
Profit/(loss) for the purpose of adjusted
basic and diluted earnings/(loss) per share
(US$'000) 17,768 (15,354)
-------- ----------
Weighted average number of shares ('000) 691,661 350,488
-------- ----------
Weighted average diluted number of shares
in issue ('000) 695,753 350,488
-------- ----------
Basic earnings/(loss) per share (cents) 4.48 (35.48)
Diluted earnings/(loss) per share (cents) 4.46 (35.48)
Adjusted earnings/(loss) per share (cents) 2.57 (4.38)
Adjusted diluted earnings/(loss) per share
(cents) 2.55 (4.38)
-------- ----------
Basic earnings/(loss) per share is calculated by dividing the
profit/(loss) attributable to equity holders of the Company (as
disclosed in the statement of comprehensive income) by the weighted
average number of ordinary shares in issue during the year.
Adjusted earnings/(loss) per share is calculated on the same
basis but uses the profit/(loss) for the purpose of basic
earnings/(loss) per share (shown above) adjusted by adding back the
non-operational items, which were recognised in the consolidated
statement of profit or loss and other comprehensive income in the
prior year. The adjusted earnings/(loss) per share is presented as
the Directors consider it provides an additional indication of the
underlying performance of the Group.
Diluted earnings/(loss) per share is calculated by dividing the
profit/(loss) attributable to equity holders of the Company by the
weighted average number of ordinary shares in issue during the
year, adjusted for the weighted average effect of share-based
payment charge outstanding during the year. As the Group incurred a
loss in 2020, diluted earnings/(loss) per share is the same as loss
per share, as the effect of share-based payment charge was
anti-dilutive.
Adjusted diluted earnings/(loss) per share is calculated on the
same basis but uses adjusted profit/(loss) (Note 9) attributable to
equity holders of the Company.
The following table shows a reconciliation between the basic and
diluted weighted average number of shares:
2021 2020
'000s '000s
Weighted average basic number of shares in issue 691,661 350,488
Weighted average effect of LTIP's 4,092 -
-------- --------
Weighted average diluted number of shares in
issue 695,753 350,488
-------- --------
11 Revenue
2021 2020
US$'000 US$'000
Charter hire 63,525 60,797
Lease income 38,824 33,252
Messing and accommodation 7,971 5,506
Maintenance service 2,865 1,267
Mobilisation and demobilisation 1,077 1,030
Sundry income 865 640
115,127 102,492
-------- --------
Revenue recognised - over time 113,931 101,683
Revenue recognised - point in time 1,196 809
-
115,127 102,492
-------- --------
Included in mobilisation and demobilisation income is an amount
of US$ 0.1 million (2020 US$ 0.3 million) that was included as
deferred revenue at the beginning of the financial year.
Lease income:
2021 2020
Maturity analysis:
Year 1 47,994 40,529
Year 2 21,306 22,856
Year 3 - 5 4,305 21,175
Onwards - -
73,605 84,559
------- -------
Split between:
Current 47,994 40,529
Non - current 25,611 44,030
73,605 84,559
------- -------
12 Derivative financial instruments
Embedded derivatives - contract to issue warrants
In June 2020, the Group restructured the terms of its borrowings
with its lenders. These terms included warrants to be issued to its
lenders if GMS had not raised US$ 75.0 million of equity by no
later than 31 December 2020. As this term was not expected to be
met, an embedded derivative liability was recognised for the
obligation to issue the warrants. At 31 December 2020, this had a
value of US$ 1.4 million, which had increased to US$ 1.8 million by
March 2021.
12 Derivative financial instruments (continued)
In March 2021, the Group amended the terms of its loan facility,
as mentioned in note 7, and additional time was granted to raise
equity before warrants were required to be issued to its lenders.
The previous obligation to issue warrants to the bank was waived,
and a contingent requirement to issue warrants to banks was
introduced. The amended terms required US$ 25.0 million of equity
to be raised by 31 December 2021 otherwise the Group would be in
default, and a further US$ 50.0 million to be raised by 31 December
2022. GMS was subsequently successful with the requirement to raise
the first tranche of equity (Refer to Note 6).
As the new terms of the loan facility contained separate
distinguishable terms with a contingent requirement to issue
warrants to banks, management determined the debt facility to
contain an embedded derivative. The Group was required to recognise
the embedded derivative at fair value. Management commissioned an
independent valuation expert to measure the fair value of the
warrants, which was determined using Monte Carlo simulations. The
simulation considers sensitivity by building models of possible
results by substituting a range of values. This represents a Level
3 fair value measurement under the IFRS 13 hierarchy. The fair
value of the liability as at 31 December 2021 was US$ 0.7 million
(31 December 2020 US$ 1.4 million). As the derivative was due to be
settled after 12 months, the balance is recognised as a non-current
liability.
The Group successfully concluded a US$ 27.8 million equity raise
in June 2021 which prevented an event of default on its loan
facilities. Under these facilities, the Group is required to raise
a further US$ 50 million of equity by the end of 2022 or issue 87
million warrants entitling the Group's banks to acquire 132 million
shares, or 11.5% of the share capital of the Company, for a total
consideration of GBP GBP7.9 million, or 6.0 pence per share.
Warrant holders will have the right to exercise their warrants up
to the end of the term of the loan facility being 30 June 2025.
The loan facility was a tri-partite agreement between the
Company, a subsidiary of the Group and the Groups banking
syndicate. As the embedded derivative was over the Company's
equity, the balance has been recorded on the Company's balance
sheet.
Interest Rate Swap
The Group entered into an Interest Rate Swap (IRS) on 30 June
2018 to hedge a notional amount of US$ 50.0 million. The remaining
notional amount hedged under the IRS as at 31 December 2021 was US$
30.8 million (31 December 2020: US$ 38.4 million). The IRS hedges
the risk of variability in interest payments by converting a
floating rate liability to a fixed rate liability. The fair value
of the IRS as at 31 December 2021 was a liability value of US$ 1.1
million (31 December 2020: US$ 2.4 million). As cashflows of the
hedging relationship were not highly probable in 2020 hedge
accounting was discontinued. The net revaluation gain in the period
to 31 December 2021 of US$ 0.1 million was accordingly recognised
in the income statement, together with a $0.1m loss in respect of
amounts recycled from the cash flow hedge reserve.
The fair value measurement of the interest rate swap was
determined by independent valuers with reference to quoted market
prices, discounted cash flow models and recognised pricing models
as appropriate. They represent Level 2 fair value measurements
under the IFRS 13 hierarchy.
IFRS 13 fair value hierarchy
Apart from the contract to issue warrants, the Group has no
other financial instruments that are classified as Level 3 in the
fair value hierarchy in the current or previous period with fair
values that are determined by reference to significant unobservable
inputs. There have been no transfers of assets or liabilities
between levels of the fair value hierarchy. There are no
non-recurring fair value measurements.
12 Derivative financial instruments (continued)
Derivative financial instruments are made up as follows:
Cross currency
interest
Interest rate swap Embedded
rate swap derivative Total
US$'000 US$'000 US$'000 US$'000
At 1 January 2021 (2,387) - (1,449) (3,836)
Loss on settlement of
derivatives 1,033 - - 1,033
Net gain on changes in
fair value of interest
rate swap 278 - - 278
Derecognition of embedded
derivative warrants - - 1,890 1,890
Initial recognition of
embedded derivative - - (926) (926)
Net loss on changes in
fair value of embedded
derivative - - (232) (232)
As at 31 December 2021 (1,076) - (717) (1,793)
Cross currency
interest
Interest rate swap Embedded
rate swap derivative Total
US$'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
Gain/(loss) on settlement
of derivatives 901 (18) - 883
Net loss on changes in
fair value of interest
rate swap (1,551) - - (1,551)
Initial recognition of
embedded derivative - - (1,386) (1,386)
Net loss on changes in
fair value of embedded
derivative - - (63) (63)
As at 31 December 2020 (2,387) - (1,449) (3,836)
This financial information includes the cost of hedging reserve
and cash flow hedge reserve, which are detailed further in the
consolidated statement of changes in equity. These reserves are
non- distributable.
13 Long term incentive plans
The Group has Long Term Incentive Plans ("LTIPs") which were
granted to senior management, managers and senior offshore
officers.
From 2019 onwards the employment condition is that each eligible
employee of the Company must remain in employment during the
three-year vesting period. LTIPs have been aligned to the Company's
share performance therefore only financial metrics will be applied.
EPS ("Earnings Per Share") has been dropped as the financial
metric.
In the prior years until 2018, the release of these shares was
conditional upon continued employment, certain market vesting
conditions and in the case of senior management LTIP awards,
performance against three-year target EPS compound annual growth
rates. Equity-settled share-based payments were measured at fair
value at the date of grant. The fair value determined, using the
Binomial Probability Model together with Monte Carlo simulations,
at the grant date of equity-settled share-based payments, is
expensed on a straight-line basis over the vesting period, based on
an estimate of the number of shares that will ultimately vest. The
fair value of each award was determined by taking into account the
market performance condition, the term of the award, the share
price at grant date, the expected price volatility of the
underlying share and the risk-free interest rate for the term of
the award.
Non-market vesting conditions, which for the Company mainly
related to the continual employment of the employee during the
vesting period, and in the case of the senior management, until
2018 as noted above, achievement of EPS growth targets, were taken
into account by adjusting the number of equity instruments expected
to vest at each balance sheet date. The cumulative amount
recognised over the vesting period was based on the number of
awards that eventually vest. Any market vesting conditions were
factored into the fair value of the share-based payment
granted.
To the extent that share-based payments are granted to employees
of the Group's subsidiaries without charge, the share-based payment
is capitalised as part of the cost of investment in
subsidiaries.
The number of share awards granted by the Group during the year
is given in the table below:
2021 2020
000's 000's
At the beginning of the year 6,573,229 8,768,294
Granted in the year - 2,661,388
Cash settled in the year (1,854,298) -
Forfeited in the year (2,219,217) (4,856,453)
Lapsed - -
At the end of the year 2,499,714 6,573,229
The weighted average remaining contractual life for the vesting
period outstanding as at 31 December 2021 was 0.5 years (31
December 2020: 1.0 years). The weighted average fair value of
shares granted during the year ended 31 December 2021 was US$ nil
(31 December 2020: US$ 0.10).
13 Long term incentive plans (continued)
LTIP LTIP
Grant date 29 May 15 November
2020 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
The expected share price volatility of Gulf Marine Services PLC
shares was determined taking into account the historical share
price movements for a three-year period up to the grant date (and
of each of the companies in the comparator group). The risk-free
return was determined from similarly dated zero coupon UK
government bonds at the time the share awards were granted, using
historical information taken from the Bank of England's
records.
On 15 March 2021, the Remuneration Committee determined that
awards granted on 28 March 2018 which were due to vest on 28 March
2021 would be settled in cash, not by the issue of shares as was
contractually stipulated, subject to the achievement of the
original performance conditions. For the purposes of IFRS 2, this
represented a reclassification of these awards from equity-settled
to cash-settled. In accordance with IFRS 2, at the date of
reclassification a balance of US$ 0.1 million equal to the fair
value of the awards at the modification date was deducted from
equity. As the fair value at the modification date was lower than
the cumulative equity-settled share-based payment charge at that
date, no adjustment was made to profit or loss as a result of the
modifications.
On 9 June 2021, the Company's Ordinary Shares of 10p each were
split into Ordinary Shares of 2p each and deferred shares of 8p
each. A consequence of this change will be that the share options
issued in prior years will be modified to such that the recipients
are granted Ordinary Shares of 2p each, not Ordinary Shares of 10p
each.
This change represented a modification of the share-based
payments for the purposes of IFRS 2. However, as the modification
did not result in a favourable change for the employees, no
adjustments to the share-based payment charge was required as a
result of the change to the Company's share capital.
14 Notes to the consolidated statement of cash flows
2021 2020
US$'000 US$'000
Operating activities
Profit/(loss) for the year 31,219 (124,304)
Adjustments for:
Depreciation of property and equipment (Note
4) 22,816 25,837
Finance expenses 14,463 46,740
Amortisation of dry docking expenditure 5,503 3,074
Depreciation of right-of-use assets 2,411 2,543
Income tax expense 1,707 1,285
Movement in ECL provision during the year 62 69
End of service benefits charge 678 527
(Reversal of impairment)/impairment loss
(Note 4) (14,959) 87,156
End of service benefits paid (546) (617)
Share-based payment charge (18) 168
Interest income (9) (15)
Recovery of ECL provision - (64)
Loss on disposal of property and equipment - 2,073
Gain on disposal of assets held for sale - (259)
Hedging revenue adjustment (Note 12) - (21)
Other income (28) (257)
Cash flow from operating activities before
movement in working capital 63,299 43,935
(Increase)/decrease in trade and other receivables (17,090) 4,866
Decrease in trade and other payables (4,849) (3,770)
----------
Cash generated from operations 41,360 45,031
Taxation paid (849) (763)
Net cash generated from operating activities 40,511 44,268
----------
14 Notes to the consolidated statement of cash flows (continued)
Changes in liabilities arising from financing activities
The table below details changes in the Group's liabilities
arising from financing activities, including both cash and non-cash
changes. Liabilities arising from financing activities are those
for which cash flows were, or future cash flows will be, classified
in the Group's consolidated statement of cash flows as cash flows
from financing activities.
Derivatives Bank borrowings
(Note 12) Lease liabilities (Note 7)
US$'000 US$'000 US$'000
At 1 January 2020 1,740 1,954 401,955
Financing cash flows
Bank borrowings received - - 21,500
Repayment of bank borrowings - - (12,075)
Principal elements of lease payments - (1,871) -
Settlement of derivatives (883) - -
Interest paid - (193) (27,903)
Total financing cashflows (883) (2,064) (18,478)
Non-cash changes:
Recognition of new lease liability
additions - 3,239 -
Interest on leases - 182 -
Interest on bank borrowings - - 27,626
Gain on fair value changes of
hedging instruments (21) - -
Net loss on change in fair value
of IRS 1,551 - -
Loss on fair value changes on
the embedded derivative (Note
12) 1,449 - -
Gain on revision of debt facility - - (1,070)
Total non-cash changes 2,979 3,421 26,556
At 31 December 2020 3,836 3,311 410,033
Financing cash flows
Bank borrowings received - - 2,000
Repayment of bank borrowings - - (30,983)
Principal elements of lease payments - (2,342) -
Settlement of derivatives (1,033) - -
Interest paid - (147) (12,737)
Total financing cashflows (1,033) (2,489) (41,720)
Non-cash changes:
Recognition of new lease liability
additions - 1,955 -
Interest on leases - 147 -
Interest on bank borrowings - - 17,545
Bank commitment fees - - -
Gain on revision of debt facility - - (6,332)
Net gain on change in fair value
of IRS (278) - -
Loss on fair value changes on
the embedded derivative (732) - -
The expensing of unamortised - - -
issue costs in relation to previous
loan
Revaluation gain on revision - - -
of debt cash flows at the date
of modification
Total non-cash changes (1,010) 2,102 11,213
At 31 December 2021 1,793 2,924 379,526
15 Events after the reporting period
Russia-Ukraine conflict
On 24th February 2022, Russia launched ground and air attacks on
Ukraine which led to the closure of airports and land borders. This
developing situation has the potential to impact Group's operations
and presents a risk to the health, safety and welfare of certain
GMS' employees living in Ukraine. The Group has implemented
procedures to provide required support should employees be affected
as well as ensure continuity across the business. In response to
military action launched by Russia, western countries and other
global allies imposed an unprecedented package of coordinated
sanctions against Russia. The Group has minimal activity with
suppliers in Russia and continues to manage its supply chain and
has robust procedures in place to avoid any disruption to
operations. Overall, the Group does not expect the war in Ukraine
and resulting sanctions to have a significant impact on
operations.
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 earnings/loss attributable to equity holders of the
Company for the period divided by the weighted average number of
ordinary shares in issue during the period, adjusted for the
weighted average effect of share options outstanding during the
period. The adjusted earnings/loss attributable to equity
shareholders of the Company is used for the purpose of basic
gain/loss per share adjusted by adding back impairment charges
(deduction of reversal of impairment during the year 2021),
restructuring charges, exceptional legal costs and costs to acquire
new bank facilities. This measure provides additional information
regarding earnings per share attributable to the underlying
activities of the business. A reconciliation of this measure is
provided in note 9.
Adjusted EBITDA - represents operating profit after adding back
depreciation (deduction for reversal of impairment during 2021),
amortisation, non-operational items and impairment charges. This
measure provides additional information in assessing the Group's
underlying performance that management is more directly able to
influence in the short term and on a basis comparable from year to
year. A reconciliation of this measure is provided in note 9.
Adjusted EBITDA margin - represents adjusted EBITDA divided by
revenue. This measure provides additional information on underlying
performance as a percentage of total revenue derived from the
Group.
Adjusted gross profit/(loss) - represents gross profit/loss
after deducting reversal of impairment/adding back impairment
charges. This measure provides additional information on the core
profitability of the Group. A reconciliation of this measure is
provided in note 9.
Adjusted net profit/(loss) - represents net profit/(loss) after
adding back impairment charges and costs of renegotiating bank
terms. This measure provides additional information in assessing
the Group's total performance that management is more directly able
to influence and, on a basis, comparable from year to year. A
reconciliation of this measure is provided in note 9 of these
results.
Average fleet utilisation - represents the percentage of
available days in a relevant period during which the fleet of SESVs
is under contract and in respect of which a customer is paying a
day rate for the charter of the SESVs.
Average fleet utilisation is calculated by adding the total
contracted days in the period of each SESV, divided by the total
number of days in the period multiplied by the number of SESVs in
the fleet.
Cost of sales excluding depreciation and amortisation -
represents cost of sales excluding depreciation and amortisation.
This measure provides additional information of the Group's cost
for operating the vessels. A reconciliation is shown below:
2021 2020
US$'000 US$'000
Statutory cost of sales 69,460 70,864
Less: depreciation and amortisation (28,241) (28,597)
41,219 42,267
EBITDA - represents earnings before interest, tax, depreciation
and amortisation, which represents operating profit after adding
back depreciation and amortisation. This measure provides
additional information of the underlying operating performance of
the Group. A reconciliation of this measure is provided in Note
9.
Margin - revenue less cost of sales before depreciation,
amortisation and impairment as identified in Note 9 of the
consolidated financial information.
Net bank debt - represents the total bank borrowings less cash
and cash equivalents. This measure provides additional information
of the Group's financial position. A reconciliation is shown
below:
2021 2020
US$'000 US$'000
Statutory bank borrowings 379,526 410,033
Less: cash and cash equivalents (8,271) (3,798)
371,255 406,235
Finance leases are excluded from net bank debt to ensure
consistency with definition of the Group's banking covenants.
Net cash flow before debt service - the sum of cash generated
from operations and investing activities.
Net leverage ratio - the ratio of net bank debt at year end to
adjusted EBITDA which is further adjusted for items including but
are not limited to reversal of impairment credits/(impairment
charges), restructuring costs, exceptional legal costs and
non-operational finance related costs in alignment with the terms
of our bank facility agreement. This has no impact for the current
or prior periods. The reconciliation is shown below:
2021 2020
US$'000 US$'000
A: Net bank debt, as identified above 371,255 406,235
B: Adjusted EBITDA, as disclosed in Note
9 64,124 50,449
Net leverage ratio (A/B): 5.78 8.1
Non-operational finance expenses - this pertains to the
following items below:
2021 2020
US$'000 US$'000
Cost to acquire new bank facility (3,165) (15,797)
Fair value adjustment on recognition of
new debt facility 1,439 (448)
(1,726) (16,245)
Operational downtime - downtime due to technical failure.
Segment adjusted gross profit/loss - represents gross
profit/loss after adding back depreciation, amortisation and
impairment charges. This measure provides additional information on
the core profitability of the Group attributable to each reporting
segment. A reconciliation of this measure is provided in note
9.
Underlying performance - day to day trading performance that
management are directly able to influence in the short term
OTHER DEFINITIONS
Average day we calculate the average day rates by dividing total
rates charter hire revenue per month by total hire days
per month throughout the year and then calculating
a monthly average.
Backlog represents firm contracts and extension options held
by clients. Backlog equals (charter day rate x remaining
days contracted) + ((estimated average Persons On
Board x daily messing rate) x remaining days contracted)
+contracted remaining unbilled mobilisation and demobilisation
fees. Includes extension options.
Borrowing LIBOR plus margin.
rate
Calendar takes base days at 365 and only excludes periods
days of time for construction and delivery time for newly
constructed vessels.
Costs capitalised represent qualifying costs that are capitalised as
part of a cost of the vessel rather than being expensed
as they meet the recognition criteria of IAS 16 Property,
Plant and Equipment.
Day rates rate per day charge to customers per hire of vessel
as agreed in the contract.
Demobilisation fee paid for the vessel re-delivery at the end of
a contract, in which client is allowed to offload
equipment and personnel.
DEPS/DLPS diluted earnings/losses per share.
Employee percentage of staff who continued to be employed
retention during the year (excluding retirements and redundancies)
taken as number of resignations during the year divided
by the total number of employees as at 31 December.
EPC engineering, procurement and construction.
ESG environmental, social and governance.
Finance service the aggregate of
a) Net finance charges for that period; and
b) All scheduled payments of principal and any other
schedule payments in the nature of principal payable
by the Group in that period in respect of financing:
i) Excluding any amounts falling due in that period
under any overdraft, working capital or revolving
facility which were available for simultaneous redrawing
under the terms of that facility;
ii) Excluding any amount of PIK that accretes in
that period;
iii) Including the amount of the capital element
of any amounts payable under any Finance Lease in
respect of that period; and
iv) Adjusted as a result of any voluntary or mandatory
prepayment
Debt Service represents the ratio of Adjusted EBITDA to debt service.
Cover
GMS core consists of 13 SESVs, with an average age of ten
fleet years.
Interest represents the ratio of Adjusted EBITDA to Net finance
Cover charges.
IOC Independent Oil Company.
KPIs Key performance indicators.
Lost Time any workplace injuries sustained by an employee while
Injuries on the job that prevents them from being able to
perform their job for a period of one or more days.
Lost Time the lost time injury rate per 200,000 man hours which
Injury Rate is a measure of the frequency of injuries requiring
(LTIR) employee absence from work for a period of one or
more days.
LIBOR London Interbank Offered Rate.
Mobilisation fee paid for the vessel readiness at the start of
a contract, in which client is allowed to load equipment
and personnel.
Net finance represents finance charges as defined by the terms
charges of the Group's banking facility for that period less
interest income for that period.
Net leverage represents the ratio of net bank debt to Adjusted
ratio EBITDA.
NOC National Oil Company.
OSW Offshore Wind.
PIK Payment In Kind. Under the banking documents dated
17 June 2020 and 31 March 2021, PIK is calculated
at 5.0% per annum on the total term facilities outstanding
amount and reduces to:
a 2.5% per annum when Net Leverage reduces below
5.0x
b Nil when Net Leverage reduces below 4.0x
Under the documents dated 31 March 2021, PIK accrues
on either 1 July 2021 if the US$ 25 million equity
is not raised by 30 June 2021, or from 1 January
2023 if the US$ 50 million is not raised by 31 December
2022.
PIK stops accruing at the date on which all loans
are paid or discharged in full.
Restricted any work-related injury other than a fatality or
work day lost work day case which results in a person being
case (RWDC) unfit for full performance of the regular job on
any day after the occupational injury.
Secured backlog represents firm contracts and extension options held
by clients. Backlog equals (charter day rate x remaining
days contracted) + ((estimated average Persons On
Board x daily messing rate)) x remaining days contracted)
+ contracted remaining unbilled mobilisation and
demobilisation fees. Includes extension options.
Secured day day rates from signed contracts firm plus options
rates held by clients.
Secured utilisation contracted days of firm plus option periods of charter
hire from existing signed contracts.
Security the ratio (expressed as a percentage) of Total Net
Cover (loan Bank Debt at that time to the Market Value of the
to value) 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 calculated on the injury rate per 200,000 man hours
Injury Rate and includes all our onshore and offshore personnel
(TRIR) and subcontracted personnel. Offshore personnel are
monitored over a 24-hour period.
Underlying underlying general and administrative (G&A) expenses
G&A excluding depreciation and amortisation, restructuring
costs, and exceptional legal costs.
Utilisation the percentage of calendar days in a relevant period
during which an SESV is under contract and in respect
of which a customer is paying a day rate for the
charter of the SESV.
Vessel operating Cost of sales before depreciation, amortisation and
expense impairment, refer to note 9.
Warrants Under the banking documents date 31 March 2021, if
Warrants are issued on 1 July 2021 because of the
failure to raise US$ 25 million by 30 June 2021,
half of the issued warrants vest on that date. The
other half will only vest on 2 January 2023 if there
is a failure to raise US$ 50 million. If warrants
are issued on 2 January 2023 because of the failure
to raise US$ 50 million, all of the issued warrants
vest on the same date. All warrants to expire on
30 June 2025 (maturity date of the facilities).
[1] Represents operating profit/(loss) after adding back
depreciation, amortisation and the reversal of impairment in 2021
and depreciation, amortisation, an impairment charge and adjusting
items in 2020 . This measure provides additional information in
assessing the Group's underlying performance that management can
more directly influence in the short term and is comparable from
year to year. A reconciliation of this measure is provided in note
30.
[2] Represents net profit/(loss) after adding back depreciation,
amortisation the reversal of impairment and adjusting items in 2021
and depreciation, amortisation, an impairment charge and adjusting
items in 2020. This measure provides additional information in
assessing the Group's total performance that management can more
directly influence and is comparable from year to year. A
reconciliation of this measure is provided in note 30.
[3] Represents total bank borrowings less cash.
[4] Represents the ratio of net bank debt to adjusted
EBITDA.
[5] Represents operating profit/(loss) after adding back
depreciation, amortisation and the reversal of impairment in 2021
and depreciation, amortisation, an impairment charge and adjusting
items in 2020. This measure provides additional information in
assessing the Group's underlying performance that management can
more directly influence in the short term and is comparable from
year to year. A reconciliation of this measure is provided in note
9.
[6] Represents net profit/(loss) after adding back depreciation,
amortisation the reversal of impairment and adjusting items in 2021
and depreciation, amortisation, an impairment charge and adjusting
items in 2020. This measure provides additional information in
assessing the Group's total performance that management can more
directly influence and is comparable from year to year. A
reconciliation of this measure is provided in note 9.
[7] A reconciliation of this measure is provided in note 9 and
is also defined in Glossary.
4 Refer to Glossary for definition of Underlying G&A .
[8] Refer to Glossary for definition
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
FR FIFEEESIVLIF
(END) Dow Jones Newswires
May 13, 2022 02:10 ET (06:10 GMT)
Gulf Marine Services (LSE:GMS)
Historical Stock Chart
From Mar 2024 to Apr 2024
Gulf Marine Services (LSE:GMS)
Historical Stock Chart
From Apr 2023 to Apr 2024
