REG - Tufton Oceanic Asset Tufton Oceanic -SHPP - Interim Results for period ended 31 December 2023
19/03/2024 07:00
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RNS Number : 2975H Tufton Oceanic Assets Ltd. 19 March 2024
Tufton Oceanic Assets Limited
("Tufton Oceanic Assets" or the "Company")
Interim Results for the six month period ended 31 December 2023
Tufton Oceanic Assets announces its interim results for the six month period
ended 31 December 2023. A copy of the Interim Report and Unaudited Financial
Statements will shortly be available on the Company's website in the Investor
Relations section at www.tuftonoceanicassets.com.
For further information, please contact:
Tufton Investment Management Ltd (Investment Manager) +44 (0) 20 7518 6700
Andrew Hampson
Nicolas Tirogalas
Singer Capital Markets +44 (0) 20 7496 3000
James Maxwell, Alex Bond, Angus Campbell (Corporate Finance)
Alan Geeves, James Waterlow, Sam Greatrex (Sales)
Hudnall Capital LLP +44 (0) 20 7520 9085
Andrew Cade
Highlights
Highlights of the financial period (vs. 6 months ending 31 December 2022):
· NAV was US$427.1m or US$1.452 per share (NAV: $431.6m or $1.402 per
share).
· NAV Total Return Per Share 9.6% (-0.6%).
· Dividends paid during the period of US$12.6m (US$12.3m), reflect
the increased target (from 4Q22) annual dividend of US$0.085 per share.
· The Company bought back 8,436,000 shares at the average price of
US$0.98 per share.
· Consolidated Gearing Ratio of 12.7% (13.7%).
· Average Charter Length of 1.7 years (1.4 years).
· Tufton Group Stakeholders held 4.0% of the issued share capital in
the Company* (vs. 3.2% as at 31 December 2022).
Diversified fleet*
· 10 product tankers
o 6 Medium Range ("MR") product tankers
o 4 handysize product tankers
· 9 bulkers
o 8 handysize bulkers
o 1 ultramax bulker
· 2 chemical tankers
· 1 gas tanker
Highlights since inception*
7.7% US$112.2m US$15.5m 39 (17)
Dividend Dividends Buybacks Vessels
Yield Acquired
(Divested)
Strategy and capital allocation review
· SHIP's annual target dividend will be increased by c.17.6% from
US$0.085 per share to US$0.10 per share. Based on this increased target the
Company is forecast to have Dividend Cover of c.1.5x over the next 18 months.
· The Board is evaluating a proposed one-off return of capital in
2Q24 of between 5% and 10% of NAV at a price representing the prevailing NAV
per share less attributable costs. Shareholders will be notified of the terms
of the return of capital accordingly.
· Fleet renewal (based on age, technology, and sector outlook) is a
priority. Returns from all new asset investments over a three-year holding
period will be compared to the benefit from a return of capital given the
prevailing share price at the time of the proposed investment and market
outlook.
· The Board will evaluate a further return of capital annually using
excess investible cash if no suitable investment opportunities are presented.
· The current buy-back policy is to remain in place (excess cash may
be used, at the discretion of the directors, to repurchase the Company's
shares should they trade at a >10% discount to NAV, as set out in the
Company's listing documents).
Chairman's Statement
Introduction
On behalf of the Board, I present the Interim Financial Statements of the
Company for the period ended 31 December 2023. The Company's portfolio as at
31 December 2023 consisted of 22 vessels, details of which are set out in the
Investment Manager's Report.
Performance
As at 31 December 2023, the Company's NAV was US$427.1m, being US$1.452 per
share (US$412.8m, US$1.365 per share as at 30 June 2023). NAV Total Return
over the period was 9.6%. Performance was driven by strong Portfolio Operating
Profit and asset value gains. Please see the Performance analysis in the
Investment Managers Report for details.
Share Price and Discount Management
During the financial period, the Company's share price decreased from US$0.99
per share as at the close of business 30 June 2023 to US$0.98 per share as at
the close of business 31 December 2023.
In common with most of the UK listed investment funds sector, the Company's
shares traded at a significant discount, on average at 31% discount to NAV
over the financial period. During the period, the Company (in accordance with
the authority granted to it by shareholders) repurchased 8,436,000 shares at a
cost of US$8,315,170. Refer to Note 5 for more details. At the end of the
period, there were 14,596,000 shares held in treasury.
Since 1 January 2024, the Company has bought back an additional 2,400,000
shares with 16,996,000 Shares held in treasury and 291,632,541 shares
outstanding as at 15 March 2024. As at 15 March 2024, the Company's shares
traded at a 24.54% discount to the ex-dividend 31 December 2023 NAV.
War in Ukraine and attacks near the Gulf of Aden
All of the Company's vessels remain fully insured against war perils. None of
the Company's vessels have been adversely affected by the war in Ukraine or
the recent attacks on vessels transiting the Red Sea/Gulf of Aden by
Iran-backed Houthi rebels based in Yemen.
The Investment Manager has formally requested all our charterers and vessel
managers to desist from trade with Russia wherever legally possible except for
humanitarian purposes. Additionally, the Investment Manager monitors
compliance through regular inspection of vessel logs and satellite data. The
Company and its vessels were compliant with all international sanctions
imposed by the US, UK, EU and UN. We have had no issues to date with any
vessels being damaged or blocked or otherwise affected by sanctions.
The Board and the Investment Manager remain watchful in monitoring the
conflicts and their consequences for shipping in general and for the Company.
Dividends
During the period the Company declared and paid dividends to shareholders as
follows:
Period end Dividend per share (US$) Announce date Ex div date Record date Paid date
Ordinary shareholders
30.06.23 0.02125 19.07.23 27.07.23 28.07.23 11.08.23
30.09.23 0.02125 18.10.23 26.10.23 27.10.23 10.11.23
A further dividend of US$0.02125 per share was declared on 17 January 2024 for
the quarter ending 31 December 2023. The dividend was paid on 9 February 2024
to shareholders on 26 January 2024 with an ex-dividend date of 25 January
2024.
Corporate Governance
The Company is a member of the Association of Investment Companies ("AIC") and
has therefore elected to comply with the provisions of the current AIC Code of
Corporate Governance which sets out a framework of best practice in respect of
governance of investment companies ("AIC Code"). The AIC Code has been
endorsed by the Financial Reporting Council and the Guernsey Financial
Services Commission (the "GFSC") as an alternative means for AIC members to
meet their obligations in relation to the UK Corporate Governance Code.
Where the Company's stakeholders, including shareholders and their appointed
agents, have matters they wish to raise with the Board in respect to the
Company, I would encourage them to contact us at SHIP@tuftonoceanicassets.com.
Environmental, Social, Governance ("ESG")
Our Investment Manager continues to integrate ESG factors into its investment
recommendations and asset ownership practices. The Board has reviewed and
approved the Investment Manager's 2022 Sustainability Report for the Company
which can be viewed on the Company's website (www.tuftonoceanicassets.com
(http://www.tuftonoceanicassets.com) ). The Investment Manager will publish
the Company's 2023 Sustainability report later this year.
Annual General Meeting
The Annual General Meeting ("AGM") of the Company was held on 24 October 2023.
I am pleased to report that all the resolutions were duly passed.
Outlook
Considering the ongoing share price discount to NAV and the Company's
forthcoming continuation vote at the AGM in October 2024, the Board conducted
a mid-term strategy and capital allocation policy review with the Investment
Manager and our advisers towards the end of the financial period.
We have reviewed the opportunity set with the Investment Manager and believe
the correct strategy for SHIP over the medium term, through to 2030, is to
continue investing in fuel-efficient secondhand vessels to maximise
shareholder returns, intending to realise the Company's portfolio of assets
starting from 2028, well before the decarbonisation of shipping accelerates.
Cognisant of the persistent discount to NAV and the Investment Manager's
priority of fleet renewal, we have worked with the Investment Manager to
institute a capital allocation policy which takes into account this
opportunity set but also sets a higher bar for new investments with the
following ongoing priorities:
· Returns from all new asset investments over a three-year holding
period will be compared to the benefit from a return of capital given the
prevailing share price at the time of the proposed investment and medium-term
market outlook.
· The Board will annually evaluate a further return of capital using
excess investible cash if no suitable investment opportunities are presented.
Additionally, we have increased the Company's target annual dividend to $0.10
per share from 1Q24 and are evaluating a proposed one-off return of capital in
2Q24, representing between 5% and 10% of NAV at a price representing the
prevailing NAV per share less attributable costs.
The Company has divested 17 vessels to date, in aggregate, at c.6% above
communicated NAV and at a realised IRR of c.25%. After the end of the
financial period, the Company agreed to divest two Handysize Product Tankers,
Pollock and Dachshund at a 3.1% premium to the two vessels most recent holding
NAV. The strong opportunity set, along with the focus on capital allocation
and the demonstrated capability to divest assets at/above NAV should result in
future IRRs being higher than the Company's published target.
Key drivers for the supply-side-led recovery in Tankers and Bulkers remain in
place as the industry slowly transitions to zero carbon fuels to meet
tightening regulations and decarbonisation targets. We expect that these
drivers will continue to support high yields and secondhand vessel values over
the next decade.
I would like to thank my fellow Directors for their commitment and support
during these challenging times and, the Investment Manager and their team for
their diligence in dealing with complex and challenging operational matters
which were increased due to the war in Ukraine and the recent vessel attacks
near the Gulf of Aden. I would also like to take this opportunity to thank our
Shareholders for their support and continued belief in our strategy.
………………………
Rob King
Non-executive Chairman
Board Members
The Company's Board of Directors comprises five independent non-executive
Directors. The Board's role is to manage and monitor the Company in accordance
with its objectives. The Board monitors the Company's adherence to its
investment policy, its operational and financial performance and its
underlying assets, as well as the performance of the Investment Manager and
other service providers. In addition, the Board has overall responsibility for
the review and approval of the Company's NAV calculations and financial
statements. It also maintains the Company's risk register, which it monitors
and updates on a regular basis.
The Directors of the Company who served during the period are:
Robert King
Stephen Le Page
Paul Barnes
Christine Rødsæther
Katriona Le Noury ("Trina") - appointed 1 November 2023
Trina is a qualified chartered accountant with more than 20 years' experience
working in the funds industry. Before becoming an independent non-executive
director in 2023, she held senior management positions at two separate Private
Equity firms, including holding directorships on the respective firms' fund
General Partner boards. She currently serves on the board of JPEL Private
Equity Limited, a London listed investment company, as well as three private
companies for a leading global private equity firm. Trina is British and a
resident in Guernsey.
All Directors, with the exception of Trina Le Noury, also served during the
year ended 30 June 2023, and their brief biographies are available in the
annual report as at that date.
Investment Manager's Report
Highlights of the Financial Period
Over the financial period NAV Total Return Per Share was 9.6% (-0.6% in 2H22),
meaning the NAV Total Return since inception was 110.3%. The main drivers for
the strong return over the period were:
· Portfolio Operating Profit US$27.7m: The Company benefited from the
high, fixed-rate time charters on our MR product tankers during the entire
period. The Company also benefited from the strong chemical tanker market with
both our chemical tankers trading in a pool, with spot market exposure.
· Charter-free value gain of US$4.7m as rising product tanker values
outweighed the effect of lower bulker values.
· Charter value gain of US$2.8m as negative charter value (mainly in
product tankers) unwound with time.
At the end of the financial period, the portfolio had a total negative charter
value of US$42.0m (US$43.3m at the end of 31 December 2022). Ceteris paribus,
the negative charter value is expected to unwind (i.e. increase NAV) by
c.US$22.0m over 2024.
The Company paid dividends of US$12.6m during the financial period (US$12.3m
in 2H22). As per the Company's discount management policy, the Company
repurchased 8,436,000 shares during that time and has therefore purchased a
total of 14,596,000 of its own shares from 4Q22 until the end of the financial
period.
Portfolio Operating Profit was US$27.7m (US$27m in 2H22). Gross Operating
Profit, an indicator of the underlying profit from operating activity,
increased YoY due to a combination of the full benefit of MR product tankers
at high time charter rates and the strong chemical tanker market. Loan
interest and fees were higher compared to the 2H22 due to the US$60m loan for
the prior-period acquisitions of the two MR product tankers, Mindful and
Courteous.
The new loan is secured on Mindful, Courteous, Marvelous and Exceptional.
Performance summary
Figures below are in US$m unless otherwise stated From 1 Jul 2023 to 31 Dec 2023 From 1 Jul 2022 to 31 Dec 2022
Ship-Days 4,048 3,908
Revenue 60.8 57.0
Operating Expense (27.4) (26.0)
Gross Operating Profit 33.4 31.0
Gross Operating profit / Time-weighted Capital Employed 14.3% 15.0%
Loan interest and fees (3.6) (1.6)
Gain / (loss) in capital values 7.5 (33.6)
Portfolio profit / (loss) 37.3 (4.2)
Interest income 0.2 0.0
Fund Level Fees and Expenses (2.3) (2.4)
Performance fee accrual - 4.0
Profit / (Loss) for the period 35.2 (2.6)
Portfolio Operating Profit 27.7 27.0
The capital value gain of US$7.5m was mainly due to higher charter-free value
and the unwinding of negative charter value in product tankers which
outweighed the smaller fall in bulker charter-free values over the financial
period. In late 4Q23, bulker charter-free values started recovering slowly as
the market improved.
Segment performance summary
Segment Performance During the Financial Period (unaudited) Product Chemical Gas Containership(*) Bulkers Total
Tankers
Tankers
Tanker
US$m unless otherwise stated
Gross Operating Profit 18.2 5.2 2.1 1.0 7.0 33.5
Loan interest & fees (3.6) - - - - (3.6)
Gain / (loss) in charter-free values 11.3 (0.1) (0.7) 0.2 (6.0) 4.7
Gain / (loss) in charter values 4.0 - - - (1.2) 2.8
Portfolio profit / (loss) 29.9 5.1 1.4 1.2 (0.2) 37.4
* The Company divested its last containership in 1Q23. Closing adjustments
reflected here.
At the end of the financial period, the Company's diversified portfolio had
high cash flow visibility from long-term charters on product tankers (43.5% of
NAV). The product tanker segment yield remained c.10% even as asset values
rose.
The Company's two chemical tankers, which represent 8.9% of NAV, benefit from
exposure to the strong spot market as they operate in a pool. The Forecast Net
Yield on our chemical tankers is based on our expectation of continued market
strength. The yield on the Company's bulkers (36.6% of NAV) rose to 9.5%, from
8.4% at the end of June 2023, as the market improved towards the end of the
financial period. Some of our bulkers were on index-linked charters at the end
of the financial period and will benefit if, as we expect, the market
continues to improve in the medium term.
Segment exposure and forecast net yields
Segment Exposure and Forecast Yields* (unaudited) Product Chemical Gas Bulkers Total
Tankers
Tankers
Tanker
% of NAV 43.5% 8.9% 5.7% 36.6% 94.7%
Forecast Net Yields* 9.9% 21.9% 16.9% 9.5% 11.3%
* Based on the market values at 31 December 2023
As at 31 December 2023, the Company's vessels had an average age of 11.9 years
and were chartered to eleven different counterparties. Both tankers and
bulkers benefit from good supply-side fundamentals which were further
accentuated by the effect of transit disruptions in the Panama Canal and the
Suez Canal. Please see the Shipping Market section of this report for details.
Mid-Term Strategy Review
Since inception, the Company has delivered on its original investment
objectives including:
· Diversified portfolio.
· Provided investors a strong and growing dividend. Increased target
dividend since the IPO from US$0.070 per share to US$0.085 per share. Please
see the charts below.
· Total capital raised: US$316.5m gross through primary and secondary
issues.
· Target annual dividend increased by c.21% from US$0.070 per share
to US$0.085 per share.
· Acquired 39 vessels with low leverage and divested 17 vessels at
c.6% above NAV in aggregate.
· Aggregate realised net IRR on all divestments is c.25%. Net Fund
IRR is 13.9%, ahead of its 12% IRR target published in its prospectus
documents.
· Low NAV volatility due to diversification, limited use of leverage
and high charter cover.
· Capital re-allocation based on rigorous fundamental analysis,
industry knowledge and ESG: divested containerships and older bulkers to
re-allocate capital into less emission-intensive bulkers and tankers.
· The operating emissions intensity of the portfolio was reduced by
c.34% between 2019 and 2022.
· Further emissions reduction expected from Energy Saving Device
retrofits, completed on eight vessels and planned for five other vessels in
2024 and 2025. Eight other vessels are already fuel-efficient relative to
their peers.
We expect the investment opportunity set for fuel-efficient secondhand vessels
to be very attractive for the next decade as the shipping industry slowly
transitions to zero carbon fuels to meet tightening regulations and
decarbonisation targets. We believe that strong supply-side fundamentals will
continue to support high yields and secondhand values, resulting in a higher
future IRR than the Company's published target.
The correct strategy for SHIP over the medium term through to 2030 is to
continue investing in fuel-efficient secondhand vessels to maximise
shareholder returns. The Company's current intention is to start to divest the
Company's portfolio of assets from 2028, well before the decarbonisation of
shipping accelerates.
Highlights of the review include:
· With effect from 1Q24, SHIP's annual target dividend will be
increased by c.17.6% from US$0.085 per share to US$0.10 per share. Based on
this increased target the Company is forecast to have Dividend Cover of c.1.5x
over the next 18 months.
· The Board is evaluating a proposed one-off return of capital in
2Q24 of between 5% and 10% of NAV at a price representing the prevailing NAV
per share less attributable costs. Shareholders will be notified of the terms
of the return of capital accordingly.
· The Company sees fleet renewal (based on age, technology, and
sector outlook) as a priority. Returns from all new asset investments over a
three-year holding period will be compared to the benefit from a return of
capital given the prevailing share price at the time of the proposed
investment and medium-term market outlook.
· The Board will evaluate a further return of capital annually using
excess investible cash if no suitable investment opportunities are presented.
· The current buy-back policy is to remain in place (excess cash may
be used, at the discretion of the directors, to repurchase shares should they
trade at a >10% discount to NAV, as set out in the Company's listing
documents).
The Assets
As at 31 December 2023, the Company owned twenty-two vessels, as follows:
Tankers Employment Comments
Octane and Sierra Time chartered ("TC") to an investment grade oil major -
Pollock, Dachshund, Cocoa, Daffodil TC to a major commodity trading and logistics company Cocoa and Daffodil: the charterer exercised their first (out of two) optional
periods until December 2025 and February 2026 respectively.
Marvelous, Mindful and Courteous
Exceptional TC to a leading tanker shipping company Exceptional's time charter was extended by up to three years from 1 January
2024 at a much higher rate than its previous charter. The new charter rate
implies a net yield of over 15% for the firm charter extension until late 2025
which, when blended with the 6-month sub-market stub end of the previous
charter, will produce a net yield of c.13% over c.2 years from 1 January.
Orson and Golding Employed on leading chemical tanker pools As described in the Company's Prospectus, a pool is a revenue sharing
structure run by a specialist third party or another ship owner.
Neon Operates on a bareboat charter under which the Company provides only the
vessel to the charterer, who is responsible for crewing, maintaining,
insuring, and operating it.
As at 31 December 2023, the Average Charter Length of the tankers (excluding
Orson and Golding) was 2 years.
Bulkers Employment Comments
Anvil, Awesome and Auspicious TC to an operator of bulkers -
Laurel TC to a leading owner and operator of bulkers Laurel's time charter was extended by 4-6 months from December 2023 at a much
higher rate than previously.
Idaho and Mayflower TC to a leading owner and operator of bulkers Idaho's time charter was extended by 10-12 months from December 2023 at a
slightly lower rate than previously.
Charming and Masterful TC to a leading merchant and processor of agricultural goods Masterful's time charter was extended by 4-6 months commencing from March 2024
at a higher rate than previously.
Rocky IV TC to an owner and operator of bulkers -
At 31 December 2023, the Average Charter Length on our bulkers was 0.5 years.
We have chosen to employ many of our bulkers on index-linked charters in
anticipation of ongoing market improvement. Please see the Shipping Market
section of this Report.
The Company's fleet across all segments performed well. Marvelous, Mindful,
Courteous, Exceptional, Awesome, Auspicious, Masterful and Charming are in the
top quartile of fuel efficiency in their market segments.
The market for secondhand ships is liquid with >US$40 billion worth of
annual transactions in 2022 and 2023. The charter-free and associated charter
values of the Company's standard vessels are calculated predominantly using
the online valuation platform provided by VesselsValue. The VesselsValue
valuation platform utilises transaction data as well as other market data to
estimate charter-free values. The Company's NAV is, in effect, proven by
recent market transactions. After the end of the financial period, the Company
agreed to divest Pollock and Dachshund at a 3.1% premium to the two vessels
most recent holding NAV. Divestments to date have been in aggregate c.6% above
communicated NAV.
The Company's portfolio as at 31 December 2023:
SPV(+) Vessel Type and Year of Build Acquisition Date Expected end of charter period**
Anvil Handysize bulker built 2013 September May
2021 2024
Auspicious Handysize bulker built 2015 February August
2022 2024
Awesome Handysize bulker built 2015 January September
2022 2024
Charming Handysize bulker built 2015 June August
2022 2024
Cocoa Handysize product tanker October December
built 2008 2020 2025
Courteous MR product tanker built 2016 December December
2022 2026
Dachshund Handysize product tanker February May
built 2008 2020 2024
Daffodil Handysize product tanker October February
built 2008 2020 2026
Exceptional MR product tanker built 2015 April December
2022 2025
Golding 25,600 DWT stainless steel chemical tanker built 2008 April NA - vessel is employed in a pool
2021
Idaho Ultramax bulker built 2011 July December
2021 2024
Laurel Handysize bulker built 2011 July April
2021 2024
Marvelous MR product tanker built 2014 July November
2022 2026
Masterful Handysize bulker built 2015 April June
2022 2024
Mayflower Handysize bulker built 2011 June March
2021 2024
Mindful MR product tanker built 2016 December December
2022 2026
Neon Mid-sized LPG carrier built 2009 July August
2018 2025
Octane MR product tanker built 2010 December August
2018 2025
Orson 20,000 DWT stainless steel chemical tanker built 2007 July NA - vessel is employed in a pool
2021
Pollock Handysize product tanker December April
built 2008 2018 2024
Rocky IV Handysize bulker built 2013 September June
2021 2024
Sierra MR product tanker built 2010 December September
2018 2025
Notes:
+ SPV that owns the vessel.
** Based on our assessment of the prevailing market conditions at 31 December
2023.
The Shipping Market
The Company aims to provide investors with an attractive level of regular and
growing income and capital returns through investing in secondhand commercial
sea-going vessels, with the portfolio diversified across the main segments of
shipping including tankers, bulkers, general cargo and containerships. The
ClarkSea Index, a broad vessel earnings indicator from Clarksons Research,
ended the financial period at US$26,213/day, c.22% higher than at the end of
June 2023 but c.12% lower than at the end of December 2022.
The financial period saw improving world GDP growth with the IMF revising
their 2023 world GDP growth estimate from 3.0% in June 2023 to 3.1% in January
2024. Global seaborne trade is expected to grow by c.3% in 2024, in line with
the long-term trend rate of c.3% CAGR between 2003 and 2023. The combination
of price inflation (commodity, wage), reduced shipyard capacity and tightening
environmental specifications continue to boost newbuild prices leading to
higher values for secondhand vessels. The Clarksons Research Newbuilding Price
Index has risen c.42% since the end of 2020. Global shipyard capacity remains
c.35% below the 2011 peak. Shipyard orderbook forward cover (i.e. the number
of years required to deliver the orderbook at the output level of the last 12
months) was 3.6 years at the end of the financial period.
Trade routes tend to be optimised across the industry so disruption of
traditional trade routes often results in diversion through longer routes
which reduces the available vessel capacity. During the financial period,
transit through two key global shipping routes, the Panama Canal and the Suez
Canal, faced disruption. Vessel transit through the Panama Canal was disrupted
from late October due to an ongoing drought while transit through the Suez
Canal was disrupted as Houthi rebel attacks on vessels in the Red Sea
escalated from late November.
This section utilises data from the Tufton Real-Time Activity Capture System
("TRACS") which analyses satellite data to track the international shipping
fleet by the major segments. TRACS uses the draught of each vessel as a proxy
for its utilisation and thereby enables us to have a close to real-time
measure of shipping demand. Other research data used in this section is from
Clarksons Research, unless specified otherwise.
Tankers
Product tanker demand was set for structural growth, benefiting from refinery
capacity expansions in Asia and the Middle East. However, demand growth
accelerated as the war in Ukraine partially replaced some demand for
short-haul product tanker cargoes with demand for long-haul cargoes:
increasing Russian exports to Asia and increasing European imports from
non-Russian suppliers including the Middle East, the US and Asia.
The attractive fundamentals in the product tanker segment have resulted in
newbuild investments. The product tanker orderbook rose from c.9% of fleet as
at the end of June 2023 to 12.5% of fleet at the end of the financial period.
This is still relatively low in historic terms. Most of the newbuild product
tankers ordered are expected to be delivered starting only in 2025. Further,
many of the new orders are focused on the larger Long Range ("LR") segment
which often represents "swing" tonnage between the clean product tanker and
the crude tanker market. The orderbook for crude tankers remained close to
historic lows (c.4% of fleet, Grieg Shipbrokers) at the end of the financial
period. The chemical tanker market also benefits from good supply-side
fundamentals with a low orderbook (c.6% of fleet, Grieg Shipbrokers) and
strong demand growth forecast. 25-30% of MR product tankers can engage in the
chemicals/vegetable oil trade.
The chemical tanker market benefits as MR product tankers shift to the
tightening product tanker market. The Company's chemical tankers benefit from
this trend as they are employed in a revenue-sharing pool and have spot market
exposure.
Over the financial period, 1-year time charter rates for MR product tankers
rose c.1% to c.US$26,300/day while average spot earnings rose 47% to
c.US$33,000/day.
Towards the end of the financial period, attacks by Houthi rebels on vessels
around the Gulf of Aden impacted normal vessel transit through the Red Sea and
consequently the Suez Canal. As a result, many vessels have been rerouted
around the Cape of Good Hope instead, adding to vessel tonne-mile demand and
further boosting the product tanker market.
Bulkers
The bulker market strengthened during the financial period due to a
combination of improving demand growth for major bulk and the impact of
reduced transit through the Panama Canal. Though bulker demand faces near term
uncertainty from slowing Chinese demand growth for major bulk commodities, we
believe the bulker market will be supported by strong supply-side
fundamentals. The bulker orderbook remained at a low level of c.8% of fleet at
the end of the financial period.
We have chosen to employ some of our bulkers on index-linked charters in
anticipation of market improvement. As the market improves, we will
selectively redeploy our bulkers on new longer-term charters at higher rates
over the next financial period. Over the financial period, 1-year time charter
rates for Handysize bulkers rose c.29% to c.US$13,800/day while average spot
earnings rose 58% to c.US$17,600/day.
The combination of tightening environmental regulations and low shipyard
capacity suggests newbuild prices of bulkers and tankers will remain high
thereby also supporting secondhand prices in the medium term. Global shipyard
capacity remains c.35% below the 2011 peak. Many newbuild designs incorporate
more flexible machinery and storage systems to handle multiple fuel types to
reduce emissions. These further increase newbuild prices. Environmental
regulations from the IMO to measure and improve vessel carbon emission
intensity incentivise lower speeds resulting in reduced shipping capacity,
aiding the supply-side adjustment. The Company's fuel-efficient vessels are
likely to benefit.
Tufton Investment Management Limited
19 March 2024
Environmental, Social and Governance Report
The Investment Manager, Tufton, emphasises the principles of Responsible
Investment in the management of the Company's assets through awareness and
integration of ESG factors into our investment process in the belief that
these factors have a positive impact on long-term financial performance. We
recognise that our first duty is to act in the best financial interests of the
Company's Shareholders and to generate attractive financial returns against
acceptable levels of risk, in accordance with the objectives of the Company.
We have been a signatory of the United Nations Principles of Responsible
Investment ("UN PRI") since December 2018 and have a Responsible Investment
policy statement which is available on Tufton's website
(https://www.tufton.com/responsible-investing) . In the 2023 UN PRI signatory
assessment, Tufton achieved scores higher than our peer group in all three
assessment categories. Please see the 2023 UN PRI scoring methodology
(https://dwtyzx6upklss.cloudfront.net/Uploads/f/k/l/02.2023assessmentmethodology_04.12_final_758018.pdf)
for details.
The Company's Board does not have a separate ESG committee but collectively
reviews progress against the policy statement as part of the Company's annual
Sustainability Report which is also publicly available on the Company's
website (https://www.tuftonoceanicassets.com/company-documents/) . The
Company's 2023 Sustainability Report will be published later this year.
ESG highlights of the financial period include:
· The Company's operating emissions intensity, as measured by the
Energy Efficiency Operating Index ("EEOI") improved by c.11% during 2023
primarily because of capital re-allocation but also from ESD retrofits.
· The efficiency hire rate premia for ESDs has been received on eight
vessels after the retrofits were completed or substantially completed on these
vessels.
· We aim to minimise coal carriage on the Company's vessels. In June
2023, Tufton committed to limiting revenues from transportation of thermal
coal to 5% of the Company's total consolidated revenues. During the financial
period, only one bulker (Anvil) carried thermal coal during one voyage which
corresponded to 0.3% of SHIP consolidated revenues.
Principal Risks and Uncertainties
The Directors have reconsidered the principal risks and uncertainties
effecting the Company. The Directors consider that the principal risks and
uncertainties have not significantly changed since the publication of the
Annual Report for the year ended 30 June 2023. The risks and associated risk
management processes, including financial risks, can be found in the Annual
Report for the financial year ending 30 June 2023,
http://www.tuftonoceanicassets.com/financial-statements/
(http://www.tuftonoceanicassets.com/financial-statements/) .
The risks referred to and which could have a material impact on the Company's
performance for the remainder of the current financial year relate to:
· Shipping and financial markets;
· Commercial risks around charter payments;
· Damage to the Company's assets;
· Cost overruns;
· Regulatory and legislative compliance;
· Safety, health and environment;
· Service quality of the Investment Manager and other Service
Providers; and
· Liquidity.
Interim Report of the Directors
The Directors present their Interim Report and the Condensed Interim Financial
Statements of the Company for the six-month period ended 31 December 2023.
The Company was registered in Guernsey on 6 February 2017 and is a registered
closed-ended investment scheme under the POI Law. The Company's Shares were
listed on the Specialist Funds Segment of the Main Market of the London Stock
Exchange on 20 December 2017 under the ticker SHIP.
Investment Objective
The Company's investment objective is to provide investors with an attractive
level of regular and growing income and capital returns through investing in
secondhand commercial sea-going vessels. The Board monitors activity through
strategy meetings, discussions as appropriate and reviews quarterly reports
from the Investment Manager. The Company has established a wholly-owned
subsidiary that acts as a Guernsey holding company for all its investments, LS
Assets Limited, which is governed by the same Directors as the Company.
All vessels acquired, vessel-related contracts and costs will be held by SPVs
domiciled in the Isle of Man or other jurisdictions considered appropriate by
the Company's advisers. The Company conducts its business in a manner that
results in it qualifying as an investment entity (as set out in IFRS 10:
Consolidated Financial Statements) for accounting purposes and as a result
applies the investment entity exemption to consolidation. The Company
therefore reports its financial results on a non-consolidated basis.
Subject to the solvency requirements of the Companies Law, the Company intends
to pay dividends on a quarterly basis. The Directors expect the dividend to
grow, in absolute terms, modestly over the long term. In October 2022 the
Company raised its target annual dividend to US$0.085 per share (previously
US$0.08 per share. After the end of the financial period, the Company raised
its target annual dividend to US$0.10 per share starting 1Q24.
The Company aims to achieve an IRR of 12% or above (net of expenses and fees)
on the Issue Price over the long term. The profit for the Company in the
period was US$35.2m, or US$0.119 per share at 31 December 2023.
Results and dividends
The Company's performance during the period is discussed in the Chairman's
Statement on pages 3 - 5. The results for the year are set out in the
Condensed Statement of Comprehensive Income on page 22.
Related Parties
Details of related party transactions that have taken place during the period
and of any material changes are set out in Note 13 of the Condensed Interim
Financial Statements.
Directors
The Directors of the Company who served during the period and to date are set
out on page 6.
Directors' interests
The Directors held the following interests in the share capital of the Company
either directly or beneficially:
31 December 2023 30 June 2023
Shares Shares
R King 60,000 60,000
S Le Page 41,268 40,000
P Barnes 5,000 5,000
C Rødsæther 30,000 30,000
T Le Noury - -
T Le Noury has acquired 5,000 ordinary shares of no par value after period
end.
The Directors fees for the first six months of the accounting periods are as
disclosed below:
Payable from Paid from Paid from
1 January 2024 1 July 2023 1 July 2022
to to to
30 June 2024 31 December 2023 30 June 2023
Director £ £ £
R King 22,500 21,000 21,000
S Le Page 21,250 19,250 19,250
P Barnes 20,000 17,750 17,750
C Rødsæther 19,250 17,750 17,750
T Le Noury 19,250 5,885 -
Other interests
Tufton Stakeholders held a total of 11,692,203, being 4.0% of the Company's
shares either directly or beneficially (30 June 2023: 11,210,831 shares being
3.7%).
Share buybacks and discount management
Subject to working capital requirements, and at the absolute discretion of the
Board, excess cash may be used to repurchase Shares. The Directors may
implement Share buyback at any time before the 90-day guideline set out in the
Prospectus where they feel it is in the best interest of the Company and all
Shareholders.
The Company purchased 8,436,000 of its own Shares at an average price of
US$0.98 per Share during the current period. Refer to Note 5 for more details.
There were 14,596,000 Shares held in Treasury and 294,032,541 Shares
outstanding as at the end of the financial period. The Company bought back a
further 2,400,000 ordinary shares, between the end of the financial period and
15 March 2023, at an average price of US$1.08. The purchased shares will be
held in treasury. The Company had 291,632,541 Shares outstanding as at the
date of approval of these accounts.
Going concern
In assessing the going concern basis of accounting the Directors have,
together with discussions and analysis provided by Tufton, had regard to the
guidance issued by the Financial Reporting Council. They have considered
recent market volatility and geopolitical events on the current and future
operations of the Company and its investments. Cash reserves are held at the
LS Assets Limited and SPV levels and rolled up to the Company as required to
enable expenses to be settled as they fall due.
Based on these activities and bearing in mind the generally stable nature of
the Company's business and assets, the Directors consider that the Company has
adequate resources to continue in operational existence for at least twelve
months from the date of approval of the Interim Report and the Condensed
Interim Financial Statements. For this reason, they continue to adopt the
going concern basis in preparing the Interim Report and the Condensed Interim
Financial Statements.
Responsibility Statement
For the period from 1 July 2023 to 31 December 2023
The Directors are responsible for preparing the Interim Report and Condensed
Interim Financial Statements, which have not been audited or reviewed by an
independent auditor, and confirm that to the best of their knowledge:
· the Condensed Interim Financial Statements have been prepared in
accordance with International Accounting Standard (IAS) 34, Interim Financial
Reporting;
· the Interim Report includes a fair review of the information
required by:
· DTR 4.2.7R of the Disclosure and Transparency Rules, being an
indication of important events that have occurred during the first six months
of the financial year and their impact on the Condensed Interim Financial
Statements; and a description of the principal risks and uncertainties for the
remaining six months of the year; and
· DTR 4.2.8R of the Disclosure and Transparency Rules, being related
party transactions that have taken place in the first six months of the
current financial year and that have materially affected the financial
position or performance of the entity during that period; and any changes in
the related party transactions described in the last annual report that could
do so.
Approved by the Board of Directors on 19 March 2024 and signed on behalf of
the Board by:
…………………………
…………………………
Rob
King
Stephen Le Page
Non-executive Chairman
Director
Condensed Statement of Comprehensive Income
For the 6-month period ended 31 December 2023
Notes 31 December 2023 31 December 2022
US$ US$
Income (Unaudited) (Unaudited)
Net changes in fair value of financial assets at fair value through profit or 4 37,390,692 (4,314,159)
loss
Foreign exchange gain 7,142 -
Total net income / (loss) 37,397,834 (4,314,159)
Expenditure
Administration fees (84,097) (85,547)
Audit fees (109,041) (119,636)
Corporate Broker fees (75,000) (75,000)
Depositary fees (26,245) -
Directors' fees 15 (102,476) (80,996)
Directors' expenses (8,079) (3,892)
Foreign exchange loss - (10,144)
Insurance fee (15,463) (4,925)
Investment management fee 11 (1,707,055) (1,815,843)
Performance fees 12 - 3,980,432
Professional fees (57,214) (66,096)
Sundry expenses (48,069) (13,716)
Total (expenses) / credit (2,232,739) 1,704,637
Operating profit / (loss) 35,165,095 (2,609,522)
Finance income 2,208 1,246
Profit / (loss) and comprehensive income for the period 35,167,303 (2,608,276)
IFRS Earnings per ordinary share (cents) 6 11.90 (0.85)
There were no potentially dilutive instruments in issue at 31 December 2023.
All activities are derived from continuing operations.
There is no other comprehensive income or expense apart from those disclosed
above and consequently a Statement of Other Comprehensive Income has not been
prepared. The accompanying notes are an integral part of these condensed
interim financial statements.
Condensed Statement of Financial Position
At 31 December 2023
Notes 31 December 2023 30 June
US$ 2023
US$
Non-current assets (Unaudited) (Audited)
Financial assets designated at fair value 4 434,161,563 405,988,715
through profit or loss
Total non-current assets 434,161,563 405,988,715
Current assets
Trade and other receivables 21,487 7,881,170
Cash and cash equivalents 22,784 47,731
Total current assets 44,271 7,928,901
Total assets 434,205,834 413,917,616
Current liabilities
Trade and other payables 7,141,338 1,144,523
Total current liabilities 7,141,338 1,144,523
Net assets 427,064,496 412,773,093
Equity
Ordinary share capital 5 295,011,061 303,326,231
Retained reserves 5 132,053,435 109,446,862
Total equity attributable to ordinary shareholders 427,064,496 412,773,093
Net assets per ordinary share (cents) 8 145.24 136.47
The accompanying notes are an integral part of these condensed interim
financial statements.
The financial statements were approved and authorised for issue by the Board
of Directors on
19 March 2024 and signed on its behalf by:
________________________________
_____________________________
Rob
King
Stephen Le Page
Non-executive
Chairman
Director
Condensed Statement of Changes in Equity
For the 6-month period ended 31 December 2023
Notes Ordinary share capital US$ Retained earnings Total
US$ US$
For the six months ended
31 December 2023 (Unaudited)
303,326,231 109,446,862 412,773,093
Shareholders' equity at 1 July 2023
Profit and comprehensive income for the period - 35,167,303 35,167,303
Share buybacks 5 (8,315,170) - (8,315,170)
Dividends paid 7 - (12,560,730) (12,560,730)
Shareholders' equity at 31 December 2023 295,011,061 132,053,435 427,064,496
Notes Ordinary share capital US$ Retained earnings Total
US$ US$
For the six months ended
31 December 2022 (Unaudited)
310,272,983 137,270,726 447,543,709
Shareholders' equity at 1 July 2022
Loss and comprehensive income for the period - (2,608,276) (2,608,276)
Share buybacks 5 (969,451) - (969,451)
Share issue costs 5 (14,002) - (14,002)
Dividends paid 7 - (12,345,142) (12,345,142)
Shareholders' equity at 31 December 2022 309,289,530 122,317,308 431,606,838
The accompanying notes are an integral part of these condensed interim
financial statements.
Condensed Statement of Cash Flows
For the 6-month period ended 31 December 2023
Notes 31 December 2023 31 December 2022
US$ US$
(Unaudited) (Unaudited)
Cash flows from operating activities
Profit / (loss) and comprehensive income for the period 35,167,303 (2,608,276)
Adjustments for:
Change in fair value on investments 4 (37,390,692) 4,314,159
Operating cash flows before movements in working capital (2,223,389) 1,705,883
Changes in working capital:
Sale of investments 4 9,217,844 -
Movement in trade and other receivables 7,859,683 5,721,585
Movement in trade and other payables 5,996,815 5,903,322
Net cash generated from operating activities 20,850,953 13,330,790
Cash flows from financing activities
Share issue costs 5 - (14,002)
Net cost from share buybacks 5 (8,315,170) (969,451)
Dividends paid to Ordinary shareholders 7 (12,560,730) (12,345,142)
Net cash utilised in financing activities (20,875,900) (13,328,595)
Net movement in cash and cash equivalents during the period (24,947) 2,195
Cash and cash equivalents at the beginning of the period 47,731 8,823
Cash and cash equivalents at the end of the period 22,784 11,018
The accompanying notes are an integral part of these condensed interim
financial statements.
Notes to the Condensed Interim Financial Statements
For the 6-month period ended 31 December 2023
1. General information
The Company was incorporated with limited liability in Guernsey under the
Companies (Guernsey) Law, 2008, as amended, on 6 February 2017 with registered
number 63061, and is regulated by the GFSC as a registered closed-ended
investment company. The registered office and principal place of business of
the Company is 1 Royal Plaza, Royal Avenue, St Peter Port, Guernsey, GY1 2HL.
The Company's investment objective is to provide investors with an attractive
level of regular and growing income and capital returns through investing in
secondhand commercial sea-going vessels.
The Company had 302,468,541 ordinary shares in issue on 1 July 2023, all of
which were listed on the Specialist Funds Segment of the Main Market of the
London Stock Exchange.
During the current period, the Company bought a total of 8,436,000 of its own
ordinary shares at an average price of US$0.98 per Share. Further details are
noted in Note 5.
The total number of Company's shares in issue, excluding Treasury Shares, was
294,032,541 at the end of the financial period.
2. Significant accounting policies
(a) Basis of preparation
The Condensed Interim Financial Statements have been prepared
on a going concern basis in accordance with IAS 34 Interim Financial
Reporting, and applicable Guernsey law. These Condensed Interim Financial
Statements do not comprise statutory Financial Statements within the meaning
of the Companies (Guernsey) Law, 2008, and should be read in conjunction with
the Financial Statements of the Company as of and for the year ended 30 June
2023, which were prepared in accordance with International Financial Reporting
Standards. The statutory Financial Statements for the year ended 30 June 2023
were approved by the Board of Directors on 25 September 2023. The opinion of
the auditors on those Financial Statements was not qualified. The accounting
policies adopted in these Condensed Interim Financial Statements are
consistent with those of the previous financial year and the corresponding
interim reporting period can be found in the Annual Report for the financial
year ending 30 June 2023,
http://www.tuftonoceanicassets.com/financial-statements/, except for the
adoption of new and amended standards as set out below.
Compliance with IFRS
The financial statements have been prepared on a going concern basis in
accordance with International Financial Reporting Standards ("IFRS"), which
comprise standards and interpretations approved by the International
Accounting Standards Board ("IASB") and International Financial Reporting
Interpretations Committee ("IFRIC"), Listing rules and applicable Guernsey
law.
Historical cost convention
The financial statements have been prepared on a historical cost basis
modified by the revaluation of investments at fair value through profit or
loss. The principal accounting policies adopted, and which have been
consistently applied (unless otherwise indicated), are set out below.
Basis of non-consolidation
The Directors consider that the Company meets the investment entity criteria
set out in IFRS 10. As a result, the Company applies the mandatory exemption
applicable to investment entities from producing consolidated financial
statements and instead fair values its investments in its subsidiaries in
accordance with IFRS 13.
The criteria which define an investment entity are as follows:
· an entity that obtains funds from one or more investors for the
purpose of providing those investors with investment services; and
· an entity that commits to its investors that its business purpose
is to invest funds solely for returns from capital appreciation, investment
income or both (including having an exit strategy for investments); and
· an entity that measures and evaluates the performance of
substantially all of its investments on a fair value basis.
The Directors consider that the Company's objective of pooling investors'
funds for the purpose of generating an income stream and capital appreciation
is consistent with the definition of an investment entity, as is the reporting
of the Company's net asset value on a fair value basis.
(b) New standards and interpretations not yet adopted
Certain new accounting standards, amendments to accounting standards and
interpretations have been published that are not mandatory for 31 December
2023 reporting periods and have not been early adopted by the Company. These
standards, amendments or interpretations are not expected to have a material
impact on the Company in the current or future reporting periods and on
foreseeable future transactions.
(c) Standards, amendments and interpretations effective during the year
There are no standards, amendments to standards or interpretations that are
effective for annual periods beginning on 1 July 2023 that have a material
effect on the financial statements of the Company.
3. Critical accounting judgements and estimates
The preparation of financial statements requires management to make estimates
and judgements that affect the amounts reported for assets and liabilities as
at the Statement of Financial Position date and the amounts reported for
revenue and expenses during the period. The nature of the estimation means
that actual outcomes could differ from those estimates. Estimates and
underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the year in which the
estimates are revised and in any future years affected.
The significant judgements, estimates and assumptions which have the greatest
effect on the recognition and measurement of assets, liabilities, income and
expenses are the same as those that applied to the Annual Report and Financial
Statements for the year ended 30 June 2023.
Critical judgements in applying the Company's accounting policies - IFRS 10:
Consolidated Financial Statements
The audit committee considered the application of IFRS 10, and whether the
Company meets the definition of an investment entity.
The Company owns the investment portfolio through its investment in LSA. The
investment by LSA comprises the NAVs of the SPVs. The Company holds 100%
voting shares in LSA and has all the characteristics of an investment company.
Cash reserves are held at the LSA and SPV levels and paid up to the Company as
required to enable expenses to be settled as they fall due.
In the judgement of the Directors, the Company meets the investment criteria
set out in IFRS 10 and they therefore consider the Company to be an investment
entity in accordance with IFRS 10. As a result, as required by IFRS 10, the
Company is not consolidating its subsidiary but is instead measuring it at
fair value in accordance with IFRS 13 - Fair value measurements.
The criteria which define an investment entity are disclosed in Note 2(a).
Critical accounting estimates
The principal critical accounting estimate in the Company's financial
statements is the value of its investment in LSA, which is in turn dependent
on the values of LSA's investments in the SPVs. Principal critical accounting
estimates in determining the values of the SPVs comprise the fair values of
their vessels, in turn comprised of the charter-free and attached charter
values, both of which are critical accounting estimates.
The unobservable inputs which significantly impact the fair value of the
vessels have been determined to be the charter-free valuation and market
charter rates for standard vessels (used to calculate charter values) and the
discount rate applied for specialised vessels.
The process of calculation of the charter-free and charter values of the
vessels is described in Note 2(j), Significant Accounting Policies, of the
statutory Financial Statements.
At 31 December 2023 the charter-free valuations of two vessels (30 June 2023:
two vessel) were provided through independent broker valuations rather than
VesselsValue, as elected by the Investment Manager given limited transactions
in this vessel type and the specialist knowledge of the broker selected. The
broker uses proprietary data that considers vessel specifications as well as
applicable market information.
Further to the information mentioned in Note 2 (j) of the statutory Financial
Statements there are specific capital adjustments considered as part of the
valuation process for standard vessels, mainly the adjustments for BWTSs and
scrubbers installed. BWTSs installed by the Company's SPVs are considered to
be an enhancement to the charter-free value. They are initially recognised at
cost and straight-line depreciated from the commissioning date to 8 September
2024, being the date by which the IMO mandates all vessels should have
installed BWTS. Scrubbers are considered an enhancement to the charter-free
value using an estimated valuation from a shipbroker, and straight-line
depreciated over 5 years.
At 31 December 2023, one vessel was treated as a specialist vessel (30 June
2023: one vessel). The specialist vessel was valued on a DCF basis by the
Investment Manager using vessel specific information including the appropriate
discount rate, which is reviewed on a regular basis to ensure it remains
relevant to the project and market risk parameters.
There were no other material areas of estimation for the Company.
4. Financial assets designated at fair value through profit or loss
(Investment)
The Company owns the investment portfolio through its investment in LSA, which
comprises the NAV of the SPVs and residual assets and liabilities in LSA. The
NAVs consist of the fair value of vessel assets and the SPVs' residual net
assets and liabilities. The whole investment portfolio is designated by the
Board as a Level 3 item on the fair value hierarchy because of the lack of
observable market information in determining the fair value. As a result, all
the information below relates to the Company's Level 3 assets only, with
respect to the requirements set out in IFRS 7. The investment held at fair
value is recorded under Non-Current Assets in the Statement of Financial
Position as there is no current intention to dispose of its investment in LSA.
The changes in the financial assets measured at fair value through profit or
loss (for which the Company has used Level 3 inputs to determine fair value,
after considering dividends declared (see Note 7)) are as follows:
30 June
31 December 2023 2023
US$ US$
LSA (Unaudited) (Audited)
Brought forward cost of investment 292,529,864 299,483,224
Total investment disposed of in the period / year (9,217,844) (6,953,360)
Carried forward cost of investment 283,312,020 292,529,864
Brought forward unrealised gains on fair value 113,458,851 147,409,496
Movement in unrealised gains / (losses) on fair value 37,390,692 (33,950,645)
Carried forward unrealised gains on fair value 150,849,543 113,458,851
Total investment at fair value 434,161,563 405,988,715
The SPVs and holding companies Handy Holdco Limited and Product Holdco
Limited, which are also SPVs, are incorporated in the Isle of Man. The
subsidiary company LS Assets Limited is incorporated in Guernsey. The country
of incorporation is also their principal place of business.
Breakdown of Fair Value:
Name 31 December 2023 30 June Direct or indirect holding Principal activity Ownership at 31 December Ownership at 30 June
US$
2023
US$ 2023 2023
LS Assets Limited - - Direct Holding company 100% 100%
Anvil Limited 18,067,683 18,240,972 Indirect SPV 100% 100%
Auspicious Limited 20,830,369 20,137,727 Indirect SPV 100% 100%
Awesome Limited 20,344,449 19,704,498 Indirect SPV 100% 100%
Candy Limited(6) - 16,785 Indirect SPV - 100%
Charming Limited 19,404,107 18,953,365 Indirect SPV 100% 100%
Citra Limited(6) - 205,362 Indirect SPV - 100%
Cocoa Limited(3) - - Indirect SPV 100% 100%
Courteous Limited(5) - - Indirect SPV 100% -
Dachshund(3,7) Limited - - Indirect SPV 100% 100%
Daffodil Limited(3) - - Indirect SPV 100% 100%
Exceptional Limited(5) - - Indirect SPV 100% 100%
Golding Limited 24,292,100 21,081,370 Indirect SPV 100% 100%
Handy HoldCo Limited 53,971,240 50,090,478 Indirect SPV (Holding Company) 100% 100%
Idaho Limited 22,159,544 22,322,508 Indirect SPV 100% 100%
Laurel Limited 16,350,130 16,410,147 Indirect SPV 100% 100%
Lavender Limited(2) 74,607 60,848 Indirect SPV 100% 100%
Marvelous Limited(5) - - Indirect SPV 100% 100%
Masterful Limited 18,924,933 18,893,952 Indirect SPV 100% 100%
Mayflower Limited 15,058,011 15,590,330 Indirect SPV 100% 100%
Mindful Limited(5) - - Indirect SPV 100% -
Neon Limited 28,025,690 26,616,326 Indirect SPV 100% 100%
Octane Limited 23,279,491 20,155,744 Indirect SPV 100% 100%
Orson Limited 19,826,608 17,938,851 Indirect SPV 100% 100%
Parrot Limited(2) 29,502 674 Indirect SPV 100% 100%
Patience Limited(1) 645,518 662,085 Indirect SPV 100% 100%
Pollock Limited(3,7) - - Indirect SPV 100% 100%
Product HoldCo Limited 74,759,375 58,135,471 Indirect SPV (Holding Company) 100% -
Riposte Limited 1,164,175 411,002 Indirect SPV 100% 100%
Rocky IV Limited 17,447,830 18,540,092 Indirect SPV 100% 100%
Sierra Limited 23,399,217 20,393,002 Indirect SPV 100% 100%
Vicuna Limited(6) - 2,598 Indirect SPV - 100%
Cash held pending investment(4) 9,296,829 10,709,986
Residual net assets / (liabilities)(4) 6,810,155 10,714,542
*Total investment at fair value 434,161,563 405,988,715
The net change in the movement of the fair value of the investment is recorded
in the Condensed Statement of Comprehensive Income.
(*) Vessels are valued at fair value in each of the SPVs shown in the table
above and combined with the residual net liabilities of each SPV to determine
the fair value of the total investment attributable to LSA.
(1) Vessel sold.
(2) Company in the process of dissolution.
(3) These SPVs report zero fair value in the table above because they are
owned by the intermediate holding company Handy Holdco Limited and are
included in Handy Holdco Limited's fair value.
(4) The cash held pending investment and residual net liabilities are held in
LSA.
(5) These SPVs report zero fair value in the table above because they are
owned by the intermediate holding company Product Holdco Limited and are
included in Product Holdco Limited's fair value.
(6) Company has been dissolved.
(7) Vessel sold post period end.
5. Share capital and reserves
Number of shares Gross amount (US$) Issue costs (US$) Share capital (US$)
As at 30 June 2023 302,468,541 309,335,404 (6,009,173) 303,326,231
Share buybacks (8,436,000) (8,315,170) - (8,315,170)
Total in issue at 294,032,541 301,020,234 (6,009,173) 295,011,061
31 December 2023
Retained reserves
Retained reserves comprise the retained earnings as detailed in the Condensed
Statement of Changes in Equity.
6. Earnings / (Loss) per share
31 December 2023 31 December 2022
US$ US$
(Unaudited) (Unaudited)
Profit / (loss) and comprehensive income for the period 35,167,303 (2,608,276)
Weighted average number of ordinary shares 295,485,726 308,495,117
Earnings per ordinary share (cents) 11.90 (0.85)
Diluted Earnings per ordinary share (cents) 11.90 (0.85)
The weighted average number of ordinary shares is 295.5m shares (2022: 308.5m
shares).
7. Dividends
The Company declared the following dividends to Ordinary
Shareholders in respect of the profit for the periods indicated:
Period end Dividend per share Ex div date Net Dividend paid Record date Paid date
Dividends declared for the period ended 31 December 2023:
30 June US$0.02125 27 July US$6,296,601 28 July 11 August 2023
2023 2023 2023
30 September 2023 US$0.02125 26 October 2023 US$6,264,129 27 October 2023 10 November 2023
Dividends declared for the period ended 31 December 2022:
30 June US$0.02 28 July US$6,172,571 29 July 12 August 2022
2022
2022
2022
30 September 2022 US$0.02 27 October 2022 US$6,172,571 28 October 2022 11 November 2022
Under the Companies (Guernsey) Law, 2008, the Company can distribute dividends
from capital and revenue reserves, subject to a prescribed net asset and
solvency test. The net asset and solvency test considers whether a company is
able to pay its debts when they fall due, and whether the value of a company's
assets is greater than its liabilities. The Board confirms that the Company
passed the net asset and solvency test for each dividend paid.
8. Net assets per ordinary share
31 December 2023 30 June 2023
US$ US$
(Unaudited) (Audited)
Shareholders' equity 427,064,496 412,773,093
Number of ordinary shares 294,032,541 302,468,541
Net assets per ordinary share (cents) 145.24 136.47
9. Financial risk management
The Company's activities expose it to a variety of financial risks; market
risk (including price risk, currency risk and interest rate risk), credit risk
and liquidity risk.
The condensed interim financial statements do not include all financial risk
management information and disclosures required in the annual financial
statements; they should be read in conjunction with the Company's Audited
Financial Statements as at 30 June 2023.
There have been no significant changes in the management of risk or in any
risk management policies since the last Statement of Financial Position date.
10. Financial assets and liabilities not measured at fair value
Cash and cash equivalents and trade and other receivables are liquid assets
whose carrying value represents fair value. The fair value of other current
assets and liabilities would not be significantly different from the values
presented at amortised cost.
11. Management fee
The Investment Manager is entitled to receive an annual fee, calculated on a
sliding scale, as follows:
(a) 0.85 per cent per annum of the quarter end Adjusted Net Asset Value up to
US$250 million;
(b) 0.75 per cent per annum of the quarter end Adjusted Net Asset Value in
excess of US$250 million but not exceeding US$500 million; and
(c) 0.65 per cent per annum of the quarter end Adjusted Net Asset Value in
excess of US$500 million.
For the period ended 31 December 2023 the Company incurred US$1,707,055
(2022: US$1,815,843) in management fees of which US$872,098 (2022:
US$880,688) was outstanding at 31 December 2023.
12. Performance fee
Tufton ODF Partners LP shall be entitled to a performance fee in respect of a
Calculation Period provided that the Total Return per Share on the Calculation
Day for the Calculation Period of reference is greater than the High Watermark
per Share.
Any fee accruing as at the end of the Calculation Period is paid 50%
subsequent to the end of that period, with the remaining 50% being retained by
the Company and deferred until the next time that a performance fee payment is
due, being adjusted for any subsequent underperformance during that time.
A performance fee of US$nil (2022: US$nil) was accrued at 31 December 2023.
13. Related parties
The Investment Manager, Tufton Investment Management Limited, is a related
party due to having key management personnel in common with the subsidiaries
of the Company. All management fee transactions with the Investment Manager
are disclosed in Note 11.
Tufton ODF Partners LP is a related party due to being the beneficiary of any
performance fee paid by the Company. All performance fee transactions are
disclosed in Note 12.
Transactions with LSA and subsidiary SPVs are not disclosed.
The Directors of the Company and their shareholdings are
stated in the Interim Report of the Directors on page 20.
14. Controlling party
In the opinion of the Directors, on the basis of shareholdings advised to
them, the Company has no immediate or ultimate controlling party.
15. Directors' fees
The remuneration of the Directors was US$102,476 (2022: US$80,996) for the
period which consisted solely of short-term employment benefits (refer to the
Interim Report of the Directors on page 20). At 31 December 2023, Directors'
fees of US$nil (2023: US$nil) were outstanding.
The Directors fees for the first six months of the accounting periods are as
disclosed below:
31 December 31 December
2023 2022
Director £ £
R King 21,000 19,000
S Le Page 19,250 17,500
P Barnes 17,750 16,250
C Rødsaether 17,750 16,250
T Le Noury 5,885 -
16. Events after the reporting period
On 11 January 2024, the Company announced that it has agreed to sell two
Handysize Product Tankers, Pollock and Dachshund, for a total of US$41.75m.
The Company purchased a total of 2,400,000 ordinary shares at a price of
US$1.08 per share post period end to 15 March 2024.
On 17 January 2024, the Company declared a dividend of US$0.02125 per ordinary
share for the quarter ending 31 December 2023. The dividend was paid on 9
February 2024 to holders of ordinary shares recorded on the register as at
close of business on 26 January 2024 with an ex-dividend date of 25 January
2024.
There has not been any other matter or circumstance occurring subsequent to
the end of the financial period that has significantly affected, or may
significantly affect, the operations of the Company or the state of affairs of
the Company in the current or future financial years.
Alternative Performance Measures ("APMs")
This Annual Report and Audited Financial Statements contain APMs, which are
financial measures not defined in IFRS. These include certain financial and
operational highlights and key financials. The definition of each of these
APMs is shown below.
The Company assesses its performance using a variety of measures that are not
specifically defined under IFRS and are therefore termed APMs. The APMs that
the Company uses may not be directly comparable with those used by other
companies. These APMs are used to present a clearer picture of how the Company
has performed and are all financial measures of historical performance. The
APMs are prepared on a consolidated basis.
Alternative Performance Measure Definition / Method of calculation Reason for use
Average Charter Length Total forecast EBITDA from charters in place, divided by the expected To provide information about the extent to which the future revenue of the
annualised EBITDA of those charters SPVs is contractually fixed
CAGR Compound Annual Growth Rate. A business and investing specific term for the To provide a measure of annual compound growth rate over time
geometric progression ratio that provides a constant rate of return over the
time period
Consolidated Gearing Ratio Loans to charter-free value on a consolidated basis To provide an indication of leverage, which is not reported in the financial
statements which are not prepared on a consolidated basis
Dividend Cover Portfolio Operating Profit less debt amortisation, divided by dividends for To provide information about the extent to which past dividends are covered by
the period past earnings
EBITDA Earnings before interest, taxes, depreciation and amortisation To provide a measure of profitability from operating activity, independent of
financing strategy
Forecast Net Yield Forecast EBITDA over the current charters minus any capex accruals for the To provide information about profitability from future operating activity
vessels in the portfolio divided by the time-weighted vessel values over the relative to current vessel values
same period
Gain / (loss) in Capital Values Fair value gains and losses (being the change in charter-free value + change Fair value of the Company's underlying investments is a key component of the
in charter value) from marking assets to market in accordance with the Company's overall investment performance
valuation policy of the Company
Gross Operating Profit Operating profit before gain / (loss) in capital values, loan interest, fees, To provide an indication of the underlying profit from operating activity,
and all other Company level expenses which is not reported in the financial statements, before interest, fees and
Company level expenses
IRR Internal rate of return - the internal rate of return is the interest rate at A widely used APM which allows the shareholders to compare performance of
which the net present value of all the cash flows from a project or investment different funds
equal zero, and is a common performance indicator used in investment funds
NAV Total Return Per Share or NAV Total Return The change in NAV per share plus dividends per share paid by the Company A measure showing how the NAV per share has performed over a period of time,
during the period, divided by the initial NAV per share at inception taking into account both capital return and dividends paid to Shareholders
Portfolio Operating Profit Gross Operating Profit and interest income less loan interest and fees, To provide an indication of the underlying net profit from operating activity,
Company Level Fees and Expenses which is not reported in the financial statements
Portfolio Price / Depreciated Replacement Cost ("P/DRC") Price divided by the Depreciated Replacement Cost. Price may refer to a The Investment Manager's preferred valuation metric for investment analysis.
transaction (investment or divestment) value or fair value at a certain date P/DRC tends to revert to 100% in the long-term
Revenue Charter income, net of broker commissions and charter related costs, earned by To provide an indication of the underlying income from operating activity
SPVs which is not reported in the financial statements
Ship-Days The sum of the number of days each vessel was owned by the Company over the To provide information about the vessel operating activity measured in days
financial period
Time-Weighted Capital Employed Time-weighted capital invested in vessels A metric used to compare Gross Operating Profit across different periods
Total Return Per Share The Net Asset Value per ordinary share on any Calculation Day adjusted to: A measure showing how the investment in the Company's shares has performed
over a period of time, taking into account both capital return and dividends
(i) include the gross amount of any dividends and/or distributions paid to an paid to Shareholders
ordinary share since Admission;
(ii) not take account of any accrual made in respect of the performance fee
itself for that Calculation Period;
Total Return Per Share (iii) not take account of any accrual made in respect of any prevailing
Historic Performance Fee Amount (as adjusted pursuant to the operation of this
paragraph below);
(iv) not take account of any increase in Net Asset Value per share
attributable to the issue of ordinary shares at a premium to Net Asset Value
per share or any buyback of any ordinary shares at a discount to Net Asset
Value per ordinary share during such Calculation Period;
(v) not take account of any increase in Net Asset Value per share attributable
to any consolidation or sub-division of ordinary shares;
(vi) take into account any other reconstruction, amalgamation or adjustment
relating to the share capital of the Company (or any share, stock or security
derived therefrom or convertible there into); and
(vii) take into account the prevailing Net Asset Value of any C Shares in
issue
Corporate Information
Directors
Robert King, Chairman
Stephen Le Page
Paul Barnes
Christine Rødsæther
Trina Le Noury - appointed 1 November 2023
Registered office
1 Royal Plaza
Royal Avenue
St Peter Port
GY1 2HL
Guernsey
Investment Manager and AIFM
Tufton Investment Management Limited ("Tufton IML")
70 Pall Mall
1(st) Floor London
SW1Y 5ES
Asset Manager
Tufton Management Limited
3(rd) Floor, St George's Court
Upper Church Street
Douglas
Isle of Man IM1 1EE
Secretary and Administrator
Apex Administration (Guernsey) Limited
(formerly Maitland Administration (Guernsey) Limited) ("Apex")
1 Royal Plaza
Royal Avenue
St Peter Port
GY1 2HL
Guernsey
Brokers
Hudnall Capital LLP
Adam House
7-10 Adam Street
London
WC2N 6AA
Singer Capital Markets
1 Bartholomew Lane
London
EC2N 2AX
Depositary
Apex Depositary (UK) Limited
Bastion House
140 London Wall
London
EC2Y 5DN
Guernsey Legal Advisers
Carey Olsen (Guernsey) LLP
PO Box 98, Carey House
Les Banques
St Peter Port
Guernsey
GY1 4BZ
UK Legal Advisers
Gowling WLG (UK) LLP
4 More London Riverside
London
SE1 2AU
Registrar
Computershare Investor Services (Guernsey) Limited
1(st) Floor, Tudor House
Le Bordage
St Peter Port
Guernsey
GY1 1DB
Receiving Agent
Computershare Investor Services PLC
The Pavillions
Bridgewater Road
Bristol
BS99 6AH
Independent Auditor to the Company
PricewaterhouseCoopers CI LLP
Royal Bank Place
1 Glategny Esplanade
St Peter Port
Guernsey
GY1 4ND
Principal Bankers
Barclays Bank Plc
Guernsey International Banking
PO Box 41
St Peter Port
Guernsey
GY1 3BE
Definitions
The following definitions apply throughout this document unless the context
requires otherwise:
Adjusted Net Asset Value The Net Asset Value less uninvested monies (cash and cash value equivalents)
held by the Company from time to time excluding monies arising on or from the
realisation of or a distribution from an investment.
Administrator Apex Administration (Guernsey) Limited (formerly Maitland Administration
(Guernsey) Limited).
AIC the Association of Investment Companies.
AIFM Directive or AIFMD the EU Directive on Alternative Investment Fund Managers (No. 2011/61/EU).
AIF an alternative investment fund.
AIFM an alternative investment fund manager.
AIFM Rules the AIFM Directive and all applicable rules and regulations implementing the
AIFM Directive in the UK.
Articles of Incorporation or Articles the articles of incorporation of the Company, as amended from time-to-time.
Asset Manager Tufton Management Limited
Auditor PricewaterhouseCoopers CI LLP
Board the Directors from time to time.
Brokers a mercantile agent employed in buying and selling shares -
The Company's brokers are Hudnall Capital LLP
and Singer Capital Markets.
BWTS Ballast Water Treatment System.
Calculation Day The last business day of each Calculation Period.
Calculation Period (a) the period starting on Admission and ending on the earlier of (i) 30 June
2024; (ii) the commencement of the winding up of the Company; and (iii) the
termination of the Manager's appointment; and
(b) if the previous Calculation Year ended on 30 June of the previous Year,
each successive period starting on 1 July and ending on the earlier of (i) 30
June three years later; (ii) the commencement of the winding up of the
Company; and (iii) the termination of the Manager's appointment.
Calculation Year 1 July to 30 June
Companies Law the Companies (Guernsey) Law, 2008 as amended.
Company or Fund Tufton Oceanic Assets Limited (Guernsey registered number 63061) which, when
the context so permits, shall include any intermediate holding company of the
Company and the SPVs.
Depreciated Replacement Cost or DRC The Investment Manager's preferred valuation metric. DRC for a secondhand
vessel is the current cost of replacing the vessel with an equivalent
newbuild, depreciated to the same age.
Directors or Board the Board of Directors of the Company.
Disclosure Guidance and Transparency Rules or DTRs the disclosure guidance and transparency rules made by the Financial Conduct
Authority under Section 73A of FSMA.
Discount Control Policy The policy described in the Discount Control section of the Company's
Prospectus.
Environmental, Social, and Corporate Governance (ESG) an evaluation of the Company's collective conscientiousness for social,
environmental and governance factors.
FCA the UK Financial Conduct Authority
Financial Reporting Council or FRC the UK Financial Reporting Council
FSMA the Financial Services and Markets Act 2000 and any statutory modification or
re-enactment thereof for the time being in force.
Fund Level Fees and Expenses Investment management fee and other professional fees and expenses at fund
level.
GFSC or Commission the Guernsey Financial Services Commission
High Watermark Per Share the higher of: (i) US$1.00 increased by the Hurdle; and (ii) if a Performance
Fee has previously been paid, the Total Return Per Share on the Calculation
Day for the last Calculation Period (if any) by reference to which a
Performance Fee was paid.
High Performance Fee Amount in respect of any Calculation Period, an amount equal to the Performance Fee
Pay-Out Amount for the previous Calculation Period where a Performance Fee was
payable.
Historic Performance Fee Amount in respect of any Calculation Period, an amount equal to be Performance Fee
Pay-Out Amount for the previous Calculation Period where a performance fee was
payable.
IASB International Accounting Standards Board
IFRIC International Financial Reporting Interpretations Committee
IFRS International Financial Reporting Standards
Investment Manager Tufton Investment Management Limited
Issue Price An issue price refers to the initial cost of a security when it first becomes
available for purchase by the public.
Listing Rules the listing rules made by the UKLA pursuant to Part VI of FSMA
London Stock Exchange or LSE London Stock Exchange plc
LPG Carrier a vessel used to transport liquefied petroleum gas.
LS Assets Limited or LSA the Guernsey holding company owning the SPVs through which the Company invests
into vessels.
LSE Admission Standards the rules issued by the London Stock Exchange in relation to the admission to
trading of, and continuing requirements for, securities admitted to the SFS.
Main Market the main market for listed securities operated by the London Stock Exchange.
Market Abuse Regulation or MAR Regulation (EU) No 596/2014 of the European Parliament and of the Council of
16 April 2014 on market abuse.
Memorandum the memorandum of association of the Company.
Net Asset Value or NAV the value, as at any date, of the assets of the Company after deduction of all
liabilities of the Company and in relation to a class of shares in the
Company, the value, as at any date of the assets attributable to that class of
shares after the deduction of all liabilities attributable to that class of
shares determined in accordance with the accounting policies adopted by the
Company from time-to-time.
Performance Fee Amount 20 per cent. of the excess in Total Return Per Share and the High Watermark
Per Share multiplied by the time weighted average number of shares in issue
during the Calculation Period.
Performance Fee Pay-Out Amount in respect of the relevant Calculation Period, an amount equal to "A", where:
A = (0.5 x B) + C;
B = the Performance Fee Amount; and
C = an amount equal to the High Performance Fee Amount.
POI Law the Protection of Investors (Bailiwick of Guernsey) Law, 2020, as amended.
Portfolio the Company's portfolio of investments from time to time.
Paris Agreement The Paris Agreement is a legally binding international treaty on climate
change.
Prospectus The Placing and Offer for Subscription document for the Company dated 8th
December 2017.
Register the register of members of the Company.
Relevant Number of Shares for any Calculation Period the time weighted average number of ordinary shares
in issue during such Calculation Period.
Responsible Investment A strategy and practice to incorporate environmental, social and governance
(ESG) factors in investment decisions and active ownership.
SFS or Specialist Funds Segment the Specialist Funds Segment of the Main Market (previously known as the
Specialist Fund Market or SFM).
Segment classifications of vessels within the shipping industry including, inter alia,
Tankers, General Cargo, Containerships and Bulkers.
SOFR Secured Overnight Financing Rate.
SPV or Special Purpose Vehicle corporate entities, formed and wholly owned (directly or indirectly) by the
Company, specifically to hold one or more vessels, and including (where the
context permits) any intermediate holding company of the Company.
£ or Sterling the lawful currency of the United Kingdom.
Tufton the Investment Manager.
Tufton Group Tufton Investment Management Holding Ltd and its subsidiaries.
Tufton Group Stakeholders Tufton Group principal shareholders, employees, non-executive directors and
former shareholders.
UK Corporate Governance Code the UK Corporate Governance Code as published by the Financial Reporting
Council from time-to-time.
UK Listing Authority the FCA acting in its capacity as the competent authority for the purposes of
Part VI of FSMA.
United Kingdom or UK the United Kingdom of Great Britain and Northern Ireland.
VesselsValue VesselsValue Limited, a third party provider of vessel valuations to the
Company and Investment Manager.
WACC the weighted average cost of capital.
VLCC Very large crude carrier.
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