REG - Gulf Marine Services - Annual Financial Report
13/05/2022 07:15
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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
Mansour Al Alami Tel: +44 (0)20 7603 1515
Executive Chairman
Celicourt Communications Tel: +44 (0) 208 434 2643
Mark Antelme
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 £7.9 million, or 6.0 pence per share.
The Group is exploring the various contractual options available per the
current bank terms to take place by the end of 2022. As disclosed, the two
options available are the raise of US$ 50 million equity or the issuance of
87.6 million warrants giving potential rights to 132 million shares if
exercised, which would result in cash proceeds to the Company of £ 7.9
million. As at 31 December 2021, neither of the two contractual scenarios had
been ruled out. The Board however consider the issuance of warrants to have a
slightly higher chance of occurrence.
Interest on bank borrowings reduced by 36.6% to US$ 17.5 million (2020: US$
27.6 million) following the renegotiation of the Group's bank facility in
March 2021, the reduction in net bank debt, following the successful equity
raise and a reduction in average LIBOR to 0.2% (2020: 1.0%).
Commercial and Operations
The Group secured nine new contracts in the year, worth US$ 66.0 million
(2020: seven contracts worth US$ 18.0 million). Tender and bid activity
increased, with 2.6 vessel years of projects that are due to commence in 2022
currently in the pipeline. Evolution commenced its first long-term contract
utilising its cantilever system.
Despite challenges brought by COVID the Group has achieved its best year for
financial performance for many years. Average utilisation, particularly for
K-Class vessels, has remained at its highest since 2016. New charters and
extensions secured in year totalled 9.6 years. Operational downtime continued
the trend of recent years of being low at 1.5% (2020: 1.6%).
Governance
Three new non-executive Directors joined the Board during 2021, with the
appointment of Jyrki Koskelo, Anthony St John and Charbel El Khoury in
February, May, and August 2021 respectively.
I currently hold the position of Chairman and Chief Executive, leading the
business and the Board. Whilst holding the positions of both Chairman and
Chief Executive is not recommended by the 2018 UK Corporate Governance Code
(the Code), the Board has concluded that, at this stage in the Group's
turnaround process, this continues to be appropriate. This recognises both the
level and pace of change necessary for the Group and its relatively small
scale. This will be regularly assessed by the Board as the Group progresses
through its turnaround process.
Removal of Material Uncertainty
The Group is currently operating as a Going Concern without any material
uncertainties. This is the first time the Group has been operating as Going
Concern without any material uncertainties since 2017.
Safety
There were two recordable injuries in the early part of 2021. One Lost Time
Injury and one Restricted Work Day Case. This led to an increase in our Total
Recordable Injury Rate from 0.0 (2020) to 0.2 (2021), and an increase in our
Lost Time Injury rate from 0.0 (2020) to 0.1 (2021). These levels remain
significantly below industry average and in both cases have since returned to
zero in early 2022. Two vessels celebrated safety milestones in the year, with
both Evolution and Endeavour reaching five years without incident.
We continue to develop our systems and processes to ensure that our offshore
operations are as safe as possible in line with the expectations of our
customers and stakeholders.
Taskforce on Climate-related Financial Disclosures
This year the Annual Report includes our first Task Force on Climate-related
Financial Disclosures (TCFD). This is a new requirement for premium listed
companies on the London Stock Exchange. We welcome the introduction of this
regulation, having previously committed to adopting the TCFD recommendations
by 2022. GMS acknowledged climate change as an emerging risk in 2019, and in
December 2021, recognised it as a principal risk.
The Group has complied with the requirements of LR 9.8.6(8)R, by reporting on
a 'comply or explain' basis against the 11 recommended TCFD disclosures. As of
31 December 2021, the Group was unable to make disclosures that were
consistent with those of the TCFD for ten out of the eleven disclosures. The
Group aims to be fully compliant by 31st December 2022.
Outlook
Due to the strong pipeline of opportunities expected to come to the market,
the Group anticipates seeing continued improvements in day rate and
utilisation levels in 2022. Secured utilisation for 2022 currently stands at
88% (equivalent in 2021: 73%).
Secured backlog stands at US$ 179.2 million as at 1 April 2022 (US$ 207.3
million as at 1 April 2021) and average secured day rates at $28.9k, 12.6%
higher than 2021 actual average day rates. Given the current high levels of
utilisation secured, combined with higher day rates, the Group expects the
financial performance to continue to improve and reiterates its EBITDA
guidance of between US$ 70-US$ 80 million for 2022.
Mansour Al Alami
Executive Chairman
Financial Review
2021 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.
Revenue Revenue Gross profit/(loss) Gross profit/(loss) Adjusted gross profit / (loss) US$'000* Adjusted gross profit / (loss) US$'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
Share capital - Ordinary Share capital - Deferred Share premium Restricted reserve Group restructuring reserve Share based payment reserve Capital contribution Cash flow hedge reserve Cost of hedging reserve Translation reserve Retained earnings Attributable to the Owners of the Company Non-controlling interests Total equity
account
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 18,505 46,445 9,253 − − − − − − − − 74,203 − 74,203
(Note 6)
Share issue costs − − (3,228) − − − − − − − − (3,228) − (3,228)
Cash settlement of share- based payments − − − − − (74) − − − − − (74) − (74)
At 31 December 2021 30,117 46,445 99,105 272 (49,710) 3,648 9,177 (558) − (2,086) 124,386 260,796 1,912 262,708
Consolidated statement of cash flows for the year ended 31 December
Notes 2021 2020
US$'000 US$'000
Net cash generated from operating activities 14 40,511 44,268
Investing activities
Payments for additions of property and equipment (7,898) (5,623)
Dry docking expenditure incurred (3,609) (7,600)
Interest received 9 15
Proceeds from disposal of property and equipment − 299
Proceeds from disposal of assets held for sale − 559
Net cash used in investing activities (11,498) (12,350)
Financing activities
Proceeds from issue of shares 27,758 −
Bank borrowings received 2,000 21,500
Repayment of bank borrowings (30,983) (12,075)
Interest paid on bank borrowings (12,950) (27,903)
Payment of issue costs on bank borrowings (3,615) (14,449)
Share issue costs paid (3,228) −
Principal elements of lease payments (2,342) (1,871)
Settlement of derivatives (1,033) (883)
Interest paid on leases (147) (193)
Dividends paid − (650)
Net cash used in financing activities (24,540) (36,524)
Net increase/(decrease) in cash and cash equivalents 4,473 (4,606)
Cash and cash equivalents at the beginning of the year 3,798 8,404
Cash and cash equivalents at the end of the year 5 8,271 3,798
Non - cash transactions
Recognition of deferred shares 46,445 -
Recognition of right-of-use asset 1,955 3,239
Capital accruals 408 585
Drydock accruals 302 411
Notes to the consolidated financial information for the year ended 31 December
2021
1 Basis of preparation
Gulf Marine Services PLC ("GMS" or "the Company") is a company which is
limited by shares and is registered and incorporated in England and Wales on
24 January 2014. The Company is a public limited company with operations
mainly in the Middle East and North Africa (MENA), and Europe. The address of
the registered office of the Company is 107 Hammersmith Road, London, United
Kingdom, W14 0QH. The registered number of the Company is 08860816.
The principal activities of GMS and its subsidiaries (together referred to as
"the Group") are chartering and operating a fleet of specially designed and
built vessels. All information in the notes relate to the Group, not the
Company unless otherwise stated.
The Company and its subsidiaries are engaged in providing self-propelled,
self-elevating support vessels, which provide a stable platform for delivery
of a wide range of services throughout the total lifecycle of offshore oil,
gas and renewable energy activities and which are capable of operations in the
Middle East and other regions.
The financial information for the year ended 31 December 2020 does not
constitute statutory accounts as defined in section 434 of the Companies Act
2006. A copy of the statutory accounts for that year has been delivered to the
Registrar of Companies. The independent auditor's report on the full financial
statements for the year ended 31 December 2020 was unqualified, however
included a material uncertainty in relation to the Company's ability to
continue as a going concern. No other statement was made under section 498 of
the Companies Act 2006.
The preliminary announcement does not constitute the Group's statutory
accounts for the year ended 31 December 2021, but is derived from those
accounts. Statutory accounts for the year ended 31 December 2021 were approved
by the Directors on 12 May 2022 and will be delivered to the Registrar of
Companies following the Company's Annual General Meeting. The independent
auditor's report on those financial statements was unqualified, did not draw
attention to any matters by way of emphasis and did not include a statement
under Section s498 (2) or (3) of the 2006 Companies Act.
The 2021 Annual Report will be posted to shareholders in advance of the Annual
General Meeting.
While the financial information included in this preliminary announcement has
been prepared in accordance with the recognition and measurement criteria of
International Financial Reporting Standards ("IFRSs‟), this announcement
does not itself contain sufficient information to comply with the disclosure
aspects of IFRSs.
The consolidated preliminary announcement of the Group has been prepared in
accordance with IFRSs, IFRIC interpretations and the Companies Act 2006
applicable to companies reporting under IFRSs. The consolidated financial
information has been prepared under the historical cost convention, as
modified by the revaluation of certain financial assets and financial
liabilities, including derivative instruments, at fair value.
Going concern
The Group's Directors have assessed the Group's financial position for a
period through to June 2023 of not less than 12 months from the date of
approval of the full year results and have a reasonable expectation that the
Group will be able to continue in operational existence for the foreseeable
future.
The material uncertainty over going concern that existed and was previously
disclosed as a significant judgment when the 31 December 2020 financial
statements were approved on 21 May 2021 no longer exists due to the successful
issuance of equity in June 2021, which removed the potential event of default
on the Group's revised bank facilities, as renegotiated in March 2021.
The renegotiation of bank facilities also resulted in a 40% reduction in
margin payable in 2021 and 2022, with the surplus cash generated from these
savings used to accelerate repayment of the loan principal (refer to Note 7
for further details on the revised terms of the bank facility).
As a result of the above refinancing in March 2021 and subsequent equity raise
in June 2021, the Directors no longer consider going concern to be a critical
accounting judgment as at 31 December 2021.
1 Basis of preparation (continued)
Going concern (continued)
The Group is exploring various contractual options available per the current
bank terms to take place by the end of 2022. There are two options available
which are either the raise of US$ 50 million equity or the issuance of 87.6
million warrants giving potential rights to 132 million shares if exercised.
As at 31 December 2021, the Board consider the more likely outcome will be the
issuance of warrants rather than the equity raise. PIK interest will
potentially accrue, only if the net leverage ratio is above 4.0 times. Based
on the latest Board approved projections, the net leverage ratio is expected
to be below 4.0x and therefore no PIK interest is expected.
The forecast used for Going Concern reflects management's key assumptions
including those around utilisation and vessel day rates on a vessel-by-vessel
basis. Specifically, these assumptions are:
· Average day rates across the fleet are assumed to be US$ 28.6k
for the 18-month period to 30 June 2023;
· 90% forecast utilisation for the 18-month period to 30 June 2023;
· Strong pipeline of tenders and opportunities for new contracts
that would commence during the forecast period.
As noted above the impact of COVID-19 has also been considered in short-term
forecasts approved by the Board which include additional hotel and testing
costs for offshore crew whilst in quarantine. Terms and conditions of crew
rotations have also been amended and costs updated to reflect this. Rotations
have been extended for all crew to limit the number of times in quarantine and
the number of changeouts on the crew which increases the risk of infection
each time it occurs. All policies are in line with Government and client
guidelines for offshore activities. Management note that the impact of
COVID-19 has shown significant signs of easing in Q1 2022 and therefore this
is not expected to be a long-term risk.
While the current situation regarding the war in Ukraine and Russian sanctions
described in note 15 remains uncertain, the Directors believe the potential
impact of the war, border closures and resulting sanctions will not have a
significant impact on operations.
Brexit is not expected to have a significant effect on the Group's operations
as 12 of 13 vessels are in the MENA region.
The Group is expected to continue to generate positive operating cash flows
for the foreseeable future and has in place a committed working capital
facility of US$ 50.0 million, of which US$ 25.0 million can be utilised to
support the issuance of performance bonds and guarantees. The balance can be
utilised to draw down cash. US$ 21.5 million of this facility was utilised as
at 31 December 2021, leaving US$ 3.5 million available for drawdown (2020: US$
3.5 million). There was a reduction to the cash element of the working capital
facility by US$ 5 million to US$ 20 million on 31st March 2022. A payment of
US$ 5 million was made by the Group on the same day reducing the amount
utilised to US$ 16.5 million, leaving US$ 3.5 million available for drawdown.
The working capital facility expires alongside the main debt facility in June
2025.
The principal borrowing facilities are subject to covenants and are measured
bi-annually in June and December. Refer to note 7 for further details.
The Group's forecasts, having taken into consideration reasonable risks and
downsides, indicate that its revised bank facilities along with sufficient
order book of contracted work (currently secured 86% of revenue for FY 2022)
and a strong pipeline of near-term opportunities for additional work (a
further 6% is at an advanced stages of negotiation captured in the Group's
backlog) will provide sufficient liquidity for its requirements for the
foreseeable future and accordingly the consolidated financial information for
the Group for the current period have been prepared on a going concern basis.
A downside case was prepared using the following assumptions:
· no work-to-win in 2022;
· a 22 percent reduction in work to win utilisation in H1 2023; and
· a reduction in day-rates for an E-Class vessel assumed to have
the largest day rate, by 10% commencing from November 2022, i.e. after expiry
of the current secured period.
1 Basis of preparation (continued)
Going concern (continued)
Based on the above scenario, the Group would not be in breach of its term loan
facility, however, the net leverage ratio is forecast to exceed 4.0 times as
at 31 December 2022 for a period of 6 months and therefore PIK interest of US$
3.9 million would accrue in the assessment period and has been included in the
above forecast. Such PIK would be settled as part of the bullet payment on
expiry of the Group's term loan facility in June 2025. The downside case is
considered to be severe but plausible and would still leave the Group with
$10m of liquidity and in compliance with the covenants under the Group's
banking facilities throughout the period until the end of May 2023.
In addition to the above reasonably plausible downside sensitivity, the
Directors have also considered a reverse stress test, where adjusted EBITDA
has been sufficiently reduced to breach the net leverage ratio as a result of
a combination of reduced utilisation and day rates, as noted below:
· no work-to-win in 2022;
· a 40 percent and 25 percent reduction in options utilisation in
2022 and H1 2023 respectively;
· a 48 percent reduction in work to win utilisation in H1 2023; and
· a reduction in day-rates for an E-Class vessel assumed to have
the largest day rate, by 10% commencing from November 2022, i.e. after expiry
of the current secured period.
Based on the above scenario, net leverage ratio is forecast to exceed 4.0
times at 31 December 2022 for a period of 6 months and therefore PIK interest
of US$ 3.9 million would accrue in the assessment period and has been included
in the above forecast. Such PIK would be settled as part of the bullet payment
on expiry of the Group's term loan facility in June 2025. The net leverage
ratio is also breached at HY 2023.
Should circumstances arise that differ from the Group's projections, the
Directors believe that a number of mitigating actions can be executed
successfully in the necessary timeframe to meet debt repayment obligations as
they become due (refer note 7 for maturity profiles) and in order to maintain
liquidity. Potential mitigating actions include the following:
· Reduction in client specific capex due to no mobilisation of
vessels of approximately US$ 4 million in 2022 and US$ 2.5 million in H1 2023;
· Vessels off hire for prolonged periods could be cold stacked to
minimise operating costs on these vessels at the rate of US$ 35,000/month for
K-Class and US$ 50,000/month for S-Class/E-Class;
· Reduction in overhead costs, particularly, bonus payments
estimated at US$ 125k per month; and
· 2022 - H2 2024 voluntary payments could be deferred till H1 2025
when the bullet payment will be made as there would be less cash available to
help deleverage on a voluntary basis.
GMS remains cognisant of the wider context in which it operates and the impact
that climate change could have on the financial statements of the Group.
2 Significant accounting policies
The significant accounting policies and methods of computation adopted in the
preparation of this financial information are consistent with those followed
in the preparation of the Group's consolidated annual financial statements for
the year ended 31 December 2020, except for the adoption of new standards and
interpretations effective as at 1 January 2021.
3 Key sources of estimation uncertainty and critical
accounting judgements
In the application of the Group's accounting policies, the Directors are
required to make judgements, estimates and assumptions about the carrying
amounts of assets and liabilities that are not readily apparent from other
sources. The estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant. Actual
results may differ from these estimates.
In applying the Group's accounting policies during the year, there are no
critical judgements.
3 Key sources of estimation uncertainty and critical
accounting judgements (continued)
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period, or in the period
of the revision and future periods if the revision affects both current and
future periods.
The key assumptions concerning the future, and other key sources of estimation
uncertainty that may have a significant risk of causing a material adjustment
to the carrying value of assets and liabilities within the next financial year
are outlined below.
Impairment and reversal of previous impairment of property and equipment
Management carried out an impairment assessment of property and equipment for
year ended 31 December 2021. Following this assessment management determined
that the recoverable amounts of the cash generating units to which items of
property and equipment were allocated, being vessels and related assets, were
most sensitive to future day rates, vessel utilisation and discount rate. It
is reasonably possible that changes to these assumptions within the next
financial year could require a material adjustment of the carrying amount of
the Group's vessels.
Whilst the Group has revised certain assumptions for certain vessels by more
than 10% relative to prior year the average increase across all vessels was
less than 10%. Management would not expect an assumption change of more than
10% across all vessels within the next financial year, and accordingly
believes that a 10% sensitivity to day rates and utilisation is appropriate.
As at 31 December 2021, the total carrying amount of the property and
equipment, drydocking expenditure, and right of use assets subject to
estimation uncertainty was US$ 602.3 million (2020: US$ 706.0 million). Refer
to Note 5 for further details including sensitivity analysis.
4 Property and equipment
Vessels Capital work-in-progress Land, building and improvements Vessel spares, fitting and other equipment Others Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Cost
At 1 January 2020 884,497 4,857 10,488 60,743 3,670 964,255
Additions − 6,208 − − − 6,208
Transfers 5,695 (7,138) − 1,163 280 −
Disposals (180) − (5,387) − (1,660) (7,227)
Write offs − − (5,101) (2,004) (323) (7,428)
At 31 December 2020 890,012 3,927 − 59,902 1,967 955,808
Additions − 8,306 − − − 8,306
Transfers 6,859 (7,191) − 332 − −
At 31 December 2021 896,871 5,042 − 60,234 1,967 964,114
4 Property and equipment (continued)
Vessels Capital work-in-progress Land, building and improvements Vessel spares, fitting and other equipment Others Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Accumulated depreciation
At 1 January 2020 221,805 2,845 8,014 13,823 3,534 250,021
Eliminated on disposal of assets − − (3,269) - (1,586) (4,855)
Write off − − (5,101) (2,004) (323) (7,428)
Depreciation expense 22,444 − 356 2,955 82 25,837
Impairment 87,156 − − − − 87,156
At 31 December 2020 331,405 2,845 − 14,774 1,707 350,731
Depreciation expense 19,492 − − 3,244 80 22,816
Reversal of impairment (14,959) − − − − (14,959)
At 31 December 2021 335,938 2,845 − 18,018 1,787 358,588
Carrying amount
At 31 December 2021 560,933 2,197 − 42,216 180 605,526
At 31 December 2020 558,607 1,082 − 45,128 260 605,077
Depreciation amounting to US$ 22.8 million (2020: US$ 25.8 million) has been
charged to the profit and loss, of which US$ 22.7 million (2020: US$ 25.5
million) was allocated to cost of sales. The remaining balance of the
depreciation charge is included in general and administrative expenses.
Vessels with a total net book value of US$ 560.9 million (2020: US$ 558.6
million), have been mortgaged as security for the loans extended by the
Group's banking syndicate (Note 7).
4 Property and equipment (continued)
Impairment
In accordance with the requirements of IAS 36 - Impairment of Assets, the
Group assesses at each reporting period if there is any indication an
additional impairment would need to be recognised for its vessels and related
assets, or if the impairment loss recognised in prior periods no longer exist
or had decreased in quantum. Such indicators can be from either internal or
external sources. In circumstances in which any indicators of impairment or
impairment reversal are identified, the Group performs a formal impairment
assessment to evaluate the carrying amounts of the Group's vessels and their
related assets, by comparing against the recoverable amount to identify any
impairments or reversals. The recoverable amount is the higher of the vessels
and related assets' fair value less costs to sell and value in use.
During the years ended 31 December 2019 and 31 December 2020, the market
capitalisation of the Group continued to be lower than the net asset value as
the Group had been unable to achieve the recovery previously anticipated
following ongoing challenging market conditions and uncertainty in respect of
the Group's capital structure. These conditions and specifically the continued
low share price were identified as indicators of potential impairment of the
Group's vessels and their related assets. As such a full impairment review of
each vessel and their related assets was undertaken in both those years. Based
on such review, management had recognised an impairment loss of US$ 59.1
million and US$ 87.2 million on certain of the Group's vessels during the
years ended 2019 and 2020 respectively. Of the 13 vessels in existence as at
31 December 2021, impairment losses had been recognised on 9 vessels while no
impairment loss had been recognised on the remaining 4 vessels. The
recoverable values in both the years were measured using value in use
computations. As permitted under IAS 36.105, none of the above impairment
losses were allocated to the assets related to the vessels as management
concluded that doing so would have reduced their carrying values to an amount
below their respective recoverable values on a standalone basis.
During the year ended 31 December 2021, external factors, such as the
improvement in general market conditions and the sustained increase in oil
prices/related activity; and internal factors, specifically, the further
increase in management's assumptions in relation to long-term day rates beyond
that previously assumed in the prior year impairment assessments, suggested
that there were indications that the value of assets may have increased as at
31 December 2021 leading to potential reversals of historic impairment losses.
Management's view of the further improvement in the long-term market outlook
was supported by a recent independent market and fleet valuation report that
management obtained from a leading consultant with extensive experience of the
subsea equipment support vessel markets in which the Group operates.
Additionally, management identified certain indicators of possible additional
impairment, such as a higher discount rate assumption, a market capitalisation
that remains below the Group's net assets, and lower actual revenues than
prior year forecasts for some vessels.
As a result of the above factors and as required by IAS 36, management
performed a formal impairment assessment as at 31 December 2021 for all
vessels.
Management has again obtained an independent broker valuation of its vessels
as at 2 February 2022 for the purpose of its banking covenant compliance
requirements. However, consistent with prior years, management does not
consider these broker valuations to represent a reliable estimate of the fair
value for the purpose of assessing the recoverable value of the Group's
vessels, noting that there have been limited "willing buyer and willing
seller" transactions in the current offshore vessel market on which such
values could reliably be based. Due to these inherent limitations, management
has again concluded that recoverable amount should be based on value in use.
The impairment review was performed for each cash-generating unit, by
identifying the value in use of each vessel and associated spares fittings,
capitalised dry-docking expenditure and right-of-use assets relating to
operating equipment used on the fleet, based on management's projections of
future utilisation, day rates and associated cash flows.
4 Property and equipment (continued)
Impairment (continued)
The projection of cash flows related to vessels and their related assets is
complex and requires the use of a number of estimates, the primary ones being
future day rates, vessel utilisation and discount rate.
In estimating the value in use, management estimated the future cash inflows
and outflows to be derived from continuing use of each vessel and its related
assets for the first four years based on its approved budgets and forecasts.
The terminal value cash flows (i.e., those beyond the 4-year period) were
estimated based on terminal value mid-cycle day rates and utilisation levels
calculated by looking back as far as 2014, when the market was at the top of
the cycle through to current levels as the industry starts to emerge out of
the bottom of the cycle, adjusted for anomalies. Such long-term forecasts also
took account of the outlook for each vessel having regard to their
specifications relative to expected customer requirements, as well as new
information obtained from recent external publications and reports and about
broader long-term trends including climate change.
The near-term assumptions used to derive future cash flows reflect contracted
rates where applicable and thereafter the market recovery from the COVID-19
pandemic and current oil price environment. Though the Group also operates in
the North Sea, its core market in the long term is expected to remain in the
Middle East which, in turn, is expected to continue to benefit from the low
production costs for oil and gas in the region, the current appetite of NOCs
to increase production and the reliance the local governments have on revenues
derived from oil and gas.
At the same time, as an operator of state-of-the-art Subsea Equipment Support
Vessels in both the oil and gas and renewables industries (offshore wind
market) with experience in multiple geographical areas, the Group's fleet
offers significant operational flexibility. Any increased demand in offshore
renewables in the long-term as a result of climate change concerns will
present the Group future opportunities to deploy more of its fleet into this
market without any major additional capital expenditure on the vessels. Hence,
the Group believes that it will not face any significant impact on the demand
for its vessels due to climate change implications beyond the extent reflected
in management's assumptions and sensitivities.
In assessing value in use, the estimated future cash flows are discounted to
their present value using a pre-tax discount rate. The discount rate of 12.6%
(2020: 10.56%) is computed on the basis of the Group's weighted average cost
of capital. The cost of equity incorporated in the computation of the discount
rate is based on risk-free rate, equity risk premium and industry sector
average betas, and reflects specific adjustments for country risk in the
countries the Group operates in, the Group's relatively small size and a Group
specific risk premium reflecting any additional risk factors relevant to the
Group. The cost of debt is based on the Group's actual cost of debt. The
weighted average is computed based on the industry capital structure. In
concurrence with external advisors, management reviewed and narrowed down the
peer companies used to compute the discount rate and measured the overall
impact of existing and additional risks related to the Group, resulting in an
increase of the WACC to 12.6% as noted above. Whilst this exceeded the
reasonably possible sensitivity disclosed in the prior year, for the reasons
disclosed in the key assumptions sensitivity section on page 25 onwards,
management still consider a 1% sensitivity on discount rate to be appropriate.
The impairment review led to the recognition of an aggregate impairment
reversal of US$ 14.96 million. The key reason for the reversal is an increase
in management's long-term assumptions for day rates compared to prior year.
This increase is partially offset by an overall decrease in long-term
utilisation assumptions and an increase in discount rate from 10.56% to 12.6%,
which is computed on the basis explained in earlier paragraph.
In accordance with the Companies Act 2006, section 841(4), the following has
been considered:
a) the directors have considered the value of some/all of the fixed
assets of the Group without revaluing them; and
b) the Directors are satisfied that the aggregate value of those assets
are not less than the aggregate amount at which they were stated in the
Group's accounts.
4 Property and equipment (continued)
Impairment (continued)
Details of the impairment reversal by cash-generating unit, along with the
associated recoverable amount reflecting its value in use, are provided
below:
Impairment Recoverable Impairment Recoverable
Reversal Amount Amount Amount
Cash Generating Unit (CGUs) Vessel class 2021 2021 2020 2020
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 % on 2022 levels Utilisation change %
Vessels class 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 day rate change % on 2020 assumptions Long term utilisation change % on 2020 assumptions
Vessels class
E-Class CGUs 29% (6%)
S-Class CGUs 2% (4%)
K-Class CGUs (5%) (2%)
4 Property and equipment (continued)
Impairment (continued)
The impairment reversals recognised on the Group's K-Class fleet (excluding
Pepper which was never impaired) primarily reflect a modest increase in
short-term forecast day rates and utilisation for these vessels as the market
begins to recover and the Group experiences increased demand. The NOCs have
indicated a preference for vessels that are larger, and in some cases,
particularly in Qatar and Saudi Arabia, able to work in deeper water than the
K-Class are capable of. As a result, the main use of these vessels is now
expected to be on contracts for engineering, procurement and construction
("EPC") clients, which are typically shorter in duration which is likely to
impact utilisation with short gaps expected between contracts and only modest
improvements, if any, in day rates due to a smaller pipeline of future
opportunities. These factors are reflected in the long-term forecasts of day
rates and utilisation for these vessels, similar to prior year.
The impairment reversals recognised on three E-Class vessels reflect further
increases primarily in long-term assumptions on day rates relative to the
Group's previous forecasts, informed by the recent independent market and
fleet valuation report obtained by the Group, as described above. The forecast
48% increase in rates relative to 2022 reflects improving long-term market
conditions coupled with a lack of supply of vessels with the capabilities of
the E-Class such as their large crane capacities and superior leg length. As
these vessels are the most capable of all the vessels in the fleet it is
anticipated they will be able to demand higher day rates going forward.
No impairment or reversals have been identified for the remaining five
cash-generating units i.e., one K-Class vessel, one E-class and three S-Class
vessels.
Key assumption sensitivities
The Group has conducted an analysis of the sensitivity of the impairment test
to reasonably possible changes in the key assumptions (long-term day rates,
utilisation and pre-tax discount rates) used to determine the recoverable
amount for each vessel as follows:
Day rates
Day rates higher by 10% Day rates lower by 10%
Vessels class Impact (in US$ millions) Number of vessels impacted Impact (in US$ millions) Number of vessels impacted
Impairment reversal of* (Impairment) of*
E-Class CGUs 43.9 3 (33.2) 4
S-Class CGUs - - (6.3) 1
K-Class CGUs 20.6 4 (16.7) 6
Total fleet 64.5 7 (56.2) 11
*This reversal of impairment / (impairment) is calculated on carrying values
before the adjustment for impairment reversals in 2021.
The total recoverable amounts of the Group's vessels as at 31 December 2021
would have been US$ 733.5 million under the increased long-term day rates
sensitivity and US$ 530.3 million for the reduced day rate sensitivity.
4 Property and equipment (continued)
Impairment (continued)
Key assumption sensitivities (continued)
Utilisation
Utilisation higher by 10% Utilisation lower by 10%
Vessels class Impact (US$m) Number of vessels impacted Impact (US$m) Number of vessels impacted
Impairment reversal of* (Impairment)
of*
E-Class CGUs 38.8 3 (33.2) 4
S-Class CGUs - - (7.9) 2
K-Class CGUs 19.9 4 (16.7) 6
Total fleet 58.7 7 (57.8) 12
*This reversal of impairment / (impairment) is calculated on carrying values
before the adjustment for impairment reversals in 2021.
The total recoverable amounts of the Group's vessels as at 31 December 2021
would have been US$ 701.5 million under the increased utilisation sensitivity
and US$ 530.3 million for the reduced utilisation sensitivity.
Whilst the Group has revised certain assumptions for certain vessels by more
than 10% relative to prior year the average increase across all vessels was
less than 10%. Management would not expect an assumption change of more than
10% across all vessels within the next financial year, and accordingly
believes that a 10% sensitivity to day rates and utilisation is appropriate.
Discount rate
A further sensitivity was conducted where a 1% increase and decrease was
applied to the pre-tax discount rate. As mentioned in Note 3 management
reviewed and narrowed down the peer companies used to compute the discount
rate following consultation with external advisors. The same companies will be
used going forward as these are deemed to be more specific to GMS's capital
structure and therefore management does not anticipate significant changes
beyond 1% to the discount rate going forward.
Discount rate higher by 1% Discount rate lower by 1%
Vessels class Impact (US$m) Number of vessels impacted Impact (US$m) Number of vessels impacted
(Impairment)/ impairment reversal of* Impairment reversal of*
E-Class CGUs (9.1) 4 26.9 3
S-Class CGUs (1.1) 1 - -
K-Class CGUs 0.5 5 8.2 4
Total fleet (9.7) 10 35.1 7
*This (impairment) / impairment reversal is calculated on carrying values
before the adjustment for impairment reversals in 2021.
The total recoverable amounts of the vessels as at 31 December 2021 would have
been US$ 679.6 million under the reduced discount rate sensitivity and US$
589.7 million for the increased discount rate sensitivity.
5 Cash and cash equivalents
2021 2020
US$'000 US$'000
Interest bearing
Held in UAE banks 639 55
Non-interest bearing
Held in UAE banks 778 1,026
Held in banks outside UAE 6,854 2,717
Total cash at bank and in hand 8,271 3,798
6 Share capital
Ordinary shares at £0.02 per share
Number of ordinary shares Ordinary
shares
(Thousands) US$'000
At 1 January 2020 and 1 January 2021 350,488 58,057
Placing of new shares 665,927 18,505
Capital reorganisation - (46,445)
As at 31 December 2021 1,016,415 30,117
Deferred shares at £0.08 per share
Number of ordinary shares Ordinary
shares
(Thousands) US$'000
At 1 January 2020 and 1 January 2021 - -
Capital reorganisation 350,488 46,445
As at 31 December 2021 350,488 46,445
Prior to an equity raise on 28 June 2021, the Group underwent a capital
reorganisation where all existing ordinary shares with a nominal value of 10
pence per share were subdivided and re-designated into 1 ordinary share with a
nominal value of 2 pence and 1 deferred share with a nominal value of 8 pence
each. The previously recognised share capital balance relating to the old 10p
ordinary shares was allocated pro rata to the new subdivided 2p ordinary
shares and 8p deferred shares.
The deferred shares have no voting rights and no right to the profits
generated by the Group. On winding-up or other return of capital, the holders
of deferred shares have extremely limited rights. The Group has the right but
not the obligation to buy back all of the Deferred Shares for an amount not
exceeding £1.00 in aggregate without obtaining the sanction of the holder or
holders of the Deferred Shares. As there is no contractual obligation,
management do not consider there to be a liability.
As part of the equity raise on 28 June 2021, the Company issued 665,926,795
new ordinary shares with a nominal value of 2 pence per share at 3 pence per
share with the additional pence per share being recognised in the share
premium account. Issue costs amounting to US$ 3.2 million (31 December 2020:
$nil) have been deducted from the share premium account.
7 Bank borrowings
Secured borrowings at amortised cost are as follows:
2021 2020
US$'000 US$'000
Term loans 358,026 388,533
Working capital facility 21,500 21,500
379,526 410,033
Bank borrowings are split between hedged and unhedged amounts as follows;
2021 2020
US$'000 US$'000
Hedged bank borrowing via Interest Rate Swap* 30,769 38,462
Unhedged bank borrowings 348,757 371,571
379,526 410,033
*This is an economic hedge and not accounted for in accordance with IFRS 9,
Financial Instruments. The Group uses an IRS to hedge a portion of the Group's
floating rate liability by converting LIBOR to a fixed rate.
Bank borrowings are presented in the consolidated statement of financial
position as follows:
2021 2020
US$'000 US$'000
Non-current portion
Bank borrowings 353,429 379,009
Current portion
Bank borrowings - scheduled repayments within one year 26,097 31,024
379,526 410,033
As noted in the 2020 annual report, on 31 December 2020, the Group's banking
syndicate agreed to extend certain obligations on the Group, which it was
otherwise required to have met, including the requirement to issue warrants to
banks and accrue Payment in Kind (PIK) interest.
This meant the Group was not in an event of default as at 31 December 2020.
This was further extended on 27 January 2021 and 25 February 2021. As the
waivers received led to revisions to the timing of payments, management
assessed the fair value of the remaining cashflows.
On 31 March 2021, the Group amended the terms of its loan facility with its
banking syndicate. The amended terms (see below) were significantly different
compared to the original loan. Management determined that the Group's loan
facility was substantially modified and accordingly the old loan facility was
extinguished, and the new facility recognised.
A gain of US$ 6.3 million (2020: US$ 1.1 million) was recognised in the profit
and loss reflecting the waiver of PIK interest otherwise payable during the
first quarter of 2021, the remeasurement of the debt to fair value as at the
date of the substantial modification, and the impact of a change in the
forecast voluntary repayment of the debt. US$ 3.2 million of costs incurred in
renegotiating the new facility were expensed (2020: US$ 15.8 million).
The remeasurement of the bank borrowings was determined in accordance with
generally accepted principles based on a discounted cash flow analysis, using
appropriate effective interest rates.
7 Bank borrowings (continued)
The principal terms of the outstanding facility as at 31 December 2021 are as
follows:
• The facility's main currency is US$ and is repayable with a
margin at 3% up to 31 December 2022 at which point margin is based on a
ratchet depending on leverage levels (2020: margin ratchet based on leverage
levels) and final maturity in June 2025 (31 December 2020: June 2025).
• The revolving working capital facility amounts to US$ 50.0
million. USD$ 25.0 million of the working capital facility is allocated to
performance bonds and guarantees and US$ 25.0 million is allocated to cash of
which US$ 21.5 million was drawn as at 31 December 2021 (31 December 2020: US$
21.5 million), leaving US$ 3.5 million available for drawdown (31 December
2020: US$ 3.5 million).
• The facility remains secured by mortgages over its whole fleet,
with a net book value at 31 December 2021 of US$ 560.9 million (31 December
2020: US$ 558.6 million) (Note 4). Additionally, gross trade receivables,
amounting to US$ 43.0 million (31 December 2020: US$ 24.2 million) have been
assigned as security against the loans extended by the Group's banking
syndicate (Note 7).
• The Group has also provided security against gross cash
balances, being cash balances amounting to US$ 8.3 million (31 December 2020:
US$ 3.8 million) (Note 5) before the restricted amounts related to visa
deposits held with the Ministry of Labour in the UAE of US$ 39K (2020: US$
95K) included in trade and other receivables, which have been assigned as
security against the loans extended by the Group's banking syndicate.
• The amended terms contain contingent conditions such that if an
equity raise of US $75.0 million in aggregate does not take place by 31
December 2022, PIK interest would potentially accrue, only if leverage is
above 4.0x and warrants would be due to the banking syndicate, refer to Note
12 for details of the valuation of the contract to issue warrants.
The facility is subject to certain financial covenants including; Debt Service
Cover; Interest Cover; and Net Leverage Ratio; which are tested bi-annually in
June and December. As at 31 December 2021 the Group were required to achieve a
net leverage ratio lower than 6.1x, interest cover with a minimum ratio of
1.2x and service cover with a minimum ratio of 2.5x. There are also additional
covenants relating to general and administrative costs, capital expenditure
and Security Cover (loan to value) which are tested annually in December. In
addition, there are restrictions to payment of dividends until the net
leverage ratio falls below 4.0 times. All financial covenants assigned to the
Group's debt facility, described above were met as of 31 December 2021.
Management considers the carrying amount of the Group's bank borrowings
approximates its fair value as at 31 December 2021.
7 Bank borrowings (continued)
Outstanding amount
Current Non-current Total Security Maturity
US$'000 US$'000 US$'000
31 December 2021:
Term loan - scheduled repayments within one year 26,097 - 26,097 Secured June 2025
Term loan - scheduled repayments within more than one year - 331,929 331,929 Secured June 2025
Working capital facility - scheduled repayment more than one year - 21,500 21,500 Secured June 2025
26,097 353,429 379,526
31 December 2020:
Term loan - scheduled repayments within one year 9,524 - 9,524 Secured June 2025
Term loan - scheduled repayments within more than one year - 379,009 379,009 Secured June 2025
Working capital facility - scheduled repayment within one year 21,500 - 21,500 Secured June 2025
31,024 379,009 410,033
8 Segment reporting
Management have identified that the Directors and senior management team are
the chief operating decision makers in accordance with the requirements of
IFRS 8 'Operating Segments'. Segment performance is assessed based upon
adjusted gross profit/(loss), which represents gross profit/(loss) before
depreciation and amortisation and loss on impairment of assets. The reportable
segments have been identified by Directors and senior management based on the
size and type of asset in operation.
The operating and reportable segments of the Group are (i) K-Class vessels,
which include the Kamikaze, Kikuyu, Kawawa, Kudeta, Keloa and Pepper vessels
(ii) S-Class vessels, which include the Shamal, Scirocco and Sharqi vessels,
(iii) E-Class vessels, which include the Endeavour, Endurance, Enterprise and
Evolution vessels, and (iv) Other vessels, considered non-core assets, which
does not form part of the K, S or E Class vessels segments. The composition of
the Other vessels segment, which are non-core assets, was amended in 2018.
All of these operating segments earn revenue related to the hiring of vessels
and related services including charter hire income, messing and accommodation
services, personnel hire and hire of equipment. The accounting policies of the
operating segments are the same as the Group's accounting policies described
in Note 2.
Revenue Segment adjusted gross profit/(loss)
2021 2020 2021 2020
US$'000 US$'000 US$'000 US$'000
K-Class vessels 43,027 40,947 26,214 25,349
E-Class vessels 38,680 29,407 25,104 12,676
S-Class vessels 33,420 32,136 22,590 22,210
Other vessels - 2 - (10)
115,127 102,492 73,908 60,225
Less:
Depreciation charged to cost of (22,738) (25,524)
sales
Amortisation charged to cost of (5,503) (3,073)
sales
Reversal of impairment/(impairment 14,959 (87,156)
loss)
Gross profit/ (loss) 60,626 (55,528)
Other general and administrative expenses (12,272) (12,632)
Finance expense (14,463) (46,740)
Foreign exchange loss, net (1,002) (993)
Other income 28 257
Finance income 9 15
Restructuring costs - (2,492)
Exceptional legal costs - (3,092)
Loss on disposal of property and - (2,073)
equipment
Gain on disposal of assets held for - 259
sale
Profit/(loss) for the year before 32,926 (123,019)
taxation
The total revenue from reportable segments which comprises the K-, S- and
E-Class vessels was US$ 115.1 million (2020: US$ 102.5 million). The Other
vessels segment does not constitute a reportable segment per IFRS 8 Operating
Segments.
Segment revenue reported above represents revenue generated from external
customers. There were no inter-segment sales in the years.
8 Segment reporting (continued)
Segment assets and liabilities, including depreciation, amortisation and
additions to non-current assets, are not reported to the chief operating
decision makers on a segmental basis and are therefore not disclosed.
Information about major customers
During the year, four customers (2020: two) individually accounted for more
than 10% of the Group's revenues. The related revenue figures for these major
customers, the identity of which may vary by year was US$ 13.4 million, US$
16.6 million, US$ 42.0 million and US$ 18.6 million (2020: US$ 39.3 million
and US$ 17.7 million). The revenue from these customers is attributable to the
E-Class vessels, S-Class vessels and K-Class vessels reportable segments.
Geographical segments
Revenue by geographical segment is based on the geographical location of the
customer as shown below.
2021 2020
US$'000 US$'000
United Arab Emirates 58,019 53,363
Saudi Arabia 21,376 17,745
Qatar 22,591 19,047
Total - Middle East and North Africa 101,986 90,155
United Kingdom 10,392 5,353
Rest of Europe 2,749 6,984
Total - Europe 13,141 12,337
Worldwide Total 115,127 102,492
Type of work
The Group operates in both the oil and gas and renewables sector. Oil and gas
revenues are driven from both client operating cost expenditure and capex
expenditure. Renewables are primarily driven by windfarm developments from
client expenditure. Details are shown below.
2021 2020
US$'000 US$'000
Oil and Gas 101,986 90,196
Renewables 13,141 12,296
Total 115,127 102,492
8 Segment reporting (continued)
Type of work (continued)
A reversal of impairment of US$ 15.0 million (2020: impairment of US$ 87.2
million) was recognised in respect of property and equipment (Note 4). These
(reversals of impairment)/impairment charge were attributable to the following
reportable segments:
2021 2020
US$'000 US$'000
K-Class vessels (4,852) 61,130
S-Class vessels - -
E-Class vessels (10,107) 26,026
Other vessels - -
(14,959) 87,156
K-Class vessels S-Class vessels E-Class vessels Other vessels Total
US$'000 US$'000 US$'000 US$'000 US$'000
2021
Depreciation charged to cost of sales 4,739 5,842 12,037 120 22,738
Amortisation charged to cost of sales 2,759 848 1,896 - 5,503
Reversal of impairment charge (4,852) - (10,107) - (14,959)
2020
Depreciation charged to cost of sales 7,432 5,807 12,092 193 25,524
Amortisation charged to cost of sales 1,863 605 605 - 3,073
Impairment charge 61,130 - 26,026 - 87,156
9 Presentation of adjusted non-GAAP results
The following table provides a reconciliation between the Group's adjusted
non-GAAP and statutory financial results:
Year ended 31 December 2021 Year ended 31 December 2020
Adjusted non-GAAP results Adjusting items Statutory total Adjusted non-GAAP results Adjusting items Statutory total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Revenue 115,127 - 115,127 102,492 - 102,492
Cost of sales
- Cost of sales before (41,219) - (41,219) (42,267) - (42,267)
depreciation,
amortisation and
impairment
- Depreciation and amortisation (28,241) - (28,241) (28,597) - (28,597)
Reversal of impairment/ - 14,959 14,959 - (87,156) (87,156)
(impairment loss)*
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 - 1,439 1,439 - (448) (448)
recognition of new debt facility*****
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 - - - 259 - 259
sale
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 30,729 - 30,729 31,453 - 31,453
amortisation
Adjusted EBITDA 64,124 14,959 79,083 50,449 (92,740) (42,291)
9 Presentation of adjusted non-GAAP results
(continued)
* The reversal of impairment credit/impairment charge on certain vessels and
related assets have been added back to gross profit/(loss) to arrive at
adjusted gross profit for the year ended 31 December 2021 and 2020 (refer to
Note 4 for further details). Management have adjusted this due to the nature
of the transaction which management believe is not directly related to
operations management are able to influence. This measure provides additional
information on the core profitability of the Group.
** Restructuring costs incurred are not considered part of the regular
underlying performance of the business and so have been added back to arrive
at adjusted loss for the year ended 31 December 2020. Management have adjusted
this due to them being one off in nature. This measure provides additional
information in assessing the Group's total performance that management is more
directly able to influence and on a basis comparable from year to year.
*** Exceptional legal costs incurred are not considered part of the regular
underlying performance of the business and so have been added back to arrive
at adjusted loss for the year ended 31 December 2020. Management have adjusted
this due to them being one off in nature. This measure provides additional
information in assessing the Group's total performance that management is more
directly able to influence and on a basis comparable from year to year.
**** Costs incurred to arrange a new bank facility have been added back to
loss before taxation to arrive at adjusted profit/(loss) for the year ended 31
December 2021 and 31 December 2020. Management have adjusted this due to both
the nature of the transaction and the incidence of these transactions
occurring. Costs incurred to arrange a new bank facility are not related to
the profitability of the Group which management are able to influence and are
typically only incurred when a refinance takes place. This measure provides
additional information in assessing the Group's total performance that
management is more directly able to influence and on a basis comparable from
year to year.
***** The fair value adjustment on recognition of the new loan has been added
back to profit/(loss) before taxation to arrive at adjusted loss for the year
ended 31 December 2021 and 2020. Management have adjusted this due to them
being one off in nature. This measure provides additional information in
assessing the Group's total performance that management is more directly able
to influence and on a basis comparable from year to year.
9 Presentation of adjusted non-GAAP results
(continued)
Year ended 31 December 2021 Year ended 31 December 2020
Adjusted non-GAAP results Adjusting items Statutory total Adjusted non-GAAP results Adjusting items Statutory total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Cashflow reconciliation:
Profit/(loss) for the year 17,986 13,233 31,219 (15,319) (108,985) (124,304)
Adjustments for:
(Reversal of impairment)/ - (14,959) (14,959) - 87,156 87,156
impairment loss (Note 4)*
Cost to acquire new bank facility** - 3,165 3,165 - 15,797 15,797
Fair value adjustment on - (1,439) (1,439) - 448 448
recognition of new debt facility***
Finance expenses 12,737 - 12,737 30,495 - 30,495
Other adjustments 32,502 - 32,502 34,343 - 34,343
(Note 14)
Cash flow from operating activities before movement in working capital 63,225 - 63,225 49,519 (5,584) 43,935
Change in trade and (17,090) - (17,090) 4,866 - 4,866
other receivables
Change in trade and (4,773) - (4,773) (1,973) (1,797) (3,770)
other payables
Cash generated from 41,362 - 41,362 52,412 (7,381) 45,031
operations (Note 14)
Income tax paid (849) - (849) (763) - (763)
Net cash flows generated 40,513 - 40,513 51,649 (7,381) 44,268
from operating
activities
Net cash flows used in (11,498) - (11,498) (12,350) - (12,350)
investing activities
Payment of issue costs on bank borrowings (450) (3,165) (3,615) (115) (14,334) (14,449)
Other cash flows used in (20,927) - (20,927) (22,075) (22,075)
financing activities
Net cash flows used in financing activities (21,377) (3,165) (24,542) (22,190) (14,334) (36,524)
Net change in cash and 7,638 (3,165) 4,473 17,109 (21,715) (4,606)
cash equivalents
* 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 31,001 (124,339)
being profit/(loss) for the year attributable to Owners of the Company
(US$'000)
Profit/(loss) for the purpose of adjusted basic and diluted earnings/(loss) 17,768 (15,354)
per share (US$'000)
Weighted average number of shares ('000) 691,661 350,488
Weighted average diluted number of shares in issue ('000) 695,753 350,488
Basic earnings/(loss) per share (cents) 4.48 (35.48)
Diluted earnings/(loss) per share (cents) 4.46 (35.48)
Adjusted earnings/(loss) per share (cents) 2.57 (4.38)
Adjusted diluted earnings/(loss) per share (cents) 2.55 (4.38)
Basic earnings/(loss) per share is calculated by dividing the profit/(loss)
attributable to equity holders of the Company (as disclosed in the statement
of comprehensive income) by the weighted average number of ordinary shares in
issue during the year.
Adjusted earnings/(loss) per share is calculated on the same basis but uses
the profit/(loss) for the purpose of basic earnings/(loss) per share (shown
above) adjusted by adding back the non-operational items, which were
recognised in the consolidated statement of profit or loss and other
comprehensive income in the prior year. The adjusted earnings/(loss) per share
is presented as the Directors consider it provides an additional indication of
the underlying performance of the Group.
Diluted earnings/(loss) per share is calculated by dividing the profit/(loss)
attributable to equity holders of the Company by the weighted average number
of ordinary shares in issue during the year, adjusted for the weighted average
effect of share-based payment charge outstanding during the year. As the Group
incurred a loss in 2020, diluted earnings/(loss) per share is the same as loss
per share, as the effect of share-based payment charge was anti-dilutive.
Adjusted diluted earnings/(loss) per share is calculated on the same basis but
uses adjusted profit/(loss) (Note 9) attributable to equity holders of the
Company.
The following table shows a reconciliation between the basic and diluted
weighted average number of shares:
2021 2020
'000s '000s
Weighted average basic number of shares in issue 691,661 350,488
Weighted average effect of LTIP's 4,092 -
Weighted average diluted number of shares in issue 695,753 350,488
11 Revenue
2021 2020
US$'000 US$'000
Charter hire 63,525 60,797
Lease income 38,824 33,252
Messing and accommodation 7,971 5,506
Maintenance service 2,865 1,267
Mobilisation and demobilisation 1,077 1,030
Sundry income 865 640
115,127 102,492
Revenue recognised - over time 113,931 101,683
Revenue recognised - point in time 1,196 809
-
115,127 102,492
Included in mobilisation and demobilisation income is an amount of US$ 0.1
million (2020 US$ 0.3 million) that was included as deferred revenue at the
beginning of the financial year.
Lease income:
2021 2020
Maturity analysis:
Year 1 47,994 40,529
Year 2 21,306 22,856
Year 3 - 5 4,305 21,175
Onwards - -
73,605 84,559
Split between:
Current 47,994 40,529
Non - current 25,611 44,030
73,605 84,559
12 Derivative financial instruments
Embedded derivatives - contract to issue warrants
In June 2020, the Group restructured the terms of its borrowings with its
lenders. These terms included warrants to be issued to its lenders if GMS had
not raised US$ 75.0 million of equity by no later than 31 December 2020. As
this term was not expected to be met, an embedded derivative liability was
recognised for the obligation to issue the warrants. At 31 December 2020, this
had a value of US$ 1.4 million, which had increased to US$ 1.8 million by
March 2021.
12 Derivative financial instruments (continued)
In March 2021, the Group amended the terms of its loan facility, as mentioned
in note 7, and additional time was granted to raise equity before warrants
were required to be issued to its lenders. The previous obligation to issue
warrants to the bank was waived, and a contingent requirement to issue
warrants to banks was introduced. The amended terms required US$ 25.0 million
of equity to be raised by 31 December 2021 otherwise the Group would be in
default, and a further US$ 50.0 million to be raised by 31 December 2022. GMS
was subsequently successful with the requirement to raise the first tranche of
equity (Refer to Note 6).
As the new terms of the loan facility contained separate distinguishable terms
with a contingent requirement to issue warrants to banks, management
determined the debt facility to contain an embedded derivative. The Group was
required to recognise the embedded derivative at fair value. Management
commissioned an independent valuation expert to measure the fair value of the
warrants, which was determined using Monte Carlo simulations. The simulation
considers sensitivity by building models of possible results by substituting a
range of values. This represents a Level 3 fair value measurement under the
IFRS 13 hierarchy. The fair value of the liability as at 31 December 2021 was
US$ 0.7 million (31 December 2020 US$ 1.4 million). As the derivative was due
to be settled after 12 months, the balance is recognised as a non-current
liability.
The Group successfully concluded a US$ 27.8 million equity raise in June 2021
which prevented an event of default on its loan facilities. Under these
facilities, the Group is required to raise a further US$ 50 million of equity
by the end of 2022 or issue 87 million warrants entitling the Group's banks to
acquire 132 million shares, or 11.5% of the share capital of the Company, for
a total consideration of GBP £7.9 million, or 6.0 pence per share. Warrant
holders will have the right to exercise their warrants up to the end of the
term of the loan facility being 30 June 2025.
The loan facility was a tri-partite agreement between the Company, a
subsidiary of the Group and the Groups banking syndicate. As the embedded
derivative was over the Company's equity, the balance has been recorded on the
Company's balance sheet.
Interest Rate Swap
The Group entered into an Interest Rate Swap (IRS) on 30 June 2018 to hedge a
notional amount of US$ 50.0 million. The remaining notional amount hedged
under the IRS as at 31 December 2021 was US$ 30.8 million (31 December 2020:
US$ 38.4 million). The IRS hedges the risk of variability in interest payments
by converting a floating rate liability to a fixed rate liability. The fair
value of the IRS as at 31 December 2021 was a liability value of US$ 1.1
million (31 December 2020: US$ 2.4 million). As cashflows of the hedging
relationship were not highly probable in 2020 hedge accounting was
discontinued. The net revaluation gain in the period to 31 December 2021 of
US$ 0.1 million was accordingly recognised in the income statement, together
with a $0.1m loss in respect of amounts recycled from the cash flow hedge
reserve.
The fair value measurement of the interest rate swap was determined by
independent valuers with reference to quoted market prices, discounted cash
flow models and recognised pricing models as appropriate. They represent
Level 2 fair value measurements under the IFRS 13 hierarchy.
IFRS 13 fair value hierarchy
Apart from the contract to issue warrants, the Group has no other financial
instruments that are classified as Level 3 in the fair value hierarchy in the
current or previous period with fair values that are determined by reference
to significant unobservable inputs. There have been no transfers of assets or
liabilities between levels of the fair value hierarchy. There are no
non-recurring fair value measurements.
12 Derivative financial instruments (continued)
Derivative financial instruments are made up as follows:
Cross currency interest rate swap
Interest rate swap Embedded derivative
Total
US$'000 US$'000 US$'000 US$'000
At 1 January 2021 (2,387) - (1,449) (3,836)
Loss on settlement of derivatives 1,033 - - 1,033
Net gain on changes in fair value of interest rate swap 278 - - 278
Derecognition of embedded derivative warrants - - 1,890 1,890
Initial recognition of embedded derivative - - (926) (926)
Net loss on changes in fair value of embedded derivative - - (232) (232)
As at 31 December 2021 (1,076) - (717) (1,793)
Cross currency interest rate swap
Interest rate swap Embedded derivative
Total
US$'000 US$'000 US$'000 US$'000
At 1 January 2020 (1,737) (3) - (1,740)
Gain on fair value changes of hedging instruments - 21 - 21
Gain/(loss) on settlement of derivatives 901 (18) - 883
Net loss on changes in fair value of interest rate swap (1,551) - - (1,551)
Initial recognition of embedded derivative - - (1,386) (1,386)
Net loss on changes in fair value of embedded derivative - - (63) (63)
As at 31 December 2020 (2,387) - (1,449) (3,836)
This financial information includes the cost of hedging reserve and cash flow
hedge reserve, which are detailed further in the consolidated statement of
changes in equity. These reserves are non- distributable.
13 Long term incentive plans
The Group has Long Term Incentive Plans ("LTIPs") which were granted to senior
management, managers and senior offshore officers.
From 2019 onwards the employment condition is that each eligible employee of
the Company must remain in employment during the three-year vesting period.
LTIPs have been aligned to the Company's share performance therefore only
financial metrics will be applied. EPS ("Earnings Per Share") has been dropped
as the financial metric.
In the prior years until 2018, the release of these shares was conditional
upon continued employment, certain market vesting conditions and in the case
of senior management LTIP awards, performance against three-year target EPS
compound annual growth rates. Equity-settled share-based payments were
measured at fair value at the date of grant. The fair value determined, using
the Binomial Probability Model together with Monte Carlo simulations, at the
grant date of equity-settled share-based payments, is expensed on a
straight-line basis over the vesting period, based on an estimate of the
number of shares that will ultimately vest. The fair value of each award was
determined by taking into account the market performance condition, the term
of the award, the share price at grant date, the expected price volatility of
the underlying share and the risk-free interest rate for the term of the
award.
Non-market vesting conditions, which for the Company mainly related to the
continual employment of the employee during the vesting period, and in the
case of the senior management, until 2018 as noted above, achievement of EPS
growth targets, were taken into account by adjusting the number of equity
instruments expected to vest at each balance sheet date. The cumulative amount
recognised over the vesting period was based on the number of awards that
eventually vest. Any market vesting conditions were factored into the fair
value of the share-based payment granted.
To the extent that share-based payments are granted to employees of the
Group's subsidiaries without charge, the share-based payment is capitalised as
part of the cost of investment in subsidiaries.
The number of share awards granted by the Group during the year is given in
the table below:
2021 2020
000's 000's
At the beginning of the year 6,573,229 8,768,294
Granted in the year - 2,661,388
Cash settled in the year (1,854,298) -
Forfeited in the year (2,219,217) (4,856,453)
Lapsed - -
At the end of the year 2,499,714 6,573,229
The weighted average remaining contractual life for the vesting period
outstanding as at 31 December 2021 was 0.5 years (31 December 2020: 1.0
years). The weighted average fair value of shares granted during the year
ended 31 December 2021 was US$ nil (31 December 2020: US$ 0.10).
13 Long term incentive plans (continued)
LTIP LTIP
Grant date 29 May 15 November 2019
2020
Share price £0.09 £0.08
Expected volatility 120% 102.79%
Risk-free rate 0.01% 0.48%
Expected dividend yield 0.00% 0.00%
Vesting period 3 years 3 years
Award life 3 years 3 years
The expected share price volatility of Gulf Marine Services PLC shares was
determined taking into account the historical share price movements for a
three-year period up to the grant date (and of each of the companies in the
comparator group). The risk-free return was determined from similarly dated
zero coupon UK government bonds at the time the share awards were granted,
using historical information taken from the Bank of England's records.
On 15 March 2021, the Remuneration Committee determined that awards granted on
28 March 2018 which were due to vest on 28 March 2021 would be settled in
cash, not by the issue of shares as was contractually stipulated, subject to
the achievement of the original performance conditions. For the purposes of
IFRS 2, this represented a reclassification of these awards from
equity-settled to cash-settled. In accordance with IFRS 2, at the date of
reclassification a balance of US$ 0.1 million equal to the fair value of the
awards at the modification date was deducted from equity. As the fair value at
the modification date was lower than the cumulative equity-settled share-based
payment charge at that date, no adjustment was made to profit or loss as a
result of the modifications.
On 9 June 2021, the Company's Ordinary Shares of 10p each were split into
Ordinary Shares of 2p each and deferred shares of 8p each. A consequence of
this change will be that the share options issued in prior years will be
modified to such that the recipients are granted Ordinary Shares of 2p each,
not Ordinary Shares of 10p each.
This change represented a modification of the share-based payments for the
purposes of IFRS 2. However, as the modification did not result in a
favourable change for the employees, no adjustments to the share-based payment
charge was required as a result of the change to the Company's share capital.
14 Notes to the consolidated statement of cash flows
2021 2020
US$'000 US$'000
Operating activities
Profit/(loss) for the year 31,219 (124,304)
Adjustments for:
Depreciation of property and equipment (Note 4) 22,816 25,837
Finance expenses 14,463 46,740
Amortisation of dry docking expenditure 5,503 3,074
Depreciation of right-of-use assets 2,411 2,543
Income tax expense 1,707 1,285
Movement in ECL provision during the year 62 69
End of service benefits charge 678 527
(Reversal of impairment)/impairment loss (Note 4) (14,959) 87,156
End of service benefits paid (546) (617)
Share-based payment charge (18) 168
Interest income (9) (15)
Recovery of ECL provision - (64)
Loss on disposal of property and equipment - 2,073
Gain on disposal of assets held for sale - (259)
Hedging revenue adjustment (Note 12) - (21)
Other income (28) (257)
Cash flow from operating activities before movement in working capital 63,299 43,935
(Increase)/decrease in trade and other receivables (17,090) 4,866
Decrease in trade and other payables (4,849) (3,770)
Cash generated from operations 41,360 45,031
Taxation paid (849) (763)
Net cash generated from operating activities 40,511 44,268
14 Notes to the consolidated statement of cash flows
(continued)
Changes in liabilities arising from financing activities
The table below details changes in the Group's liabilities arising from
financing activities, including both cash and non-cash changes. Liabilities
arising from financing activities are those for which cash flows were, or
future cash flows will be, classified in the Group's consolidated statement of
cash flows as cash flows from financing activities.
Derivatives 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 rates we calculate the average day rates by dividing total charter hire revenue per
month by total hire days per month throughout the year and then calculating a
monthly average.
Backlog represents firm contracts and extension options held by clients. Backlog
equals (charter day rate x remaining days contracted) + ((estimated average
Persons On Board x daily messing rate) x remaining days contracted)
+contracted remaining unbilled mobilisation and demobilisation fees. Includes
extension options.
Borrowing rate LIBOR plus margin.
Calendar days takes base days at 365 and only excludes periods of time for construction and
delivery time for newly constructed vessels.
Costs capitalised represent qualifying costs that are capitalised as part of a cost of the
vessel rather than being expensed as they meet the recognition criteria of IAS
16 Property, Plant and Equipment.
Day rates rate per day charge to customers per hire of vessel as agreed in the contract.
Demobilisation fee paid for the vessel re-delivery at the end of a contract, in which client
is allowed to offload equipment and personnel.
DEPS/DLPS diluted earnings/losses per share.
Employee retention percentage of staff who continued to be employed during the year (excluding
retirements and redundancies) taken as number of resignations during the year
divided by the total number of employees as at 31 December.
EPC engineering, procurement and construction.
ESG environmental, social and governance.
Finance service the aggregate of
a) Net finance charges for that period; and
b) All scheduled payments of principal and any other schedule payments in the
nature of principal payable by the Group in that period in respect of
financing:
i) Excluding any amounts falling due in that period under any
overdraft, working capital or revolving facility which were available for
simultaneous redrawing under the terms of that facility;
ii) Excluding any amount of PIK that accretes in that period;
iii) Including the amount of the capital element of any amounts payable
under any Finance Lease in respect of that period; and
iv) Adjusted as a result of any voluntary or mandatory prepayment
Debt Service Cover represents the ratio of Adjusted EBITDA to debt service.
GMS core fleet consists of 13 SESVs, with an average age of ten years.
Interest Cover represents the ratio of Adjusted EBITDA to Net finance charges.
IOC Independent Oil Company.
KPIs Key performance indicators.
Lost Time Injuries any workplace injuries sustained by an employee while on the job that prevents
them from being able to perform their job for a period of one or more days.
Lost Time Injury Rate (LTIR) the lost time injury rate per 200,000 man hours which is a measure of the
frequency of injuries requiring employee absence from work for a period of one
or more days.
LIBOR London Interbank Offered Rate.
Mobilisation fee paid for the vessel readiness at the start of a contract, in which client
is allowed to load equipment and personnel.
Net finance charges represents finance charges as defined by the terms of the Group's banking
facility for that period less interest income for that period.
Net leverage ratio represents the ratio of net bank debt to Adjusted EBITDA.
NOC National Oil Company.
OSW Offshore Wind.
PIK Payment In Kind. Under the banking documents dated 17 June 2020 and 31 March
2021, PIK is calculated at 5.0% per annum on the total term facilities
outstanding amount and reduces to:
a 2.5% per annum when Net Leverage reduces below 5.0x
b Nil when Net Leverage reduces below 4.0x
Under the documents dated 31 March 2021, PIK accrues on either 1 July 2021 if
the US$ 25 million equity is not raised by 30 June 2021, or from 1 January
2023 if the US$ 50 million is not raised by 31 December 2022.
PIK stops accruing at the date on which all loans are paid or discharged in
full.
Restricted work day case (RWDC) any work-related injury other than a fatality or lost work day case which
results in a person being unfit for full performance of the regular job on any
day after the occupational injury.
Secured backlog represents firm contracts and extension options held by clients. Backlog
equals (charter day rate x remaining days contracted) + ((estimated average
Persons On Board x daily messing rate)) x remaining days contracted) +
contracted remaining unbilled mobilisation and demobilisation fees. Includes
extension options.
Secured day rates day rates from signed contracts firm plus options held by clients.
Secured utilisation contracted days of firm plus option periods of charter hire from existing
signed contracts.
Security Cover (loan to value) the ratio (expressed as a percentage) of Total Net Bank Debt at that time to
the Market Value of the Secured Vessels.
SESV Self-Elevating Support Vessels.
SG&A spend means that the selling, general and administrative expenses calculated on an
accruals basis should be no more than the SG&A maximum spend for any
relevant period.
Total Recordable Injury Rate (TRIR) calculated on the injury rate per 200,000 man hours and includes all our
onshore and offshore personnel and subcontracted personnel. Offshore personnel
are monitored over a 24-hour period.
Underlying G&A underlying general and administrative (G&A) expenses excluding
depreciation and amortisation, restructuring costs, and exceptional legal
costs.
Utilisation the percentage of calendar days in a relevant period during which an SESV is
under contract and in respect of which a customer is paying a day rate for the
charter of the SESV.
Vessel operating expense Cost of sales before depreciation, amortisation and impairment, refer to note
9.
Warrants Under the banking documents date 31 March 2021, if Warrants are issued on 1
July 2021 because of the failure to raise US$ 25 million by 30 June 2021, half
of the issued warrants vest on that date. The other half will only vest on 2
January 2023 if there is a failure to raise US$ 50 million. If warrants are
issued on 2 January 2023 because of the failure to raise US$ 50 million, all
of the issued warrants vest on the same date. All warrants to expire on 30
June 2025 (maturity date of the facilities).
1 Represents operating profit/(loss) after adding back depreciation,
amortisation and the reversal of impairment in 2021 and depreciation,
amortisation, an impairment charge and adjusting items in 2020. This measure
provides additional information in assessing the Group's underlying
performance that management can more directly influence in the short term and
is comparable from year to year. A reconciliation of this measure is provided
in note 30.
2 Represents net profit/(loss) after adding back depreciation, amortisation
the reversal of impairment and adjusting items in 2021 and depreciation,
amortisation, an impairment charge and adjusting items in 2020. This measure
provides additional information in assessing the Group's total performance
that management can more directly influence and is comparable from year to
year. A reconciliation of this measure is provided in note 30.
3 Represents total bank borrowings less cash.
4 Represents the ratio of net bank debt to adjusted EBITDA.
5 Represents operating profit/(loss) after adding back depreciation,
amortisation and the reversal of impairment in 2021 and depreciation,
amortisation, an impairment charge and adjusting items in 2020. This measure
provides additional information in assessing the Group's underlying
performance that management can more directly influence in the short term and
is comparable from year to year. A reconciliation of this measure is provided
in note 9.
6 Represents net profit/(loss) after adding back depreciation, amortisation
the reversal of impairment and adjusting items in 2021 and depreciation,
amortisation, an impairment charge and adjusting items in 2020. This measure
provides additional information in assessing the Group's total performance
that management can more directly influence and is comparable from year to
year. A reconciliation of this measure is provided in note 9.
7 A reconciliation of this measure is provided in note 9 and is also defined
in Glossary.
4 Refer to Glossary for definition of Underlying G&A.
8 Refer to Glossary for definition
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. END FR FIFEEESIVLIFRecent news on Gulf Marine Services
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