TIDMTHAL
RNS Number : 6169J
Thalassa Holdings Limited
13 September 2016
Thalassa Holdings Ltd
(Reuters: THAL.L, Bloomberg: THAL LN)
("Thalassa" or the "Company")
Results for the 6 months ended 30 June 2016
The Company is pleased to announce its financial results for the
6 months ended 30 June 2016. A summary of the results is set out
below.
Highlights for the 6 months ended 30 June 2016
GROUP RESULTS 1H 2016 versus 1H 2015
-- Revenue US$5.2m vs. US$9.9m
-- Gross Profit $US2.9m vs. US$4.2m
-- Gross Margin 56.7% vs. 42.2%
-- Operating Profit before depreciation (EBITDA) US$0.5m vs.
US$1.5m
-- Adjusted Group Net Profit *(1) US$1.0m vs. US$0.7m
-- Group Net Profit US$0.8m vs. US$0.4m
-- Adjusted Group Earnings Per Share (basic and diluted)*(1,2)
US$0.04 (GBP0.03) vs. US$0.02 (GBP0.01)
-- Group Earnings Per Share (basic and diluted)*(2) US$0.03
(GBP0.02) vs. US$0.02 (GBP0.01)
-- Book value per share US$1.17 (GBP0.77) vs. US$1.61
(GBP1.02)
-- Cash US$13.2m vs. 1H15: US$14.4m
-- Debt US$ nil (1H15: US$ nil)
*(1) excluding R&D costs at Autonomous Robotics if US$0.2m
(1H15: US$0.2m)
*(2) based on weighted average number of shares in issue of
23,420,184 (1H15: 25,056,837)
SUBSEQUENT EVENTS
-- Trade receivables as at 30 June 2016 received US$5.5m
-- Trade receivables as at 12 September 2016 US$0.0m
-- Cash as at 12 September 2016 *(3) US$7.9m
*(3) cash includes the purchase of 23.14% in issued share
capital of The Local Shopping REIT plc as announced 12 September
2016
(Refer to note 7 for full list of subsequent events)
OPERATIONAL HIGHLIGHTS
-- WGP
Completion of 2 surveys (Snorre and Grane) as part of the
ongoing contract to provide seismic source services to Statoil's
PRM activities in the North Sea
-- ARL
Redesign of Autonomous Node completed
Prototype under construction
Prototype initial testing targeted for Q4 2016
Contacts:
Thalassa Holdings Ltd
Duncan Soukup, Executive Chairman +33 (0)6 78 63 26 89
WH Ireland Limited (Nominated
Adviser)
Chris Fielding, Head of Corporate
Finance 0207 220 1650
Press enquiries:
Square1 Consulting (Public
Relations) +44 (0)207 929 5599
David Bick
www.thalassaholdingsltd.com
Chairman's Statement
"Just when you thought it was safe to go back into the water..."
Jaws 2, Peter Benchley
Like most sequels the Original is usually always better or in
the case of Jaws, scarier; possibly because in the original movie,
one didn't expect a Great White to come flying out of the water and
into ones face. In the sequel Jaws 2, the entire movie was toned
down as the original barely escaped an R rating. Nonetheless, in
the tamed down sequel (less blood) the shark looked more vicious
and still hunted and feasted on humans...but the audience wasn't
scared! The movie simply lacked "Hitchcockian" tension or
suspense!
Following the 2008 banking crisis, by comparison, the sequel is
veritably boring or Jaws 2esque. The collapse in oil prices has, as
I detail below, come close to equalling the losses incurred in the
mortgage backed security markets which nearly brought the banking
and insurance industries to their knees. Yet because far fewer
individuals are affected, it would appear that far fewer care!
And yet I would argue that we should be much more fearful of
current economic and financial market conditions than those that
existed pre the 2008 banking crisis. Why? Because of "complacency"!
In the aftermath of 2008 central banks around the World had ample
ammunition, with which they flooded the financial markets, in order
to avert a liquidity crisis (they feared that lending would dry up)
and in order to stimulate Global economic activity and avoid a
repeat of the Great Depression that followed the 1929 Stock market
collapse.
It is now quite clear that central banks are virtually out of
ammunition (not to mention ideas). The ECB's wonderfully named
"Outright Monetary Transactions" policy or unlimited bond purchase
program introduced in 2012 has now ballooned into an EUR80bn a
month lottery game that has so far failed but which may now be
followed by the even more bizarre prospect of "Helicopter Money"
which could involve direct payments to individuals by central
banks! Recently, ECB Board member Yves Mersch dismissed "extreme
measures," which he warned would have unacceptable side effects and
undermine trust in the single currency. "We cannot fulfil our
mandate with mathematical equations, but only with instruments that
maintain trust in the currency," Mr. Mersch said. Clearly, monetary
policy alone is not the panacea to slow/no growth, no inflation
environment that the Western World currently faces.
Pumping unlimited amounts of cash into the system may sound
quite brilliant, but like most, if not every cunning plan, it is
flawed and ultimately, in my opinion doomed to partial, if not
complete failure. Somebody should have told the central bankers
that giving commercial and investment bankers and hedge fund
managers access to virtually unlimited free money is like giving
drugs to drug addicts; they are not going to change their bad
habits and lend or invest the money wisely!
In America the Fed Funds rate currently sits at 0.5%, in Europe
the ECB has set its Main Refinancing Operations rate (MRO) at 0%,
whilst in Japan the Japanese Prime Lending Rate is at -0.75%. And
on 4 August 2016 the Bank of England cut the Bank Rate to
0.25%!
So given the lowest interest rate environment on record, why
isn't global economic growth roaring? Probably because instead of
investing in growth, banks are on the one hand in relatively bad
shape because of non-performing loans so they are "hoarding". And
probably because the companies they are lending to are becoming
more efficient and investing in productivity, which, rather than
creating jobs, results in job losses. A great case in point is
Amazon; highly efficient in its delivery of goods and services,
with a recent market cap of $366.9 billion run by a nice enough
chap, Jeff Bezos, now the richest man in America, but a company,
which is not only transforming an industry but replacing menial
labour with less of the same and lots more automation. Don't get me
wrong, I am not suggesting that Amazon is doing anything wrong,
what I am suggesting is that the people who are being displaced by
technological progress need to be retrained or they will land
permanently on the pile of unemployed that is slowing economic
recovery and future growth. 40%+ youth unemployment in the "PIGS"
is simply an accident waiting to happen.
Blame the current phase of the recurring financial crisis, as
the IMF and EU parliamentarians do, on Brexit if you will, but the
reality, in my opinion, is far more sinister.
Political leaders are the first to take credit for success but
are apparently never responsible for failure!
As Tacitius originally wrote,
Inquissima haec bellorum condicio est: prospera omnes sibi
indicant, aduersa uni imputantur. (Tacitus, Agricola 27:1 (written
98AD) [1])
"Success has many fathers, failure is an orphan".
One could be forgiven in thinking that Tacitius, in his book
Agricola, was writing about a farmer or farming (Agriculture).
Nothing could be further from the truth, Tacitus was an historian
and Agricola is the story of his father in law, Gnaeus Julius
Agricola, an eminent Roman General and Governor of Britain from AD
77/78 to 83/84...and is possibly one of Boris Johnson's favourite
reads, or should be!
Tacitus favourably contrasts the liberty of the native Britons
to the corruption and tyranny of the (Roman) Empire; the book also
contains eloquent and forceful polemics against the rapacity and
greed of Rome (or was he writing about Brussels, Westminster or
Washington?).
For Tacitus, Agricola served as an example of how, even under
despotism, it was possible to behave correctly, avoiding the
opposite extremes of servility and useless opposition.
My point, quite simply is that central bankers, ably supported
by the Governments to whom they report, have sold the family
silver, given the money to the same people (numpties?) who caused
the initial problem and told them to have another go!
The 2008 Banking crisis bailout is estimated to have cost the US
alone, $7.7 trillion!
"After the original $700 billion bailout, the ongoing bailout
was kept very secret because Chairman Ben Bernanke, argued that
revealing borrower details would create a stigma - investors and
counterparties would shun firms that used the central bank as
lender of last resort. In fact, $7.7 trillion of the secret
emergency lending was only disclosed to the public after Congress
forced a one-time audit of the Federal Reserve in November of 2011.
After the audit the public found out the bailout was in trillions
not billions; and that there were no requirements attached to the
bailout money - the banks could use it for any purpose." Mike
Collins, Forbes.
You would have thought that these "clowns" would have learnt
something, anything from the near terminal meltdown? Not a
chance.
6 years after the Banking crisis, the fragility of the World's
financial system is again being laid bare.
Oil prices have collapsed, recovered and are again falling and,
whether because of Brexit or simply because of a complete inability
to address Italy's debt problem, the Italian banking system is at
risk of imploding and eviscerating thousands of individual
investors because neither the IMF nor the ECB or any other major
institution is willing to share the burden of losses on their
loans. Monte Paschi, the oldest bank in the World, has already
raised $8 billion in capital over the past two years, all of which
has been vaporized and is now seeking a further $5 billion to stave
off bankruptcy. In a last minute deal 5 Banks (no not serious
investors!) have agreed to underwrite a rescue issue. In other
words these smart lads and ladettes have agreed to invest their
"shareholders money" (NOT their own) in the biggest basket case in
Europe in the event that they are unable to place shares with other
misguided miscreants. The icing on the cake is even tastier, the
transaction will no doubt generate generous fees (millions of $!),
which will flow through the underwriters' P&Ls and boost
earnings to help pay bonuses. Wahoo! Party time! In the meantime,
the "investment" (punt?) will disappear into the balance sheets of
the underwriting banks only to probably reappear at some point in
the future in the Notes to the accounts as a write off!
The last time this disappearing act was performed with such
aplomb was shortly before WEST LB Panmure Gordon went up in flames.
I am sure that some may disagree with my understanding of the
facts. However, the story goes something like this, ambitious
banker joins small time player (Panmure) owned by Ignorant Parent
Company ("IPC") (West LB). Small time player muscles its way into
the big leagues by using IPC's pristine and very healthy balance
sheet to underwrite (dump?) overpriced structured products (loans
and convertible loans). IPC's balance sheet gets destroyed when in
2000 the market crashes and IPC's investments turn to dust. The
really great (actually not so great!) part of the story is that
Panmure generated millions of $ of virtual profits and paid out
millions of EUR/GBP/$ in bonuses, which their executives kept
whilst in 2002 West LB wrote off $2bn in bad debts.
Sadly, the board and management learned nothing from this near
death experience and rolled the dice again but with disastrous
success. When in 2008 the mortgage backed securities market in the
US collapsed, West LB sustained such enormous losses that the Bank
was ultimately wound up. In the ten years prior to its demise West
LB generated EUR1.13bn in profits (in 3 of those years) and
EUR7.21bn in losses (during the other 7 years)!
http://www.bloomberg.com/news/articles/2012-06-29/westlb-s-fall-from-grace-is-lesson-in-investment-bank-hazards
Which brings me back to oil...
All told, 69 North American oil and gas producers with $34.3
billion in cumulative secured and unsecured debt had gone under as
of 30 June 2016 when I started writing...
Stop the presses! As at the end of July 2016, 90 companies
involving $66.5 billion in secured and unsecured debt have filed
for bankruptcy. Worse, since share prices peaked in 2014, the oil
bust has wiped out about $1 trillion in energy company equity, with
the Dow Jones U.S. Oil & Gas Index off 40%.
http://www.haynesboone.com//media/files/attorney%20publications/2016/energy_bankruptcy_monitor/oil_patch_bankruptcy_20160106.ashx
There's more to come. "Despite the modest recovery in energy
prices, all indications suggest many more producer bankruptcy
filings will occur during 2016," writes Haynes & Boone.
According to Deloitte, about a third of global oil and gas
companies, or about 175 of them, are at risk of insolvency.
Bernstein Research estimates that by 2019 we'll see more than $70
billion in defaults amid more than $400 billion in high-yield
energy debt - that would indicate that we're only halfway through
the bankruptcies. (Christopher Helman, Forbes)
Sandridge Energy Inc. $8.3 billion
Linn Energy $6.1 billion
Breitburn operating LP $5.8 billion
Pacific Exploration & Production $5.3 billion
Samson Resources $4.3 billion
Ultra Petroleum $3.8 billion
Halcon Resources Corporation $3.2 billion
Sabine Oil & Gas $2.9 billion
Energy XXI $2.8 billion
Quicksilver Resources $2.1 billion
Midstates Petroleum $2.1 billion
Chaparral Energy Inc. $1.8 billion
Berry Petroleum Company LLC $1.8 billion
Atlas Rescources Partners LP $1.4 billion
Venoco $1.3 billion
Penn Virginia Corp $1.3 billion
Swift Energy $1.2 billion
Energy & Exploration Partners $1.2 billion
Magnum Hunter Resources $1.1 billion
Milagro Oil & Gas $1.0 billion
New Gulf Resources $600 million
Goodrich Petroleum $500 million
ERG Resources $400 million
http://www.forbes.com/sites/christopherhelman/2016/05/09/the-15-biggest-oil-bankruptcies-so-far/#3961110f739b
And if these figures were not chilling enough, the collapse in
the oil price, has, according to Malcolm Dickson at Wood MacKenzie
resulted in a $1 trillion cut in Global upstream capital spend,
which can only lead to massive price dislocation (spike) down the
road.
"Global upstream capital spend from 2015 out to 2020 has been
reduced by 22% or US$740 billion. When we include cuts to
conventional exploration investment, the figure increases to just
over US$1 trillion. The impact of the drop in oil prices on global
upstream development spend has been enormous. Companies have
responded to the fall by deferring or cancelling projects."
https://www.woodmac.com/analysis/global-upstream-investment-slashed-by-US1-trillion
Another "bizarre rambling statement" from yours truly? Without a
doubt! Melodramatic. No! Fact, Yes! Relevant to a Mid-Year or
Annual Report, absolutely, because the chaotic environment outlined
above is the one in which we operate.
So, how should any company operate in an environment recently
described by one US fund manager, "as one in which rational
investment is currently impossible"?
Given a combined age of 250 years old, the board of Thalassa
might on occasion appear more akin to Satler and Waldorf sitting in
the balcony criticizing everyone and everything. I would, however,
argue that a bit of grey hair right now probably represents a safer
pair of hands than Shane Warne showed at the Oval in 2005 when he
dropped Kevin Pietersen (and the Ashes!). Pietersen went on to
score 158!
There is a time to be aggressive and a time to be defensive and
we at Thalassa, if it is not apparent from my musings above, are
still fearful of both the macro and micro economic environment in
our areas of operation. This is reflected in our hedging strategy
that has again, so far this year, generated sound profits for the
Company. However, lets not forget, it is chaos that creates
opportunity.
Were it not for zero or in some cases negative interest rates,
we believe that stock prices would not currently be trading at or
near their all time highs! With this in mind we continue to hedge
with a negative bias.
Thalassa is a holding company, currently with two operating
subsidiaries. For the past three years we have scoured various
industries looking for appropriate (good value) acquisitions,
without success. We believe that the environment is changing and we
have recently identified a number of potentially interesting
situations; a good sign but no guarantee that we will succeed in
acquiring any of the companies that we have identified. I should
make it clear that the three situations we have identified are not
in the Energy Services sector. We will of course keep shareholders
appraised as and when we have news to announce.
In closing, I would like to congratulate everyone at WGP and ARL
for their hard work and dedication and on producing a set of
exceptional results in seriously torrid conditions. I would also
like to thank our clients for their trust and confidence in our
ability to deliver against bigger, better funded competitors. Of
course, I would also like to thank our shareholders for their
continued support.
And lastly, to the host of City analysts, City Scribblers and
Fund Managers who are obliged to read multiple Chairman's
statements; trust me, it is more challenging (boring?) writing a
Chairman's statement by far, than having to read one! Nevertheless,
my thanks goes to those with the patience to have done so.
Duncan Soukup
Chairman
Post Report Events:
As announced in the Company's RNS of 2 September 2016 the
Company has entered into an agreement to purchase 40,000,000 new
shares in Papua Mining for GBP400,000. The Company will, upon
closing of the transaction, appoint a Director to the Board of
Papua and to work with the current Board to formulate a profitable,
cash generative growth plan.
As announced in the Company's RNS of 12 September 2016, the
Company is beneficially interested in 19,093,376 shares of The
Local Shopping Reit plc ("LSR"), which represents 23.14 per cent of
its issued share capital. The Board of Thalassa will be seeking to
engage with the Board of LSR with a view to reviewing and changing
LSR's investment policy approved in July 2013.
WGP Operational Review
As anticipated, 1H 2016 was as tough as predicted. Oil prices,
whilst briefly recovering to US$50 per barrel, have not recovered
to the levels that would trigger new exploration projects. In fact,
increased stockpiles in the US, Iranian oil back on the open
market, Saudi Arabia and other OPEC Members unwilling to curb
production, a slow-down in the Chinese economy coupled with
uncertainty caused by Brexit, have all conspired to cap oil prices
at least for the time being. The net effect of the uncertainty in
the Energy sector and lack of concerted policy or agreement amongst
the World's largest producers has resulted in oil companies
continuing a policy of cost cutting, and development of lower risk
activity. Fortunately for us, Permenanent Reservoir Monitoring
(Production enhancement) has benefitted whilst Capex on exploration
has suffered badly.
To most of the seismic data acquisition contractors, the
collapse in exploration related seismic will only really hit in the
3rd and 4th Quarter 2016 and into 2017. The lifeline of work that
existed for the past 9 months as a result of prospective licence
sales offshore Mexico (announced prior to the oil price slump) and
Myanmar is starting to run dry, and mainstream contractors are
scrambling to find work. Business is so slack that many (all?)
contractors now appear willing to operate at or below cost just to
try and stay in the game long enough for a turnaround. Such a
strategy is needless to say ultimately self destructive and will
lead to the accelerated potential bankruptcy of a number of US and
EU players. To counter this, the acquisition contractors have
nearly all developed their own speculative multi-client programs of
work. In most cases they have tried to de-risk where possible by
seeking pre-funding from the oil companies. At this stage in the
macro oil cycle, E&P companies are much more willing to spend
on multi-client surveys for new exploration as it keeps the data
flowing in new provinces whilst limiting the dedicated resource and
investment otherwise required to design, manage and fully fund a
bespoke survey on their own. Of course, the multi-client model will
only work if there are subsequent data sales, more often than not
triggered by licence round announcements and subsequent awards. So
the data sets will sit on the balance sheet in the hope there will
be a recovery in the near future. This has two effects. The
existing fleet of vessels will be deployed using a financial model
based on 'the hope' of selling the data to multiple clients,
however, the longer term effect is when the recovery starts there
will be a lag in ramping up exploration as this spec. data will
already be sitting on the shelf at knock down rates.
WGP took the strategic decision some years ago to invest in
technology and focus its efforts on developing opportunities that
would be funded out of production budgets rather than exploration;
on the basis that the oil production sector is less cyclical and to
therefore de-risk the downturns. Hence the focus on Permanent
Reservoir Monitoring ("PRM") opportunities. Whilst the market has
not grown at a pace that would have been expected, it is clear that
oil companies will continue a strategy for Enhanced Oil Recovery
("EOR") in the near to long term future, whilst new exploration is
deemed too high risk.
The significance of the Statoil and ConocoPhillips Scandinavia
AS ("COPSAS" / "COP") contracts should not, therefore, be
underestimated. A typical proprietary marine seismic survey may
last 4 weeks, maybe longer in the case of a large multi-client type
survey. The contracts that WGP has for PRM activity in the
Norwegian Sector are multi-year and multi-survey. The barriers to
entry are immense - as the whole premise of PRM is for absolute
repeatability and elimination of all variances, wherever possible,
on a survey-to-survey basis.
In terms of operational activity, in 1H 2016, WGP completed the
sixth surveys for Statoil over Snorre and Grane, now into the third
year of the PRM contract. I am happy to report that after a
challenging start (deployment of new, bespoke, state of the art
equipment) operational performance improvements are now reducing
technical downtime and increasing operational productivity.
Meanwhile, the Ekofisk PRM contract that was executed in December
2015 for COPSAS saw the final design and procurement stages of the
fifth generation Portable Modular Source System ("PMSS(TM) "). The
first survey for COPAS is scheduled to commence in September 2016,
following assembly, shake down and testing of the equipment.
Whilst the pipeline of new exploration opportunities has all but
dried-up, the company continues to receive new PRM enquiries and
will remain resolute in securing these and maintaining its lead
market position in this sector. As for exploration activity - it's
truly a case of keeping one's ear to the ground and avoiding the
economic suicide which some in the industry are currently engaged
in such that they are losing money at the Gross Margin Level!
Whilst we might be trundling along the bottom or near the bottom of
the oil price curve, we are unlikely, in our opinion, to see any
sustained recovery until mid-2017. By that time, there will have
been little or no new exploration activity for 3 years or more. As
stockpiles are consumed, and global demand outstrips global supply,
there will inevitably be a race for new exploration.
Mark Burnett
CEO - WGP Exploration Ltd
Autonomous Robotics Ltd (ARL) Operational Review
Summary
ARL continues to focus on the development of a Flying Nodes
system for deep water Ocean Bottom Nodes seismic surveys. The
Flying Nodes system concept illustrated by the animation at
www.autonomousroboticsltd.com has been shown through survey
modelling to offer a significant cost saving for Ocean Bottom
Seismic (OBS) deep water surveys compared with alternative node OBS
solutions. Continuing to address the highest risks associated with
the system, ARL has prioritised the design and manufacture of the
first prototype node for 2016 with targeted improvements in node
efficiency and stability to be included in this first design. These
design improvements have caused some delay to the programme but
results of modelling have shown improvements have been achieved.
Design and manufacture of the first prototype node will continue
during the second half of 2016 and we anticipate that initial
testing will commence by the end of the year.
Marketing
After the successful launch of the new Flying Nodes concept in
the USA at SEG in 2015 the system has been presented in Europe at
EAGE 2016. Again, there was considerable interest in the Flying
Nodes concept and the paper ARL presented at the EAGE conference
was well received. Oil Majors continue to show interest in the
development of Flying Nodes as a means of reducing operational
costs for deep water seismic surveys and would like to see further
development of the proposed equipment.
Operations
ARL continue to operate with a core level of staff from the WGP
Eastleigh Court facility while being supported by a number of
development partners and subcontractors. This allows ARL to ensure
the highest technical risks of the Flying Nodes technology are
investigated and solutions found to mitigate these risks while
keeping costs at a minimum.
Technology Development
The main focus of development effort has been on progressing
towards a first operational prototype of the Flying Node. A
significant level of work including Computational Fluid Dynamics
(CFD) has been performed to assist in the improvement of efficiency
and stability for the Flying Node. More effort than anticipated has
been necessary to implement these improvements in the Flying Node
design which has resulted in some delay to the planned programme
but it was considered necessary to include this improved capability
for the first prototype node.
The detailed design work for the first prototype node including
the underwater pressure vessel and battery system is well advanced
and will be completed in the third quarter. The immediate aim for
the first prototype node is for completion of the detailed design,
manufacture, assembly and bench tests. It is also expected first in
water tests of the prototype node operating as an ROV with a tether
will commence before the end of 2016.
Outlook
The priority for the second half of 2016 will be the completion
of the design and manufacture of the first prototype node. Some of
the main activities will be as follows.
-- Complete design and manufacture of the first prototype node
-- Progress software solutions for the prototype node
-- Develop a first stage testing programme for the prototype node
-- Start testing the node in ROV (tethered) mode
-- Review potential for further patent applications
Dave Grant
CEO - Autonomous Robotics Ltd
Financial Review
Group results for the 6 months to 30 June 2016 showed revenue of
US$5.2m versus US$9.9m in 1H15, a decrease of 47.8%. Revenue from
Seismic Operations has been generated from the Spring surveys over
the Snorre and Grane fields for Statoil. The additional revenue
generated in 2015 from the project with TGS in the Barents Sea and
late data sales for the 2014 multi-client data set were not
repeated in 2016.
Cost of Sales decreased by 60.8% in 1H16 to US$2.3m (1H15:
US$5.7m). Cost of Sales as a proportion of Revenue was 43.3% as
compared to 57.8% in 1H15 and 49.9% for the whole of 2015.
Gross profit was US$2.9m, a decrease of 29.9% versus the same
period last year of US$4.2m. Gross margin increased by 34.4% to
56.7% from 42.2% in 1H15 and 8.4% from the full year 2015 gross
margin of 50.1%.
Administrative expenses for 1H16 were US$2.4m, 9.9% less than
1H15 of US$2.7m. ARL contributed costs of US$0.2m in 1H16 (1H15:
US$0.2m).
Operating Profit before depreciation was US$0.5m versus US$1.5m
in 1H15 with operating margin at 11.2%, from 15.2% in 1H15.
Adjusted Operating Profit before depreciation (excluding R&D
costs at ARL) was US$0.7m (1H15: US$1.8m).
Depreciation of US$0.4m (1H15: US$1.1m) reflects depreciation on
the Group's equipment, the decrease due to the impact of write
downs on equipment made at the end of 2015.
Operating Profit decreased to US$0.1m (1H15 US$0.4m). Adjusted
operating Profit was US$0.3m (1H15: US$0.6m).
Net financial income of US$0.8m included foreign exchange gains
and interest income in the period partially offset by interest and
share option expense (1H15: US$0.1m).
Profit before tax, was US$0.9m versus US$0.5m in 1H15. Adjusted
profit before tax was US$1.2m (1H15: US$0.8m).
Tax in the period of US$0.2m incorporates an estimate of the tax
liability incurred from the Company's operations across its
different regions (1H15 US$0.06m).
Net profit was US$0.8m compared to US$0.4m in 1H15. Adjusted net
profit was US$1.0m (1H15: US$0.7m).
Net assets at 30 June 2016 amounted to US$26.4m (1H15: US$39.7m,
2015: US$26.4m) resulting in net assets per share of US$1.17
(GBP0.77) versus US$1.61 (GBP1.02) in 1H15 and US$1.12 (GBP0.79) at
31 December 2015, the decrease across comparative periods largely
as a result of the exceptional write downs and the impact on net
assets as at 31 December 2015.
The Company had debt of US$0.0m at the period end (1H15:
US$0.0m, 2015: US$0.0m).
Trade Receivables was US$5.5m as at 30 June 2016, which has
since been received in full.
Cash as at 30 June 2016 was US$13.2m (1H15: US$14.4m, 2015:
US$20.3m).
Net cash outflow from operating activities amounted to US$(4.0)m
as compared to cash outflow of US$(2.8)m in 1H15. The cash outflow
of US$4.0m does not reflect the US$5.5m of outstanding trade
receivables at 30 June 2016, all of which was subsequently
received.
Consolidated Statement of Income
For the six months ended 30 June 2016
Six months Six months Year
ended ended ended
30 Jun 30 Jun 31 Dec
16 15 15
Unaudited Unaudited Audited
Note $ $ $
Revenue 5,195,619 9,945,965 18,863,273
Cost of sales (2,250,995) (5,747,423) (9,416,746)
Gross profit 2,944,624 4,198,542 9,446,527
-------------------------------------- ----- ------------ ------------ -------------
Administrative expenses (2,423,061) (2,688,225) (5,775,983)
Operating profit before depreciation
and exceptional write downs 521,563 1,510,317 3,670,544
-------------------------------------- ----- ------------ ------------ -------------
Depreciation (389,225) (1,119,157) (2,226,645)
-------------------------------------- ----- ------------ ------------ -------------
Operating profit before exceptional
write downs 132,338 391,160 1,443,899
-------------------------------------- ----- ------------ ------------ -------------
Exceptional write downs - - (12,948,755)
Operating profit/(loss) 132,338 391,160 (11,504,856)
-------------------------------------- ----- ------------ ------------ -------------
Net financial income/(expense) 806,406 114,696 (261,144)
-------------------------------------- ----- ------------ ------------ -------------
Profit/(loss) before taxation 938,744 505,856 (11,766,000)
-------------------------------------- ----- ------------ ------------ -------------
Taxation (181,097) (58,901) (493,230)
-------------------------------------- ----- ------------ ------------ -------------
Profit/(loss) for the financial
period 757,647 446,955 (12,259,230)
-------------------------------------- ----- ------------ ------------ -------------
Earnings per share - US$ (using
weighted average
number of shares)
Basic and Diluted 3 0.03 0.02 (0.50)
Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2016
Six months Six months Year
ended ended ended
30 Jun 30 Jun 31 Dec
16 15 15
Unaudited Unaudited Audited
$ $ $
Profit/(loss) for the financial
period 757,647 446,955 (12,259,230)
Other comprehensive income:
Exchange differences on re-translating
foreign operations (49,287) 21,612 43,460
Unrealised losses on available (24,800) - -
for sale investments*(1)
Total comprehensive income 683,560 468,567 (12,215,770)
---------------------------------------- ----------- ----------- -------------
*(1) As at 5 September the "available for sale" investments
referred to above were subsequently disposed of realising a gain of
$36,216.
Consolidated Statement of Financial Position
At 30 June 2016
30 Jun 16 30 Jun 31 Dec
15 15
Unaudited Unaudited Audited
Note $ $ $
Assets
Non-current assets
Goodwill 368,525 368,525 368,525
Property, plant and equipment 9,642,600 12,697,943 8,023,557
Multi-client library - 1,573,946 -
Loans 4 1,526,522 7,227,568 1,503,823
Total non-current assets 11,537,647 21,867,982 9,895,905
------------------------------- ----- ------------- ------------ -------------
Current assets
Inventories 372,325 331,765 391,035
Derivative financial asset 295,000 25,750 -
Trade and other receivables 6,128,395 7,599,847 811,728
Cash and cash equivalents 13,247,222 14,445,912 20,303,136
Total current assets 20,042,942 22,403,274 21,505,899
------------------------------- ----- ------------- ------------ -------------
Liabilities
Current liabilities
Trade and other payables 5,217,842 4,590,652 5,012,720
Total current liabilities 5,217,842 4,590,652 5,012,720
------------------------------- ----- ------------- ------------ -------------
Net current assets 14,825,100 17,812,622 16,493,179
------------------------------- ----- ------------- ------------ -------------
Net assets 26,362,747 39,680,604 26,389,084
------------------------------- ----- ------------- ------------ -------------
Shareholders' equity
Share capital 6 250,675 250,675 250,675
Share premium 6 45,202,810 45,118,623 45,202,810
Treasury shares (1,650,322) (249,055) (940,425)
Foreign exchange reserve (83,520) (56,081) (34,233)
Accumulated losses (17,356,896) (5,383,558) (18,089,743)
Total shareholders' equity 26,362,747 39,680,604 26,389,084
Total equity 26,362,747 39,680,604 26,389,084
------------------------------- ----- ------------- ------------ -------------
These condensed consolidated financial statements were approved
by the board on 12 September 2016.
Consolidated Statement of Cash Flows
For the six months ended 30 June 2016
Six months Six months Year
ended ended ended
30 Jun 30 Jun 31 Dec
16 15 15
Unaudited Unaudited Audited
$ $ $
Cash flows from operating activities
Profit/(Loss) for the period before
taxation 938,744 505,856 (11,766,000)
Impairment of assets - - 13,374,071
Share option expense - 84,188 168,375
Unrealised gain on FX option - 40,813 66,563
(Increase)/decrease in inventories 18,710 11,466 (47,804)
(Increase)/decrease in trade and
other receivables (5,316,668) (4,844,924) 1,943,195
Increase/(decrease) in trade and
other payables 205,122 60,433 (975,750)
Net foreign exchange (gain)/loss (49,288) 21,612 43,460
Accrued interest income (22,699) (102,920) (212,082)
Taxation (181,095) (58,901) (493,230)
---------------------------------------- ------------ ------------ -------------
Cash (used in)/generated by operations (4,407,174) (4,282,377) 2,100,798
---------------------------------------- ------------ ------------ -------------
Depreciation 389,225 1,119,157 2,226,645
Amortisation of multi-client library - 315,747 430,336
Net cash flow used in operating
activities (4,017,949) (2,847,473) 4,757,779
---------------------------------------- ------------ ------------ -------------
Cash flows from investing activities
Purchase of available for sale (319,800) - -
investments
Purchase of property, plant and
equipment (2,008,268) (185,634) (1,242,292)
Net cash flow used in/from investing
activities (2,328,068) (185,634) (1,242,292)
---------------------------------------- ------------ ------------ -------------
Cash flows from financing activities
(Purchase) of treasury shares (709,897) (249,055) (940,425)
Net cash flow used in financing
activities (709,897) (249,055) (940,425)
---------------------------------------- ------------ ------------ -------------
Net (decrease)/increase in cash
and cash equivalents (7,055,914) (3,282,162) 2,575,062
Cash and cash equivalents at the
start of the period 20,303,136 17,728,074 17,728,074
Cash and cash equivalents at the
end of the period 13,247,222 14,445,912 20,303,136
---------------------------------------- ------------ ------------ -------------
Consolidated Statement of Changes in Equity
For the six months ended 30 June 2016
Foreign Total
Share Share Treasury Exchange Accumulated Shareholders
Capital Premium Shares Reserve Losses Equity
$ $ $ $ $ $
Balance
as at 30
June 2015 250,675 45,118,623 (249,055) (56,081) (5,383,558) 39,680,604
Share option
expense - 84,187 - - - 84,187
Purchase
of treasury
shares - - (691,370) - - (691,370)
Total comprehensive
income for
the period - - - 21,848 (12,706,185) (12,684,337)
--------------------- -------------- ----------- ------------ --------- ------------- -------------
Balance
as at
31 December
2015 250,675 45,202,810 (940,425) (34,233) (18,089,743) 26,389,084
Purchase
of treasury
shares - - (709,897) - - (709,897)
Total comprehensive
income for
the period - - - (49,287) 732,847 683,560
Balance
as at 30
June 2016 250,675 45,202,810 (1,650,322) (83,520) (17,356,896) 26,362,747
--------------------- -------------- ----------- ------------ --------- ------------- -------------
Notes to the Consolidated Interim Financial Information
1. General information
Thalassa Holdings Ltd (the "Company") is a British Virgin Island
("BVI") International business company ("IBC"), incorporated and
registered in the BVI on 26 September 2007. The Company was
established as a holding company, and currently has three directly
owned subsidiaries, WGP Group Ltd ("WGP"), GO Science Group Ltd
("GO") and WGP Geosolutions Limited (together with Thalassa
Holdings Ltd, the "Group").
WGP Group Ltd is a wholly owned subsidiary of Thalassa which
owns the seismic operating assets of the Thalassa Group and whose
subsidiaries are:
-- WGP Energy Services Ltd ("WESL")
-- WGP Exploration Ltd ("WGPE")
-- WGP Technical Services Ltd ("WGPT")
-- WGP Professional Services Ltd ("WGPP")
-- WGP Survey Ltd ("WGPS")
GO Science Group Ltd is a wholly owned subsidiary of Thalassa
and is an Autonomous Underwater Vehicle ("AUV") research and
development company with one subsidiary:
-- Autonomous Robotics Limited ("ARL" - formerly GO Science 2013 Ltd)
WGP Geosolutions Limited is a wholly owned subsidiary of
Thalassa which has an additional subsidiary, WGP Group AT GmbH,
both currently non-operational.
The Group's interest in each of the subsidiaries is 100%.
2. Significant Accounting policies
The Group prepares its accounts in accordance with applicable
International Financial Reporting Standards ("IFRS") as adopted by
the EU.
The accounting policies applied by the Company in this unaudited
consolidated interim financial information are the same as those
applied by the Company in its consolidated financial statements for
the year ended 31 December 2015.
2.1. Basis of preparation
The condensed consolidated financial statement for the six
months ended 30 June 2016 has been prepared in accordance with
International Accounting Standard No. 34, 'Interim Financial
Reporting'. They do not include all of the information required for
full annual financial statements and should be read in conjunction
with the consolidated financial statements of the Company for the
year ended 31 December 2015.
All intra-group transactions, balances, income and expenses are
eliminated in full on consolidation.
2.2. Going concern
The financial information has been prepared on the going concern
basis as management consider that the Group has sufficient cash to
fund its current commitments for the foreseeable future.
3. Earnings per share
30 Jun 30 Jun 31 Dec
2016 2015 2015
Unaudited Unaudited Audited
The calculation of earnings per
share is based on
the following loss and number
of shares:
Profit/(loss) for the period ($) 757,647 446,955 (12,259,230)
Weighted average number of shares
of the Company 23,420,184 25,056,837 24,656,136
Earnings per share:
Basic and Diluted (US$) 0.03 0.02 (0.50)
4. Loans
30 Jun 30 Jun 31 Dec
16 15 15
Unaudited Unaudited Audited
$ $ $
Loans 1,526,522 7,227,568 1,503,823
------- ----------------- ----------------- -----------------
Loans and receivables includes a loan of US$1,503,823 plus
accrued interest of US$22,699 to the THAL Discretionary Trust.
Interest is payable at 3% per annum (reviewed periodically to keep
in line with market rates).
The THAL Discretionary Trust is a trust, independent of
Thalassa, established for the benefit of individuals or parties to
whom the Trustees wish to make awards at their discretion.
5. Related party balances and transactions
Under the consultancy and administrative services agreement
entered into on 23 July 2008 with a company in which the Chairman
has a beneficial interest, the Group was invoiced US$323,913 for
consultancy and administrative services provided to the Group. At
30 June 2016 the amount owed to this company was US$40,694 (1H15:
US$0).
6. Share capital and share premium
Six months Year
ended ended
30 Jun 31 Dec
16 15
Unaudited Audited
$ $
Authorised share capital:
100,000,000 ordinary shares of
$0.01 each 1,000,000 1,000,000
Allotted, issued and fully paid 250,675 250,675
Number
of
Number Treasury Treasury
of shares shares shares
$
Number of shares outstanding
at the period end:
Balance as 31 December 2015 23,608,865 1,458,657 940,425
Shares purchased (1,030,000) 1,030,000 709,897
--------------------------------- ------------- ------------- ----------------
Balance as 30 June 2016 22,578,865 2,488,657 1,650,322
--------------------------------- ------------- ------------- ----------------
7. Subsequent events
As announced on 12 July 2016, the Company purchased 100,000 of
its shares at a price of 44 pence per share.
In the Consolidated Financial Statements for the year ended 31
December 2015 released on 5 April 2016, the Company referred to the
outstanding trade receivable owed by Joint Stock Company
"Sevmorgeo" ("SMG") to WGP Energy Services Ltd ("WGPES"), a wholly
owned subsidiary of Thalassa, in respect of the provision of
seismic equipment and related services in Ecuador. In Note 16 to
the Consolidated Financial Statements, the Company confirmed that
arbitral proceedings had been commenced in the London Court of
International Arbitration against SMG to recover the outstanding
trade receivable plus interest and costs (the "Claim"). As
disclosed in Note 16, Duncan Soukup, the Company's Chairman, had
paid the USD$1.1 million discount offered to SMG in January 2014
himself on a nonrecourse basis.
The Company announced on 12 August 2016 that WGPES had entered
into an assignment agreement with Joint Stock Company "Rosgeologia"
("Rosgeo"), the parent of SMG, under which the rights to the Claim
have been assigned to Rosgeo for a consideration of $750,000
payable to WGPES. As a result of this assignment, the Company is in
a position to repay the Chairman that amount of the discount he
paid, but not its entirety. WGPES has no further claim against SMG
or Rosgeo and the Claim has been discontinued.
The Company announced on 2 September 2016 that it has agreed the
terms of a conditional investment of GBP400,000 for 40,000,000 new
ordinary shares of Papua Mining plc at a price of 1 pence per
share. The issue of the shares is conditional upon approval by its
shareholders at a general meeting to be convened by no later than
31 October 2016.
As announced on 9 September 2016, the Company acquired
10,438,376 ordinary shares in The Local Shopping REIT plc ("LSR")
at an aggregate cost of approximately GBP3.6 million. As announced
12 September 2016, a further 6,225,000 ordinary shares in LSR were
acquired at an aggregate cost of GBP2.05m. As a result, it is now
beneficially interested in 19,093,376 LSR Shares, which represents
23.14 per cent of the issued share capital of LSR.
8. Copies of the Interim Report
The interim report is available on the Company's website:
www.thalassaholdingsltd.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR AKBDPABKDBCD
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