REG - Gulf Marine Services - Final Results
04/04/2024 07:00
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RNS Number : 2402J Gulf Marine Services PLC 04 April 2024
April 04(th), 2024
Gulf Marine Services PLC
('Gulf Marine Services', 'GMS', 'the Company' or 'the Group')
2023 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 2023.
2023 Overview
2021 2022 2023 2023 versus 2022 change
US$m US$m US$m
Revenue 115.1 133.2 151.6 +14%
Adjusted EBITDA(1) 64.1 71.5 87.5 +22%
Net profit for the year 31.2 25.4 42.1 +66%
Average fleet utilization 84% 88% 94% +7%
Underlying G&A expenses(4) as percentage of revenue 9% 8% 7% -13%
Net leverage ratio(3) 5.8:1 4.4:1 3.05:1 -31%
2023 Financial Highlights
- Group net profits of US$ 42.1 million (2022: US$ 25.4 million), reflecting
the strength of the Group's recovery.
- Adjusted EBITDA increased to US$ 87.5 million (2022: US$ 71.5 million)
driven by an increase in revenue. Adjusted EBITDA margin(5) also increased to
58% (2022: 54%).
- Net bank debt(2) reduced to US$ 267.3 million (2022: US$ 315.8 million).
Net leverage ratio reduced to 3.05 times (2022: 4.4 times).
- Revenue increased by 14% to US$ 151.6 million (2022: US$ 133.2 million)
driven by increased utilisation on E-Class and K-Class vessels and higher
average day rates across all vessel classes, particularly E-Class.
- Cost of sales as a percentage of revenue(6) reduced by five percentage
points to 54% (2022: 59%).
- Underlying general and administrative expenses as a percentage of revenue
reduced to 7% (2022: 8%).
- Net reversal of impairment of US$ 33.4 million (2022: US$ 7.8 million)
reflecting continued improved market conditions.
- Finance expenses have increased to US$ 31.4 million (2022: US$ 17.7
million) driven by an increase in LIBOR/SOFR rates, the temporary introduction
of both a 250 bps PIK in Q1 as well as the increase on the margin rate of the
loan from 3.1 to 4.0%, both triggered by the net leverage ratio exceeding 4:1
times as at 31 December 2022. On achieving net leverage ratio below 4:1 times,
PIK ceased to accrue in the second quarter of the year, and the margin was
thereafter reduced by 90 basis points to 3.1%. This resulted in a reduction
in the cost of financing of 340 basis points.
- Impact of changes in the fair value of the derivative increased to US$
11.1 million (2022: US$ 2.5 million), primarily due to the increase in the
Group's share price.
2023 Operational Highlights
- Average fleet utilisation(7) increased by six percentage points to 94%
(2022: 88%) with an improvement in E-Class and K-Class vessels at 92% (2022:
82%) and 95% (2022: 87%) respectively.
- Average day rates increased to US$ 30.3k (2022: US$ 27.5k) with
improvements across all vessel classes, particularly for E-Class.
- New charters and extensions secured in the year totalled 8.4 years (2022:
19.4 years).
- Operational downtime decreased to 0.8% (2022: 2.2%).
2024 Highlights and Outlook
- Adjusted EBITDA guidance is set at US$ 92 million to US$ 100 million for
2024.
- Target utilisation for 2024 is 95% of which 83% is already secured.
- Anticipate continued improvement on day rates as our vessel demand
outstrips supply on the back of a pipeline of opportunities.
- Average secured day rates of over 10% higher than 2023 actual levels.
- Reversal of impairment recognised with a value of US$ 33.4 million
indicative of continued improvement of long-term market conditions.
- Group anticipates net leverage ratio to be below 2.5 times before the end
of 2024.
See Glossary.
1 Represents operating profit after adding back depreciation,
amortisation, non-operational items and impairment charges or deducting
reversal of impairment. 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 31 to the consolidated
financial statements.
2 Represents total bank borrowings less cash.
3 Represents the ratio of net bank debt to adjusted EBITDA.
4 Represents general and administrative costs excluding depreciation,
amortisation and other exceptional costs. A reconciliation of this measure is
provided in Note 31 to the consolidated financial statements.
5 Represents adjusted EBITDA divided by revenue.
6 Represents reported cost of sales divided by revenue.
7 Represents the percentage of available days in a relevant period
during which the fleet of Self Elevating Support Vessels (SESVs) is under
contract and in respect of which a customer is paying a day rate for the
charter of the SESVs.
Chairman's Review
Committed to Maximising Shareholder Value
In 2023, our business thrived amid industry tailwinds, showcasing
year-over-year growth in revenues, utilisation, and day rates. We successfully
reduced our net leverage ratio to 3.05 times from 4.4 times as of 31 December
2022. Looking forward, we will continue our deleveraging journey as we spare
no efforts to continue to increase shareholders value.
Group performance
In 2023, the Group demonstrated improvement in its financial performance,
attributed to an increase in both utilisation and average day rates across the
fleet. Average utilisation was up six percentage points to 94% and the average
day rates across the fleet increased to US$ 30.3k compared to the previous
year's US$ 27.5k. It is important to highlight that these figures represent
averages for the entire fleet, and considering some contracts carried over
from previous years at lower rates, the actual increase for new contracts
surpassed the reported average. This signals a positive trend in securing new
contracts at rates higher than the fleet's overall average, contributing to
the overall revenue growth.
The improvement in revenue translated into an improved adjusted EBITDA of US$
87.5 million (2022: US$ 71.5 million). This exceeded both our initial guidance
range of US$ 75 million to US$ 83 million, as well as surpassing the revised
guidance of
US$ 86 million. This accomplishment highlights the success of our operational
performance in maximising financial results.
Capital structure and liquidity
As a result of our commitment to deleveraging, the net leverage ratio on 31
December 2023 was reduced to 3.05 times
(31 December 2022: 4.4 times), driven by a reduction in the net bank debt to
US$ 267.3 million (31 December 2022:
US$ 315.8 million) and with improved EBITDA for the year. Attaining a net
leverage ratio below 4:1 was crucial, allowing us to limit the number of
quarters we were charged PIK interest to one quarter. During the year, we
lowered the cost of financing by 340 basis points. Key benefits of being below
4:1 times includes GMS meeting its covenants, being able to pay dividends and
cutting some debt monitoring fees. This achievement not only highlights our
financial resilience but also positions us to effectively address other
challenges, as highlighted in the risk management section, while advancing on
our deleveraging journey.
Concurrent with our deleveraging efforts aimed at shifting value from lenders
to shareholders, we are initiating plans to reward our shareholders. Recently
approved by the Board, our residual dividend policy seeks to strike a balance
between investing in the business and providing returns to shareholders.
Management is currently evaluating the timing for its implementation, a
consideration that has only recently come to the forefront.
The Group is in the process of refinancing its term facility in advance of the
bullet payment becoming due in June 2025. Management's ongoing discussions
with various lending entities are aimed at securing terms that align with our
long-term strategic objectives, ensuring continued financial stability. We are
optimistic about the outcome of these negotiations and will keep shareholders
updated as we navigate this pivotal phase in our financial planning. The Board
expresses confidence in our ability to secure favourable terms that will
contribute to the sustained success and growth.
Governance
In August 2023, we announced the departure of Rashed Al Jarwan, a
non‐executive Director of the Group, who retired from the Board. I extend my
sincere gratitude to Rashed for his contributions during the pivotal period
since joining the Board in 2020. Following Rashed's retirement, we were
pleased to welcome Haifa Al Mubarak who joined the Board as an independent
non‐executive Director in October 2023. Haifa brings over 40 years of oil
and gas experience to the business and also reflects our efforts to create a
more representative Board, demonstrating our commitment to promoting diversity
in all aspects of our organisation. I look forward to continuing to benefit
from Haifa's insights and expertise.
As a Board, we have continued to emphasise the development of effective risk
management and internal control systems, including regular audits and
reporting to ensure accountability and transparency. Demonstrated by over 50
meetings with investors and other stakeholders, we have open lines of
communication on relevant information. We conducted sessions on transparent
and ethical business practices, including a Code of Conduct review for
employees and stakeholders, and ensuring compliance with relevant regulations
and laws. This is an example of our continuous commitment towards
environmental, social, and governance (ESG) initiatives, including
sustainability practices and community engagement.
Commercial and operations
The Group successfully secured four new contracts and extended four existing
ones, totalling 8.4 years in aggregate
(2022: 19.4 years in aggregate). Our operational performance also demonstrated
continued improvement, as evidenced by a reduction in operational downtime to
0.8%, compared to 2.2% in 2022.
Safety
The Group improved its Lost Time Injury Rate (LTIR) going from 0.1 in 2022 to
zero in 2023. However, two medical treatment cases were recorded taking the
Total Recordable Injury Rate (TRIR) from 0.1 in 2022 to 0.18 in 2023. These
levels continue to be below industry average. We continue to look at areas of
improvement in our systems and processes and engaging our employees to ensure
that our offshore operations continue to be as safe as possible in line with
the expectations of our customers and stakeholders.
Task Force on Climate-related Financial Disclosures
We continue to comply with LR 9.8.6(8)R requirements by including
climate-related financial disclosures consistent with Task Force on Climate
related Financial Disclosures (TCFD) recommendations and recommended
disclosures. The TCFD recommendations focus on how companies respond to the
risks and opportunities associated with climate change. Consistent with the
recommendations, a climate scenario analysis was used to understand the
potential climate-related transition and physical risks to our operations over
the short, medium, and long term. Climate change is now integrated into our
enterprise risk assessment process. Risk management workshops are held at
least annually and attended by the Executive Chairman and other Directors.
Outlook
The offshore industry is dynamic, and today we are more agile to adapt and
ensure sustained relevance in the future. I take pride in our successful
deleveraging efforts, which along with our much improved operational and
financial performance, underscores our commitment to enhancing shareholder
value. Concurrently, we are actively exploring avenues for future growth,
aligning ourselves with emerging trends and positioning for sustained success.
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 adjusted EBITDA guidance for 2024 between US$ 92 million to US$
100 million. This reflects our confidence in sustaining positive momentum.
Finally, I would like to thank our employees, shareholders and other
stakeholders for their continued support in achieving the Group's ongoing
success.
Mansour Al Alami
Executive Chairman
03 April 2024
Financial Review
2023 2022 2021
US$m US$m US$m
Revenue 151.6 133.2 115.1
Gross profit 102.8 60.5 60.6
Adjusted EBITDA(1) 87.5 71.5 64.1
Net impairment reversal 33.4 7.8 15.0
Net profit for the year 42.1 25.4 31.2
Revenue and Segmental Profit/Loss
The Group posted 14% increase in revenue, reaching US$ 151.6 million compared
to the previous year's US$ 133.2 million. This growth was a result of
combination of an increase in both utilisation and average days rates.
Utilisation increased by six percentage points to 94% from the 2022 figure of
88%. This continues to be the highest level of utilisation achieved since
2014. Notable improvements in the utilisation rates were observed in the
E-Class and K-Class vessels, reaching 92% (2022: 82%) and 95% (2022: 87%)
respectively. S-Class vessels utilisation was slightly lower at 94% (2022:
97%).
Average day rates across the fleet increased by 10% to US$ 30.3k compared to
the previous year's US$ 27.5k with improvements across all vessel classes,
particularly for E-Class whereby, the day rates improved by 17% to US$ 41.4k
(2022: US$ 35.4k). K-Class and S-Class rates increased by 7% and 5%,
respectively.
The United Arab Emirates (UAE), Qatar and Saudi Arabia combined region
continue to be the largest geographical market representing 91%
(2022: 89%) of total revenue. The remaining 9% (2022: 11%) of revenue was
earned from the renewables market in Europe.
The table below shows the contribution to revenue, gross profit and adjusted
gross profit(2) made by each vessel class during the year.
Revenue US$'000 Gross profit US$'000 Adjusted gross profit US$'000
Vessel Class 2023 2022 2023 2022 2023 2022
E-Class vessels 60,955 51,135 43,070 18,525 26,730 15,205
S-Class vessels 35,018 33,986 21,327 12,600 16,865 17,231
K-Class vessels 55,630 48,036 38,440 29,409 25,814 20,310
Total 151,603 133,157 102,837 60,534 69,409 52,746
Cost of Sales, Reversal of Impairment and Administrative Expenses
Cost of sales as a percentage of revenue decreased by five percentage points
to 54% compared to 59% reported in 2022.
As a result of continued improved market conditions, an impairment assessment
of the Group's fleet was conducted which resulted in a net impairment reversal
of US$ 33.4 million (2022: net impairment reversal of US$ 7.8 million). Refer
to Note 5 to the consolidated financial statements for further details.
Underlying general and administrative expeses(3) (which excludes depreciation,
amortisation and other exceptional costs) reduced as a percentage of revenue
to 7% in 2023 from 8% in 2022. Reported general and administrative expenses
amounted to
US$14.6 million, up from US$13.2 million in 2022, driven by increased staff
costs and professional fees.
1 Represents operating profit after adding back depreciation,
amortisation, non-operational items and impairment charges or deducting
reversal of impairment. This measure provides additional information in
assessing the Group's underlying performance that management is more directly
able to influence in the short term and on a basis comparable from year to
year. A reconciliation of this measure is provided in note 31 to the financial
statements.
2 Represents gross profit after deducting reversal of impairment/adding
back impairment charges. This measure provides additional information on the
core profitability of the Group. A reconciliation of this measure is provided
in Note 31.
3 Represents general and administrative expenses excluding depreciation
and amortisation, and other exceptional costs. A reconciliation of this
measure is provided in Note 31 to the financial statements.
Adjusted EBITDA
The adjusted EBITDA increased to US$ 87.5 million (2022: US$ 71.5 million)
which exceeded both our initial guidance range of
US$ 75 million to US$ 83 million as well as surpassed the revised guidance of
US$ 86 million. The increase reflects improvement in market conditions leading
to higher utilisation and day rates.
The adjusted EBITDA margin has also increased to 58% (2022: 54%). Adjusted
EBITDA is considered an appropriate and comparable measure showing underlying
performance, that management are able to influence. Please refer to Note 31 to
the consolidated financial statements and Glossary for further details.
Finance Expense
Finance expenses increased to US$ 31.4 million (2022: US$ 17.7 million) which
is mainly driven by an increase in LIBOR/SOFR rates. Further, 250 basis points
of PIK interest costs were also applied and the margin rate on the loan
increased from 3% to 4% for first quarter of the year which were triggered by
the net leverage ratio exceeding 4.0 times as at 31 December 2022. On
achieving a net leverage ratio below 4:1 times, PIK interest ceased to accrue
in the second quarter of the year, and the margin was thereafter reduced by 90
basis points to 3.1%. This has resulted in reduction in cost of financing by
340 basis points. Attaining a net leverage ratio below 4:1 times was
crucial, allowing us to limit the number of quarters we were charged a PIK
interest to one quarter only. Key benefits of being below 4:1 times is it
allows GMS to meet its covenants, to pay dividends and to cut some debt
monitoring fees.
The accounting driven impact of changes in fair value of the derivative (the
warrants issued to the lenders) increased to
US$ 11.1 million (2022: US$ 2.5 million) in 2023, due to the increase in the
share price of the Company. Company expects valuation charges over par value
to get reversed when the warrants are either exercised or when they will
expire, on 30 June 2025.
Earnings
Net profit for the year increased to US$ 42.1 million compared to US$ 25.4
million reported in 2022. The 65.7% increase in net profit was mainly driven
by higher revenue and the reversal of impairments charged in the previous
years. The increase was partially offset by an increase in finance expenses
and the accounting impact of changes in the fair value of derivative (the
warrants issued to the lenders) as explained above.
Capital Expenditure
The Group's capital expenditure relating to drydocking and improvements of the
vessels increased to US$ 11.3 million
(2022: US$ 9.1 million).
Cash Flow and Liquidity
During the year, the Group delivered higher operating cash flows of US$ 94.4
million (2022: US$ 82.6 million). This increase is primarily from higher
revenues generated during the year. The net cash outflow from investing
activities increased to US$ 12.8 million (2022: US$ 6.3 million).
The Group's net cash outflow from financing activities was US$ 85.2 million
(2022: US$ 72.3 million) mainly comprising of repayments to the banks of US$
56.2 million (2022: US$ 51.4 million) and interest paid of US$ 27.4 million
(2022: US$ 17.5 million). The repayments towards the bank loan of US$ 56.2
million were almost double the Group's obligation to its lenders for 2023.
The Group has US$ 8.7 million of available resources comprising cash and cash
equivalents at the reporting date. Further, it has an available working
capital facility of US$ 15.0 million (2022: US$ 20.0 million) which can be
utilised to draw down cash, of which US$ 2.0 million (2022: Nil) was utilised,
leaving US$ 13.0 million (2022: US$ 20.0 million) available for drawdown.
During the period, the working capital facility was reduced by US$ 5.0
million. The facility expires alongside the main debt facility in June 2025.
Balance Sheet
Total non-current assets at 31 December 2023 were US$ 621.0 million (2022: US$
605.3 million), following a net impairment reversal of
US$ 33.4 million (2022: US$ 7.8 million) on some of the Group's vessels.
The total current liabilities increased to US$ 99.5 million from US$ 69.3
million in 2022, primarily due to higher scheduled repayments under the loan
agreement for 2024. Additionally, trade payables and accrued expenses
increased to US$ 13.2 million
(2022: US$ 12.6 million) and US$ 16.1 million (2022: US$ 11.2 million),
respectively.
The Group was in a net current liability position as of 31 December 2023,
amounting to US$ 52.1 million (2022: US$ 15.8 million). Total current assets
have decreased as receivables are converted into cash that was used to repay
the debt. Management closely monitors the Group's liquidity position including
focus on the forecasted short-term cash flows which would be sufficient to
meet the Group's current liabilities, including the current portion of the
bank borrowings which represents the principal repayments due over the next 12
months. The loan prepayments were also made after ensuring that forecasted
cash inflows are sufficient to meet the Group's short-term obligations.
Total non-current liabilities decreased as a result of reduction in bank
borrowings. The increase in equity reflects the net profit achieved during the
period.
Net Bank Debt and Borrowings
Net bank debt reduced to US$ 267.3 million (2022: US$ 315.8 million). This was
a result of management's commitment to accelerate deleveraging. The Group
repaid US$ 56.2 million (2022: US$ 51.4 million) towards its term loan, of
which, US$ 26.2 million
(2022: US$ 3.8 million) were over and above its contractual obligation for
2023. A total of US$ 33.7 million (2022: US$ 3.8 million) was prepaid during
2023.
Going Concern
The Group is in the process of refinancing its term facility in advance as the
bullet payment becoming due in June 2025. Management's ongoing discussions
with various lending entities are aimed at securing terms that align with our
long-term strategic objectives, ensuring continued financial stability. Given
the improved financial performance reported during 2023 and the current high
levels of utilisation secured, combined with higher day rates, the Group
expects the financial performance to continue to improve during the assessment
period. As such, we are optimistic about the outcome of these negotiations.
The Group's forecasts indicate that its anticipated refinanced debt facility
will provide sufficient liquidity for its requirements for at least the next
12 months and accordingly, the consolidated financial statements for the Group
have been prepared on the going concern basis. For further details please
refer the Going Concern disclosure in Note 3 to the consolidated financial
statements.
Related Party Transactions
During the year, there were related party transactions for catering services
of US$ 0.6 million (2022: US$ 1.2 million), overhauling services of US$ 2.4
million (2022: US$ 1.9 million) and laboratory services of US$ 18k (2022: US$
7k) with affiliates of Mazrui International LLC, the Group's second largest
shareholder (25.6%).
All related party transactions disclosed herein have been conducted at arm's
length and entered into after a competitive bidding process. This process
ensures that the terms and conditions of such transactions are fair,
reasonable, and comparable to those that would be available in similar
transactions with unrelated third parties.
The Group is not allowed to have any transactions with its largest
shareholder, Seafox International (29.99%) as agreed with Lenders. Further
details can be found in Note 24 of the consolidated financial statements.
Adjusting Items
The Group presents adjusted results, in addition to the statutory results, as
the Directors consider that they provide a useful indication of performance. A
reconciliation between the adjusted non-GAAP and statutory results is provided
in Note 31 to the consolidated financial statements with further information
provided in the Glossary.
Alex Aclimandos
Chief Financial Officer
03 April 2024
GULF MARINE SERVICES PLC
Consolidated statement of profit or loss and other comprehensive income
For the year ended 31 December 2023
Notes 2023 2022
US$'000 US$'000
Revenue 30,33 151,603 133,157
Cost of sales (81,987) (78,587)
Impairment loss of property and equipment 5,30 (3,565) (13,192)
Reversal of impairment of property and equipment 5,30 36,993 20,980
Expected credit losses 9 (207) (1,824)
Gross profit 102,837 60,534
General and administrative expenses (14,645) (13,212)
Operating profit 88,192 47,322
Finance income 34 221 11
Impact of change in fair value of warrants 11 (11,077) (2,481)
Finance expense 35 (31,431) (17,656)
Foreign exchange loss, net 36 (987) (138)
Other income 12 68
Profit for the year before taxation 44,930 27,126
Taxation charge for the year 8 (2,862) (1,724)
Net profit for the year 42,068 25,402
Other comprehensive income/(expense) - items that may be reclassified to
profit or loss:
Net hedging gain reclassified to the profit or loss 35 279 279
Net exchange gain / (loss) on translation of foreign operations 343 (799)
Total comprehensive income for the year 42,690 24,882
Profit attributable to:
Owners of the Company 41,342 25,326
Non-controlling interests 19 726 76
42,068 25,402
Total comprehensive income attributable to:
Owners of the Company 41,964 24,806
Non-controlling interests 19 726 76
42,690 24,882
Earnings per share:
Basic (cents per share) 32 4.07 2.49
Diluted (cents per share) 32 3.92 2.47
All results are derived from continuing operations in each year. There are no
discontinued operations in either year.
The attached notes 1 to 39 form an integral part of these consolidated
financial statements.
GULF MARINE SERVICES PLC
Consolidated statement of financial position
As at 31 December 2023
Notes 2023 2022
US$'000 US$'000
ASSETS
Non-current assets
Property and equipment 5 606,412 592,955
Dry docking expenditure 6 11,204 8,931
Right-of-use assets 7 3,347 3,371
Total non-current assets 620,963 605,257
Current assets
Trade receivables 9 30,646 33,179
Prepayments, advances and other receivables 10 8,057 7,722
Derivative financial instruments 11 - 386
Cash and cash equivalents 12 8,666 12,275
Total current assets 47,369 53,562
Total assets 668,332 658,819
EQUITY AND LIABILITIES
Capital and reserves
Share capital - Ordinary 13 30,117 30,117
Capital redemption reserve 13 46,445 46,445
Share premium account 13 99,105 99,105
Restricted reserve 14 272 272
Group restructuring reserve 15 (49,710) (49,710)
Share based payment reserve 16 - 3,632
Capital contribution 17 9,177 9,177
Cash flow hedge reserve 11 - (279)
Translation reserve (2,542) (2,885)
Retained earnings 194,703 149,712
Attributable to the owners of the Company 327,567 285,586
Non-controlling interest 19 2,714 1,988
Total equity 330,281 287,574
Current liabilities
Trade and other payables 21 35,054 27,979
Current tax liability 7,032 6,321
Bank borrowings - scheduled repayments within one year 22 41,500 30,000
Lease liabilities 23 1,623 1,845
Derivative financial instruments 11 14,275 3,198
Total current liabilities 99,484 69,343
Non-current liabilities
Provision for employees' end of service benefits 20 2,395 2,140
Bank borrowings - scheduled repayments more than one year 22 234,439 298,085
Lease liabilities 23 1,733 1,677
Total non-current liabilities 238,567 301,902
Total liabilities 338,051 371,245
Total equity and liabilities 668,332 658,819
The consolidated financial statements were approved by the Board of Directors
and authorised for issue on
03 April 2024. Registered Company 08860816. They were signed on its behalf by:
Jyrki Koskelo Mansour Al Alami
Independent non-executive Director Executive Chairman
The attached notes 1 to 39 form an integral part of these consolidated
financial statements.
GULF MARINE SERVICES PLC
Consolidated statement of changes in equity
For the year ended 31 December 2023
Share capital - Ordinary Share capital - Deferred Capital redemption reserve Share premium Restricted reserve Group restructuring reserve Share based payment reserve Capital contribution Cash flow hedge reserve Translation Retained earnings Attributable to the owners of the Company Non-controlling interest Total equity
account Reserve
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 2022 30,117 46,445 − 99,105 272 (49,710) 3,648 9,177 (558) (2,086) 124,386 260,796 1,912 262,708
Profit for the year − − − − − − − − − − 25,326 25,326 76 25,402
Other comprehensive income for the year
Net hedging gain on interest hedges reclassified to the profit or loss − − − − − − − − 279 − − 279 − 279
Exchange differences on foreign operations − − − − − − − − − (799) − (799) − (799)
Total comprehensive income for the year − − − − − − − − 279 (799) 25,326 24,806 76 24,882
Transactions with owners of the Company
Capital reorganisation (Note 13) − (46,445) 46,445 − − − − − − − − − − −
Share based payment charge − − − − − − 45 − − − − 45 − 45
Cash settlement of share- based payments − − − − − − (61) − − − − (61) − (61)
Total transactions with owners of the Company − (46,445) 46,445 − − − (16) − − − − (16) − (16)
At 31 December 2022 30,117 − 46,445 99,105 272 (49,710) 3,632 9,177 (279) (2,885) 149,712 285,586 1,988 287,574
Profit for the year − − − − − − − − − − 41,342 41,342 726 42,068
Other comprehensive income for the year
Net hedging gain on interest hedges reclassified to the profit or loss − − − − − − − − 279 − − 279 − 279
Exchange differences on foreign operations − − − − − − − − − 343 − 343 − 343
Total comprehensive income for the year − − − − − − − − 279 343 41,342 41,964 726 42,690
Transactions with owners of the Company
Share based payment charge − − − − − − 17 − − − − 17 − 17
Transfer of share option reserve − − − − − − (3,649) − − − 3,649 − − −
Total transactions with owners of the Company − − − − − − (3,632) − − − 3,649 17 − 17
At 31 December 2023 30,117 − 46,445 99,105 272 (49,710) − 9,177 − (2,542) 194,703 327,567 2,714 330,281
Refer to Notes 13 to 19 for description of each reserve.
The attached notes 1 to 39 form an integral part of these consolidated
financial statements.
GULF MARINE SERVICES PLC
Consolidated statement of cashflows
For the year ended 31 December 2023
Notes 2023 2022
US$'000 US$'000
Operating activities
Profit for the year 42,068 25,402
Adjustments for:
Depreciation of property and equipment 5 24,297 23,695
Finance expenses 35 31,431 17,656
Impact of change in fair value of warrants 11 11,077 2,481
Amortisation of dry-docking expenditure 6 4,687 5,613
Depreciation of right-of-use assets 7 3,188 2,635
Income tax expense 8 2,862 1,724
Net charge of expected credit losses 9 207 1,825
End of service benefits charge 20 723 270
Impairment loss 5 3,565 13,192
Reversal of impairment 5 (36,993) (20,980)
End of service benefits paid 20 (468) (452)
Share-based payment charge 16 - 45
Interest income 34 (221) (11)
Other income (12) (68)
Cash flows from operating activities before movement in working capital 86,411 73,027
Changes in:
- trade and other receivables 2,003 5,610
- trade and other payables 8,140 5,005
Cash generated from operations 96,554 83,642
Taxation paid (2,151) (1,077)
Net cash generated from operating activities 94,403 82,565
Investing activities
Payments for additions of property and equipment (3,459) (3,345)
Dry docking spend excluding drydock accruals (9,550) (2,970)
Interest received 221 11
Net cash used in investing activities (12,788) (6,304)
Financing activities
Repayment of bank borrowings 37 (56,174) (51,445)
Interest paid on bank borrowings (27,428) (17,525)
Principal elements of lease payments 37 (3,330) (2,524)
Settlement of derivatives 37 327 (384)
Payment of issue costs on bank borrowings (374) (148)
Interest paid on leases 37 (245) (170)
Cash settled share-based payments - (61)
Bank borrowings received 37 2,000 -
Net cash used in financing activities (85,224) (72,257)
Net (decrease) / increase in cash and cash equivalents (3,609) 4,004
Cash and cash equivalents at the beginning of the year 12,275 8,271
Cash and cash equivalents at the end of the year 12 8,666 12,275
Non - cash transactions
Cancellation of deferred shares - (46,445)
Recognition of right-of-use assets 3,231 3,122
Addition / (reversal) to capital accruals 867 (9)
Increase in drydock accruals 2,590 2,775
The attached notes 1 to 39 form an integral part of these consolidated
financial statements.
GULF MARINE SERVICES PLC
Notes to the consolidated financial statements
For the year ended 31 December 2023
1 General information
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 Arabian Peninsula region 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
shareholder pattern of the Group is disclosed in the annual report.
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
Arabian Peninsula, Europe and other regions.
The financial information for the year ended 31 December 2022 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 2022 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 preliminary announcement does not constitute the Group's statutory
accounts for the year ended 31 December 2023, but is derived from those
accounts. Statutory accounts for the year ended 31 December 2023 were approved
by the Directors on 03 April 2024 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 2023 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 derivative financial instruments at fair value.
2 Adoption of new and revised International
Financial Reporting Standards (IFRS)
The accounting policies and methods of computation adopted in the preparation
of these consolidated financial statements are consistent with those followed
in the preparation of the Group's consolidated annual financial statements for
the year ended 31 December 2022, except for the adoption of new standards and
interpretations effective as at 1 January 2023.
GULF MARINE SERVICES PLC
Notes to the consolidated financial statements (continued)
For the year ended 31 December 2023
2 Adoption of new and revised International
Financial Reporting Standards (IFRS) (continued)
New and revised IFRSs
The following new and revised IFRSs have been adopted in these consolidated
financial statements. The application of these new and revised IFRSs has not
had any material impact on the amounts reported for the current and prior
years but may affect the accounting for future transactions or arrangements.
Effective for
annual periods
beginning on or after
IFRS 17 Insurance Contracts 1 January 2023
Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice 1 January 2023
Statement 2 Making Materiality Judgements-Disclosure of Accounting Policies
Amendments to IAS 8 Accounting Policies Changes in Accounting Estimates and 1 January 2023
Errors-Definition of Accounting Estimates
Amendments to IAS 12 Income Taxes-Deferred Tax related to Assets and 1 January 2023
Liabilities arising from a Single Transaction
Amendments to IAS 12 International tax reform -Pillar two model rules 23 May 2023
New and revised IFRSs in issue but not yet effective
At the date of authorisation of these consolidated financial statements, the
following new and revised IFRSs were in issue but not yet effective:
Effective for
annual periods
beginning on or after
Amendments to IAS 1 Classification of Liabilities as Current or Non-Current 1 January 2024
and Non-Current Liabilities with Covenants
Amendments to IAS 7 and IFRS 7 Supplier Finance Arrangements 1 January 2024
Amendments to IFRS 16 Lease Liability in a Sale and Leaseback 1 January 2024
Amendments to IAS 21 Lack of Exchangeability 1 January 2025
Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between an Optional
Investor and its Associate or Joint Venture
Management anticipates that these new standards, interpretations and
amendments will be adopted in the Group's consolidated financial statements as
and when they are applicable and the impact of adoption of these new
standards, interpretations and amendments is currently being assessed on the
consolidated financial statements of the Group before the period of initial
application.
3 Material accounting policies
The Group's material accounting policies adopted in the preparation of these
consolidated financial statements are set out below. Except as noted in Note
2, these policies have been consistently applied to each of the years
presented. During the year we amended the presentation of the change in fair
value of the warrants in the consolidated statement of profit or loss and
other comprehensive income to provide better information to the users of the
consolidated financial statements. Please see note 39 for further information.
Statement of compliance
The consolidated financial statements have been prepared in accordance with
UK-adopted international accounting standards in conformity with the
requirements of the Companies Act 2006.
Basis of preparation
The consolidated financial statements have been prepared on the historical
cost basis, except for derivative financial instruments that are measured at
fair values at the end of each reporting period. Historical cost is generally
based on the fair value of the consideration given in exchange for assets.
3 Material accounting policies (continued)
For financial reporting purposes, fair value measurements are categorised into
Level 1, 2 or 3 based on the degree to which the inputs to the fair value
measurements are observable and the significance of the inputs to the fair
value measurement in its entirety, which are described as follows:
· Level 1 inputs are quoted prices (unadjusted) in active markets
for identical assets or liabilities that the entity can access at the
measurement date;
· Level 2 inputs are inputs, other than quoted prices included
within Level 1, that are observable for the asset or liability, either
directly or indirectly; and
· Level 3 inputs are unobservable inputs for the asset or
liability.
The principal accounting policies adopted are set out below.
Going concern
The Directors have assessed the Group's financial position through to June
2025 and hold a reasonable expectation of its ability to continue as going
concern for the foreseeable future. With three consecutive years of reported
profit and a forecast of continued positive operating cash flows, particularly
in light of the market outlook, the Group remains well-positioned for
sustained success.
During the year, the Group made a repayment of US$ 56.2 million (2022: US$
51.4 million) towards its borrowings, of which, US$ 26.2 million (2022: US$
3.8 million) were over and above its contractual obligations, resulting in a
reduction in the current ratio. A total of US$ 33.7 million (2022: US$ 3.8
million) was prepaid during 2023. Hence, the Group was in a net current
liability position as of 31 December 2023, amounting to US $52.1 million
(2022: US$15.8 million). Management closely monitors the Group's liquidity
position including focus on the forecasted short-term cash flows which would
be sufficient to meet the Group's current liabilities, including the current
portion of the bank borrowings which represents the principal repayments due
over the next 12 months. The loan prepayments were also made after ensuring
that forecasted cash inflows are sufficient to meet the Group's short-term
obligations.
The Group also has a revolving working capital facility which amounts to US$
40.0 million (31 December 2022: US$ 45.0 million). US$ 25.0 million (31
December 2022: US$ 25.0 million) of the working capital facility is allocated
to performance bonds and guarantees and US$ 15.0 million (31 December 2022:
US$ 20 million) is allocated to funded portion, of which US$ 2.0 million was
utilised as of 31 December 2023, leaving US$ 13.0 million available for
drawdown (31 December 2022: US$ 20.0 million). The working capital facility
expires alongside the main debt facility in June 2025.
The Group is in the process of refinancing its term facility in advance as the
bullet payment becomes due in June 2025. Management's ongoing discussions with
various lending entities are aimed at securing terms that align with our
long-term strategic objectives, ensuring continued financial stability. Given
the improved financial performance reported during 2023 and the current high
levels of utilisation secured, combined with higher day rates, the Group
expects the financial performance to continue to improve. As such, we are
optimistic about the outcome of these negotiations.
The forecast used for Going Concern reflects management's key assumptions
including those around utilisation, vessel day rates on a vessel-by-vessel
basis and refinancing of its term facility during latter half of the coming
year. Specifically, these assumptions are:
· average day rates across the fleet are assumed to be US$ 34.0k
for the 18-month period to 30 June 2025;
· 94% forecast utilisation for the 18-month period to 30 June 2025;
· pipeline of tenders and opportunities for new contracts that
would commence during the forecast period.
3 Material accounting policies (continued)
Going concern (continued)
A downside case was prepared using the following assumptions:
· no work-to-win during the 18-months period to 30 June 2025;
· 17 percentage points reduction in utilisation for the 18-months
period to 30 June 2025;
· interest rate to remain at current levels instead of a forecasted
decline of 25 basis points commencing second quarter of 2024.
Based on the above scenario, the Group would not be in breach of its current
term loan facility. The downside case is considered to be severe, but it would
still leave the Group with US$ 7.9 million of liquidity and in compliance with
the covenants under the Group's banking facilities throughout the assessment
period.
In addition to the above downside sensitivity, the Directors have also
considered a reverse stress test, where EBITDA has been sufficiently reduced
to breach debt covenant. This scenario assumes a substantial increase in
operational downtime to 7%, compared to the base case cashflows with a 2.5%
operational downtime. The significant increase in operational downtime for
2024 would result in breach of the Finance Service Cover ratio as at 31
December 2024.
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 and in order to maintain liquidity. Potential mitigating
actions include the vessels off hire for prolonged periods could be cold
stacked to minimise operating costs on these vessels which has been factored
into the downside case. Additional mitigations could be considered including
but not limited to reduction in overhead costs, relaxation / waiver from
covenant compliance and rescheduling of repayments with lenders.
Management is aware of the broader operating context and acknowledges the
potential impact of climate change on the Group's consolidated financial
statements. However, it is anticipated that the effect of climate change will
be negligible during the going concern assessment period.
After considering reasonable risks and potential downsides, the Group's
forecasts suggest that its bank facilities, combined with increased
utilization at higher day rates and a pipeline of near-term opportunities for
additional work, will provide sufficient liquidity to meet its needs in the
foreseeable future. Accordingly, the consolidated financial statements for the
Group for the year ended 31 December 2023 have been prepared on a going
concern basis.
3 Material accounting policies (continued)
Basis of consolidation
These consolidated financial statements incorporate the financial statements
of GMS and subsidiaries controlled by GMS. The Group has assessed the control
which GMS has over its subsidiaries in accordance with IFRS 10 Consolidated
Financial Statements, which provides that an investor controls an investee
when the investor is exposed, or has rights, to variable returns from its
involvement with the investee and has the ability to affect those returns
through its power over the investee.
Details of GMS's subsidiaries at 31 December 2023 and 2022 are as follows:
Proportion of Ownership Interest
Name Place of Registration Registered Address 2023 2022 Type of Activity
Gulf Marine Services W.L.L. United Arab Emirates Office 403, International Tower, 24(th) Karama Street, P.O. Box 46046, Abu 100% 100% Marine Contractor
Dhabi, United Arab Emirates
Gulf Marine Services W.L.L. - Qatar Branch United Arab Emirates Office 403, International Tower, 24(th) Karama Street, P.O. Box 46046, Abu 100% 100% Marine Contractor
Dhabi, United Arab Emirates
GMS Global Commercial Invt LLC United Arab Emirates Office 403, International Tower, 24(th) Karama Street, P.O. Box 46046, Abu 100% 100% General Investment
Dhabi, United Arab Emirates
Gulf Marine Middle East FZE United Arab Emirates ELOB, Office No. E-16F-04, P.O. Box 53944, Hamriyah Free Zone, Sharjah 100% 100% Operator of offshore barges
Gulf Marine Saudi Arabia Co. Limited Saudi Arabia King Fahad Road, Al Khobar, 75% 75% Operator of offshore barges
Eastern Province , P.O. Box 31411
Kingdom Saudi Arabia
Gulf Marine Services LLC Qatar 41 Floor, Tornado Tower, West Bay, Doha, Qatar, POB 6689 100% 100% Marine Contractor
Gulf Marine Services (UK) Limited United Kingdom c/o MacKinnon's, 14 Carden Place, Aberdeen, AB10 1UR 100% 100% Operator of offshore barges
GMS Jersey Holdco. 1* Limited Jersey 12 Castle Street, St. Helier, Jersey, 100% 100% General Investment
JE2 3RT
GMS Jersey Holdco. 2 Limited Jersey 12 Castle Street, St. Helier, Jersey, 100% 100% General Investment
JE2 3RT
Offshore Holding Invt SA Panama Bloc Office Hub, Fifth Floor, Santa Maria Business District, Panama, 100% 100% Holding Company
Republic of Panama
Offshore Accommodation Invt SA Panama Bloc Office Hub, Fifth Floor, Santa Maria Business District, Panama, 100% 100% Dormant
Republic of Panama
3 Material accounting policies (continued)
Basis of consolidation (continued)
Proportion of Ownership Interest
Name Place of Registration Registered Address 2023 2022 Type of Activity
Offshore Jack-up Invt SA Panama Bloc Office Hub, Fifth Floor, Santa Maria Business District, Panama, 100% 100% Owner of Barge "Kamikaze"
Republic of Panama
Offshore Structure Invt SA Panama Bloc Office Hub, Fifth Floor, Santa Maria Business District, Panama, 100% 100% Owner of Barge "Kikuyu"
Republic of Panama
Offshore Craft Invt SA Panama Bloc Office Hub, Fifth Floor, Santa Maria Business District, Panama, 100% 100% Owner of Barge "GMS Endeavour"
Republic of Panama
Offshore Maritime Invt SA Panama Bloc Office Hub, Fifth Floor, Santa Maria Business District, Panama, 100% 100% Dormant
Republic of Panama
Offshore Tugboat Invt SA Panama Bloc Office Hub, Fifth Floor, Santa Maria Business District, Panama, 100% 100% Dormant
Republic of Panama
Offshore Boat Invt SA Panama Bloc Office Hub, Fifth Floor, Santa Maria Business District, Panama, 100% 100% Owner of Barge "Kawawa"
Republic of Panama
Offshore Kudeta Invt SA Panama Bloc Office Hub, Fifth Floor, Santa Maria Business District, Panama, 100% 100% Owner of Barge "Kudeta"
Republic of Panama
GMS Endurance Invt SA Panama Bloc Office Hub, Fifth Floor, Santa Maria Business District, Panama, 100% 100% Owner of Barge "Endurance"
Republic of Panama
GMS Enterprise Investment SA Panama Bloc Office Hub, Fifth Floor, Santa Maria Business District, Panama, 100% 100% Owner of Barge "Enterprise"
Republic of Panama
3 Material accounting policies (continued)
Basis of consolidation (continued)
Proportion of Ownership Interest
Name Place of Registration Registered Address 2023 2022 Type of Activity
GMS Sharqi Investment SA Panama Bloc Office Hub, Fifth Floor, Santa Maria Business District, Panama, 100% 100% Owner of Barge "Sharqi"
Republic of Panama
GMS Scirocco Investment SA Panama Bloc Office Hub, Fifth Floor, Santa Maria Business District, Panama, 100% 100% Owner of Barge "Scirocco"
Republic of Panama
GMS Shamal Investment SA Panama Bloc Office Hub, Fifth Floor, Santa Maria Business District, Panama, 100% 100% Owner of Barge "Shamal"
Republic of Panama
GMS Keloa Invt SA Panama Bloc Office Hub, Fifth Floor, Santa Maria Business District, Panama, 100% 100% Owner of Barge "Keloa"
Republic of Panama
GMS Pepper Invt SA Panama Bloc Office Hub, Fifth Floor, Santa Maria Business District, Panama, 100% 100% Owner of Barge "Pepper"
Republic of Panama
GMS Evolution Invt SA Panama Bloc Office Hub, Fifth Floor, Santa Maria Business District, Panama, 100% 100% Owner of Barge "Evolution"
Republic of Panama
GMS Phoenix Investment SA Panama Bloc Office Hub, Fifth Floor, Santa Maria Business District, Panama, Republic 100% 100% Dormant
of Panama
Mena Marine Limited** Cayman Islands Ugland House, Grand Cayman, KY1-1104, Cayman Islands, P.O. Box 309 0% 100% General investment and trading
Gulf Marine Services (Asia) Pte. Limited Singapore 1 Scotts Road, #21-07, Shaw Centre, Singapore, 228208 100% 100% Operator of offshore barges
Gulf Marine Services (Asia) Pte. Limited - Qatar branch Qatar 22 Floor, Office 22, Tornado Tower, Majilis Al Tawoon Street, P.O. Box 27774, 100% 100% Operator of offshore barges
Doha, Qatar
* Held directly by Gulf Marine Services PLC.
** The subsidiary wound up on 29 December 2023.
3 Material accounting policies (continued)
Basis of consolidation (continued)
The results of subsidiaries acquired or disposed of during the year are
included in the consolidated statement of profit or loss and other
comprehensive income from the effective date of acquisition or up to the
effective date of disposal, as appropriate.
Where necessary, adjustments are made to the results of subsidiaries to bring
their accounting policies in line with those used by other members of the
Group. All intra-group transactions, balances, income and expenses are
eliminated in full on consolidation.
Non-controlling interests in subsidiaries are identified separately from the
Group's equity therein. The interests of non-controlling shareholders are
initially measured either at fair value or at the non-controlling interests'
proportionate share of the fair value of the acquiree's identifiable net
assets. The choice of measurement basis is made on an
acquisition-by-acquisition basis. Subsequent to acquisition, the carrying
amount of non-controlling interests is the amount of those interests at
initial recognition plus the non-controlling interests' share of subsequent
changes in equity. Total comprehensive income is attributed to non-controlling
interests even if this results in the non-controlling interests having a
deficit balance.
Changes in the Group's interests in subsidiaries that do not result in a loss
of control are accounted for as equity transactions. The carrying amounts of
the Group's interests and the non-controlling interests are adjusted to
reflect the changes in their relative interests in the subsidiaries. Any
difference between the amount by which the non-controlling interests are
adjusted and the fair value of the consideration paid or received is
recognised directly in equity and attributed to owners of the Group.
Acquisitions of subsidiaries and businesses are accounted for using the
acquisition method. The consideration for each acquisition is measured at the
aggregate of the fair values (at the date of exchange) of assets given,
liabilities incurred or assumed, and equity instruments issued by the Group in
exchange for control of the acquiree. Acquisition-related costs are recognised
in profit or loss as incurred. Fair value is determined as the amount for
which an asset could be exchanged, or a liability transferred, between
knowledgeable, willing parties in an arm's length transaction.
The acquiree's identifiable assets, liabilities and contingent liabilities
that meet the conditions for recognition under IFRS 3 (2008) are recognised at
their fair value at the acquisition date.
When the Group loses control of a subsidiary, the profit or loss on disposal
is calculated as the difference between (i) the aggregate of the fair value of
the consideration received and the fair value of any retained interest and
(ii) the previous carrying amount of the assets (including goodwill), and
liabilities of the subsidiary and any non-controlling interests. Amounts
previously recognised in other comprehensive income in relation to the
subsidiary are accounted for (i.e. reclassified to profit or loss or
transferred directly to retained earnings) in the same manner as would be
required if the relevant assets or liabilities were disposed of. The fair
value of any investment retained in the former subsidiary at the date when
control is lost is regarded as the fair value on initial recognition for
subsequent accounting under IFRS 9 Financial Instruments: Recognition and
Measurement or, when applicable, the cost on initial recognition of an
investment in an associate or jointly controlled entity.
Revenue recognition
The Group recognises revenue from contracts with customers as follows:
· Charter revenue;
· Lease income;
· Revenue from messing and accommodation services;
· Manpower income;
· Maintenance income;
· Contract mobilisation revenue;
· Contract demobilisation revenue; and
· Sundry income.
Revenue is measured as the fair value of the consideration received or
receivable for the provision of services in the ordinary course of business,
net of trade discounts, volume rebates, and sales taxes excluding amounts
collected on behalf of third parties. Revenue is recognised when control of
the services is transferred to the customer.
3 Material accounting policies (continued)
Revenue recognition (continued)
Consequently, revenue for the provision of services is recognised either:
· Over time during the period that control incrementally transfers
to the customer and the customer simultaneously receives and consumes the
benefits. The Group has applied the practical expedient and recognises revenue
over time in accordance with IFRS 15 i.e. the amount at which the Group has
the right to invoice clients.
· Wholly at a single point in time when GMS has completed its
performance obligation.
Revenue recognised over time
The Group's activities that require revenue recognition over time includes the
following performance obligation:
Performance obligation 1 - Charter revenue, contract mobilisation revenue,
revenue from messing and accommodation services, and manpower income
Chartering of vessels, mobilisations, messing and accommodation services and
manpower income are considered to be a combined performance obligation as they
are not separately identifiable and the Group's clients cannot benefit from
these services on their own or together with other readily available
resources. This performance obligation, being the service element of client
contracts, is separate from the underlying lease component contained within
client contracts which is recognised separately.
Revenue is recognised for certain mobilisation related reimbursable costs.
Each reimbursable item and amount is stipulated in the Group's contract with
the customer. Reimbursable costs are included in the performance obligation
and are recognised as part of the transaction price, because the Group is the
primary obligor in the arrangement, has discretion in supplier selection and
is involved in determining product or service specifications.
Performance obligation 2 - Sundry income
Sundry income that relates only specifically to additional billable
requirements of charter hire contracts are recognised over the duration of the
contract. For the component of sundry income that is not recognized over time,
the performance obligation is explained below.
Revenue recognised at a point in time
The Group's activities that require revenue recognition at a point in time
include the following performance obligations.
Performance obligation 1 - Contract demobilisation revenue
Lump-sum fees received for equipment moves (and related costs) as part of
demobilisations are recognised when the demobilisation has occurred at a point
in time.
Performance obligation 2 - Sundry income
Includes in Sundry income are handling charges, which are applied to costs
paid by the Group and then recharged to the customer. The revenue is
recognised when the costs are recharged to customers as this is when the
performance obligation is fulfilled and control has passed to the customer.
Deferred and accrued revenue
Clients are typically billed on the last day of specific periods that are
contractually agreed upon. Where there is delay in billing, accrued revenue is
recognised in trade and other receivables for any services rendered where
clients have not yet been billed (see Note 9).
As noted above, lump sum payments are sometimes received at the outset of a
contract for equipment moves or modifications. These lump sum payments give
rise to deferred revenue in trade and other payables (see Note 21).
3 Material accounting policies (continued)
Leases
The Group as lessee
The Group assesses whether a contract is or contains a lease, at inception of
the contract. The Group recognises a right-of-use asset and a corresponding
lease liability with respect to all lease arrangements in which it is the
lessee, except for certain short-term leases (defined as leases with a lease
term of 12 months or less) and leases of low value assets.
Low value assets have a low value purchase price when new, typically $5,000 or
less, and include items such as tablets and personal computers, small items of
office furniture and telephones. For these leases, the Group recognises the
lease payments as an operating expense on a straight-line basis over the term
of the lease unless another systematic basis is more representative of the
time pattern in which economic benefits from the leased assets are consumed.
Leases of operating equipment linked to commercial contracts are recognised to
match the length of the contract even where the contract term is less than 12
months.
The lease liability is initially measured at the present value of the lease
payments that are not paid at the commencement date, discounted by using the
Group's incremental borrowing rate. This is the rate that would be available
on a loan with similar conditions to obtain an asset of a similar value.
Lease payments included in the measurement of the lease liability comprise:
· Fixed lease payments (including in-substance fixed payments),
less any lease incentives receivable;
· Variable lease payments that depend on an index or rate,
initially measured using the index or rate at the commencement date;
· The amount expected to be payable by the lessee under residual
value guarantees;
· The exercise price of purchase options, if the lessee is
reasonably certain to exercise the options; and
· Payments of penalties for terminating the lease if the lease term
reflects the exercise of an option to terminate the lease.
The lease liability is presented as a separate line in the consolidated
statement of financial position.
The lease liability is subsequently measured by increasing the carrying amount
to reflect interest on the lease liability (using the effective interest
method) and by reducing the carrying amount to reflect the lease payments
made.
The Group remeasures the lease liability (and makes a corresponding adjustment
to the related right-of-use asset) whenever:
· The lease term has changed or there is a significant event or
change in circumstances resulting in a change in the assessment of exercise of
a purchase option, in which case the lease liability is remeasured by
discounting the revised lease payments using a revised discount rate.
· The lease payments change due to changes in an index or rate or a
change in expected payment under a guaranteed residual value, in which cases
the lease liability is remeasured by discounting the revised lease payments
using an unchanged discount rate (unless the lease payments change is due to a
change in a floating interest rate, in which case a revised discount rate is
used).
· A lease contract is modified and the lease modification is not
accounted for as a separate lease, in which case the lease liability is
remeasured based on the lease term of the modified lease by discounting the
revised lease payments using a revised discount rate at the effective date of
the modification.
There were no such remeasurements made during the year (2022: nil).
The right-of-use assets comprise the initial measurement of the corresponding
lease liability, lease payments made at or before the commencement day, less
any lease incentives received and any initial direct costs. They are
subsequently measured at cost less accumulated depreciation and impairment
losses.
Whenever the Group incurs an obligation for costs to dismantle and remove a
leased asset, restore the site on which it is located or restore the
underlying asset to the condition required by the terms and conditions of the
lease, a provision is recognised and measured under IAS 37. To the extent that
the costs relate to a right-of-use asset, the costs are included in the
related right-of-use asset, unless those costs are incurred to produce
inventories.
3 Material accounting policies (continued)
Leases (continued)
The Group as lessee (continued)
Right-of-use assets are depreciated over the shorter period of lease term and
useful life of the underlying asset. If a lease transfers ownership of the
underlying asset or the cost of the right-of-use asset reflects that the Group
expects to exercise a purchase option, the related right-of-use asset is
depreciated over the useful life of the underlying asset. The depreciation
starts at the commencement date of the lease.
The right-of-use assets are presented as a separate line in the consolidated
statement of financial position. The Group applies IAS 36 to determine whether
a right-of-use asset is impaired and accounts for any identified impairment
loss as described in the 'Property and Equipment' policy.
As a practical expedient, IFRS 16 permits a lessee not to separate non-lease
components, and instead account for any lease and associated non-lease
components as a single arrangement. The Group has not used this practical
expedient. For a contract that contains a lease component and one or more
additional lease or non-lease components, the Group allocates the
consideration in the contract to each lease component on the basis of the
relative stand-alone price of the lease component and the aggregate
stand-alone price of the non-lease components.
The Group as a lessor
At inception or on modification of a contract that contains a lease component,
the Group allocates the consideration in the contract to each lease component
on the basis of their relative stand‑ alone prices.
When the Group acts as a lessor, it determines at lease inception whether each
lease is a finance lease or an operating lease.
To classify each lease, the Group makes an overall assessment of whether the
lease transfers substantially all of the risks and rewards incidental to
ownership of the underlying asset. If this is the case, then the lease is a
finance lease; if not, then it is an operating lease. As part of this
assessment, the Group considers certain indicators such as whether the lease
is for the major part of the economic life of the asset.
When the Group is an intermediate lessor, it accounts for its interests in the
head lease and the sub‑lease separately. It assesses the lease
classification of a sub‑lease with reference to the right‑of‑use asset
arising from the head lease, not with reference to the underlying asset. If a
head lease is a short‑term lease to which the Group applies the exemption
described above, then it classifies the sub‑lease as an operating lease.
The Group's contracts with clients contain an underlying lease component
separate to the service element. These leases are classified as operating
leases and the income is recognised on a straight line basis over the term of
the lease.
The Group applies IFRS 15 to allocate consideration under each component based
on its standalone selling price. The standalone selling price of the lease
component is estimated using a market assessment approach by taking the market
rate, being the contract day rate and deducting all other identifiable
components, creating a residual amount deemed to be the lease element.
Property and equipment
Property and equipment is stated at cost which includes capitalised borrowing
costs less accumulated depreciation and accumulated impairment losses (if
any). The cost of property and equipment is their purchase cost together with
any incidental expenses of acquisition. Subsequent expenditure incurred on
vessels is capitalised where the expenditure gives rise to future economic
benefits in excess of the originally assessed standard of performance of the
existing assets.
The costs of contractual equipment modifications or upgrades to vessels that
are permanent in nature are capitalised and depreciated in accordance with the
Group's fixed asset capitalisation policy. The costs of moving equipment while
not under contract are expensed as incurred.
Depreciation is recognised so as to write-off the cost of property and
equipment less their estimated residual values over their useful lives, using
the straight-line method. The estimated residual values of vessels and related
equipment are determined taking into consideration the expected scrap value of
the vessel, which is calculated based on the weight and the market rate of
steel at the time of asset purchase.
3 Material accounting policies (continued)
Property and equipment (continued)
If the price per unit of steel at the balance sheet date varies significantly
from that on date of purchase, the residual value is reassessed to reflect
changes in market value.
The estimated useful lives used for this purpose are:
Vessels* 35 years
Vessel spares, fittings and other equipment* 3 - 20 years
Others** 3 - 5 years
Taking into consideration independent professional advice, management
considers the principal estimated useful lives of vessels for the purpose of
calculating depreciation to be 35 years from the date of construction of the
vessel.
*Depreciation of these assets is charged to cost of sales.
** Depreciation of these assets is charged to general and administrative
expenses.
The estimated useful life depends on the type and nature of the vessel. The
estimated useful lives, residual values and depreciation method are reviewed
at each year end, with the effect of any changes in estimate accounted for on
a prospective basis.
The gain or loss arising on the disposal or retirement of an item of property
and equipment is determined as the difference between the sale proceeds and
the carrying amount of the asset and is recognised within administrative
expenses in the profit or loss. The depreciation charge for the year is
allocated between cost of sales and administrative expenses, depending on the
usage of the respective assets.
Dry docking
Dry docking costs are costs of repairs and maintenance incurred on a vessel to
ensure compliance with applicable regulations and to maintain certification
for vessels. The cost incurred for periodical dry docking or major overhauls
of the vessels are identified as a separate inherent component of the vessels.
These costs depreciate on a straight-line basis over the period to the next
anticipated dry docking being approximately 30 months. Costs incurred outside
of the dry docking period which relate to major works, overhaul / services,
that would normally be carried out during the dry docking, as well as surveys,
inspections and third party maintenance of the vessels are initially treated
as capital work-in-progress ("CWIP") of the specific vessel. Following the
transfer of these balances to property and equipment, depreciation commences
at the date of completion of the survey. Costs associated with equipment
failure are recognised in the profit and loss as incurred.
Capital work-in-progress
Properties and vessels under the course of construction, are carried at cost,
less any recognised impairment loss. Cost includes professional fees and, for
qualifying assets, borrowing costs capitalised in accordance with the Group's
accounting policy. Depreciation of these assets, on the same basis as other
property assets, commences when the assets are ready for their intended use.
Impairment of tangible assets
At the end of each reporting period, the Group reviews the carrying amounts of
its tangible assets to determine whether there is any indication that those
assets have suffered an impairment loss or impairment reversal.
If any such indication exists, the recoverable amount of the asset is
estimated in order to determine the extent of the impairment loss (if any).
When it is not possible to estimate the recoverable amount of an individual
asset, the Group estimates the recoverable amount of the cash-generating unit
to which the asset belongs. When a reasonable and consistent basis of
allocation can be identified, corporate assets are also allocated to
individual cash-generating units, or otherwise they are allocated to the
smallest group of cash-generating units for which a reasonable and consistent
allocation basis can be identified. The Group also has separately identifiable
equipment which are typically interchangeable across vessels and where costs
can be measured reliably. These assets are not included as part of the cash
generating unit.
3 Material accounting policies (continued)
Property and equipment (continued)
Impairment of tangible assets (continued)
Recoverable amount is the higher of fair value less costs to sell and value in
use. 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
reflects risk free rates of returns as well as specific adjustments for
country risk in the countries the Group operates in, adjusted for a Company
specific risk premium, to determine an appropriate discount rate.
If the recoverable amount of an asset (or cash-generating unit) is estimated
to be less than its carrying amount, the carrying amount of the asset (or
cash-generating unit) is reduced to its recoverable amount. An impairment loss
is recognised immediately in profit or loss.
When an impairment loss subsequently reverses, the carrying amount of the
asset (or a cash-generating unit) is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does not exceed
the carrying amount that would have been determined had no impairment loss
been recognised for the asset (or cash-generating unit) in prior years. A
reversal of an impairment loss is recognised immediately in profit or loss.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or
production of qualifying assets, which are assets that necessarily take a
substantial period of time to get ready for their intended use or sale, are
added to the cost of those assets, until such time as the assets are
substantially ready for their intended use or sale.
All other borrowing costs are recognised in profit or loss in the period in
which they are incurred.
Provisions
Provisions are recognised when the Group has a present obligation (legal or
constructive) as a result of a past event, it is probable that the Group will
be required to settle the obligation and a reliable estimate can be made of
the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration
required to settle the present obligation at the end of the reporting period,
taking into account the risks and uncertainties surrounding the obligation.
Where a provision is measured using the cash flows estimated to settle the
present obligation, its carrying amount is the present value of those cash
flows (when the effect of the time value of money is material).
When some or all of the economic benefits required to settle a provision are
expected to be recovered from a third party, the receivable is recognised as
an asset if it is virtually certain that reimbursement will be received and
the amount of the receivable can be measured reliably.
Employees' end of service benefits
In accordance with Labour Laws of some of the countries in which we operate,
the Group is required to provide for End of Service Benefits for certain
employees.
The only obligation of the Group with respect to end of service benefits is to
make the specified lump-sum payments to employees, which become payable when
they leave the Group for reasons other than gross misconduct but may be paid
earlier at the discretion of the Group. The amount payable is calculated as a
multiple of a pre-defined fraction of basic salary based on the number of full
years of service.
To meet the requirement of the laws of the countries in which we operate, a
provision is made for the full amount of end of service benefits payable to
qualifying employees up to the end of the reporting period. The provision
relating to end of service benefits is disclosed as a non-current liability.
The provision has not been subject to a full actuarial valuation or discounted
as the impact would not be material.
The actual payment is typically made in the year of cessation of employment of
a qualifying employee but may be pre-paid. If the payment is made in the year
of cessation of employment, the payment for end of service benefit will be
made as a lump-sum along with the full and final settlement of the employee.
3 Material accounting policies (continued)
Employees' end of service benefits (continued)
The total expense recognised in profit or loss of US$ 0.7 million (2022: US$
0.3 million) (Note 20) represents the end of service benefit provision made
for employees in accordance with the labour laws of companies where we
operate.
Foreign currencies
The Group's consolidated financial statements are presented in US Dollars
(US$), which is also the functional currency of the Company. All amounts have
been rounded to the nearest thousand, unless otherwise stated. For each
entity, the Group determines the functional currency and items included in the
financial statements of each entity are measured using that functional
currency.
In preparing the financial statements of the individual companies,
transactions in currencies other than the entity's functional currency
(foreign currencies) are recorded at the rates of exchange prevailing at the
dates of the transactions.
At the end of each reporting period, monetary items denominated in foreign
currencies are retranslated at the rates prevailing at that date. Non-monetary
items carried at fair value that are denominated in foreign currencies are
retranslated at the rates prevailing at the date when the fair value was
determined. Non-monetary items that are measured in terms of historical cost
in a foreign currency are not retranslated.
Exchange differences are recognised in profit or loss in the period in which
they arise, except for exchange differences on monetary items receivable from
or payable to a foreign operation for which settlement is neither planned nor
likely to occur, which form part of the net investment in a foreign operation,
and which are recognised in the foreign currency translation reserve and
recognised in profit or loss on disposal of the net investment.
For the purpose of presenting consolidated financial information, the assets
and liabilities of the Group's subsidiaries are expressed in US$ using
exchange rates prevailing at the end of the reporting period. Income and
expense items are translated at the average exchange rates for the period,
unless exchange rates fluctuated significantly during that period, in which
case the exchange rates at the dates of the transactions are used. Exchange
differences arising, if any, are recognised in other comprehensive income and
accumulated in equity (attributed to non-controlling interests as
appropriate).
On the disposal of a foreign operation (i.e. a disposal of the Group's entire
interest in a foreign operation, or a disposal involving loss of control over
a subsidiary that includes a foreign operation, loss of joint control over a
jointly controlled entity that includes a foreign operation, or loss of
significant influence over an associate that includes a foreign operation),
all of the accumulated exchange differences in respect of that operation
attributable to the Group are reclassified to profit or loss. Any exchange
differences that have previously been attributed to non-controlling interests
are derecognised, but they are not reclassified to profit or loss.
Adjusting items
Adjusting items are significant items of income or expense in cost of sales,
general and administrative expenses, and net finance costs, which individually
or, if of a similar type, in aggregate, are relevant to an understanding of
the Group's underlying financial performance because of their size, nature or
incidence. Adjusting items together with an explanation as to why management
consider them appropriate to adjust are disclosed separately in Note 31. The
Group believes that these items are useful to users of the Group's
consolidated financial statements in helping them to understand the underlying
business performance through alternate performance measures that are used to
derive the Group's principal non-GAAP measures of adjusted Earnings Before
Interest, Taxes, Depreciation, and Amortisation ("EBITDA"), adjusted EBITDA
margin, adjusted gross profit/(loss), adjusted operating profit/(loss),
adjusted net profit/(loss) and adjusted diluted earnings/(loss) per share, all
of which are before the impact of adjusting items and which are reconciled
from operating profit/(loss), profit/(loss) before taxation and diluted
earnings/(loss) per share. Adjusting items include but are not limited to
reversal of impairment credits/(impairment charges), restructuring costs,
exceptional legal & tax costs, and non-operational finance related costs.
3 Material accounting policies (continued)
Taxation
Income tax expense represents the sum of the tax currently payable.
Current tax
The tax currently payable is based on taxable profit for each subsidiary based
on the jurisdiction in which it operates. Current tax comprises the expected
tax payable or receivable on the taxable income or loss for the year and any
adjustment to the tax payable or receivable in respect of previous years. The
amount of current tax payable or receivable is the best estimate of the tax
amount expected to be paid or received that reflects uncertainty related to
income taxes, if any. It is measured using tax rates enacted or substantively
enacted at the reporting date.
Deferred tax
Deferred tax is recognised on temporary differences between the carrying
amounts of the assets and liabilities in the consolidated financial statements
and the corresponding tax bases used in the computation of taxable profit.
Deferred tax liabilities are generally recognised for all taxable temporary
differences.
Deferred tax assets are generally recognised for all deductible temporary
differences to the extent that it is probable that taxable profits will be
available against which those deductible temporary differences can be
utilised. Such deferred tax assets and liabilities are not recognised if the
temporary difference arises from goodwill or from the initial recognition
(other than in a business combination) of other assets and liabilities in a
transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences
arising on investments in subsidiaries and associates, and interests in joint
ventures, except where the Group is able to control the reversal of the
temporary difference and it is probable that the temporary difference will not
reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be
recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised based on tax
laws and rates that have been enacted or substantively enacted at the balance
sheet date. Deferred tax is charged or credited in the profit or loss, except
when it relates to items charged or credited in other comprehensive income, in
which case the deferred tax is also dealt with in other comprehensive income.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to set-off current tax assets against current tax
liabilities and when they relate to income taxes levied by the same taxation
authority and the Group intends to settle its current tax assets and
liabilities on a net basis.
Share based payments
Long term incentive plans
The fair value of an equity instrument is determined at the grant date based
on market prices if available, taking into account the terms and conditions
upon which those equity instruments were granted. If market prices are not
available for share awards, the fair value of the equity instruments is
estimated using a valuation technique to derive an estimate of what the price
of those equity instruments would have been at the relevant measurement date
in an arm's length transaction between knowledgeable, willing parties.
Equity-settled share-based payments to employees are measured at the fair
value of the instruments, using a binomial model together with Monte-Carlo
simulations as at the grant date, and is expensed over the vesting period. The
value of the expense is dependent upon certain key assumptions including the
expected future volatility of the Group's share price at the date of grant.
The fair value measurement reflects all market based vesting conditions. The
impact of the revision of the original estimates, if any, is recognised in
profit or loss such that the cumulative expense reflects the revised estimate,
with a corresponding adjustment to equity reserves.
3 Material accounting policies (continued)
Financial assets
Financial assets including derivatives are classified, at initial recognition,
and subsequently measured at amortised cost, fair value through other
comprehensive income, or fair value through profit or loss.
The Group has the following financial assets: cash and cash equivalents and
trade and other receivables (excluding prepayments and advances to suppliers).
These financial assets are classified at amortised cost.
The classification of financial assets at initial recognition depends on the
financial asset's contractual cash flow characteristics and the Group's
business model for managing them. With the exception of trade receivables that
do not contain a significant financing component or for which the Group has
applied the practical expedient, the Group initially measures a financial
asset at its fair value plus, in the case of a financial asset not at fair
value through profit or loss, transaction costs.
Trade receivables that do not contain a significant financing component or for
which the Group has applied the practical expedient are measured at the
transaction price determined under IFRS 15.
In order for a financial asset to be classified and measured at amortised cost
or fair value through other comprehensive income ("OCI"), it needs to give
rise to cash flows that are solely payments of principal and interest ("SPPI")
on the principal amount outstanding. This assessment is referred to as the
SPPI test and is performed at an instrument level.
The Group's business model for managing financial assets refers to how it
manages its financial assets in order to generate cash flows. The business
model determines whether cash flows will result from collecting contractual
cash flows, selling the financial assets, or both.
Purchases or sales of financial assets that require delivery of assets within
a time frame established by regulation or convention in the market place
(regular way trades) are recognised on the trade date, i.e. the date that the
Group commits to purchase or sell the asset.
The Group measures financial assets at amortised cost if both of the following
conditions are met:
· the financial asset is held within a business model with the
objective to hold financial assets in order to collect contractual cash flows;
and
· the contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
As the business model of the Group is to hold financial assets to collect
contractual cashflows, they are held at amortised
cost.
Financial assets at amortised cost are subsequently measured using the
effective interest rate ("EIR") method and are subject to impairment. Gains
and losses are recognised in profit or loss when the asset is derecognised,
modified or impaired.
Cash and cash equivalents
Cash and cash equivalents include balances held with banks with original
maturities of three months or less and cash on hand.
Trade receivables
Trade receivables represent the Group's right to an amount of consideration
that is unconditional (i.e. only the passage of time is required before the
payment of the consideration is due).
3 Material accounting policies (continued)
Financial assets (continued)
Impairment of financial assets
The Group recognises an allowance for expected credit losses ("ECLs") for all
financial assets that are measured at amortised cost or debt instruments
measured at fair value through other comprehensive income. ECLs are based on
the difference between the contractual cash flows due in accordance with the
contract and all the cash flows that the Group expects to receive, discounted
at the EIR.
For trade and other receivables and contract assets, the Group applies a
simplified approach.
For trade receivables and contract assets, the Group recognises loss
allowances based on lifetime ECLs at each reporting date.
The Group has established a provision matrix that is based on its historical
credit loss experience, adjusted for forward-looking factors specific to the
debtors and the economic environment.
The provision rates are grouped together based on days due for various
customer segments that have similar loss patterns (geography, customer type
and rating and coverage by letters of credit and other forms of credit
insurance).
The Group had an expected credit loss provision of US$ 2.2 million as at 31
December 2023
(31 December 2022: US$ 2.0 million), refer to Note 9 for further details.
The Group considers a financial asset to move into stage 3 and be in default
when there is objective evidence that, as a result of one or more events that
occurred after the initial recognition of the financial asset, the estimated
future cash flows of the investment have been affected.
Objective evidence of impairment could include:
· significant financial difficulty of the issuer or counterparty; or
· default or delinquency in interest or principal payments; or
· it becoming probable that the borrower will enter bankruptcy or
financial reorganisation.
A financial asset is written off when there is no reasonable expectation of
recovering the contractual cash flows.
Derecognition of financial assets
The Group derecognises a financial asset only when the contractual rights to
the cash flows from the asset expire, or when it transfers the financial asset
and substantially all the risks and rewards of ownership of the asset to
another entity. If the Group neither transfers nor retains substantially all
the risks and rewards of ownership and continues to control the transferred
asset, the Group recognises its retained interest in the asset and an
associated liability for amounts it may have to pay. If the Group retains
substantially all the risks and rewards of ownership of a transferred
financial asset, the Group continues to recognise the financial asset and also
recognises a collateralised borrowing for the proceeds received.
Financial liabilities and equity instruments
Classification as debt or equity
Debt and equity instruments are classified as either financial liabilities or
as equity in accordance with the substance of the contractual arrangements and
the definitions of a financial liability and an equity instrument.
3 Material accounting policies (continued)
Financial liabilities and equity instruments (continued)
Equity instruments
An equity instrument is any contract that evidences a residual interest in the
assets of an entity after deducting all of its liabilities. Equity instruments
issued by the Group are recorded at the proceeds received, net of direct issue
costs.
Financial liabilities
The Group's financial liabilities include trade and other payables,
derivatives, lease liabilities and bank borrowings. All financial liabilities
are classified at amortised cost unless they can be designated as at Fair
Value Through Profit or Loss ("FVTPL").
Derivatives that are not designated and effective as hedging instruments are
classified as financial liabilities and are held at FVTPL. Derivatives held at
FVTPL are initially recognised at fair value at the date a derivative contract
is entered into and are subsequently remeasured to their fair value at the end
of each reporting period with the resulting gain or loss recognised in profit
or loss immediately.
Trade and other payables, bank borrowings, lease liabilities, amounts due to
related parties and contract liabilities are classified at amortised cost and
are initially measured at fair value, net of transaction costs. They are
subsequently measured at amortised cost using the EIR method, with interest
expense recognised based on its effective interest rate, except for short-term
payables or when the recognition of interest would be immaterial.
The EIR method is a method of calculating the amortised cost of a financial
liability and of allocating interest expense over the relevant period. The EIR
is the rate that exactly discounts estimated future cash payments through the
expected life of the financial liability, or, where appropriate, a shorter
period.
The Group's loan facility is a floating rate financial liability as interest
rates are based on variable SOFR rates. The Group's accounting policy is to
treat the loan as a floating rate financial liability and the Group performs
periodic estimations to reflect movements in market interest rates and alters
the effective interest rate accordingly.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group's
obligations are discharged, cancelled or they expire. The difference between
the carrying amount of the financial liability derecognised and the
consideration paid and payable is recognised in the consolidated statement of
profit or loss.
When an existing financial liability is replaced by another from the same
lender on substantially different terms, or the terms of an existing liability
are substantially modified, such an exchange or modification is treated as the
derecognition of the original liability and the recognition of a new
liability. The difference between the carrying amount of the financial
liability derecognised and the consideration paid is recognised in the
consolidated statement of profit or loss and other comprehensive income.
When an existing financial liability is replaced by another on terms which are
not substantially modified, the exchange is deemed to be a continuation of the
existing liability and the financial liability is not derecognised.
Derivative financial instruments
The Group uses derivative financial instruments, such as interest rate swaps,
to hedge its interest rate risks. Such derivative financial instruments are
initially recognised at fair value on the date on which a derivative contract
is entered into and are subsequently remeasured at fair value. Derivatives are
carried as financial assets when the fair value is positive and as financial
liabilities when the fair value is negative.
For the purpose of hedge accounting, hedges are classified as cash flow hedges
when hedging the exposure to variability in cash flows that is either
attributable to a particular risk associated with a recognised asset or
liability or a highly probable forecast transaction or the foreign currency
risk in an unrecognised firm commitment.
At the inception of a hedge relationship, the Group formally designates and
documents the hedge relationship to which it wishes to apply hedge accounting
and the risk management objective and strategy for undertaking the hedge.
The documentation includes identification of the hedging instrument, the
hedged item, the nature of the risk being hedged and how the Group will assess
whether the hedging relationship meets the hedge effectiveness requirements
(including the analysis of sources of hedge ineffectiveness and how the hedge
ratio is determined).
3 Material accounting policies (continued)
Financial liabilities and equity instruments (continued)
Derivative financial instruments (continued)
A hedging relationship qualifies for hedge accounting if it meets all of the
following effectiveness requirements:
· there is 'an economic relationship' between the hedged item and
the hedging instrument;
· the effect of credit risk does not 'dominate the value changes'
that result from that economic relationship;
· the hedge ratio of the hedging relationship is the same as that
resulting from the quantity of the hedged item that the Group actually hedges
and the quantity of the hedging instrument that the Group actually uses to
hedge that quantity of hedged item.
Hedges that meet all the qualifying criteria for hedge accounting are
accounted for as described below:
Cash flow hedges
The effective portion of the gain or loss on the hedging instrument is
recognised in other comprehensive income ("OCI") and accumulated in the cash
flow hedge reserve, while any ineffective portion is recognised immediately in
the consolidated statement of profit or loss and other comprehensive income.
The cash flow hedge reserve is adjusted to the lower of the cumulative gain or
loss on the hedging instrument and the cumulative change in fair value of the
hedged item.
The ineffective portion relating for cash flow hedges are recognised in
finance expenses in the profit or loss.
The Group designates interest rate swaps ("IRS") as hedging instruments. The
Group designates the change in fair value of the entire derivative contracts
in its cash flow hedge relationships.
For cash flow hedges, the amount accumulated in OCI is reclassified to profit
or loss as a reclassification adjustment in the same period or periods during
which the hedged cash flows affect profit or loss. The amount remaining in the
cashflow hedge reserve is reclassified to profit or loss as reclassification
adjustments in the same period or periods during which the hedged expected
future cashflows affected profit or loss. The Group reclassify amounts
remaining in the cashflow hedge reserve on a time apportionments basis.
If cash flow hedge accounting is discontinued, the amount that has been
accumulated in OCI must remain in accumulated OCI if the hedged future cash
flows are still expected to occur. Otherwise, the amount will be immediately
reclassified to profit or loss as a reclassification adjustment. After
discontinuation, once the hedged cash flow occurs, any amount remaining in
accumulated OCI must be accounted for depending on the nature of the
underlying transaction as described above.
Warrants
The Group measures the warrants issued at fair value with changes in fair
value recognised in the profit or loss.
4 Key sources of estimation uncertainty and critical
accounting judgements
In the application of the Group's accounting policies, which are described in
Note 3, 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 was one
critical accounting judgement relating to a subsidiary of the Group that
received a tax assessment from the Saudi tax authorities (ZATCA) for an amount
related to the transfer pricing of our inter-group bareboat agreement. While
the Directors, guided by the Group's tax advisors, believe that the Group has
complied with the relevant tax legislation and a zero balance is due, a
provision of US$ 0.5 million is recognised for potential outcome in an attempt
to reach an amicable solution. Further details of the tax assessment are
disclosed in Note 8.
4 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
The Group obtained an independent valuation of its vessels as at 31 December
2023 for the purpose of its banking covenant compliance requirements. However,
consistent with prior years, management does not consider these 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, if any, "willing buyer and willing seller" transactions of similar
vessels in the current offshore vessel market on which such values could
reliably be based. Due to these inherent limitations, management concluded
that recoverable amount should be based on value in use.
Management carried out an impairment assessment of property and equipment for
year ended 31 December 2023. 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.
Management would not expect an assumption change of more than 10% in aggregate
for the entire fleet within the next financial year, and accordingly, believes
that a 10% sensitivity to day rates and utilisation is appropriate. Further,
for discount rate, management would not expect an assumption change of more
than 1% and accordingly, believes that a 1% sensitivity to discount rate is
appropriate.
As at 31 December 2023, the total carrying amount of the property and
equipment, drydocking expenditure, and right of use assets subject to
estimation uncertainty was US$ 621.0 million (2022: US$ 605.3 million). Refer
to Note 5 for further details including sensitivity analysis.
Impairment of financial assets
The Group recognises an allowance for expected credit losses ("ECLs") for all
financial assets that are measured at amortised cost or debt instruments
measured at fair value through other comprehensive income. ECLs are based on
the difference between the contractual cash flows due in accordance with the
contract and all the cash flows that the Group expects to receive, discounted
at the EIR.
Management carried out an impairment assessment of trade receivables and
contract assets for the year ended 31 December 2023. Following this assessment
management considered the following criteria for impairment:
Objective evidence of impairment could include:
· significant financial difficulty of the issuer or counterparty; or
· default or delinquency in interest or principal payments; or
· it becoming probable that the borrower will enter bankruptcy or
financial reorganisation.
A financial asset is written off when there is no reasonable expectation of
recovering the contractual cash flows.
Management concluded that the Group had an expected credit loss provision
expense of US$ 0.2 million as at 31 December 2023 (31 December 2022: US$ 2.0
million), refer to Notes 9 for further details.
Fair valuation of Warrants
Management commissioned an independent valuation expert to measure the fair
value of the warrants, which was determined using Monte Carlo option-pricing
model. The simulation considers sensitivity by building models of possible
results by substituting a range of values. The increase in fair value of the
warrants is primarily due to increase in share price and its volatility. A 10%
change in share price will increase or decrease the valuation by US$ 0.2
million.
GULF MARINE SERVICES PLC
Notes to the consolidated financial statements (continued)
5 Property and equipment
Vessels Capital work-in-progress Vessel spares, fitting and other equipment Others Total
US$'000 US$'000 US$'000 US$'000 US$'000
Cost
At 1 January 2022 896,871 5,042 60,234 1,967 964,114
Additions − 3,336 − − 3,336
Transfers 1,329 (1,612) − 283 −
At 31 December 2022 898,200 6,766 60,234 2,250 967,450
Additions − 4,326 − − 4,326
Transfers − (523) 523 − −
At 31 December 2023 898,200 10,569 60,757 2,250 971,776
5 Property and equipment (continued)
Vessels Capital work-in-progress Vessel spares, fitting and other equipment Others Total
US$'000 US$'000 US$'000 US$'000 US$'000
Accumulated depreciation and impairment
At 1 January 2022 335,938 2,845 18,018 1,787 358,588
Depreciation expense (Note 36) 20,365 − 3,201 129 23,695
Impairment charge 13,192 − - - 13,192
Reversal of impairment (20,980) − - - (20,980)
At 31 December 2022 348,515 2,845 21,219 1,916 374,495
Depreciation expense (Note 36) 20,900 − 3,252 145 24,297
Impairment charge 3,565 − − − 3,565
Reversal of impairment (36,993) − − − (36,993)
At 31 December 2023 335,987 2,845 24,471 2,061 365,364
Carrying amount
At 31 December 2023 562,213 7,724 36,286 189 606,412
At 31 December 2022 549,685 3,921 39,015 334 592,955
Depreciation amounting to US$ 24.3 million (2022: US$ 23.7 million) has been
charged to the profit and loss, of which US$ 24.2 million (2022: US$ 23.6
million) was allocated to cost of sales (Note 31). The remaining balance of
the depreciation charge is included in general and administrative expenses
(Note 31).
Vessels with a total net book value of US$ 562.2 million (2022: US$ 549.7
million), have been mortgaged as security for the loans extended by the
Group's banking syndicate (Note 22).
5 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 exists
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.
Based on the impairment assessment reviews conducted in previous years, the
Group recognised impairment losses of US$ 59.1 million and US$ 87.2 million in
fiscal years 2019 and 2020 respectively. As conditions improved, including day
rates, utilization, and market outlook, the historical impairment losses of
US$ 14.9 million and US$ 21.0 million on various vessels were subsequently
reversed in fiscal years 2021 and 2022, respectively. During 2022, an
additional impairment loss of US$ 13.2 million was also recognised on certain
vessels, primarily due to higher discount rate resulting in a net impairment
reversal of US$ 7.8 million.
As at 31 December 2023, and in line with IAS 36 requirements, management
concluded that a formal impairment assessment was required. Factors considered
by management included favourable indicators, including an improvement in
utilization, day rates, an increase in market values of vessels and decrease
in interest rate, and unfavourable indicators including the market
capitalization of the Group remaining below the book value of the Group's
equity.
The Group has again obtained an independent valuation of its vessels as at 31
December 2023 for the purpose of its banking covenant compliance requirements.
However, consistent with prior years, management does not consider these
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, if any, "willing buyer and willing seller" transactions of
similar vessels 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 of 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.
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 next four years based on its latest 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 2022 levels as the industry starts to emerge out of the bottom of
the cycle, adjusted for anomalies. The terminal value cash flow assumptions
are applied till the end of estimated useful economic life of each vessel,
which is consistent with prior year. Such long-term forecasts also took
account of the outlook for each vessel having regard to their specifications
relative to expected customer requirements 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 increased
activity in Self Elevated Support Vessels (SESV) market. Though the Group
continues to operate in the North Sea, its core market in the long term is
expected to remain in the Arabian Peninsula region 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 National Oil Companies ("NOCs") to increase
production and the reliance the local governments have on revenues derived
from oil and gas.
5 Property and equipment (continued)
Impairment (continued)
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 12.93%
(2022: 13.58%) 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 the industry sector average betas, risk-free rate of return
as well as 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 and the effective cost of debt reported by the peer group as at 31
December 2023. The weighted average is computed based on the industry capital
structure.
The impairment review led to the recognition of a net impairment reversal of
US$ 33.43 million. The key reason for the reversal is further improvement in
general market conditions compared to prior year and a decrease in discount
rate from 13.58% to 12.93% predominantly due to reduction in the cost of
equity of the Group.
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.
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 / (Impairment) amount reversal / (Impairment) amount
Cash Generating Unit (CGUs) 2023 2023 2022 2022
US$'000 US$'000 US$'000 US$'000
E-Class -1 12,414 94,441 1,820 66,933
E-Class -2 (3,565) 62,481 (2,691) 66,823
E-Class -3 907 79,985 (941) 73,269
E-Class -4 6,584 88,582 5,131 85,592
E-class 16,340 325,489 3,319 292,617
S-Class -1 4,462 61,092 (4,631) 53,923
S-Class -2 - 67,067 - 56,398
S-Class -3 - 68,787 - 58,865
S-class 4,462 196,946 (4,631) 169,186
K-Class -1 1,773 16,264 (1,984) 15,475
K-Class -2 1,102 17,033 3,333 16,874
K-Class -3 2,025 18,353 2,880 16,059
K-Class -4 4,464 16,268 (19) 12,678
K-Class -5 1,321 22,047 7,816 21,519
K-Class -6 1,941 51,075 (2,926) 51,139
K-class 12,626 141,040 9,100 133,744
Total 33,428 663,475 7,788 595,547
5 Property and equipment (continued)
Impairment (continued)
The below table compares the long-term (Terminal value) day rate and
utilisation assumptions used to forecast future cash flows from 2028 for the
remainder of each vessel's useful economic life against those secured for
2024:
Day rate change % on 2024 levels Utilisation change %
Vessels class on 2024 levels
E-Class CGUs 30% -13%
S-Class CGUs -4% 3%
K-Class CGUs -9% -16%
The below table compares the long-term day rate and utilisation assumptions
used to forecast future cash flows during the year ended 31 December 2023
against the Group's long-term assumptions in the impairment assessment
performed as at 31 December 2022:
Day rate change % on 2023 levels Utilisation change %
Vessels class on 2023 levels
E-Class CGUs - -
S-Class CGUs - -
K-Class CGUs - -
The impairment reversal recognised on the Group's K-Class vessels primarily
reflects an increase in short-term forecast day rates and utilisation, as the
Group experiences increased demand in a recovering market. When reviewing the
longer-term assumptions, the Group has assumed a lower day rate and
utilisation for terminal values to reflect higher competition in the market
for smaller vessels.
The net impairment reversal recognised on E-Class vessels reflect further
increases in short-term assumptions on day rates and utilisation relative to
the Group's previous forecasts. The forecast of 30% increase in day rates
relative to 2024 reflects improving market conditions coupled with a limited
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 and utilization going forward.
The net impairment reversal recognised on the Group's S-Class vessel primarily
reflects an increase in short-term forecast day rates and utilisation, as the
Group experiences increased demand in a recovering market.
Key assumption sensitivities
The Group has conducted an analysis of the sensitivity of the impairment test
to reasonable 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$ million) Number of vessels impacted Impact (in US$ million) Number of vessels impacted
(Impairment)/ impairment reversal of* (Impairment)/ impairment reversal of*
E-Class CGUs 38.0 6 (15.0) 3
S-Class CGUs 4.5 - (2.6) 1
K-Class CGUs 28.1 2 (17.1) 6
Total fleet 70.6 8 (34.7-) 10
*This reversal of impairment / (impairment charge) is calculated on carrying
values before the adjustment for impairment reversals in 2023.
The total recoverable amounts of the Group's vessels as at 31 December 2023
would have been US$ 766.8 million under the increased day rates sensitivity
and US$ 552.3 million for the reduced day rate sensitivity.
5 Property and equipment (continued)
Impairment (continued)
Key assumption sensitivities (continued)
Utilisation
Utilisation higher by 10% Utilisation lower by 10%
Vessels class Impact (in US$ million) Number of vessels impacted Impact (in US$ million) Number of vessels impacted
(Impairment)/ impairment reversal of* (Impairment)/ impairment reversal of*
E-Class CGUs 31.1 2 (15.0) 3
S-Class CGUs 4.5 - (2.6) 1
K-Class CGUs 22.2 6 (17.1) 6
Total fleet 57.8 8 (34.7) 10
*This reversal of impairment / (impairment charge) is calculated on carrying
values before the adjustment for impairment reversals in 2023.
The total recoverable amounts of the Group's vessels as at 31 December 2023
would have been US$ 726.9 million under the increased utilisation sensitivity
and US$ 552.3 million for the reduced utilisation sensitivity.
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
An additional sensitivity analysis was conducted by adjusting the pre-tax
discount rate upwards and downwards by 100 basis points (1%). Given that the
change in the discount rate from the previous year is less than 100 basis
points, such sensitivity was deemed appropriate for this analysis.
Discount rate higher by 1% Discount rate lower by 1%
Vessels class Impact (in US$ million) Number of vessels impacted Impact (in US$ million) Number of vessels impacted
(Impairment)/ impairment reversal of* (Impairment)/ impairment reversal of*
E-Class CGUs 6.3 2 27.7 2
S-Class CGUs 3.7 1 4.5 -
K-Class CGUs 6.0 6 16.7 6
Total fleet 16.0 9 48.9 8
*This (impairment charge) / impairment reversal is calculated on carrying
values before the adjustment for impairment reversals in 2023.
The total recoverable amounts of the vessels as at 31 December 2023 would have
been US$ 707.3 million under the reduced discount rate sensitivity and US$
624.4 million for the increased discount rate sensitivity.
6 Dry docking expenditure
The movement in dry docking expenditure is summarised as follows:
2023 2022
US$'000 US$'000
At 1 January 8,931 8,799
Expenditure incurred during the year 6,960 5,745
Amortised during the year (Note 36) (4,687) (5,613)
At 31 December 11,204 8,931
7 Right-of-use assets
Buildings Communications equipment Operating equipment Total
US$'000 US$'000 US$'000 US$'000
Cost
At 1 January 2022 2,262 251 7,560 10,073
Additions 186 - 2,936 3,122
At 31 December 2022 2,448 251 10,496 13,195
Additions 519 894 1,818 3,231
Derecognised - - (567) (567)
At 31 December 2023 2,967 1,145 11,747 15,859
Accumulated depreciation
At 1 January 2022 1,448 173 5,568 7,189
Depreciation for the year 419 78 2,138 2,635
At 31 December 2022 1,867 251 7,706 9,824
Depreciation for the year 574 106 2,508 3,188
Derecognised - - (500) (500)
At 31 December 2023 2,441 357 9,714 12,512
Carrying amount
At 31 December 2023 526 788 2,033 3,347
At 31 December 2022 581 - 2,790 3,371
The consolidated statement of profit or loss and other comprehensive income
includes the following amounts relating to leases.
2023 2022
US$'000 US$'000
Depreciation of right of use assets (Note 36) 3,188 2,635
Expense relating to short term leases or leases of low value assets (Note 36) 228 965
Lease charges included in operating activities 3,416 3,600
Interest on lease liabilities (Note 35) 245 170
Lease charges included in profit before tax 3,661 3,770
The total cash outflow for leases amounted to US$ 3.8 million for the year
ended 31 December 2023 (2022: US$ 3.7 million).
8 Taxation charge for the year
Tax is calculated at the rates prevailing in the respective jurisdictions in
which the Group operates. The overall effective rate is the aggregate of taxes
paid in jurisdictions where income is subject to tax (being principally Qatar,
the United Kingdom, and Saudi Arabia), divided by the Group's profit/(loss).
2023 2022
US$'000 US$'000
Profit from operations before tax 44,930 27,126
Tax at the UK corporation tax rate of 23.5% (2022: 19%) 10,568 5,154
Effect of different tax rates in overseas jurisdictions (13,461) (6,106)
Expense not deductible for tax purposes 2,413 20
Overseas taxes not based on profit 1,714 861
Increase in unrecognised deferred tax 1,113 1,242
Prior year tax adjustments 630 584
Income not taxable for tax purposes (115) (31)
Total tax charge 2,862 1,724
During the year, the tax rates on profits were 10% in Qatar (2022: 10%),
23.52% in the United Kingdom (2022: 19%) and 20% in Saudi Arabia (2022: 20%)
applicable to the portion of profits generated from respective jurisdictions.
The Group also incurred 2.5% Zakat tax (an obligatory tax to donate 2.5% of
retained earnings each year) on the portion of profits generated in Saudi
Arabia (2022: 2.5%).
The Group incurs 5% withholding tax on remittances from Saudi Arabia (2022:
5%). The withholding tax included in the current tax charge amounted to US$
1.6 million (2022: US$ 0.9 million).
The Group expects the overall effective tax rate in the future to vary
according to local tax law changes in jurisdictions which incur taxes,
applicability of corporate tax in the UAE, as well as any changes to the share
of Group's profits or losses which arise in tax paying jurisdictions.
At the consolidated statement of financial position date, the Group has unused
tax losses of US$ 30.2 million (2022: US$ 26.4 million), arising from UK
operations, available for offset against future profits with an indefinite
expiry period. In line with the prior year, the current year assessment
relates to the E-Class vessel which is the only vessel expected to operate in
the UK for the foreseeable future. Based on the projections of this remaining
vessel's activity, there are insufficient future taxable profits to justify
the recognition of a deferred tax asset. On this basis no deferred tax asset
has been recognised in the current or prior year, the unrecognised deferred
tax asset calculated at the substantively enacted rate in the UK of 25%
amounts to US$ 7.6 million as at 31 December 2023 (2022: US$ 6.6 million).
The Group accrues for estimated penalties, if any, with respect to any open
tax related matters. Any changes to such estimates relating to prior periods
are presented in the "prior year tax adjustments" above.
Factors affecting current and future tax charges
United Kingdom (UK)
In the Spring Budget 2021, the UK Government announced that from 01 April 2023
the corporation tax rate would increase to 25%. Deferred taxes at the balance
sheet date have been measured using these enacted tax rates as disclosed in
these consolidated financial statements.
The future effective tax rate of the Group could be impacted by changes in tax
law, primarily increasing corporation tax rates and increasing withholding
taxes applicable to the Group.
8 Taxation charge for the year (continued)
United Arab Emirates (UAE)
On 9 December 2022, the UAE Ministry of Finance released Federal Decree-Law
No. 47 of 2022 on the Taxation of Corporations and Businesses (Corporate Tax
Law or the Law) to enact a Federal Corporate Tax regime in the UAE. This Law
has become effective for accounting periods beginning on or after 1 June 2023.
The Group's UAE operations will be subject to a 9% corporation tax rate with
effect from 01 January 2024. A rate of 0% will apply to taxable income not
exceeding a particular threshold to be prescribed by way of a Cabinet Decision
(expected to be AED 375,000 based on information released by the UAE Ministry
of Finance).
GMS has considered deferred tax implications in the preparation of these
consolidated financial statements in respect of property and equipment and
potential timing differences that could give rise to a deferred tax liability.
There are currently no UAE tax laws that would impact treatment of
depreciation and amortization of property, plant and equipment, that would
result in such a timing difference. Hence, management has concluded that no
adjustments to these consolidated financial statements are necessary.
Kingdom of Saudi Arabia
A subsidiary of the Group received a tax assessment from the Saudi tax
authorities (ZATCA) for an amount of
US$ 7.3 million related to the transfer pricing of inter-group bareboat
agreement, for the period from 2017 to 2019. The Group has currently filed an
appeal with the Tax Violations and Disputes Appellate Committee (TVDAC)
against the assessment raised by ZATCA. The Directors have considered the
claim, including consideration of third-party tax advice received. Noticing
the claim retrospectively applied from 2010 in respect of a law which was
issued in 2019, which applied a "tested party" assessment different to that
supported by the Group tax advisors and using an approach which the Directors
(supported by their tax advisors) consider to be inconsistent with the
principles set out in the KSA transfer price guidelines, the Directors believe
that the Group has complied with the relevant tax legislation. Nevertheless,
to reach an amicable solution, the Group has also filed a settlement
application with the Alternate Dispute Resolution Committee (ADRC), which
subsequently requested a settlement offer. The Directors have responded by
proposing a settlement of US$ 0.5 million and are currently awaiting a
response from the ADRC. On that basis, a provision of US$ 0.5 million has also
been recognised in these consolidated financial statements.
9 Trade receivables
2023 2022
US$'000 US$'000
Trade receivables (gross of allowances) 32,872 35,198
Less: Allowance for expected credit losses (2,226) (2,019)
Trade receivables 30,646 33,179
Gross trade receivables, amounting to US$ 32.9 million (2022: US$ 35.2
million), have been assigned as security against the loans extended by the
Group's banking syndicate (Note 22).
Trade receivables disclosed above are measured at amortised cost. Credit
periods are granted on a client by client basis. The Group does not hold any
collateral or other credit enhancements over any of its trade receivables nor
does it have a legal right of offset against any amounts owed by the Group to
the counterparty. For details of the calculation of expected credit losses,
refer to Note 3.
Impairment has been considered for accrued revenue but is not considered
material.
9 Trade receivables (continued)
The movement in the allowance for ECL and bad and doubtful receivables during
the year was as follows:
2023 2022
US$'000 US$'000
At 1 January 2,019 195
Net charge of expected credit losses (Note 36) 207 1,824
At 31 December 2,226 2,019
Trade receivables are considered past due once they have passed their
contracted due date. The net charge of expected credit loss provision during
the year was US$ 0.2 million (2022: US$ 1.8 million).
Management carried out an impairment assessment of trade receivables for the
year ended 31 December 2023 and concluded that the Group had an expected
credit loss provision of US$ 2.2 million as at 31 December 2023
(31 December 2022: US$ 2.0 million).
During January 2023, a customer entered administration. The Group had traded
with this customer in the past and accordingly, had recorded an allowance for
impairment amounting to US$ 1.9 million in the previous year.
Included in the Group's trade receivables balance are receivables with a gross
amount of US$ 4.1 million
(2022: US$ 0.8 million) which are past due for 30 days or more at the
reporting date. At 31 December, the analysis of Trade receivables is as
follows:
Number of days past due
Current < 30 days 31-60 days 61-90 days 91-120 days > 120 days Total
US$'000 US'000 US'000 US'000 US'000 US'000 US'000
Trade receivables 28,714 26 - - - 4,132 32,872
Less: Allowance for expected credit losses (110) - - - - (2,116) (2,226)
Net trade receivables 2023 28,604 26 - - - 2,016 30,646
Trade receivables 30,166 4,216 - - 30 786 35,198
Less: Allowance for expected credit losses (2,003) (10) - - - (6) (2,019)
Net trade receivables 2022 28,163 4,206 - - 30 780 33,179
Seven customers (2022: nine) account for 99% (2022: 99%) of the total trade
receivables balance (see revenue by segment information in Note 30). When
assessing credit risk, ongoing assessments of customer credit and liquidity
positions are performed.
10 Prepayments, advances and other receivables
2023 2022
US$'000 US$'000
Accrued revenue 2,656 1,303
Prepayments 3,557 3,137
Deposits* 86 85
Advances to suppliers 1,758 3,197
At 31 December 8,057 7,722
* Deposits include bank guarantee deposits of US$ 39K (2022: US$ 39K).
Guarantee deposits are paid by the Group for employee work visas under UAE
labour laws.
11 Derivative financial instruments
Warrants
Under the terms of the Group's loan facility, the Group was required to issue
warrants to its lenders as GMS had not raised US$ 50.0 million of equity by 31
December 2022.
On 2 January 2023, as the US$ 50.0 million equity raise did not take place,
therefore 87,621,947 warrants were issued to the lenders. Based on the final
report prepared by a Calculation Agent, the warrants give right to their
holders to acquire 137,075,773 shares at an exercise price of 5.75 pence per
share for a total consideration of GBP £7.9 million. Warrant holders will
have the right to exercise their warrants up to the end of the term of the
loan facility, being 30 June 2025.
Management commissioned an independent valuation expert to measure the fair
value of the warrants, which was determined using Monte Carlo option-pricing
model, which takes into consideration the market values of comparable public
companies, considering among other factors, the use of multiples of earnings,
and adjusted to reflect the restrictions on the ability of our shares to trade
in an active market. The simulation considers sensitivity by building models
of possible results by substituting a range of values. Warrants valuation
represents a Level 3 fair value measurement under IFRS 13 hierarchy. The fair
value of the warrants as at 31 December 2023 was US$ 14.3 million (31 December
2022: US$ 3.2 million). The increase in fair value of the warrants is
primarily due to increase in share price and its volatility. The share price
increased from 4.65 pence as at 31 December 2022 to 14.5 pence as at
31 December 2023. A 10% change in share price will increase or decrease the
valuation by US$ 0.2 million.
Interest Rate Swap
The Group had an Interest Rate Swap (IRS) arrangement, originally in place,
with a notional amount of
US$ 50.0 million. The remaining notional amount hedged under the IRS as at 31
December 2023 was US$ nil
(31 December 2022: US$ 23.1 million). The IRS hedged the risk of variability
in interest payments by converting a floating rate liability to a fixed rate
liability. The IRS arrangement matured during the year, therefore, the fair
value of the IRS as at 31 December 2023 was US$ nil (31 December 2022: asset
value US$ 0.4m). In 2020 cash flows of the hedging relationship for the IRS
were not highly probable and, therefore, hedge accounting was discontinued
from that point.
Historically, the fair value measurement of the interest rate swap was
determined by independent valuers with reference to quoted market prices,
discounted cash flow models and recognised pricing models as appropriate. They
represent Level 2 fair value measurements under the IFRS 13 hierarchy.
IFRS 13 fair value hierarchy
Apart from warrants, the Group has no other financial instruments that are
classified as Level 3 in the fair value hierarchy in the current year 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.
11 Derivative financial instruments (continued)
Derivative financial instruments are made up as follows:
Interest rate swap
Warrants Total
US$'000 US$'000 US$'000
At 1 January 2023 386 (3,198) (2,812)
Net loss on changes in fair value of interest rate swap (59) - (59)
Final settlement of derivatives (327) - (327)
Impact of change in fair value of warrants - (11,077) (11,077)
As at 31 December 2023 - (14,275) (14,275)
Interest rate swap
Warrants Total
US$'000 US$'000 US$'000
At 1 January 2022 (1,076) (717) (1,793)
Settlement of derivatives 384 - 384
Net gain on changes in fair value of interest rate swap 1,078 - 1,078
Impact of change in fair value of warrants - (2,481) (2,481)
As at 31 December 2022 386 (3,198) (2,812)
These consolidated financial statements include 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.
The balance in the cashflow hedging reserve as at 31 December 2023 was nil
(2022: US $ 0.28 million).
12 Cash and cash equivalents
2023 2022
US$'000 US$'000
Interest bearing
Held in UAE banks 1,422 1,209
Non-interest bearing
Held in UAE banks 964 2,824
Held in banks outside UAE 6,280 8,242
Total cash and cash equivalents 8,666 12,275
13 Share capital and other reserves
Ordinary shares at £0.02 per share
Number of ordinary shares Ordinary
shares
(Thousands) US$'000
At 1 January 2023 1,016,415 30,117
As at 31 December 2023 1,016,415 30,117
Number of ordinary shares Ordinary
shares
(Thousands) US$'000
At 1 January 2022 1,016,415 30,117
As at 31 December 2022 1,016,415 30,117
Capital redemption reserve
Number of ordinary shares Capital redemption reserve
(Thousands) US$'000
At 1 January 2023 350,488 46,445
As at 31 December 2023 350,488 46,445
Share premium
Number of ordinary shares Share premium account
(Thousands) US$'000
At 1 January 2023 1,016,415 99,105
As at 31 December 2023 1,016,415 99,105
Prior to an equity raise on 28 June 2021 the Group underwent a capital
reorganisation where all existing ordinary shares with a nominal value of 10
pence per share were subdivided and re-designated into 1 ordinary share with a
nominal value of 2 pence and 1 deferred share with a nominal value of 8 pence
each. The previously recognised share capital balance relating to the old 10p
ordinary shares was allocated pro rata to the new subdivided 2p ordinary
shares and 8p deferred shares. The deferred shares had no voting rights and no
right to the profits generated by the Group. On winding-up or other return of
capital, the holders of deferred shares had extremely limited rights, if any.
The Group had the right but not the obligation to buyback all of the deferred
shares for an amount not exceeding £1.00 in aggregate, which with the
shareholders approval, was completed on 30 June 2022. Accordingly, 350,487,787
deferred shares were cancelled. Following the cancellation of the Deferred
shares on 30 June 2022, a transfer of $46.4 million was made from Share
capital - Deferred to a Capital redemption reserve. There was no dilution to
the shares ownership as a result of the share reorganisation.
Under the Companies Act, a share buy‑back by a public company can only be
financed through distributable reserves or the proceeds of a fresh issue of
shares made for the purpose of financing a share buyback. The Company had
sufficient reserves to purchase the Deferred shares for £1.00.
The Group has issued warrants to its lenders which may result in increase in
issued share capital in future (refer Note 11).
14 Restricted reserve
The restricted reserve of US$ 0.3 million (2022: US$ 0.3 million) represents
the statutory reserves of certain subsidiaries. As required by the Commercial
Companies Law in the countries where those entities are established, 10% of
profit for the year is transferred to the statutory reserve until the reserve
equals 50% of the share capital. Following a recent change to the Regulations
of Companies in Kingdom of Saudi Arabia, apportions can cease when the reserve
equals 30% instead of 50% of the share capital, although the subsidiary
continues to maintain this at 50%. This reserve is not available for
distribution. No amounts were transferred to this reserve during the year
ended 31 December 2023 (2022: US$ nil).
15 Group restructuring reserve
The Group restructuring reserve arose on consolidation under the pooling of
interests (merger accounting) method used for the Group restructuring. Under
this method, the Group was treated as a continuation of GMS Global Commercial
Investments LLC (the predecessor parent Company) and its subsidiaries. At the
date the Company became the new parent company of the Group via a
share-for-share exchange, the difference between the share capital of GMS
Global Commercial Investments LLC and the Company, amounting to US$ 49.7
million
(2022: US $49.7 million), was recorded in the books of Gulf Marine Services
PLC as a Group restructuring reserve. This reserve is non-distributable.
16 Share based payment reserve
Share based payment reserve of US$ nil (2022: US$ 3.6 million) relates to
awards granted to employees under the long-term incentive plans. Refer to Note
28 for further details.
17 Capital contribution
The capital contribution reserve is as follows:
2023 2022
US$'000 US$'000
At 31 December 9,177 9,177
During 2013, US$ 7.8 million was transferred from share appreciation rights
payable to capital contribution as, effective 1 January 2013, the shareholders
have assumed the obligation to settle the share appreciation rights. An
additional charge in respect of this scheme of US$ 1.4 million was made in
2014. The total balance of US$ 9.2 million is not available for distribution.
18 Translation reserve and Retained earnings
Foreign currency translation reserve represents differences on foreign
currency net investments arising from the re-translation of the net
investments in overseas subsidiaries.
Retained earnings include the accumulated realised and certain unrealised
gains and losses made by the Group.
19 Non-controlling interests
The movement in non-controlling interests is summarised as follows:
2023 2022
US$'000 US$'000
At 1 January 1,988 1,912
Share of profit for the year 726 76
At 31 December 2,714 1,988
19 Non-controlling interest (continued)
The following table summarises the information relating to the subsidiary that
has material non -controlling interest, before any intra‑group eliminations.
2023 2022
US$'000 US$'000
Statement of financial position information:
Non-current assets 129 76
Current assets 16,408 17,830
Non-current liabilities (18) (38)
Current liabilities (6,952) (9,607)
Net assets 9,567 8,261
Net assets attributable to non-controlling interests 2,714 1,988
Statement of profit or loss and other comprehensive income information:
Revenue 38,088 22,569
Profit after tax and zakat 1,306 876
Total comprehensive income 1,306 876
Profit allocated to non-controlling interests 726 76
Statement of cashflow information:
Cash flows from operating activities (1,162) 1,933
Cash flows from financing activities (dividends: nil) (795) (525)
Net (decrease) / increase in cash and cash equivalents (1,957) 1,408
20 Provision for employees' end of service benefits
In accordance with Labour Laws of some of the countries where the Group
operates, it is required to provide for end of service benefits for certain
employees. The movement in the provision for employees' end of service
benefits during the year was as follows:
2023 2022
US$'000 US$'000
At 1 January 2,140 2,322
Provided during the year 723 270
Paid during the year (468) (452)
At 31 December 2,395 2,140
21 Trade and other payables
2023 2022
US$'000 US$'000
Trade payables 13,213 12,618
Due to related parties (Note 24) 962 2,841
Accrued expenses 16,090 11,169
Deferred revenue 3,546 628
VAT payable 392 365
Other payables 851 358
35,054 27,979
No interest is payable on the outstanding balances. Trade and other payables
are all current liabilities.
22 Bank borrowings
Secured borrowings at amortised cost are as follows:
2023 2022
US$'000 US$'000
Term loans 273,939 328,085
Working capital facility (utilised)* 2,000 -
275,939 328,085
*The revolving working capital facility amounts to US$ 40.0 million (31
December 2022: US$ 45.0 million).
US$ 25.0 million (31 December 2022: US$ 25.0 million) of the working capital
facility is allocated to performance bonds and guarantees and US$ 15.0 million
(31 December 2022: US$ 20 million) is allocated to funded portion, of which
US$ 2.0 million was utilised as of 31 December 2023, leaving US$ 13.0 million
available for drawdown
(31 December 2022: US$ 20.0 million). The working capital facility expires
alongside the main debt facility in June 2025.
Bank borrowings are split between hedged and unhedged amounts as follows;
2023 2022
US$'000 US$'000
Unhedged bank borrowings 275,939 305,008
Hedged bank borrowing via Interest Rate Swap* - 23,077
275,939 328,085
*This is an economic hedge and not accounted for in accordance with IFRS 9,
Financial Instruments. The Group used an IRS to hedge a portion of the Group's
floating rate liability by converting SOFR to a fixed rate. The IRS matured
during the year, Refer to Note 27 for further details.
Bank borrowings are presented in the consolidated statement of financial
position as follows:
2023 2022
US$'000 US$'000
Non-current portion
Bank borrowings 234,439 298,085
Current portion
Bank borrowings - scheduled repayments within one year 39,500 30,000
Working capital facility 2,000 -
275,939 328,085
The principal terms of the outstanding facility as at 31 December 2023 are as
follows:
· The facility's main currency is US$ and is repayable with a
Secured Overnight Financing Rate (SOFR) plus a margin based on a ratchet
depending on leverage levels.
· Following the cessation of the LIBOR on 30 June 2023, the
reference rate in the Common Terms Agreement has been changed to the SOFR as
the new benchmark rate.
22 Bank borrowings (continued)
· As of the second quarter of 2023, the Group has achieved a
reduction in the net leverage ratio to below 4.0, and PIK is no longer
accrued. As a result, the margin rate on the loan has been decreased from 4%
to 3.1%.
· The facility remains secured by mortgages over its whole fleet
with a net book value at 31 December 2023 of US$ 562.2 million (31 December
2022: US$ 549.7 million) (Note 5). Additionally, gross trade receivables,
amounting to US$ 32.9 million (31 December 2022: US$ 35.2 million) have been
assigned as security against the loans extended by the Group's banking
syndicate (Note 9).
· The Group has also provided security against gross cash balances,
being cash balances amounting to
US$ 8.7 million (31 December 2022: US$ 12.3 million) (Note 12) before the
restricted amounts related to visa deposits held with the Ministry of Labour
in the UAE which are included in deposits. These have been assigned as
security against the loans extended by the Group's banking syndicate.
· As an equity raise of US $50.0 million did not take place by 31
December 2022, 87.6 million warrants were issued on 2 January 2023, giving
debt holders the right to 137,075,773 million shares at a strike price of 5.75
pence per share.
The facility is subject to certain financial covenants including: Debt Service
Cover, Interest Cover, and Net Leverage Ratio, which are tested bi-annually in
June and December. There are also additional covenants relating to general
and administrative costs, capital expenditure and Security Cover (loan to
value) which are tested annually in December. Further, there were restrictions
to payment of dividends until the net leverage ratio falls below 4.0 times, a
level reached in second quarter of 2023. All applicable financial covenants
assigned to the Group's debt facility were met as of 31 December 2023.
GULF MARINE SERVICES PLC
Notes to the consolidated financial statements (continued)
22 Bank borrowings (continued)
Outstanding amount
Current Non-current Total Security Maturity
US$'000 US$'000 US$'000
31 December 2023:
Term loan - scheduled repayments within one year 39,500 - 39,500 Secured June 2025
Term loan - scheduled repayments within more than one year - 234,439 234,439 Secured June 2025
Working capital facility - scheduled repayment within one year 2,000 - 2,000 Secured June 2025
41,500 234,439 275,939
31 December 2022:
Term loan - scheduled repayments within one year 30,000 - 30,000 Secured June 2025
Term loan - scheduled repayments within more than one year - 298,085 298,085 Secured June 2025
Working capital facility - scheduled repayment more than one year - - - Secured June 2025
30,000 298,085 328,085
23 Lease liabilities
2023 2022
US$'000 US$'000
As at 1 January 3,522 2,924
Recognition of new lease liability additions 3,231 3,122
Interest on lease liabilities (Note 35) 245 170
Principal element of lease payments (3,330) (2,524)
Derecognition of lease liability (67) -
Interest paid (245) (170)
As at 31 December 3,356 3,522
Maturity analysis:
Year 1 1,623 1,845
Year 2 1,297 834
Year 3 - 5 436 692
Onwards - 151
3,356 3,522
Split between:
Current 1,623 1,845
Non - current 1,733 1,677
3,356 3,522
24 Related party transactions
Related parties comprise the Group's major shareholders, Directors and
entities related to them, companies under common ownership and/or common
management and control, their partners and key management personnel. Pricing
policies and terms of related party transactions are approved by the Group's
Board.
Balances and transactions between the Group and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not disclosed
in this note.
Key management personnel:
As at 31 December 2023, there were 2.6 million shares held by Directors (31
December 2022: 2.6 million).
Related parties
The Group's principal subsidiaries are outlined in Note 3. The related parties
comprising of the Group's major shareholders are outlined in the Directors
Report in the annual report. The other related parties during the year were:
Partner in relation to UAE Operations Relationship
National Catering Company Limited WLL Affiliate of a significant shareholder of the Company
Sigma Enterprise Company LLC Affiliate of a significant shareholder of the Company
Aman Integrated Solutions LLC Affiliate of a significant shareholder of the Company
24 Related party transactions (continued)
The amounts outstanding to National Catering Company Limited WLL as at 31
December 2023 was US$ 0.5 million
(2022: US$ 0.8 million) included in trade and other payables (Note 21).
The amount outstanding to Sigma Enterprise Company LLC as at 31 December 2023
was US$ 0.5 million, (2022: US$ 1.8 million) included in trade and other
payables (Note 21).
The amounts outstanding to Aman Integrated Solutions LLC as at 31 December
2023 was US$ 3k (2022: US$ nil) included in trade and other payables (Note
21).
During 2023, there were no transactions with Seafox international or any of
its subsidiaries (2022: US $nil).
Significant transactions with the related party during the year:
2023 2022
US$'000 US$'000
National Catering Company Limited WLL - Catering services 581 1,232
Sigma Enterprise Company LLC - Vessel maintenance and overhaul services 2,372 1,930
Aman Integrated Solutions LLC - Laboratory services 18 7
Compensation of key management personnel
The remuneration of Directors and other members of key management personnel
during the year were as follows:
2023 2022
US$'000 US$'000
Short-term benefits 983 617
End of service benefits 24 24
1,007 641
Compensation of key management personnel represents the charge to the profit
or loss in respect of the remuneration of the executive Directors. At 31
December 2023, there were four executive Directors (2022: four). Further
details of remuneration of the Board and key management personnel relating to
2023 are contained in the Directors' Remuneration Report in the annual report.
25 Contingent liabilities
At 31 December 2023, the banks acting for Gulf Marine Middle East FZE, one of
the subsidiaries of the Group, had issued performance bonds amounting to US$
19.6 million (31 December 2022: US$ 18.0 million), all of which were
counter-indemnified by other subsidiaries of the Group.
26 Commitments
2023 2022
US$'000 US$'000
Capital commitments 7,825 6,221
Capital commitments comprise mainly capital expenditure, which has been
contractually agreed with suppliers for future periods for equipment or the
upgrade of existing vessels.
27 Financial instruments
Categories of financial instruments
2023 2022
US$'000 US$'000
Financial assets:
Current assets at amortised cost:
Cash and cash equivalents (Note 12) 8,666 12,275
Trade receivables and other receivables (Note 9,10)* 33,388 34,567
Current assets recorded at FVTPL:
Interest rate swap (Note 11) - 386
Total financial assets 42,054 47,228
*Trade and other receivables exclude prepayments and advances to suppliers.
2023 2022
US$'000 US$'000
Financial liabilities:
Derivatives recorded at FVTPL:
Warrants (Note 11) 14,275 3,198
Financial liabilities recorded at amortised cost:
Trade and other payables (Note 21)* 31,116 26,986
Lease liabilities (Note 23) 3,356 3,522
Current bank borrowings - scheduled repayments within one year 41,500 30,000
(Note 22)
Non-current bank borrowings - scheduled repayments more than one year 234,439 298,085
(Note 22)
Total financial liabilities 324,686 361,791
* Trade and other payables excludes amounts of deferred revenue and VAT
payable.
The following table combines information about the following;
· Fair values of financial instruments (except financial
instruments when carrying amount approximates their fair value); and
· Fair value hierarchy levels of financial liabilities for which
fair value was disclosed.
2023 2022
US$'000 US$'000
Financial assets:
Recognised at level 2 of the fair value hierarchy:
Interest rate swap (Note 11) - 386
Financial liabilities:
Recognised at level 3 of the fair value hierarchy:
Warrants (Note 11) 14,275 3,198
27 Financial instruments (continued)
Categories of financial instruments (continued)
The fair value of financial instruments classified as level 3 are, in certain
circumstances, measured using valuation techniques that incorporate
assumptions that are not evidenced by the prices from observable current
market transactions in the same instrument and are not based on observable
market data.
The fair value of the Group's warrants at 31 December 2023 has been arrived at
on the basis of a valuation carried out at that date by a third- party expert,
an independent valuer not connected with the Group. The valuation conforms to
International Valuation Standards. The fair value was determined using a
Monte-Carlo simulation.
Favourable and unfavourable changes in the value of financial instruments are
determined on the basis of changes in the value of the instruments as a result
of varying the levels of the unobservable parameters, quantification of which
is judgmental. There have been no transfers between Level 2 and Level 3 during
the years ended 31 December 2023 and 31 December 2022.
Capital risk management
The Group manages its capital to support its ability to continue as a going
concern while maximising the return on equity. The Group does not have a
formalised optimal target capital structure or target ratios in connection
with its capital risk management objectives. The capital structure of the
Group consists of net bank debt and total equity. The Group continues to take
measures to de-leverage the Company and intends to continue to do so in the
coming years.
Material accounting policies
Details of the material accounting policies and methods adopted, including the
criteria for recognition, the basis of measurement and the basis on which
income and expenses are recognised, in respect of each class of financial
asset, financial liability and equity instrument are disclosed in Note 3 to
the consolidated financial statements.
Financial risk management objectives
The Group is exposed to the following risks related to financial instruments -
credit risk, liquidity risk, interest rate risk and foreign currency risk.
Management actively monitors and manages these financial risks relating to the
Group.
Credit risk management
Credit risk refers to the risk that a counterparty will default on its
contractual obligations resulting in financial loss to the Group and arises
principally from the Group's trade and other receivables and cash and cash
equivalents.
The Group has adopted a policy of dealing when possible, with creditworthy
counterparties while keen to maximize utilization for its vessels.
Cash balances held with banks are assessed to have low credit risk of default
since these banks are highly regulated by the central banks of the respective
countries. At the year-end, cash at bank and in hand totaled US$ 8.7 million
(2022: US$ 12.3 million), deposited with banks with Fitch short-term ratings
of F2 to F1+ (Refer to Note 12).
27 Financial instruments (continued)
Credit risk management (continued)
Concentration of credit risk arises when a number of counterparties are
engaged in similar business activities, or activities in the same geographic
region, or have similar economic features that would cause their ability to
meet contractual obligations to be similarly affected by changes in economic,
political or other conditions. Concentration of credit risk indicates the
relative sensitivity of the Group's performance to developments affecting a
particular industry or geographic location. During the year, vessels were
chartered to 7 companies in the Arabian Peninsula region and 2 companies in
Europe, including NOCs and engineering, procurement and construction ("EPC")
contractors.
At 31 December 2023, 7 companies in specific regions accounted for 99% (2022:
9 companies in specific regions accounted for 99%) of the outstanding trade
receivables.
The credit risk on liquid funds is limited because the funds are held by banks
with high credit ratings assigned by international agencies.
The amount that best represents maximum credit risk exposure on financial
assets at the end of the reporting period, in the event counterparties failing
to perform their obligations generally approximates their carrying value.
The Group considers cash and cash equivalents and trade and other receivables
which are neither past due nor impaired to have a low credit risk and an
internal rating of 'performing'. Performing is defined as a counterparty that
has a stable financial position and which there are no past due amounts.
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board of
Directors. The Group manages liquidity risk by seeking to maintain sufficient
facilities to ensure availability of funds for forecast and actual cash flow
requirements.
The table below summarises the maturity profile of the Group's financial
liabilities. The contractual maturities of the Group's financial liabilities
have been determined on the basis of the remaining period at the end of the
reporting period to the contractual maturity date. The maturity profile is
monitored by management to assist in ensuring adequate liquidity is
maintained. Refer to Going Concern in Note 3.
27 Financial instruments (continued)
Liquidity risk management (continued)
The maturity profile of the assets and liabilities at the end of the reporting
period based on contractual repayment arrangements was as follows:
Contractual cash flows
Interest rate Total 1 to 3 4 to 12 months 2 to 5
Carrying amount months years
31 December 2023 US$'000 US$'000 US$'000
Non-interest bearing financial liabilities
Trade and other payables* 31,116 31,116 31,116 - -
Interest bearing financial liabilities 8.6%-9.2%
Bank borrowings- principal 275,939 275,939 4,000 37,500 234,439
Interest on bank borrowings 133 32,984 5,955 17,164 9,865
Lease liabilities 3,356 3,356 618 1,155 1,583
Interest on lease liabilities - 251 60 110 81
41,749 55,929 245,968
310,544 343,646
Interest rate Total 4 to 12 2 to 5
Carrying amount 1 to 3 months years
months
US$'000 US$'000 US$'000 US$'000
31 December 2022
Non-interest bearing financial liabilities
Trade and other payables* 26,986 26,986 26,986 - -
Interest bearing financial liabilities 3.2%-6.7%
Bank borrowings- principal 328,085 328,085 7,500 22,500 298,085
Interest on bank borrowings - 40,395 2,656 7,603 30,136
Lease liabilities 3,522 3,522 462 1,383 1,677
Interest on lease liabilities - 148 20 42 86
358,593 399,136 37,624 31,528 329,984
*Trade and other payables excludes amounts of deferred revenue and VAT
payable.
In addition to above table, capital commitments are expected to be settled in
next twelve months.
Interest rate risk management
The Group is exposed to cash flow interest rate risk on its bank borrowings.
The Group enters into floating interest rate instruments for the same.
Further, the Group had an Interest Rate Swap (IRS) arrangement, originally in
place, with a notional amount of US$ 50.0 million. The remaining notional
amount hedged under the IRS as at 31 December 2023 was US$ nil (31 December
2022: US$ 23.1 million). The IRS hedged the risk of variability in interest
payments by converting a floating rate liability to a fixed rate liability.
The IRS arrangement matured during the year, therefore, the fair value of the
IRS as at 31 December 2023 was US$ nil (31 December 2022: asset value US$ 0.4
million). In 2020 cash flows of the hedging relationship for the IRS were not
highly probable and, therefore, hedge accounting was discontinued from that
point. A change of 100 basis points in interest rates at the reporting date
would have increased/(decreased) consolidated statement of profit or loss and
other comprehensive income by US $ 3.3 million.
27 Financial instruments (continued)
Foreign currency risk management
The majority of the Group's transactions are denominated in US Dollars, UAE
Dirhams, Euros and Pound Sterling. As the UAE Dirham, Saudi Riyal and Qatari
Riyal are pegged to the US Dollar, balances in UAE Dirham, Saudi Riyal and
Qatari Riyal are not considered to represent significant currency risk.
Transactions in other foreign currencies entered into by the Group are
short-term in nature and therefore management considers that the currency risk
associated with these transactions is limited.
The carrying amounts of the Group's significant foreign currency denominated
monetary assets include cash and cash equivalents and trade receivables and
liabilities include trade payables. The amounts at the reporting date are as
follows:
Assets Liabilities
31 December 31 December
2023 2022 2023 2022
US$'000 US$'000 US$'000 US$'000
US Dollars 21,912 26,556 3,421 13,146
UAE Dirhams 1,154 283 6,482 1,110
Saudi Riyals 8,531 10,332 1,307 -
Pound Sterling 12 31 2,003 1,218
Euros 6,141 4,535 - -
Qatari Riyals 3,694 6,237 - 317
Norwegian Krone - 2 - -
Others - 26 - -
41,444 48,002 13,213 15,791
At 31 December 2023, if the exchange rate of the currencies other than the UAE
Dirham, Saudi Riyal and Qatari Riyal had increased/decreased by 10% against
the US Dollar, with all other variables held constant, the Group's profit for
the year would have been higher/lower by US$ 0.4 million (2022: higher/lower
by US$ 0.9 million) mainly as a result of foreign exchange loss or gain on
translation of Euro and Pound Sterling denominated balances.
28 Long term incentive plans
The Group had Long Term Incentive Plans ("LTIPs") which were granted to senior
management, managers and senior offshore officers.
The employment condition attached to the Groups LTIP's was that each eligible
employee of the Company must remain in employment during the three-year
vesting period. For 2019 and 2020 awards, LTIPs were aligned to Company's
share performance. The release of these shares was conditional upon continued
employment and market vesting conditions. There were no LTIP awards granted
during 2021.
During the year ended 31 December 2023, the market vesting conditions for the
LTIP awards granted in 2020 were not met, and all LTIP awards issued in 2020
were forfeited.
During the year ended 31 December 2022, additional LTIPs awards were granted
to the Chairman and Senior Management. The awards were to vest over three
years subject to the same employment conditions and performance conditions
being met in 2024 based on defined ranges. There was an underpin condition
such that no awards would vest if the debt leverage in the Group exceeded 4.0
times EBITDA at 31 December 2022. As this criterion had not been met all LTIP
awards issued in 2022 were forfeited.
Equity-settled share-based payments were measured at fair value at the date of
grant. The fair value determined, using the Binomial Probability Model
together with Monte Carlo statistical method, at the grant date of
equity-settled share-based payments, is expensed on a straight-line basis over
the vesting period, based on an estimate of the number of shares that will
ultimately vest. The fair value of each award was determined by taking into
account the performance conditions, the term of the award, the share price at
grant date, the expected price volatility of the underlying share and the
risk-free interest rate for the term of the award.
28 Long term incentive plans (continued)
Non-market vesting conditions were taken into account by adjusting the number
of equity instruments expected to vest at each balance sheet date so that,
ultimately, the cumulative amount recognised over the vesting period was based
on the number of awards that eventually vest. Any market vesting conditions
were factored into the fair value of the share-based payment granted.
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:
2023 2022
000's 000's
At the beginning of the year 1,176,014 2,499,714
Granted in the year - 9,460,000
Cash settled in the year - (921,310)
Forfeited in the year (1,176,014) (9,862,390)
At the end of the year - 1,176,014
The weighted average remaining contractual life for the vesting period
outstanding as at 31 December 2023 was nil years (31 December 2022: 0.1
years). The weighted average fair value of shares granted during the period to
31 December 2023 was US$ nil (31 December 2022: US$ 0.06 million).
LTIP LTIP LTIP
Grant date 14 Jun 2022 29 May 2020 15 Nov 2019
Share price £0.06 £0.09 £0.08
Exercise price £0.00 £0.00 £0.00
Expected volatility 102% 120% 103%
Risk-free rate 2.17% 0.01% 0.48%
Expected dividend yield 0.00% 0.00% 0.00%
Vesting period 3 years 3 years 3 years
Award life 3 years 3 years 3 years
The expected share price volatility of Gulf Marine Services PLC shares was
determined by considering the historical share price movements for a
three-year period up to the grant date (and of each of the companies in the
peer 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.
29 Dividends
There was no dividend declared or paid in 2023 (2022: nil). No final dividend
in respect of the year ended
31 December 2023 is to be proposed at the 2023 AGM. The Directors have
approved a residual dividend policy which seeks to strike a balance between
funding growth initiatives and providing returns to shareholders. Management
is currently evaluating the timing for its implementation.
30 Segment reporting
The Group has 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,
and (iii) E-Class vessels, which include the Endeavour, Endurance, Enterprise
and Evolution vessels.
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 3.
Revenue Gross profit before adjustments for depreciation, amortisation and impairment
charges
2023 2022 2023 2022
US$'000 US$'000 US$'000 US$'000
E-Class vessels 60,955 51,135 41,864 32,024
S-Class vessels 35,018 33,986 23,217 23,899
K-Class vessels 55,630 48,036 33,375 27,827
151,603 133,157 98,456 83,750
Depreciation charged to cost of sales (24,153) (23,567)
Amortisation charged to cost of sales (4,687) (5,613)
Expected credit losses (207) (1,824)
Adjusted gross profit 69,409 52,746
Impairment loss (3,565) (13,192)
Reversal of impairment 36,993 20,980
Gross profit 102,837 60,534
Finance expense (31,431) (17,656)
Impact of change in fair value of warrants (11,077) (2,481)
Other general and administrative expenses (14,645) (13,212)
Foreign exchange loss, net (987) (138)
Other income 12 68
Finance income 221 11
Profit for the year before taxation 44,930 27,126
Segment revenue reported above represents revenue generated from external
customers. There were no inter-segment sales in the years.
Segment assets and liabilities, including depreciation, amortisation and
additions to non-current assets, are not reported to the key decision makers
on a segmental basis and are therefore, not disclosed.
Information about major customers
During the year, four customers (2022: four) 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$ 49.7 million, US$
38.1 million, US$ 25.3 million and US$ 15.4 million (2022: US$ 9.0 million,
US$ 22.1 million, US$ 43.1 million and US$ 22.4 million).
30 Segment reporting (continued)
Geographical segments
Revenue by geographical segment is based on the geographical location of the
customer as shown below.
2023 2022
US$'000 US$'000
United Arab Emirates 58,452 51,848
Saudi Arabia 38,088 22,645
Qatar 40,680 44,259
Total - Arabian Peninsula region 137,220 118,752
Total - Europe 14,383 14,405
Worldwide Total 151,603 133,157
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.
2023 2022
US$'000 US$'000
Oil and Gas 137,220 118,752
Renewables 14,383 14,405
Total 151,603 133,157
Reversal of impairment of US$ 37.0 million and impairment charge of US$ 3.6
million was recognised in respect of property and equipment (Note 5) (2022:
Reversal of impairment of US$ 21.0 million and impairment charge of US $ 13.2
million) attributable to the following reportable segments:
2023 2022
US$'000 US$'000
E-Class vessels (16,340) (3,319)
S-Class vessels (4,462) 4,631
K-Class vessels (12,626) (9,100)
(33,428) (7,788)
E-Class vessels S-Class vessels K-Class vessels Total
US$'000 US$'000 US$'000 US$'000
2023
Depreciation charged to cost of sales 12,892 5,660 5,601 24,153
Amortisation charged to cost of sales 2,035 692 1,960 4,687
Net reversal of impairment (16,340) (4,462) (12,626) (33,428)
2022
Depreciation charged to cost of sales 12,694 5,829 5,044 23,567
Amortisation charged to cost of sales 2,302 839 2,472 5,613
Impairment charge/(reversal of impairment charge) - net (3,319) 4,631 (9,100) (7,788)
31 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 2023 Year ended 31 December 2022
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 151,603 - 151,603 133,157 - 133,157
Cost of sales
- Vessel operating expenses before depreciation, amortisation and impairment (53,147) - (53,147) (49,407) - (49,407)
- Depreciation and amortisation (28,840) - (28,840) (29,180) - (29,180)
Expected credit losses (207) - (207) (1,824) - (1,824)
Net reversal of impairment* - 33,428 33,428 - 7,788 7,788
Gross profit 69,409 33,428 102,837 52,746 7,788 60,534
General and administrative
- Amortisation (3,188) - (3,188) (2,635) - (2,635)
- Depreciation (145) - (145) (128) - (128)
- Other administrative costs (10,727) - (10,727) (10,449) - (10,449)
- Exceptional legal costs** - (585) (585) - - -
Operating profit 55,349 32,843 88,192 39,534 7,788 47,322
Finance income 221 - 221 11 - 11
Finance expense (31,431) - (31,431) (17,656) - (17,656)
Impact of change in fair value of warrants (11,077) - (11,077) (2,481) - (2,481)
Other income 12 - 12 68 - 68
Foreign exchange loss, net (987) - (987) (138) - (138)
Profit before taxation 12,087 32,843 44,930 19,338 7,788 27,126
Taxation (charge)/credit
- Taxation charge (2,329) - (2,329) (1,724) - (1,724)
- Exceptional tax expense** - (533) (533) - - -
Profit for the year 9,758 32,310 42,068 17,614 7,788 25,402
Profit attributable to:
Owners of the Company 9,032 32,310 41,342 17,538 7,788 25,326
Non-controlling interests 726 - 726 76 - 76
Earnings per share (basic) 0.89 3.18 4.07 1.73 0.76 2.49
Earnings per share (diluted) 0.86 3.06 3.92 1.71 0.76 2.47
Supplementary non
statutory information
Operating profit 55,349 32,843 88,192 39,534 7,788 47,322
Add: Depreciation and amortisation 32,173 - 32,173 31,944 - 31,944
Adjusted EBITDA 87,522 32,843 120,365 71,478 7,788 79,266
* The reversal of impairment credit/impairment charge on certain vessels have
been added back to gross profit to arrive at adjusted gross profit for the
year ended 31 December 2023 and 2022 (refer to Note 5 for further details).
Management has adjusted this due to the nature of the transaction which it
believes is not directly related to operations management are able to
influence. This measure provides additional information on the core
profitability of the Group.
**These exceptional legal cost and exceptional tax expense relates to ZATCA
transfer pricing case legal fee and expected tax outcome as explained in Note
8.
31 Presentation of adjusted non-GAAP results (continued)
Year ended 31 December 2023 Year ended 31 December 2022
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 for the year 9,758 32,310 42,068 17,614 7,788 25,402
Adjustments for:
Net reversal of impairment* - (33,428) (33,428) (7,788) (7,788)
Finance expenses 31,431 - 31,431 17,656 - 17,656
Impact of change in fair value of warrants 11,077 - 11,077 2,481 - 2,481
Other adjustments ** 34,145 1,118 35,263 35,276 - 35,276
Cash flow from operating activities before movement in working capital 86,411 - 86,411 73,027 - 73,027
Change in trade and other receivables 2,003 - 2,003 5,610 - 5,610
Change in trade and other payables 8,140 - 8,140 5,005 - 5,005
Cash generated from operations 96,554 - 96,554 83,642 - 83,642
Income tax paid (2,151) - (2,151) (1,077) - (1,077)
Net cash flows from operating activities 94,403 - 94,403 82,565 - 82,565
Net cash flows used in investing activities (12,788) - (12,788) (6,304) - (6,304)
Payment of issue costs on bank borrowings (374) - (374) (148) - (148)
Other cash flows used in financing activities (84,850) - (84,850) (72,109) - (72,109)
Net cash flows used in financing activities (85,224) - (85,224) (72,257) - (72,257)
Net change in cash and cash equivalents (3,609) - (3,609) 4,004 - 4,004
*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 2023 and
2022 (refer to Note 5 for further details).
**These exceptional legal cost and exceptional tax expense relates to ZATCA
transfer pricing case legal fee and expected tax outcome as explained in Note
8.
32 Earnings per share
2023 2022
Profit for the purpose of basic and diluted earnings per share being profit 41,342 25,326
for the year attributable to Owners of the Company (US$'000)
Profit for the purpose of adjusted basic and diluted earnings per share 9,032 17,538
(US$'000) (Note 31)
Weighted average number of shares ('000) 1,016,415 1,016,415
Weighted average diluted number of shares in issue ('000) 1,055,003 1,024,124
Basic earnings per share (cents) 4.07 2.49
Diluted earnings per share (cents) 3.92 2.47
Adjusted earnings per share (cents) 0.89 1.73
Adjusted diluted earnings per share (cents) 0.86 1.71
Basic earnings per share is calculated by dividing the profit 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 per share is calculated on the same basis but uses the
profit for the purpose of basic earnings 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 (Note
31). The adjusted earnings per share is presented as the Directors consider it
provides an additional indication of the underlying performance of the Group.
Diluted earnings per share is calculated by dividing the profit 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
outstanding warrants and LTIPs during the year.
Adjusted diluted earnings per share is calculated on the same basis but uses
adjusted profit (Note 31) attributable to equity holders of the Group.
The following table shows a reconciliation between the basic and diluted
weighted average number of shares:
2023 2022
'000s '000s
Weighted average basic number of shares in issue 1,016,415 1,016,415
Weighted average effect of LTIP's - 7,709
Weighted average effect of warrants 38,588 -
Weighted average diluted number of shares in issue 1,055,003 1,024,124
33 Revenue
All revenue in the above table is in scope of IFRS 15 with the exception of
lease income which is in scope of IFRS 16.
2023 2022
US$'000 US$'000
Charter hire 76,111 70,295
Lease income 57,073 44,543
Messing and accommodation 9,173 12,746
Manpower income 5,418 3,516
Mobilisation and demobilisation 2,255 1,281
Sundry income 1,573 776
151,603 133,157
Revenue recognised - over time 149,871 131,958
Revenue recognised - point in time 1,732 1,199
-
151,603 133,157
Included in mobilisation and demobilisation income is an amount of US$ 0.6
million (2022 US$ 0.6 million) that was included as deferred revenue at the
beginning of the financial year.
Lease income:
2023 2022
US$'000 US$'000
Maturity analysis:
Year 1 68,207 57,665
Year 2 56,551 36,696
Year 3 - 5 73,649 32,947
198,407 127,308
Split between:
Current 68,207 57,665
Non - current 130,200 69,643
198,407 127,308
Further descriptions on the above types of revenue have been provided in Note
3.
34 Finance income
2023 2022
US$'000 US$'000
Bank interest 221 11
35 Finance expense
2023 2022
US$'000 US$'000
Interest on bank borrowings 29,456 17,231
Gain on IRS reclassified to profit or loss 279 279
Net loss / (gain) on changes in fair value of interest rate swap (Note 11) 59 (1,078)
Interest on lease liabilities (Note 23) 245 170
Other finance expenses 1,392 1,054
31,431 17,656
36 Profit for the year
The profit for the year is stated after charging/(crediting):
2023 2022
US$'000 US$'000
Total staff costs (see below) 31,230 27,350
Depreciation of property and equipment (Note 5) 24,297 23,695
Amortisation of dry-docking expenditure (Note 6) 4,687 5,613
Depreciation of right-of-use assets (Note 7) 3,188 2,635
Net charge of expected credit losses (Note 9) 207 1,824
Auditor's remuneration (see below) 1,127 787
Net foreign exchange loss 987 138
Other income (12) (68)
Expense relating to short term leases or leases of low value assets (Note 7) 228 965
Reversal of impairment loss (Note 5) (33,428) (7,788)
The average number of full time equivalent employees (excluding non-executive
Directors) by geographic area was:
2023 2022
Number Number
Arabian Peninsula region 598 539
Rest of the world 30 28
628 567
The total number of full-time equivalent employees (including executive
Directors) as at 31 December 2023 was 660 (31 December 2022: 594). The number
of full-time employees increased in the year due to an increase in offshore
headcount from the second half of the year.
Their aggregate remuneration comprised:
2023 2022
US$'000 US$'000
Wages and salaries 30,477 26,845
End of service benefit (Note 20) 723 270
Share based payment charge 17 45
Employment taxes* 13 190
31,230 27,350
*Employment taxes include US$ 6K (2022: US $ 0.17 million) in respect of
social security costs for our crew working in France.
The analysis of the auditor's remuneration is as follows:
2023 2022
US$'000 US$'000
Group audit fees 700 520
Overruns and out of pocket expenses in relation to 2022 Group audit 177 -
Subsidiary audit fees 100 100
Total audit fees 977 620
Audit-related assurance services 150 167
Total fees 1,127 787
37 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.
Bank borrowings
Derivatives Lease liabilities (Note 22)
(Note 11) (Note 23)
US$'000 US$'000 US$'000
At 1 January 2022 1,793 2,924 379,526
Financing cash flows
Repayment of bank borrowings - - (51,445)
Principal elements of lease payments - (2,524) -
Settlement of derivatives (384) - -
Interest paid - (170) (17,227)
Total financing cashflows (384) (2,694) (68,672)
Non-cash changes:
Recognition of new lease liability additions - 3,122 -
Interest on lease liabilities (Note 35) - 170 -
Interest on bank borrowings (Note 35) - - 17,231
Net gain on change in fair value of IRS (Note 11) (1,078) - -
Impact of change in fair value of warrants (Note 11) 2,481 - -
Total non-cash changes 1,403 3,292 17,231
At 31 December 2022 2,812 3,522 328,085
Financing cash flows
Repayment of bank borrowings - - (56,174)
Working capital facility 2,000
Principal elements of lease payments - (3,330) -
Settlement of derivatives 327 - -
Interest paid - (245) (27,428)
Total financing cashflows 327 (3,575) (81,602)
Non-cash changes:
Recognition of new lease liability additions - 3,231 -
Derecognition of lease liability - (67) -
Interest on lease liabilities (Note 35) - 245 -
Interest on bank borrowings (Note 35) - - 29,456
Net gain on change in fair value of IRS (Note 11) 59 - -
Impact of change in fair value of warrants (Note 11) 11,077 - -
Total non-cash changes 11,136 3,409 29,456
At 31 December 2023 14,275 3,356 275,939
38 Events after the reporting period
There were no subsequent events, that impact to these consolidated financial
statements after the reporting period.
39 Reclassification
Certain figures have been reclassified since the comparative consolidated
financial statements as presented below. We believe the revised presentation
gives users better information to understand these consolidated financial
statements given the materiality of the warrants in the current period.
After reclassification
Before reclassification
Reclassifications
US$'000 US$'000 US$'000
Consolidated statement of profit or loss and other comprehensive income
Finance expense (Note 35) (20,137) 2,481 (17,656)
Impact of change in fair value of warrants - (2,481) (2,481)
A transposition error was identified in relation to the presentation of
derivative financial instruments on the face of the consolidated statement of
financial position in the prior period. A current derivative liability ($3.2m)
was included in both the current liability and non-current liability section
of the statement of financial position. This has been corrected in the
comparative amounts in the current year.
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