STEADY
PROGRESS
Global Ports Investments PLC Annual Report 2017
GLOBAL PORTS
RUSSIA’S LEADING
CONTAINER TERMINAL
OPERATOR BASED ON
THROUGHPUT AND
CAPACITY
Overview
1-5
Key Strengths 1
About Us 2
Strategic Report
6-27
Chairman’s Statement 8
Chief Executive Officer’s Statement 10
Market Overview 12
Strategy 14
Business Review 16
Corporate Social Responsibility 25
IN THIS REPORT
Corporate Governance
28-45
Corporate Governance 30
Board of Directors 32
Executive Management 38
Terminal Directors 40
Risk Management 42
Consolidated
Financial Statements
1-69
Directors’ Report and Consolidated
Financial Statements 1
Parent Company
Financial Statements
1-43
Directors’ Report and Parent Company
Financial Statements 1
Additional Information
1-4
Directors’ Responsibility Statement 1
Definitions 2
Shareholder Information
and Key Contacts 4
KEY STRENGTHS
7
marine container terminals
in Russia and Finland 1
Limited CAPEX requirements due to well invested
terminals and available container capacity.
No.1
container terminal
operator in Russia 2
Undisputed industry leader in Russia in terms of throughput
and capacity covering 2 major sea basins.
1.2m
TEU– consolidated marine
container throughput in 2017
Handling almost one in three containers
entering and coming in and out of the country.
2.7m
tonnes of consolidated
marine bulk throughput
A record result for the Group as 2017 share
of non-container revenues increased to 23%.
27%
reduction in LTIFR
22%
increase in Group’s
consolidated bulk cargo
throughput
HIGHLIGHTS OF THE YEAR
USD146m
Free Cash Flow generated
by the Group
7%
increase in consolidated
container throughput
USD81m
reduction in Group
Net Debt
USD484m
reduction in Group Net Debt
over last five years (2013-2017)
20.5%
30.75%
Ownership
Structure4
30.75%
9%
9%
ANNUAL REPORT 2017
Delo Group 3
APM Terminals
Ilibrinio Establishment Ltd
Free-float (LSE listing)
Polozio Enterprises Ltd
APM Terminals operates a global terminal network of 22,000 professionals with 74 operating
port facilities and 117 Inland Services operations in 58 countries around the globe.
APM Terminals is a part of A.P. Moller-Maersk, the world’s largest integrator of container
and ports logistics.
Delo Group is one of the largest private transportation and logistics holding companies
in Russia. The Group offers a full range of services in the port of Novorossiysk, including
stevedoring, tug boats and vessels bunkering (“DeloPorts”). Delo Group also offers
multimodal freight forwarding services using own inland terminals, warehouses, flatcars
(“RUSCON”). Delo Group operates two port terminals and five inland terminals and
employs a workforce of 2,600 people.
Delo Group has made over USD 300 million of investment into the development of
terminals and port infrastructure since 2004. Currently its stevedore assets offer over
3.5MT of throughput capacity at its KSK grain terminal and over 350,000 TEUs of capacity
at its NUTEP container terminal.
1. Eurogate currently has a 20% effective ownership interest in ULCT; Container Finance
currently has a 25% effective ownership interest in Finnish ports.
2. Based on 2017 overall container throughput in the Russian Federation ports
(Source: ASOP) and public sources on capacity.
3. On 12 April 2018 Delo Group has acceded to the shareholder agreement with APM
Terminals B.V. and TIHL has been released from its obligations under such agreement.
4. As of April 2018.
1
OVERVIEW
ABOUT US
PERFORMANCE
FOCUS ON
OPERATIONAL EFFICIENCY
AND FREE CASH FLOW
The recovery in the Russian container market continued through the second half of 2017, and total
market recorded volumes grew by 16% for the full year. Growing consumer demand stimulated imports
that, when combined with increased containerisation of exports, drove the resulting market growth.
Against this backdrop, the Group continued
to implement its strategy of capitalising on
the recovery of the container market,
developing additional revenue streams,
improving operational efficiency, maximising
free cash flow generation and deleveraging.
Global Ports’ Consolidated Marine Container
Throughput volumes grew by 6.8% as a whole
in 2017, having accelerated by 11.8% in the
second half of the year. The Group also
delivered a record performance in Consolidated
Marine Bulk Cargo Throughput, posting a 21.9%
year-on-year increase in 2017 to reach an
all-time high of 2.7 million tonnes. Looking
forward, the Group is strategically well
positioned to benefit from the continued
expansion of Russia’s underdeveloped container
market, supported by real wage growth and
recovery in consumer sentiment.
Performance
As a result Global Ports generated Revenue
of USD 330.5 million, Adjusted EBITDA of USD
201.6 million and Free Cash Flow of USD 145.9
million in 2017. The Group’s Net Debt reduced
by a further USD 81.4 million over the period.
Consolidated Financial and Operating Data
Selected IFRS Financial Information
Revenue
Cost of sales and administrative, selling and marketing expenses
Operating profit/(loss)
Net profit/(loss)
BALANCE SHEET AND CASH FLOW STATEMENT
Total assets
Cash and cash equivalents
Net cash from operating activities
CAPEX on cash basis
SELECTED NON-IFRS FINANCIAL INFORMATION
Total operating cash costs
Adjusted EBITDA
Adjusted EBITDA margin
Net debt
Net debt to Adjusted EBITDA
Free Cash Flow
2017
USD million
2016
USD million
Change
USD million
330.5
-191.2
-5.4
-53.0
331.5
-222.7
-0.5
61.3
-1.0
31.5
-4.9
-114.2
2017
USD million
2016
USD million
Change
USD million
1,655.6
130.4
173.9
28.0
1,643.0
119.3
195.8
18.0
12.6
11.2
-21.9
10.0
2017
USD million
2016
USD million
Change
USD million
128.9
201.6
61.0%
865.9
4.3
145.9
107.1
224.3
67.7%
947.3
4.2
177.8
21.8
-22.7
-81.4
0.1
-31.9
Change %
-0.3%
-14.1%
1086.3%
-186.5%
Change %
0.8%
9.4%
-11.2%
55.8%
Change %
20.3%
-10.1%
-8.6%
1.7%
-17.9%
2
GLOBAL PORTS INVESTMENTS PLC
Key Milestones
January-December: Generating
new revenue streams
The Group reached an all-time high
of 2.7 million tonnes in consolidated
marine bulk handling (+22% y-o-y)
driven by coal handling at VSC and
bulk cargo handling at PLP. High
and heavy Ro-Ro handling grew
by 59%.
November: Headquarters
relocated to St. Petersburg
The Group relocated its Russian
HQ to Saint Petersburg, and
consolidated multiple locations
in St. Petersburg into one central
office building allowing further
centralisation, improvement of
governance structure and savings
on rent costs, travelling and other
running expenses.
December: Delo Group agreed
to become co-controlling
shareholder in Global Ports
TIHL entered into an agreement
to sell its 30.75% stake in Global
Ports to Delo Group, one of the
largest private transportation
and integrated logistics holding
companies in Russia, which
through its subsidiary DeloPorts,
provides stevedoring, tugboat and
bunkering services in the port of
Novorossiysk in the Black Sea Basin,
alongside operating container and
grain shipment terminals*.
December 2017: FAS
Settlement agreed
The Moscow Arbitrage Court
approved the terms of a
settlement agreements between
the Russian Federal Antimonopoly
Service (FAS) and the Group’s
VSC, PLP and FCT terminals with
respect to the antimonopoly laws
findings of FAS in April 2017 in
relation to the pricing of
stevedoring services in Russian
ports. The terms of the
settlement will not have any
material impact on the Group’s
financial position or cash flow
and will not negatively affect
operating activities in any
significant way.
Global Ports Segment Data
RUSSIAN PORTS SEGMENT
Gross marine container throughput, 000s TEU
Gross container throughput of inland terminals, 000s TEU
Ro-Ro (thousand units)
Cars (thousand units)
Bulk cargo marine (thousand tonnes)
Bulk cargo inland (thousand tonnes)
Revenue, USDm
Adjusted EBITDA, USDm
Adjusted EBITDA margin, %
OIL PRODUCTS TERMINAL SEGMENT
Oil products gross throughput (million tonnes)
Revenue, USDm
Adjusted EBITDA, USDm
Adjusted EBITDA margin, %
FINNISH PORTS SEGMENT
Gross container throughput, 000s
Revenue, USDm
Adjusted EBITDA, USDm
Adjusted EBITDA margin, %
* Transaction closed on 12 April 2018.
ANNUAL REPORT 2017
2017
1,372.5
287.9
23.9
95.4
2,731.2
822.7
360.5
242.0
67.1%
2017
2.1
51.4
7.6
14.9%
2017
115.6
10.9
1.8
16.3%
2016
Change
Change %
1,283.9
288.9
15.0
96.4
2,236.0
658.4
359.7
264.3
73.5%
2016
2.6
59.0
18.6
31.6%
2016
187.5
12.9
1.5
11.6%
88.6
-1.0
8.9
-1.0
495.2
147.5
0.8
-22.4
6.9%
-0.3%
59.0%
-1.0%
22.1%
21.8%
0.2%
-8.5%
Change
Change %
-0.5
-7.6
-11.0
-17.7%
-12.9%
-59.1%
Change
Change %
-71.9
-2.0
0.3
-38.4%
-15.4%
19.4%
3
OVERVIEW ABOUT US
MAP
STRONG PRESENCE
IN RUSSIA’S KEY
CONTAINER GATEWAYS
Global Ports is one of the leading container operators in Russia’s two
main sea cargo basins. Our efficient, well-invested terminals provide
for low CAPEX requirements and high cash flow generation.
Baltic Sea
Basin
Cargo from
the Americas
St. Petersburg
Moscow
Ekaterinburg
Far East
Basin
Cargo from
the Americas
By sea
By rail
By road
By Sea
The Baltic Sea Basin’s container terminals are close to key
transhipment hubs for Russia’s inbound and outbound
containers, such as Hamburg and Rotterdam. The basin has
a strong customer base due to its economic development,
access to Russia’s most populous regions and cost-effective
transportation of containers to major Russian cities.
By Rail
The Far East Basin is the fastest route for transporting
containers from Asia to the European part of Russia and
many CIS countries and transit to EU. The shorter transit
time is a key advantage for customers shipping high-value
and time-sensitive cargo.
4
GLOBAL PORTS INVESTMENTS PLC
50%
Share of Baltic Basin
terminals in the overall
container throughput
of Russian terminals.
Terminal overview
1
First Container
Terminal (FCT)
Location:
St. Petersburg
Cargo handled:
Containers
Finland
8
Baltic Sea
Gulf of Finland
5
2 6
1
7
4
9
10
Estonia
Russia
Russia
China
3
Japan
Sea of Japan
Baltic Sea Basin
The Group’s container terminals in the Baltic Sea Basin offer direct
access to the most populous and economically developed regions of
the European part of Russia, including Moscow and St. Petersburg.
Far East Basin
The Group’s container terminal in the Far East Basin is in an
ice-free harbour with deep-water access and a direct link to
the Trans-Siberian railway.
3.0MTEU
Global Ports marine
terminal capacity 5.
29%
Share of Far East Basin
terminals in the overall
container throughput
of Russian terminals.
0.7MTEU
Global Ports marine
terminal capacity.
2
Petrolesport
(PLP)
Location:
St. Petersburg
3
4
5
Vostochnaya Stevedoring
Company (VSC)
UST-LUGA Container
Terminal (ULCT)
Moby Dik
(MD)
Location:
Nakhodka
Cargo handled:
Containers, Ro-Ro,
bulk and general cargo
Cargo handled:
Containers, Ro-Ro,
bulk cargo (coal)
Location:
Ust-Luga port cluster
Cargo handled:
Containers, bulk cargo
Location:
Kronstadt (St. Petersburg)
Cargo handled:
Containers, Ro-Ro,
bulk and general cargo
Container throughput capacity 5:
1.25m TEU per year
Container throughput capacity 5:
1m TEU per year
Container throughput capacity 5:
650,000 TEU per year
Container throughput capacity 5:
440,000 TEU per year
Container throughput capacity 5:
400,000 TEU per year
Ownership:
100%
6
Yanino
(YLP)
Ownership:
100%
7
Logistika
Terminal (LT)
Ownership:
100%
8 9
MLT Kotka
and MLT Helsinki
Ownership:
80%
10
Vopak
E.O.S.
Location:
St. Petersburg
Location:
Inland, near St. Petersburg
Location:
Helsinki and Kotka, Finland
Location:
Tallinn, Estonia
Cargo handled:
Containers, bulk cargo
Cargo handled:
Containers, bulk cargo
Cargo handled:
Containers, Ro-Ro,
bulk cargo
Cargo handled:
Oil products
Container throughput capacity 5:
200,000 TEU per year
Container throughput capacity 5:
200,000 TEU per year
Container throughput capacity 5:
420,000 TEU per year
Storage capacity:
1,026,000 cbm
Ownership:
75%
Ownership:
100%
Ownership:
75%
Ownership:
50%
Ownership:
75%
Our
Partners:
Entity: Vopak E.O.S.
Partner: Royal Vopak
Share: 50%
Entity: Moby Dik,
Finnish Ports, Yanino
Partner: Container
Finance Ltd Oy
Share: 25% in each
Entity: UCLT
Partner: Eurogate
Share: 20%
5. Company estimates based on annual potential berth and yard throughput capacity. To maximise the efficiency of its operations, the Group may choose to flex headcount,
working hours and used equipment at its terminals. As a result, current actual capacity may differ from the published numbers based on annual potential berth and yard
throughput capacity.
ANNUAL REPORT 2017
5
OVERVIEW STRATEGIC
REPORT
In 2017, Global Ports continued to focus on developing additional
revenue streams, improving operational efficiency, free cash
flow generation and deleveraging. As a result of these actions,
the Group achieved Adjusted EBITDA of USD 202 million with
a healthy Adjusted EBITDA margin of 61% and strong Free Cash
Flow of USD 146 million. The Group also decreased its Net Debt
by a further USD 81.4 million over the period.
6
GLOBAL PORTS INVESTMENTS PLC
ANNUAL REPORT 2017
7
STRATEGIC REPORT CHAIRMAN’S STATEMENT
MANAGEMENT
IN A CHALLENGING
ENVIRONMENT
Our 2017 results demonstrate that Global
Ports has successfully navigated what has
been a very turbulent period for our markets.
We experienced a perfect storm in 2015 and
2016: an economic recession in Russia, rouble
depreciation, weak import demand and
consumer confidence, the introduction of new
capacity in the market, low utilisation levels
and intense competition. So, if the true
measure of a successful business is its ability
to deliver through economic turbulence,
however difficult the circumstances, then our
performance in 2017 is positive proof of the
strength of Global Ports. We have emerged as
a stronger, more focused company and in the
process strengthened our reputation as the
leading player in the ports sector in Russia.
2017 was a transitional year for the global
economy. For the first time since the 2008
crisis, global growth exceeded expectations
and forecasts were revised upward. Russia’s
economy grew on the back of synchronised
growth in Asia, the US and Europe. The
Russian container market too staged a strong
recovery, fuelled by a revival in imports and
increased containerisation of exports. Our own
operational performance was equally solid;
Global Ports more than held its own in what
remained a highly competitive environment.
If I were to identify specific items from our
results, I would highlight the acceleration in
our container volumes, up 7% for the year, our
record-breaking volumes in marine bulk cargo,
the expansion in our profit margin in the
second half of the year, our continued
excellent cash generation, our cost control
result, and, finally, our improved safety
performance. Aside from our operations,
the other major news item was that Global
Ports reached a conclusive settlement with
the Russian Federal Antimonopoly Service
(FAS), having appealed its findings on
breaches of antimonopoly laws relating to
the pricing of stevedoring services.
Consistent delivery of our strategy
Global Ports is a core infrastructure business;
our ports form an integral part of supply
chains that stretch around the globe,
providing Russia with access to international
markets. Given the long-term nature of the
infrastructure sector, our strategy for growth
has to be similarly long term. We are totally
focused on creating sustainable long term
value for our shareholders. Our network of
modern, well-invested terminals provides an
unparalleled presence where it matters, in the
key Baltic and Far East regions. We also own
two-thirds of the real estate at our terminals
and have invested heavily in our facilities.
All told, Global Ports owns a world-class set
of infrastructure assets which gives the Group
an enduring competitive advantage that is
hard to replicate.
Throughout the challenging macroeconomic
climate of the last few years, management
has resolutely stuck to its long-term strategy,
while taking the tough short-term action
needed in challenging markets. In 2017,
this took the form of prioritising operational
efficiency and control cost, debt repayment,
cash flow maximisation and health and
safety. In each of these critical areas,
management delivered tangible results
in line with our long-term objectives.
Moreover, these were achieved without
affecting our day-to-day operational
performance or compromising service levels.
This is a great achievement and highlights
the strength of our business model and the
quality of both our executive management
and our workforce.
Governance and the Board
The Board understands the importance of
good governance for the successful running
of the company. One of the most important
governance tasks the Board focuses on is
succession planning. The Board regularly
reviews its requirements to ensure that we
retain the skills on the Board and within the
business needed to be effective and ensure
stability and continuity.
GLOBAL PORTS INVESTMENTS PLC
Morten Engelstoft
Chairman
8
“2018 has started on a promising note as the positive market
trends observed in the latter half of 2017 have continued.”
There were a number of changes in the
management team in 2017. In March, Mikhail
Loganov was appointed as Chief Executive
Officer of Global Ports Management, having
previously been CFO of the Group. Mikhail has
worked for the company for almost ten years,
has a deep understanding of our business and
has settled into his new role seamlessly. In
September, Alexander Roslavtsev joined as
our new CFO of Global Ports Management,
filling the role vacated by Mikhail Loganov.
Alexander is an experienced finance director
and was previously CFO of Rusagro, one of
Russia’s largest agricultural companies. He
also has a wealth of international experience
having worked for a number of international
blue-chip companies.
In addition, there were several changes
to composition of the Board and in the
responsibilities of Directors in 2017 and at
the beginning of 2018.
I was honoured to be elected as Chairman
of Global Ports, after having been a member
of the Board since 2016. I am grateful to my
fellow Board members and to my predecessor,
Peder Sondergaard, for ensuring a smooth
handover. I look forward to working together
with the management team to build on
the strong legacy that I have inherited at
Global Ports.
I want to express my thanks for two long-
serving Independent Non-Executive Directors,
Siobhan Walker, who left us in 2017, and
Captain Bryan Smith, who will retire from
the Board at the 2018 AGM. They have both
provided valuable service and wise counsel to
the Board over many years. We are especially
grateful to Bryan for his superb work as our
Senior Independent Director and to Siobhan
for her thoughtful leadership of the Audit
and Risk Committee. I also extend a warm
welcome to our three new Independent
Non-Executive Directors who joined in 2017
and at the beginning of 2018, Britta Dalunde,
Inna Kuznetsova and Lambros Papadopoulos,
and I look forward to working with them.
ANNUAL REPORT 2017
The role of the Board is to act as custodians
of shareholder value for the long term. I am
confident that Global Ports will continue to
function effectively under the direction of a
talented, well-balanced Board comprised of
experienced Executive Directors and
independent Non-Executives.
Global Ports has also benefitted from the
stability provided by its two co-controlling
shareholders, TIHL and APM Terminals, each
of which held a 30.75% shareholding. In
December, TIHL announced that it had agreed
to sell its stake to Delo Group, a leading
Russian ports logistics group. Delo’s decision
to acquire TIHL’s shareholding is further proof
of the long-term attractions of our industry.
With Delo, a prominent local player, and APM
Terminals, a leading global operator of
container terminals, as co-controlling
shareholders, we will continue to benefit
from the insight from two long-term investors
who share our vision for the industry.
A sustainable and safe business
The Board believes that the success of Global
Ports goes beyond its financial or operating
performance. We recognise that the company
also creates added value by promoting a
clean environment, providing employment
opportunities and supporting local
communities. We believe in being a
responsible business and doing the right
thing, for the good of our business and our
stakeholders. This includes ensuring a safe
workplace, developing our employees and
acting in a way that upholds social and
environmental standards. We have a clear
agenda of initiatives to achieve this based
around safety, environmental stewardship,
employee engagement, community
involvement and running a business
responsibly. We believe that this approach
creates value for us and our stakeholders.
Safety is one of our top priorities. We will
not compromise the integrity and safety of
our people and our operations. As a Board,
we are absolutely committed to building a
sustainable safety culture across the company
and we are striving to ensure that every Global
Ports employee understands and complies
with safe and secure working practices.
It is therefore gratifying to report that there
was a further improvement in our safety
performance in 2017. Our Lost Time Injury
Rate fell by a further 27%, and our recent
safety audit of terminals revealed 95%
compliance with our strict global minimum
safety requirements.
The leadership team remains determined
to transform the safety culture, leading by
example, and further initiatives are planned
for 2018.
Outlook
In 2017, we made progress in safety
performance, with serious incidents and injury
rates falling. We delivered strong cash flow,
reduced debt and controlled our capital
spending and costs. In the coming year, we
expect to do more of the same, and we will
continue to implement our strategy, seeking
to exploit our asset base as the container
market recovers, develop additional revenue
streams, improve efficiency and productivity,
maximise cash flow and continue
to deleverage.
Finally, I want to thank everyone in the
company for their hard work and dedication
over the last year.
Morten Engelstoft
Chairman
26 April 2018
9
STRATEGIC REPORT CHIEF EXECUTIVE OFFICER’S STATEMENT
FINANCIAL PRUDENCE
YIELDS RESULTS
I have now completed my first full year as
CEO of Global Ports Management and I am
pleased to be able to report that 2017 was
a year of substantial progress. The Group
turned in a strong operating performance,
growing container volumes, increasing bulk
cargo throughput and maintaining its number
one position in the Russian container market.
We also posted a solid financial result,
characterised by healthy levels of cash flow
and a further decrease in net debt.
However, safety remains one of our top
priorities so it is particularly pleasing to be
able to report that we made good progress
in our safety performance in 2017. I am also
very pleased with the strong backing we
received for the safety programme from our
employees across the Group. We generated
a 27% reduction in lost time injuries and
recorded injuries during the year. This
improvement is a genuinely impressive result
and demonstrates the commitment of all our
employees and contractors to working safely.
Market Overview
The improving macroeconomic climate in
Russia provided the cue for a strong recovery
in the container market in Russia in 2017.
Overall marine container throughput by
Russian terminals reached 4.4 million TEU
in 2017, an increase of 16% year-on-year.
Imports led the way, as strong consumer
demand sparked a sustained revival in
demand for imported goods. To illustrate
this point, there was a 20% increase in the
handling of laden import containers at
Russian ports in 2017. On the export side,
throughput of laden containers also grew well,
up 12% year-on-year, as better global growth
spurred exports and containerisation made
greater inroads into export supply chains,
part of a sustained trend that we expect to
continue, given that Russia lags well behind
its peers in containerisation levels.
Strong volume dynamics also drove an
improvement in overall market capacity
utilisation which, as a result, averaged 60%
at the end of 2017. This was a welcome
development, given that utilisation rates had
previously remained stubbornly low, averaging
below 50% in recent years, and have been
a contributing factor to the weak pricing
environment the industry has endured in
the last couple of years.
The Baltic Basin, where six out of Global Ports’
seven marine terminals are located, remained
the key container gateway to Russia, handling
just over 50% of total Russian container
shipments in 2017. While the Baltic Basin
grew at a respectable 11% per annum, it
was eclipsed by the Far East and South of
Russia basins, which grew at 27% and 20%
respectively, benefitting from a shortage of
shipping capacity on the main Asia to Europe
route that is principally handled via the Baltic.
Operating performance
The management team set itself a clear set
of goals for 2017 and I am pleased that we
have largely achieved what we had set out
to do. Operationally the priorities were: to
improve safety; strengthen our market
position and further diversify our revenues.
In some ways, the challenges we encountered
in 2015 and 2016 proved instructive as they
forced us to review our management
methods. As a result, we took a series of
initiatives aimed at remaining competitive,
creating new revenue streams, and improving
productivity and efficiency. These decisions
laid the groundwork for the solid operational
performance we delivered in 2017.
The Group’s Consolidated Marine Container
Throughput increased 6.8% to 1.2 million TEUs
in 2017. At the start of the year, we realigned
our pricing and introduced commercial
incentives to bring us more in line with our
competitors. These incentives helped deliver
strong growth in our container volumes.
Container traffic in the first half grew by 2%
and accelerated in the second half to just over
11.8% year-on-year.
GLOBAL PORTS INVESTMENTS PLC
Mikhail Loganov
Chief Executive Officer
10
“2018 has started well as container volumes have continued to
grow and our own performance year-to-date confirms this.”
USD 467 million since the acquisition of NCC
in 2013. Improving our balance sheet strength
remains a critical priority for Global Ports, and
we continue to focus on further deleveraging.
Outlook
There is a greater degree of optimism on the
prospects for the Russian container market
than has been evident in a long time. Whilst
further geopolitically inspired disruption
cannot be ruled out, and is a risk factor that
we closely monitor, 2018 has started well as
container volumes have continued to grow
and our own performance year-to-date
confirms this. As the market leader, we are
well placed to benefit from the continued
expansion of Russia’s under-containerised
market, supported by real wages growth and
the continued recovery in consumer sentiment.
Mikhail Loganov
CEO
26 April 2018
Alongside growing our container volumes,
we also successfully increased throughput
in our non-container segment. This formed
part of our drive to create additional revenue
streams and improve asset utilisation at our
ports. Consolidated Marine Bulk Throughput
increased by 22% as we handled a record
2.7 million tonnes of cargo, up from 2.2 million
tonnes in 2016. This was driven principally by
growth in export coal handling and an
increase in scrap metal and fertiliser exports.
In response to greater demand for coal
handling we expanded our coal handling
capacity at VSC. At the same time, VSC also
signed an agreement to invest in various
environmental protection measures to lessen
the potential environmental impact of this
increased activity. The measures included
additional water treatment facilities and coal
dust suspension systems in the surrounding
region. Elsewhere, there was a strong
performance from traditional Ro-Ro handling
with 59% more volume on the back of strong
export demand in Asia for heavy duty vehicles.
In relation to the Federal Antimonopoly Service
(FAS) charge in April 2017 alleging a breach of
antimonopoly laws in relation to the pricing of
stevedoring services in Russia, we challenged
the findings in court. The outcome was that in
December 2017, the Moscow Arbitrage Court
approved the terms of a settlement between
the Group’s terminals (VSC, PLP and FCT) and
the FAS. We maintained that the Group had
not acted improperly in relation to
competition regulation, and so we were
pleased to be able to draw a line under the
matter, the terms of which did not materially
affect the Group’s financial position or its
operating activities.
Financial results
Our financial priorities for 2017 were threefold:
to focus on costs; maximise free cash flow;
and continue to deleverage. We have delivered
well against these goals.
Revenue performance was broadly flat year
on year at USD 330.5 million, as a 5.5%
decline in container revenues was largely
offset by very strong growth in our non-
container revenue, itself a core operational
priority. Continued disciplined cost
management ensured that, despite strong
cargo volume growth, our adjusted Total
Operating Cash Cost, after stripping out any
foreign exchange impact, grew by only 5%
which was also pleasing. We restricted CAPEX
spend to planned maintenance and some
targeted expansion of coal handling capacity
at VSC. The USD 28 million CAPEX figure for
2017 was in line with our mid-year guidance.
Despite a decrease in Adjusted EBITDA to
USD 202 million due to lower revenue per TEU
and the negative FX impact on our costs, our
Adjusted EBITDA margin improved in the
second half over the first half from 59.9% to
62%. Our ability to generate strong cash flows
from the business was also a feature of our
results, with the Group producing USD 146
million of free cash flow in 2017. We also
continued to deleverage and strengthen the
balance sheet, reducing Net Debt by a further
USD 81 million. Total debt stood at USD 996
million at the year end, which is down some
ANNUAL REPORT 2017
11
STRATEGIC REPORT MARKET OVERVIEW
STEADY GROWTH IN
BOTH IMPORTS AND
CONTAINERISED EXPORTS
There has been a continuing and active volume recovery in the Russian
container market since Q4 2016, as a result of which the Russian market
grew by 16% over the course of 2017 to 4.4 million TEU.
According to data from Drewry, growth in
the Russian container market was one of
the highest growing worldwide, significantly
exceeded the global average growth rate
in 2017 of 6.3%.
Laden imports were the primary engine of
growth. Volumes in this market segment grew
by 19% from 1.57 million TEU in 2016 to 1.87
million TEU in 2017. The recent growth of
consumer confidence as a result of a stable
rouble, lower inflation rates and the growth
of real incomes spurred a greater demand for
imported goods over the year, which in turn
became the principal driver of laden imports.
These positive trends also continued in
exports. The growth in exports of goods
from Russia, together with the continuing
containerisation of Russian export channels
resulted in a 12% growth in laden containerised
exports over the course of 2017. The sustained
nature of this trend is evidenced by the fact
that laden containerised exports has grown by
more than 50% in only four years: from 0.76
million TEU in 2013 to 1.2 million TEU in 2017.
Accordingly, the share of laden containerised
exports across Russia exceeded 60% in 2017,
approaching 80% in the North West of the
country, while the comparative share was as
low as a third only as recently as 2013. Taking
into account the continued growth in exports
and the continued low level of containerisation
in Russia, we foresee considerable potential
for further increasing containerised exports
going forward.
The Russian Far East continued to be the
highest growing basin, expanding by 27%
over the course of 2017. Likewise, the total
volume of transit containers via Far Eastern
terminals stood at 1.3 million TEU, representing
29% of the total Russian market. The
container turnover of the Black Sea region
also grew, albeit at a lower rate of 20%
to 0.8 million TEU.
The Baltic region continues to lead the
Russian container market – with nearly half of
all containers in the country transited through
the terminals in Russia’s North West. However,
growth rates in cargo turnover in the Baltic
regions were lower than the national average,
at 10.7% in 2017, generating a total of 2.2
million TEU.
Despite the high recovery rates of 2017,
Russian container market activity remains
below its pre-crisis level, which, combined with
the favourable macroeconomic situation in
Russia and continued low containerisation
levels, gives us cause for cautious optimism,
for the market outlook in 2018.
RUSSIAN CONTAINER MARKET VOLUMES
(MILLION TEU)
CONTAINER/THOUSAND CAPITA IN 2017
(TEU/K PEOPLE)
WORLD MARKETS GROWTH IN 2017 (%)
2013
2014
2015
2016
2017
12
5.2
5.1
EUROPE
TURKEY
3.8
3.8
NORTH AMERICA
WORLD
101
4.4
RUSSIA
32
130
EUROPE
5.7%
124
123
TURKEY
12.4%
NORTH AMERICA
8.0%
6.3%
WORLD
RUSSIA
15.7%
GLOBAL PORTS INVESTMENTS PLC
RUSSIAN CONTAINER MARKET (QUARTERLY DYNAMICS)
RUSSIAN CONTAINER MARKET VOLUMES
(BY BASIN, 2017)
3%
1%
-2%
-6%
-5%
16%
16%
7%
1%
0.5%
-23%
-24%
-27%
-29%
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1H17
2H17
29%
17%
3%
50%
Baltic Basin
Black Sea Basin
Northern Ports Basin
Far East Basin
VOLUMES OF RUSSIAN CONTAINER MARKET (MONTHLY DYNAMICS, K TEU)
450
400
350
300
250
JAN13
JULY13
JAN14
JULY14
JAN15
JULY15
JAN16
JULY16
JAN17
JULY17
JAN18
LADEN EXPORT CONTAINER THROUGHPUT
(K TEU)
SHARE OF LADEN EXPORT CONTAINER
THROUGHPUT IN ST. PETERSBURG
(AND AREA)
IMPORTS OF EMPTY CONTAINERS (K TEU)
2013
2014
2015
2016
2017
764
920
937
1,054
1,182
2013
2014
2015
2016
2017
40%
50%
68%
76%
76%
2013
32
17
2014
2015
2016
2017
71
77
103
ANNUAL REPORT 2017
13
STRATEGIC REPORT STRATEGY
FOCUS
ON STRATEGIC
PRIORITIES
Following a period of rapid growth and investment that made
Global Ports number one in Russia1, the Group is now focused
on its core strategy of extracting value from existing infrastructure,
deleveraging and improving efficiency and cost control.
STRATEGIC PRIORITIES
STRATEGIC OBJECTIVES
ACTIONS IN 2017
RESULTS IN 2017
FULLY UTILISE
CORE ASSETS
AND EXISTING
INFRASTRUCTURE
MAXIMISE
EFFICIENCY
AND COST CONTROL
FOCUS ON
CASH FLOW
AND DEBT
REPAYMENT
– Prioritise safety operations
– Conducted design reviews and two safety
– Lost-time incident frequency rate reduced to 1.10 from 1.51 in 2016 and 2.3 in 2015
– Focus on core (maritime) activity
– Maximise value from assets
– Generate new revenue streams
audits at all terminals
– Further roll-out of additional safety improvements and standards, such as
– Continued focus on bulk cargos to better
contractor safety and Lock-Out Tag-Out
utilise terminal space
– Expanded VSC coal handling capacity
– Strengthened communication channels
with clients
–
Increased our Global Minimum Requirements compliance to 95% across all terminals
– Handled 2.7 million tonnes of bulk cargo, up 22% year-on-year to Group
record levels
– Heavy Ro-Ro throughput increased 59% year-on-year
– Share of non-container revenue increased to 23% compared to 19% in 2016
+22%
Increase in bulk cargo throughput
– Scrutinise all expenses and processes
– Strong, continued focus on cost control
– Focus on greater productivity
– HQ relocated to one principal site in
St. Petersburg, transferring staff from
Moscow and alternative locations in
St. Petersburg
– Optimised workforce scheduling
–
Implemented additional operating
efficiency initiatives
– Total Operating Cash Costs grew by only 5% in rouble terms despite 7%
increase in container throughput, 22% increase in bulk cargo throughput
and 2.5% labour inflation
– Adjusted EBITDA margin maintained at 61%
61%
– Decreased operating peaks, optimised maintenance, centralised procurement
and reduced transport outsourcing
Adjusted EBITDA margin
– Optimise CAPEX, supported by well
– Well invested terminals enabled scale
– Generated strong free cash flow of USD 146 million
invested terminals
down of CAPEX requirements
– Preserve cash where possible
– Capital expenditure was focused on
– Use Free Cash Flow to repay debt
planned maintenance and an increase in
annual capacity for coal handling at VSC
– Generated significant positive cash flow
– Repaid additional debt to reduce net debt
levels further
– Decreased Net Debt by an additional USD 81.4 million
– Limited CAPEX of USD 28 million, in line with guidance
– Continued to target annual CAPEX of USD 25-35 million, providing
opportunistic approach to attractive new projects of smaller scale
USD146m
Free Cash flow generated
1. Based on 2017 overall container throughput in the Russian Federation ports (Source: ASOP) and public sources on capacity.
14
GLOBAL PORTS INVESTMENTS PLC
– Focus on core (maritime) activity
– Maximise value from assets
– Generate new revenue streams
audits at all terminals
utilise terminal space
– Expanded VSC coal handling capacity
– Strengthened communication channels
with clients
– Scrutinise all expenses and processes
– Strong, continued focus on cost control
– Focus on greater productivity
– HQ relocated to one principal site in
St. Petersburg, transferring staff from
Moscow and alternative locations in
St. Petersburg
– Optimised workforce scheduling
–
Implemented additional operating
efficiency initiatives
FULLY UTILISE
CORE ASSETS
AND EXISTING
INFRASTRUCTURE
MAXIMISE
EFFICIENCY
AND COST CONTROL
FOCUS ON
CASH FLOW
AND DEBT
REPAYMENT
STRATEGIC PRIORITIES
STRATEGIC OBJECTIVES
ACTIONS IN 2017
RESULTS IN 2017
– Prioritise safety operations
– Conducted design reviews and two safety
– Lost-time incident frequency rate reduced to 1.10 from 1.51 in 2016 and 2.3 in 2015
– Continued focus on bulk cargos to better
contractor safety and Lock-Out Tag-Out
– Further roll-out of additional safety improvements and standards, such as
–
Increased our Global Minimum Requirements compliance to 95% across all terminals
– Handled 2.7 million tonnes of bulk cargo, up 22% year-on-year to Group
record levels
– Heavy Ro-Ro throughput increased 59% year-on-year
– Share of non-container revenue increased to 23% compared to 19% in 2016
+22%
Increase in bulk cargo throughput
– Total Operating Cash Costs grew by only 5% in rouble terms despite 7%
increase in container throughput, 22% increase in bulk cargo throughput
and 2.5% labour inflation
– Adjusted EBITDA margin maintained at 61%
– Decreased operating peaks, optimised maintenance, centralised procurement
and reduced transport outsourcing
61%
Adjusted EBITDA margin
– Optimise CAPEX, supported by well
– Well invested terminals enabled scale
– Generated strong free cash flow of USD 146 million
invested terminals
down of CAPEX requirements
– Preserve cash where possible
– Capital expenditure was focused on
– Use Free Cash Flow to repay debt
planned maintenance and an increase in
annual capacity for coal handling at VSC
– Generated significant positive cash flow
– Repaid additional debt to reduce net debt
levels further
– Decreased Net Debt by an additional USD 81.4 million
– Limited CAPEX of USD 28 million, in line with guidance
– Continued to target annual CAPEX of USD 25-35 million, providing
opportunistic approach to attractive new projects of smaller scale
USD146m
Free Cash flow generated
ANNUAL REPORT 2017
15
STRATEGIC REPORT BUSINESS
REVIEW
Recovery in the Russian container market continued in the second half of 2017, posting 16%
growth in volumes for the full year. This growth was principally driven by a revival in imports,
due to improved consumer demand, along with increased containerisation of exports.
Summary
Against this backdrop, the Group continued
to implement its strategy of harnessing the
recovery of the container market, developing
additional revenue streams, improving
operational efficiency, maximising free cash
flow generation and deleveraging.
The growth of Global Ports’ Consolidated
Marine Container Throughput accelerated
to 11.8% in the second half of 2017, resulting
in 6.8% growth for 2017 as a whole.
The Group also delivered a record 21.9%
year-on-year increase in Consolidated Marine
Bulk Cargo Throughput in 2017, which reached
an all-time high of 2.7 million tonnes.
As a result of these operational achievements,
Global Ports generated Revenue of USD 330.5
million, Gross profit of USD 182.0 million,
Adjusted EBITDA of USD 201.6 million* and
Free Cash Flow of USD 145.9 million* in 2017.
The Group’s Net Debt1 reduced by a further
USD 81.4 million* over the period.
Group financial and operational highlights
for Full Year 2017
– The Russian container market sustained its
recovery in the second half of 2017, resulting
in 16% volume growth for 2017 as a whole.
Total container throughput in the Russian
container market reached 4.4 million TEU.
– The Group’s Consolidated Marine Container
Throughput increased 6.8% to 1,205
thousand TEU in 2017 compared to 1,128
thousand TEU in 2016. Throughput growth
accelerated to 11.8% for the second half of
2017 over the comparable period last year.
– The Group focused on increasing bulk cargo
volumes to improve the utilisation rates at
its terminals. As a result, Consolidated
Marine Bulk Throughput increased by 21.9%
to 2.7 million tonnes in 2017, a record level in
the Group’s history, driven by growth in coal
handling at VSC and bulk cargoes at PLP.
– Revenue in 2017 remained broadly flat at
USD 330.5 million USD (0.3% decline
compared to 2016) compared to USD 331.5
million in 2016. A 5.5% decrease in container
revenue was largely offset by 22.7% growth
in non-container revenue. The reduction in
container revenue was driven by the 11.5%
decline in Revenue per TEU as a result of
pricing initiatives introduced at the
beginning of the year.
– Total Operating Cash Costs increased 20.3%
during 2017 primarily due to the appreciation
of the Rouble against the US dollar. FX
adjusted Total Operating Cash Costs2
increased by just 4.9% despite strong
growth in container and bulk cargo volumes.
– Gross Profit in 2017 increased 25.2% to USD
182.0 million*.
– Adjusted EBITDA in 2017 decreased 10.1% to
USD 201.6 million* mainly due to the decline
in Revenue per TEU and the negative impact
of the Russian rouble appreciation3 on the
Group’s largely RUB-denominated cost base
when translated into US dollars.
In the second half of 2017, adjusted EBITDA
grew 7.2% to USD 104.3 million* compared
to the first half of 2017 and the Adjusted
EBITDA Margin improved to 62.1% versus
59.9% in 1H17 driven by the Group’s volume
recovery and strict cost control.
–
– The operating loss in 2017 amounted to USD
5.3 million as the Gross profit achieved of
USD 182 million was absorbed by one-off
non-monetary items such as Impairment,
Loss from the Group’s share of the result in
joint ventures and Recycling of derivative
losses previously recognised through other
comprehensive income.
– The Group’s capital expenditure on a cash
basis was USD 28.0 million in 2017, in line with
the Group’s mid-term guidance of USD 25-35
million. Capital expenditure was focused on
planned maintenance and an increase in
annual capacity for coal handling at VSC
from 1 million tonnes to 2.5 million tonnes.
– Net cash from operating activities
decreased by USD 21.9 million, or 11.2%,
from USD 195.8 million in 2016, to USD 173.9
million in 2017.
– Free Cash Flow remained strong at USD
145.9 million*, although this was 17.9%
below the level generated in 2016. This
decline was primarily due to a decrease in
cash generated from operations from USD
218.7 million to USD 196.7 million. In the
second half of 2017 the Group generated
USD 75.6 million* of Free Cash Flow, 7.4%
more than in the first half of 2017.
–
– The Group continued to deleverage and
reduced Net Debt4 by a further USD 81.4
million* compared to 2016. The Group
decreased its Total Debt4 by USD 70.2
million* during 2017 with Total Debt4 down
more than USD 467 million* since the NCC
Group acquisition at the end of 2013.
In December 2017, the Moscow Arbitrage
Court approved the terms of a settlement
agreement between the Russian Federal
Antimonopoly Service (FAS) and the Group’s
VSC, PLP and FCT terminals with respect to
the findings of FAS in April 2017 that these
terminals (as well as a number of other
Russian terminal operators) were in breach
of antimonopoly laws in relation to the
pricing of stevedoring services in Russian
ports. The terms of the settlement did not
have any material impact on the Group’s
financial position or cash flow and did not
negatively affect operating activities in any
significant way.
In line with previously disclosed statements
made in March 2015, the Group continues
to prioritise deleveraging over dividend
distribution.
–
Including derivative financial instruments used for economic hedging of the Group’s borrowings.
1.
2. Management estimate, calculated as if effective USD/RUB exchange rate in 2017 was the same as in 2016.
3. The average exchange rate of the Russian rouble appreciated against the US dollar by 14.6% in 2017 compared to 2016.
4.
Including derivative financial instruments used for economic hedging of the Group’s borrowings.
16
GLOBAL PORTS INVESTMENTS PLC
“ The combination of acceleration in our container volumes, strong growth
in bulk cargo throughput, and strict cost control resulted in increased
Adjusted EBITDA and an expansion of Adjusted EBITDA Margin for
the Group in the second half of the year.”
Mikhail Loganov
Chief Executive Officer
Global Ports Management LLC
Results of operations for Global Ports for
the twelve months ended 31 December 2017
The financial information presented in this
review is extracted from the consolidated
financial statements of Global Ports for the
twelve-month period ended 31 December
2017, prepared in accordance with
International Financial Reporting Standards
as adopted by the European Union (IFRS).
This review also includes certain non-IFRS
financial information, identified using
capitalised terms below. For further
information on the calculation of such
non-IFRS financial information, see Additional
Information section of this report and the
section entitled “Non-IFRS Measures: Adjusted
EBITDA and Adjusted EBITDA Margin” below.
Readers of this review should read the entire
announcement together with the Global Ports
Group Condensed Consolidated Financial
Information (unaudited) also released on the
date hereof, and not just rely on the summary
information set out below.
Certain financial information which is derived
from the management accounts is marked in
this announcement with an asterisk {*}.
Rounding adjustments have been made
in calculating some of the financial and
operational information included in this
presentation. As a result, numerical figures
shown as totals in some tables may not be
exact arithmetic aggregations of the figures
that precede them.
Operating Information
The table below sets out the container
and bulk cargo throughput of the Group’s
terminals for the periods indicated. Gross
throughput is shown on a 100% basis for each
terminal, including terminals held through
joint ventures and accounted for using the
equity method.
ANNUAL REPORT 2017
Marine Terminals
Containerised cargo (thousand TEUs)
PLP
VSC
Moby Dik
FCT
ULCT
Finnish Ports
Non-containerised cargo
Ro-Ro (thousand units)
Cars (thousand units)
Other bulk cargo (thousand tonnes)
Inland Terminals
Yanino
Containerised cargo (thousand TEUs)
Bulk cargo throughput (thousand tonnes)
LT
Containerised cargo (thousand TEUs)
Bulk cargo throughput (thousand tonnes)
VEOS (million tonnes)
Total Marine Container Throughput in
Russia (thousand TEUs)
Consolidated Marine Container Throughput
Consolidated Inland Container Throughput
Consolidated Marine Bulk Throughput
Consolidated Inland Bulk Throughput
FY 2017
FY 2016
Change
Abs
%
206.3
370.8
167.6
553.8
74.1
115.6
23.9
95.4
2,731
116.2
498.6
171.8
324.1
2.1
264.6
301.3
155.4
480.4
82.2
187.5
15.0
96.4
2,236
114.8
354.7
174.2
303.7
2.6
1,372.5
1,205.0
171.8
2,694.9
324.1
1,283.9
1,128.5
174.2
2,209.9
303.7
(58.3)
69.5
12.2
73.4
(8.1)
(71.9)
(22.0%)
23.1%
7.8%
15.3%
(9.8%)
(38.4%)
8.9
(0.9)
495
59.2%
(1.0%)
22.2%
1.4
143.9
1.2%
40.6%
(2.4)
20.4
(0.5)
88.6
76.5
(2.4)
485.1
20.4
(1.4%)
6.7%
(18.1%)
6.9%
6.8%
(1.4%)
21.9%
6.7%
CONSOLIDATED MARINE CONTAINER
THROUGHPUT (THOUSAND TEUS)
+6.8%
RO-RO (THOUSAND UNITS)
+59.2%
2016
2017
1,128
1,205
2016
2017
15.0
CONSOLIDATED MARINE BULK THROUGHPUT
(THOUSAND TONNES)
CARS (THOUSAND UNITS)
+21.9%
-1.0%
2016
2017
2,209
2,694
2016
2017
23.9
96.4
95.4
17
STRATEGIC REPORT BUSINESS REVIEW (CONTINUED)
“ The Russian container market continued its strong recovery in the second
half of 2017 which resulted in 16.0% growth for full year 2017 versus 2016.
The main driver of this growth was a 20.0% increase in the handling of
laden import containers. Throughput of laden export containers at Russian
terminals also continued to grow strongly (+12.2% y-o-y), principally due
to increased exports and the wider use of containers in Russia.”
Brian Bitsch
Chief Commercial Officer
Global Ports Management LLC
Overall marine container throughput by
Russian terminals reached 4.43 million TEU in
2017 compared to 3.82 million TEU for 2016.
As a result of market growth, average
container handling capacity utilisation5 for
the market improved to approximately 60%
in December 2017 compared to 47% in 2016.
Container throughput in the Far East and South
of Russia demonstrated higher growth rates of
26.8% y-o-y and 19.7% y-o-y respectively,
underpinned by the shortage of shipping
capacity on the Asia-Europe route that is
handled through the Baltic Basin. The Russian
Baltic Basin, where six of the Group’s seven
marine terminals are located, remains the key
container gateway to Russia handling 50.3% of
the total containers in Russia in 2017, although
with a slower growth rate of 10.7% y-o-y.
The Group’s Consolidated Marine Container
Throughput increased 6.8% to 1,205 thousand
TEU in the reporting period compared to
1,128 thousand TEU in 2016. Following the
introduction of pricing initiatives at the
beginning of 2017, the Group delivered 2%
growth in container volumes in the first half
of 2017, with growth accelerating to 11.8%
y-o-y in the second half of 2017 and 23%
in January-February 2018.
Traditional Ro-Ro handling increased 59.2%
to 23.9 thousand units in the 2017, from 15.0
thousand units in 2016. The key driver of such
growth was the export of Kamaz vehicles
to Asia.
Results of operations of Global Ports for the twelve-month period ended 31 December 2017 and 2016
The following table sets out the principal components of the Group’s consolidated income statement and certain additional non-IFRS data of the
Group for the twelve months ended 31 December 2017 and 2016:
Selected consolidated financial information
Revenue
Cost of sales
incl. impairment of property, plant and equipment and intangible assets
Gross profit
Administrative, selling and marketing expenses
Share of (loss)/profit of joint ventures accounted for using the equity method
Other gains/(losses) – net
Operating (loss)/profit
Finance income
Finance costs
Change in fair value of derivative
Net foreign exchange gains/(losses) on financial activities
Finance income/(costs) – net
Profit before income tax
Income tax expense
Profit/(loss) for the period
Attributable to:
Owners of the Company
Non-controlling interest
Key Non-IFRS financial information
Adjusted EBITDA
Adjusted EBITDA Margin
Cash Cost of Sales
Total Operating Cash Costs
Free Cash Flow
5. Company estimates based on publicly available information and ASOP data.
FY 2017
USD million
FY 2016
USD million
Change
USD million
Change
%
330.5
(148.5)
(11.4)
182.0
(42.7)
(73.3)
(71.3)
(5.4)
2.0
(90.9)
42.1
27.9
(18.8)
(24.2)
(28.8)
(53.0)
(53.0)
0.0
201.6*
61.0%*
(87.1)*
(128.9)*
145.9*
331.5
(186.1)
(67.5)
145.4
(36.7)
(40.4)
(68.8)
(0.5)
1.4
(98.1)
64.4
142.6
110.3
109.9
(48.6)
61.3
61.0
0.2
224.3*
67.7%*
(71.0)*
(107.1)*
177.8*
(1.0)
37.6
56.1
36.6
(6.1)
(32.9)
(2.6)
(4.9)
0.7
7.2
(22.3)
(114.6)
(129.1)
(134.0)
19.8
(114.2)
(114.0)
(0.2)
(0.3%)
(20.2%)
–
25.2%
16.5%
81.3%
3.7%
1086.3%
49.7%
(7.3%)
(34.7%)
(80.4%)
(117.0%)
(122.0%)
(40.7%)
(186.5%)
(186.8%)
(88.3%)
(22.7)
(10.1%)
(16.1)
(21.7)
(31.9)
22.7%
20.3%
(17.9%)
18
GLOBAL PORTS INVESTMENTS PLC
The following table sets forth the components of the consolidated Revenue for the twelve months of 2017 and 2016:
Container handling
Other
Total revenue
The Group’s car handling volumes were
broadly flat y-o-y, decreasing by 1.0% to 95
thousand cars. The Group’s volumes were
impacted by Toyota’s decision to start local
production of one of their models which had
previously been imported as well as PLP’s
continued focus on the premium car segment.
The Group continued to focus on increasing
bulk cargo volumes in 2017 to improve the
utilisation rates at its terminals. As a result,
Consolidated Marine Bulk Throughput
increased by 21.9% (485 thousand tonnes)
to 2,695 thousand tonnes. The growth in
Consolidated Marine Bulk Throughput was
primarily driven by growth in export coal
handling at VSC and an increase in scrap metal
and other export bulk cargo handling at PLP.
In response to high demand for coal handling
services the Group increased its coal handling
capacity at VSC in 2017 which has already
reached its planned high utilisation levels. The
Group have no plans to increase coal capacity
at VSC further given the strong recovery of
the container market.
FY 2017
USD million
FY 2016
USD million
Change
USD million
254.8*
75.7*
330.5
269.8*
61.7*
331.5
(15.0)
14.0
(1.0)
Change
%
(5.5%)
22.7%
(0.3%)
Revenue
In 2017 revenue was broadly flat, decreasing
by USD 1.0 million or 0.3% y-o-y to USD
330.5 million 6. The decline in container
handling revenue was offset by an increase
in other revenue.
Revenue from container handling declined
5.5%, or USD 15.0 million to USD 254.8
million*. This decline was driven by a 11.5%*
fall in consolidated Revenue per TEU due to
pricing initiatives introduced at the beginning
of the year, which was partially offset by the
Group’s 6.8% growth in consolidated
container throughput.
Other revenue increased by 22.7%, or USD
14.0 million, to USD 75.7 million*, driven by
coal and other cargo handling. Revenue from
other services, primarily related to Russian
rouble-priced railway services at VSC7, grew
along with higher volumes of services provided
by VSC due to increased container throughput.
Ro-Ro cargo handling volumes also grew by
59.2% in the period.
The share of non-container revenue in
consolidated revenue of the Group increased
from 18.6%* in the 2016 to 22.9%* in 2017.
In order to increase the attractiveness of its
ports, in 2017 Global Ports introduced Russian
rouble-based pricing for services offered to
Russian freight-forwarders and cargo owners.
Cost of sales
Cost of sales decreased by USD 37.6 million,
or 20.2%, from USD 186.1 million in 2016 to USD
148.5 million in 2017. The decrease was primarily
driven by a significant reduction in the non-cash
property, plant and equipment impairment
charge of USD 11.4 million (versus USD 67.5
million in 2016). Cash Cost of Sales increased by
22.7% from USD 71.0 million* in 2016 to 87.1
million* in 2017. Property, plant and equipment
depreciation increased by 8.0% from USD 34.3
million in 2016 to USD 37.0 million in 2017,
primarily driven by the appreciation of
the Russian rouble mentioned below.
The increase in the Cash Cost of Sales was
largely driven by the 14.6% appreciation of
the average exchange rate of the Russian
rouble against the US dollar in 2017. As the
significant majority of the Group’s Cash Cost
of Sales items are Rouble-denominated, the
volatility of the exchange rate has a significant
impact on costs presented in US dollars. Cash
Cost of Sales adjusted for foreign exchange
rate change grew 6.9%*8 on the back of
6.8% growth in container throughput and
21.9% growth in Consolidated Marine
Bulk Throughput.
Cost of sales
The following table sets out a breakdown by expense of the Cost of sales for 2017 and 2016:
Depreciation of property, plant and equipment
Amortisation of intangible assets
Impairment of property, plant and equipment and intangible assets
Staff costs
Transportation expenses
Fuel, electricity and gas
Repair and maintenance of property, plant and equipment
Purchased services
Taxes other than on income
Other operating expenses
Total cost of sales
Cash cost of Sales
FY 2017
USD million
FY 2016
USD million
Change
USD million
37.0
12.9
11.4
41.9
8.3
7.6
7.1
6.8
5.2
10.2
148.5
87.1*
34.3
13.2
67.5
34.2
6.6
5.7
6.2
5.3
4.3
8.6
186.1
71.0*
2.8
(0.3)
(56.1)
7.7
1.7
1.8
0.9
1.5
0.8
1.7
(37.6)
16.1
Change
%
8.0%
(2.0%)
(83.1%)
22.4%
25.7%
32.1%
13.7%
29.0%
19.5%
19.4%
(20.2%)
22.7%
6.
On a 100% basis total revenue of the Russian Ports segment amounted to USD 360.5 million, of which USD 277.0 million* accounted for container handling and USD 83.4
million* for other services.
7. The average exchange rate of the Russian rouble appreciated against the US dollar by 14.6% in 2017 compared to 2016.
8. Management estimate, calculated as if effective USD/RUB exchange rate in 2017 was the same as in 2016.
ANNUAL REPORT 2017
19
STRATEGIC REPORT TOTAL OPERATING CASH COSTS ADJUSTED
FOR FX (USD MILLION)10
+5%
2016
2017
107.1
112.4
TOTAL OPERATING CASH COSTS
(USD MILLION)
+20.3%
2016
2017
107.1
128.9
CASH CAPEX (USD MILLION)
2014
24
2015
12
2016
18
2017
28
Impairment of property, plant and
equipment and intangible assets
The Group follows its accounting policies
to test goodwill and other non-financial
assets for possible impairment or reversal
of impairment. For LT, the inland terminal
near St. Petersburg, the fair value of property,
plant and equipment has been assessed using
comparative market method taking into
account the agreement for its sale signed in
August 2017. Based on the procedure above
impairment charges of USD 11.4 million
for LT were recognised. This impairment
charge was fully allocated to property,
plant and equipment.
Gross profit
Gross profit increased by USD 36.6 million,
or 25.2%, from USD 145.4 million in 2016 to
USD 182.0 million in 2017. This decrease was
due to the factors described above.
Administrative, selling and
marketing expenses
Administrative, selling and marketing
expenses increased by USD 6.1 million, or
16.5%, from USD 36.7 million in 2016 to USD
42.7 million in 2017. This was primarily due to
an increase of USD 3.9 million in Staff costs,
a USD 0.7 million increase in Operating lease
costs as well as an increase of USD 1.3 million
in Other expenses which were partially offset
by a USD 0.5 million decrease in Taxes. As a
substantial part of the Group’s Administrative,
selling and marketing expenses are Russian
rouble-denominated, the volatility of the
exchange rate has a significant impact on
costs presented in US dollars. The average
exchange rate of the Russian rouble
appreciated against the US dollar by 14.6%
in the 2017 compared to 2016. Administrative,
selling and marketing expenses adjusted for
foreign exchange rate change increased by
0.9%*9 in 2017.
Share of profit/(loss) of joint ventures
accounted for using the equity method
The Group’s share of loss from joint ventures
increased from USD 40.4 million in 2016 to
USD 73.3 million in 2017. This result was
principally due to unfavourable results from
BUSINESS REVIEW (CONTINUED)
Vopak E.O.S (Estonia), which were caused
primarily by a structural deterioration of the
business environment in which the terminal
operates, which is heavily dependent on the
flows of Russian oil products. As a result, the
Group has taken an impairment charge of
USD 71.6 million on its investment. The
investment in Vopak E.O.S has been impaired
to the carrying amount of USD 7.3 million.
Other gains/(losses) – net
Other gains/(losses) amounted to a net
loss of USD 71.3 million in 2017, compared to
a loss of USD 68.8 million in 2017. This was
primarily due to an increase in the recycling of
derivative losses previously recognised through
other comprehensive income from USD 63.2
million in 2016 to USD 69.6 in 2017. The nature
of this loss is the following: upon acquisition of
NCC at the end of 2013 the Group designated
an acquired derivative as a cash flow hedge
instrument on one of NCC’s loans. At the end
of 2015 the Group partly restructured its debt
portfolio. In the course of this restructuring
the loan has been terminated. This resulted
in the termination of the cross-currency
interest rate swap arrangement explained
above. The termination of the cross-currency
interest rate swap arrangement together with
the settlement of the related loan led to the
cancellation of the related cash flow hedge
and non-cash loss recycling in the Group’s
consolidated income statement during the
contractual maturity of the settled loan. As of
31 December 2017 the loss was recycled in full.
Operating profit/(loss)
The Group’s operating loss increased by USD
4.9 million from USD 0.5 million in 2016 to
USD 5.4 million in 2017 due to the factors
described above.
Finance income/(costs) – net
Finance income/(costs) – net changed from
income of USD 110.3 million in 2016 to a cost
of USD 18.8 million in 2017. This move was
primarily due to the decrease in foreign
exchange gains on financing activities from
USD 142.6 million in 2016 to USD 27.9 million in
2017. This was a result of a lower appreciation
of the Russian rouble, which in turn led to
reduced gains from the translation of US
Share of profit/(loss) of joint ventures accounted for using the equity method
VEOS
MLT
CD Holding
FY 2017
USD million
FY 2016
USD million
Change
USD million
(77.5)
5.2
(1.0)
(46.4)
6.6
(0.7)
(31.1)
(1.4)
(0.3)
Change
%
67.0%
(21.7%)
50.3%
Total share of profit/(loss) of joint ventures
(73.3)
(40.4)
(32.9)
81.3%
The average exchange rate of Russian rouble appreciated against the US dollar by 14.6% in 2017 compared to 2016.
9.
10. Management estimate, calculated as if effective USD/RUB exchange rate in 2017 was the same as in 2017.
20
GLOBAL PORTS INVESTMENTS PLC
DEBT MATURITY PROFILE
AS OF 31 DECEMBER 2017(USD MILLION)
2018
50
2019
25
2020
64
155
2021
2022
2023
and after
CONSISTENT NET DEBT REDUCTION
(USD MILLION)
348
355
1,350
1,208
1,048
947
866
dollar-denominated borrowings in the Group’s
subsidiaries. Further, a lower positive change
in the fair value of derivative instruments11
of USD 42.1 million in 2017 compared to a
positive change of USD 64.4 million in 2016
contributed to the movement in finance
income/(costs) – net.
Profit/(loss) before income tax
Profit/(loss) before income tax decreased
from a profit of USD 109.9 million in 2016 to
a loss of USD 24.1 million due to the factors
described above.
Income tax expense
In 2017, the income tax expense was USD 28.8
million, compared to USD 48.6 million in 2016.
The difference in the effective tax rate from the
normally applicable Russian statutory tax rate
of 20% was largely driven by the effect of
expenses and losses not deductible for tax
purposes, withholding tax on undistributed
profits and non taxable results of joint ventures.
Profit/(loss) for the period
The company reported a loss of USD 53.0
million in 2017 compared to a profit of USD
61.3 million in 2016 due to the factors
described above.
Liquidity and Capital Resources
General
As at 31 December 2017, the Group had USD
130.4 million in cash and cash equivalents.
The Group’s liquidity needs arise primarily in
connection with repayments of principal and
interest payments, and the capital investment
programmes and ongoing operating costs of
its operations. In 2017 the Group’s liquidity
needs were met primarily by cash flows
generated from its operating activities. The
management of the Group expects to fund its
liquidity requirements in both the short and
medium term with cash generated from
operating activities and borrowings.
As a result of the shareholding or joint venture
agreements at Moby Dik, the Finnish Ports,
Yanino and Vopak E.O.S., the cash generated
from the operating activities of each of the
entities in those businesses is not freely
available to fund the other operations and
capital expenditures of the Group or any other
businesses within the Group and can only be
lent to an entity or distributed as a dividend
with the consent of the other shareholders to
those arrangements.
As of 31 December 2017, the Group had USD
996.4 million of total borrowings12, of which
USD 49.5 million comprised current
borrowings and USD 946.8 million comprised
Cash flows
The following table sets out the principal components of the Group’s consolidated cash flow
statement for 2017 and 2016:
FY 2017
USD million
FY 2016
USD million
Change
USD million
Change
%
2013
2014
2015
2016
Cash generated from operations
Tax paid
Net cash from operating activities before
dividends received from joint ventures and
adjusted for income tax
Dividends received from joint ventures
Net cash from operating activities
Net cash used in investing activities
Purchases of intangible assets
Purchases of property, plant and equipment
Proceeds from sale of property, plant and
equipment
Loans granted to related parties
Loan repayments received from related parties
Interest received
Net cash used in financing activities
Proceeds from borrowings
Repayments of borrowings
Interest paid
Proceeds from derivative financial instruments
Other
Free Cash Flow (Net cash from operating
activities – Purchase of PPE)
196.7
(33.5)
218.7
(28.1)
(22.0)
(5.4)
(10.0%)
19.2%
2017
163.2
10.8
173.9
(34.6)
(1.8)
(28.0)
0.3
(7.5)
1.2
1.3
(129.1)
–
(57.5)
(89.1)
20.3
–
190.6
5.3
195.8
(25.6)
(0.1)
(18.0)
1.0
(9.9)
0.4
1.0
(175.9)
829.3
(943.0)
(70.3)
11.4
(0.7)
(27.4)
5.5
(14.4%)
103.8%
(21.9)
(11.2%)
(9.0)
(1.7)
(10.0)
35.2%
1464.4%
55.4%
(0.7)
2.4
0.7
0.3
46.7
(829.3)
885.5
(18.8)
8.9
0.7
(71.6%)
(24.2%)
166.4%
29.6%
(26.6%)
–
(93.9%)
26.8%
78.1%
–
145.9*
177.8*
(31.9)
(17.9%)
11. During 2015 and 2016 the Group entered into three cross-currency swap arrangements to exchange its RUR-denominated liabilities related to the newly issued bonds (three
issues of RUR 5,000 million each) with fixed interest rate of approximately 13% in the amount RUR 15,000 million to USD-denominated debt with the lower fixed interest rate.
12. Including derivative financial instruments.
ANNUAL REPORT 2017
21
STRATEGIC REPORT BUSINESS REVIEW (CONTINUED)
“ Balance sheet discipline continues to be critical for Global Ports and
we remain highly focused on deleveraging. We reduced our net debt by
another USD 81.4 million in 2017 and since the NCC acquisition, the
Group’s total debt position has been reduced by almost half a billion
US dollars.”
1H 2018
2H 2018
2019
2020
2021
2022 and after
Total
USD million
37.7
11.9
24.9
63.9
155.2
702.8
996.4
As at 31 December 2017, the carrying amounts
of the Group’s borrowings were denominated
in the following currencies:
Rouble
US dollar
Total
USD million
277.7
797.0
1,074.8
As at 31 December 2017, the carrying amounts
of a majority of the Group’s borrowings
denominated in Russian roubles, in the
amount of USD 267.8 million, were swapped
into US dollars.
Alexander Roslavtsev
Chief Financial Officer
Global Ports Management LLC
non-current borrowings. As at 31 December
2017, the Group had no undrawn borrowing
facilities. See also “Capital resources”.
Net cash from operating activities
Net cash from operating activities decreased
by USD 21.9 million, or 11.2%, from USD 195.8
million in 2016, to USD 173.9 million in 2017.
The decrease in net cash from operating
activities was primarily due to a USD 22.0
million, or 10%, decline in the cash generated
from operations in 2017 compared to 2016,
which was partially offset by the USD 5.5
million or 103.8% increase in Dividends
received from joint ventures. This growth was
driven by a dividend payment declared by
VEOS previously and paid in 2017.
Net cash used in investing activities
Net cash used in investing activities increased
by USD 9.0 million, or 35.2%, from USD 25.6
million in 2016 to USD 34.6 million in 2017.
This increase was primarily driven by a USD
10.0 million or 55.4% increase in Purchases
of property, plant and equipment from USD
18.0 million in 2016 to USD 28.0 million in 2017.
Purchases of property, plant and equipment
were in line with the previously announced
mid-term CAPEX guidance of USD 25-35
million. The Group’s modern and already
well-invested terminals allow for lower capital
investments without compromising the
efficiency and safety of the operations.
Capital expenditure was focused on planned
maintenance and an increase in capacity for
coal handling at VSC from 1 million tonnes to
2.5 million tonnes. Purchases of intangible
assets increased from USD 0.1 million in 2016
to USD 1.8 million in 2017. The primary use of
these investments were: (a) an upgrade of the
IT platform for the terminal operation system
at PLP; and (b) advance payments for a new
ERP platform.
Net cash used in financing activities
Net cash used in financing activities decreased
by USD 46.7 million, or 26.6%, from USD 175.9
million in 2016 to USD 129.1 million 2017. The
decrease in net cash used in financing activities
was primarily due to the decrease in net
proceeds and repayment of borrowings and
finance lease principal payments by USD 56.0
million or 48.1% from USD 116.2 million in 2016
to USD 60.3 million in 2017. This decrease is in
line with the Group’s debt repayment schedule.
Capital resources
The Group’s financial indebtedness consists
of bank borrowings, bonds, loans from third
parties, finance leases liabilities and net
derivative financial instruments and reached
USD 996.4 million as at 31 December 2017.
As of that date, all of the Group’s borrowings
were secured by equity interests in certain
Group members or by guarantees and
suretyships granted by certain Group
members. Certain of these borrowings
contain covenants requiring the Group
and the borrower to maintain specific
indebtedness to Adjusted EBITDA and other
ratios, as well as covenants having the effect
of restricting the ability of the borrower
to transfer assets, make loans and pay
dividends to other members of the Group.
The weighted average interest rate of the
Group’s debt portfolio is 6.8%, including the
effects of swap arrangements.
As at 31 December 2017, the Group had
leverage of Net debt to Adjusted EBITDA ratio
of 4.3* (compared to a ratio of 4.2* as at
31 December 2016 and 4.4* as at 30 June
2017). The following table sets out the
maturity profile of the Group’s total
borrowings (including finance leases)
and net derivative financial instruments
as at 31 December 2017.
22
GLOBAL PORTS INVESTMENTS PLC
Reconciliation of Additional data (Non-IFRS) to the Consolidated Financial Information
for the twelve-month period ended 31 December 2017
Reconciliation of Adjusted EBITDA to Profit for the period
Profit/(loss) for the year
Adjusted for
Income tax expense
Finance (income)/costs – net
Amortisation of intangible assets
Depreciation of property, plant and equipment
Impairment of goodwill and property, plant and
equipment
Other losses – net
Share of loss of joint ventures accounted for
using the equity method
FY 2017
USD million
FY 2016
USD million
Change
USD million
Change
%
(53.0)
61.3
(114.2)
(186.5%)
28.8
18.8
13.0
38.0
11.4
71.3
48.6
(110.3)
13.2
34.8
67.5
68.8
(19.8)
129.1
(0.3)
3.2
(56.1)
2.6
(40.7%)
(117.0%)
(2.0%)
9.1%
(83.1%)
3.7%
73.3
40.4
32.9
81.3%
Adjusted EBITDA*
201.6*
224.3*
(22.7)
(10.1%)
Reconciliation of Adjusted EBITDA Margin
Revenue
Adjusted EBITDA*
Adjusted EBITDA Margin*
FY 2017
USD million
FY 2016
USD million
Change
USD million
330.5
201.6*
331.5
224.3*
61.0%
67.7%
(1.0)
(22.7)
Change
%
(0.3%)
(10.1%)
Reconciliation of Total Operating Cash Costs to Cost of sales and administrative,
selling and marketing expenses
Cost of sales
Administrative, selling and marketing expenses
Total
Adjusted for
Impairment of goodwill and property, plant
and equipment
Depreciation of property, plant and equipment
Amortisation of intangible assets
FY 2017
USD million
FY 2016
USD million
Change
USD million
148.5
42.7
191.2
186.1
36.7
222.7
(37.6)
6.1
(31.5)
Change
%
(20.2%)
16.5%
(14.1%)
(11.4)
(38.0)
(13.0)
(67.5)
(34.9)
(13.2)
56.1
(3.2)
0.2
(83.1%)
9.1%
(1.8%)
Total Operating Cash Costs*
128.9*
107.2*
21.7
20.3%
Reconciliation of Cash Costs of Sales to Cost of sales
Cost of sales
Adjusted for
Impairment of goodwill and property, plant and
equipment
Depreciation of property, plant and equipment
Amortisation of intangible assets
Cash Cost of Sales*
FY 2017
USD million
FY 2016
USD million
Change
USD million
Change
%
148.5
186.1
(37.6)
(20.2%)
(11.4)
(37.0)
(12.9)
(67.5)
(34.3)
(13.2)
87.1*
71.0*
56.1
(2.8)
0.3
16.1
(83.1%)
8.0%
(2.0%)
22.7%
ANNUAL REPORT 2017
23
STRATEGIC REPORT
BUSINESS REVIEW (CONTINUED)
Reconciliation of Cash Administrative, Selling and Marketing Expenses to Administrative,
selling and marketing expenses
Administrative, selling and marketing expenses
Adjusted for
Depreciation of property, plant and equipment
Amortisation of intangible assets
Cash Administrative, Selling and
Marketing expenses*
FY 2017
USD million
FY 2016
USD million
Change
USD million
42.7
36.7
6.1
Change
%
16.5%
(1.0)
(0.0)
(0.6)
(0.0)
(0.4)
(0.0)
72.7%
40.3%
41.7
36.1
5.6
15.6%
Reconciliation of Net Debt and Total Debt to Borrowings
Non-current borrowings
Current borrowings
Adjusted for
Derivative financial instruments
(non-current assets)
Derivative financial instruments
(current assets)
Total Debt*
Adjusted for
Cash and cash equivalents
Net Debt*
As at
31.12.2017
USD million
As at
31.12.2016
USD million
Change
USD million
1,005.7
69.1
1,040.9
78.7
(35.2)
(9.6)
Change
%
(3.4%)
(12.2%)
(58.8)
(35.5)
(23.3)
65.6%
(19.5)
(17.4)
(2.1)
12.2%
996.4*
1,066.6*
(70.2)
(6.6%)
(130.4)
(119.3)
(11.2)
9.4%
865.9*
947.3*
(81.4)
(8.6%)
Reconciliation of Free Cash Flow to Net cash from operating activities
Net cash from operating activities
Adjusted for
Purchases of property, plant and equipment
Free Cash Flow
FY 2017
USD million
FY 2016
USD million
Change
USD million
Change
%
173.9
195.8
(21.9)
(11.2%)
(28.0)
(18.0)
(10.0)
55.4%
145.9
177.8
(31.9)
(17.9%)
24
GLOBAL PORTS INVESTMENTS PLC
CORPORATE SOCIAL RESPONSIBILITY
INVESTING IN PEOPLE,
COMMUNITIES, SOCIETY
AND THE ENVIRONMENT
Introduction
At Global Ports, our corporate social
responsibility (CSR) strategy is an integral part
of realising our core strategic priorities. The
objectives for our business and CSR strategies
are the same – to generate sustainable
shareholder value over the long term.
Our CSR strategy embraces five key objectives
that support delivery of the Group’s overall
commercial strategy. As a sustainable and
responsible organisation, our objectives are to:
– Operate with integrity;
– Deliver economic and social benefit to the
communities we serve;
– Build employee advocacy for the Group
and its role in the community;
– Manage the environmental impacts of our
business operations; and
– Communicate our commitment to corporate
responsibility openly and transparently.
Safety
Safety is a top priority for Global Ports. We are
always mindful that the nature of our industry
means our people are regularly exposed to
activities that put them at risk. Therefore our
ultimate safety goal is zero-harm, with all our
people returning home safely every day.
Strong leadership and management
involvement is critical to building a responsible
safety culture. At Global Ports, our Board and
Senior Executives understand that the tone is
set from the top and are fully committed to
driving forward our safety agenda.
As a company, our goal is to build and embed
a sustainable safety culture that changes the
way our people think about health and safety,
that is easy for our people to understand and
that is simple to implement, based on three
core principles:
– Providing a safe working environment;
– Providing comprehensive implementation
plans built around best practice safety and
compliance standards; and
–
– Offering comprehensive training
programmes focused on risk awareness
and reduction.
Health & Safety forms part of the
induction process for new employees and
for any visitors visiting our production
areas. We conduct regular safety-training
exercises for staff covering general safety
issues including: fire drills; first aid;
electrical safety; traffic rules around
facilities; and safe working at height.
In addition, the Group runs regular
specialised training programmes for its
employees that need more specialised
training for example in the safe operation
of hazardous production facilities or
handling of hazardous materials.
Ensuring a safe working environment
We expect, and require, our people to put safety
first in everything they do. To achieve this, we
invest in Safety, providing suitable resources,
training and time with priority given to
addressing behavioural and cultural attitudes.
At the same time, we recognise that the work
place is a dynamic environment so we
constantly review our working processes to
ensure they are the safest they can be.
The Group has put in place a focused safety
management framework that covers all aspects
of performance monitoring, benchmarking,
target-setting and training and development.
We ensure a safe working environment in
a number of ways:
– By establishing critical minimum safety
standards in line with industry best practice
(Global Minimum Requirements).
– Through regular safety audits that
benchmark our facilities’ compliance in
implementing our GMRs.
– Through regular safety and risk awareness
training for our staff and contractors.
– Through involvement in the Annual Safety
Day held jointly with APM Terminals which
aims to highlight the central importance of
safety and increase individual commitment
to ensuring a safe work place.
– Through regular monitoring of the health
and wellbeing of our employees aimed
at improving and maintaining their
wellbeing and reducing the incidence
of occupational illnesses.
Governance Framework
The Board is responsible for setting the
Group’s health and safety strategy, and for
creating the overarching policies and safety
standards that set the guidelines for safety
throughout all of Global Ports’ operations.
The Senior Executives of the Group and
its companies oversee implementation of
policy, strategy and initiatives across all our
businesses. They regularly review Business
Unit commentary and performance reports
in order to monitor the safety performance
of individual business units.
“At Global Ports we believe that promoting a culture of responsible
business is fundamental to our long-term success and to being
acknowledged as a world-class operator of ports.”
Britta Dalunde
Chairman of the Audit and Risk Committee
Independent Non-Executive Director
ANNUAL REPORT 2017
25
STRATEGIC REPORT CORPORATE SOCIAL RESPONSIBILITY (CONTINUED)
The Senior Executives supply the Board with
quarterly performance reports for discussion.
The Board conducts an annual review of the
Group’s safety performance and agrees with
the Senior Executives a plan of action and
targets for the next twelve months.
How We Performed in 2017
The Group has delegated to the Chief
Operational Officer the monitoring and
measurement of health and safety
performance through a number of metrics.
Our performance in 2017 showed clear signs
of improvement with our main safety metrics
continuing the positive trend of recent years.
We are pleased that the 2017 safety audit
at our seven terminals produced an overall
average score of 95% compliance with our
Global Minimum Requirements.
We also made further progress in reducing
the frequency rate of injuries suffered at our
facilities (LTIFR), which has continued to
steadily decline. It is also very pleasing to report
that there were no fatalities recorded at the
Group’s terminals in 2017, maintaining Global
Ports level of zero fatalities since becoming a
listed company.
Where incidents do occur, all are fully
investigated and examined at the highest level
as required under our safety rules and corrective
actions and preventative measures are put in
place to ensure that the incident does not
reoccur and future risks are mitigated.
Our priorities in 2018
As part of our ongoing strategy to transform
the safety ethos of our company, in 2018 our
priorities will be to focus on:
–
improving our monitoring, reporting and
reviewing of safety, including adopting
a more rigorous approach to incident
reporting and follow-up.
Implementing a comprehensive
behavioural-change package of measures,
including increasing the leadership’s
involvement in safety initiatives like the
annual Safety Day.
Implementing our External Contractor safety
programme to align contractor selection
more closely to our internal safety policies.
–
–
Employee Engagement
We employ over 2,400 people and our success
depends on our ability to attract, develop and
retain the best talent at every level across our
business. We aim to provide a safe, stimulating
and enjoyable working environment that
inspires our people to do their best.
Training & Development
Employee development and training is a
significant part of what we offer our people.
26
We want to provide a dynamic and exciting
workplace that is attractive to both existing
employees and new recruits.
We offer a variety of professional training
and development courses to all our people
at whatever level. We provided career
opportunities across the Group for our high
potential employees. And we place a strong
emphasis on identifying and nurturing the
next generation of leaders in the business.
Recognising and rewarding our employees
in a fair and transparent way ensures that
our people feel incentivised to succeed, that
outstanding performance is recognised, and
that individuals are differentiated based on
abilities and results. The Group has performance
management systems in place throughout its
operations to ensure that corporate and
individual goals are clearly aligned.
Human Rights & Diversity
We believe all people are entitled to
fundamental rights and freedoms and
creating an equal fair and diverse workplace
is a priority for the Group. Therefore we are
committed to upholding the rights of everyone
who works for the Group and those who have
dealings with it. Our approach to human rights
and diversity is based on our Code of Conduct
and underpinned by our values.
We support the standards of fair treatment
and non-discrimination, and we work to
prevent and mitigate adverse human rights
impacts in our operations. We implement our
employees’ human rights protections through
our Code of Conduct. Through our CSR and
HR teams we monitor and work to address
any alleged human rights complaints or
concerns, whether from our employees or
third-parties. Equally, we recognise the
importance of gender diversity within the
Group and the benefits it brings to the
business. Across the Group females represent
36% of the employees, including 32% of
production staff and 65% of administrative
staff. At a senior leadership level, 30% of the
Board are female and 24% of the senior
executive, as of 31 December 2017.
Engaging with our people
We believe that open and transparent
communication is vital to a successful
workplace. We recognise that regular
engagement with our workforce helps
to motivate them to do their best.
We provide updates on our strategic priorities
and business performance through a variety
of communication channels including
management briefings and internal emails.
We are taking steps to further improve
communications with our staff, with the
construction of a dedicated company intranet
which will be launched in the near future.
We also seek regular feedback from our
employees to measure engagement and
gather important insights about our business.
We conduct regular staff surveys and all
feedback is reviewed, and any important
issues identified for further review.
Environment
Global Ports is committed to protecting the
environment and improving the quality of life
of the local communities wherever it operates.
Being good neighbours to the communities
where we operate also means continuing to
reduce our impact on the environment.
The Group aims to comply strictly with all
applicable requirements of environmental laws
in the regions where it operates. Responsibility
towards the environment is embedded in all
of Global Ports’ investment programmes.
Across our port terminals, we continue to
prioritise schemes that reduce our energy
and water usage and improve our waste
management performance. The Group
regularly invests in energy efficiency and
environmental protection related projects.
These projects include: construction and
upgrading of waste water treatment facilities;
installation of energy efficient lighting;
renovation and renewal of storm water
drainage systems; construction of new coal
dust protection facilities; and the installation
of energy-efficient heating systems.
Waste Management
Global Ports aims to reduce the amount of
waste that its port terminals produce, re-use
resources where possible and dispose of waste
in a way that minimises the environmental
impact while maximising operational and
financial efficiency.
Generally the activities of the Group do not
lead to the formation of any solid or dangerous
waste products. However, the Group does
monitor and analyse its waste management
activities, and each facility regularly reviews
opportunities for waste recycling and reuse
of materials. Global Ports is also working hard
with its industry partners to reduce the impact
of shipping and port operations on water
quality at its port terminals.
We are concentrating hard on reducing our
environmental footprint. Specifically, we are
looking at ways to increase our energy efficiency
and also reduce air emissions. For instance, we
are working with our customers to try to find
ways to reduce the impact that visiting vessels
have on the ports’ air quality. All non-recyclable
waste such as waste oil is carefully stored in
ways designed to prevent any harmful
substances escaping into the environment.
Global Ports also makes strenuous efforts
to manage water resources effectively and
minimise the impact of negative water quality
GLOBAL PORTS INVESTMENTS PLC
Energy Usage
Electricity consumption per 1 tonne of cargo
handled by Russian Ports’ marine terminals
Fuel consumption per 1 tonne of cargo handled
by Russian Ports’ marine terminals
Unit
2015
2016
2017
kWh
2.38
2.38
2.15
l/t
0.47
0.46
0.44
on the environment. Recycling waste water
is a top priority for Global Ports.
the largest port terminals is centralised and
actioned at Group level by the corporate centre.
VSC signed an agreement with both
administrations: city of Nakhodka and
Primorsk Territory. According to the terms
of the agreement around, 670 million RUR
will be invested in 2018 – 2021 into various
environmental protection measures including
additional water treatment facilities, coal dust
suspension systems and other initiatives.
Governance and Ethics
The Group recognises that its reputation and
good name are amongst its most valuable
assets, which could easily be lost by actual
or suspected corrupt or unethical behaviour.
We maintain a strict stance against bribery
and corruption and operate a zero tolerance
regime to all forms of corruption. Global
Ports’s Anti-Corruption Policy sets out the
goals and objectives, the defining principles
and the role of the Board and executive
management in executing the Group’s zero
tolerance approach to these matters.
The Group has an established anti-corruption
compliance framework in place as part of its
risk management arrangements. It is based
on the Group’s Code of Conduct which sets
out how we should conduct our business.
Employees are encouraged to approach
management and legal department whenever
they have questions about what to do in
difficult situations and Internal audit and
Independent Board Members when they want
to voice concerns about known violations of
the Group’s policy.
The Group’s whistleblowing service, enables
employees, contractors, suppliers and members
of the public to report any significant concerns
about the business, or behaviour of individuals.
The new system was established in 2017. The
Group aims to provide anti-corruption training
to all line managers, including those working in
central office functions.
Supply Chain Management
The Group enjoys good relations with its
suppliers and is working closely with our key
suppliers to establish high operating standards
and ensure accountability through the supply
chain. The Group operates to a strict set of
guidelines that are covered by its Procurement
policy. As a matter of policy, all procurement for
ANNUAL REPORT 2017
All tenders are conducted via publication of
RFQ on open website, creating transparency
and equal rights for all potential suppliers.
The process is conducted in accordance with
the Procurement Standard issued by the
organisation. Our procurement team is also
able to access information and advice on global
best practice through its involvement with the
APM Terminals global networks.
Our Communities
The Group believes that good community
relations are important to the long-term
development and sustainability of its operations.
Global Ports is committed to supporting the
local communities where it operates and
improving the quality of life for its employees
and their communities through supporting
community-driven social investment. This is the
philosophy that underpins the Group’s approach
to social investment.
Global Ports funds a variety of social and
charitable projects. These are focused around
the themes of Health, Education, Culture and
Welfare. Under the Health banner, the Group
supports a variety of sports programmes in its
communities. The Group also backs various
educational programmes and funds welfare
projects, principally those dealing with
vulnerable adults and children.
The Group also prioritises support for social
infrastructure, sponsoring socially important
projects in the regions where it operates, for
instance funding heritage restoration projects.
As a matter of policy, entities and
representatives of legislative, executive or
judiciary authorities, political parties,
commercial entities and individuals or legal
entities associated with them are not eligible
for the Group’s charity and sponsor support.
In 2017, the Group continued its commitment
to key social programmes, providing support
to a number of projects, including:
– VSC, FCT, ULCT and PLP support of the
Life Line Foundation;
– VSC support for the repairs and purchase
of medicine for the baby orphanage at
Nakhodka Children’s Hospital; and
– FCT, PLP and ULCT donations to the
St. Petersburg Public Organisation,
“Interrupted Flight”, in order to provide
financial aid to the St. Petersburg
metro bomb victims.
LTIFR
2014
2015
2016
2017
2.13
2.3
1.51
1.10
DIVERSITY: FEMALES AS A PERCENTAGE
OF TOTAL STAFF
36%
64%
Female
Male
DIVERSITY: FEMALES AS A PERCENTAGE
OF DEPARTMENT STAFF
PRODUCTION ADMINISTRATION
32%
68%
35%
65%
Male
Female
DIVERSITY: LENGTH OF SERVICE (YEARS)
15%
30%
26%
29%
Less that 5 years
5-10 years
10-20 years
More than 20 years
27
STRATEGIC REPORT
28
GLOBAL PORTS INVESTMENTS PLC
CORPORATE
GOVERNANCE
Effective governance is central to Global Ports’
long-term success. The Group has assembled a skilled,
diverse Board of Directors to help deliver high standards.
ANNUAL REPORT 2017
29
CORPORATE GOVERNANCE CORPORATE GOVERNANCE
STRONG INSTITUTIONS,
RIGOROUS OVERSIGHT
Global Ports has a diverse set of stakeholders, from international institutions
holding our shares and bonds, to our customers, employees, regulators and
communities. Made up of seasoned industry professionals, the Board of Directors
is committed to acting in the best interest of all stakeholders.
Though the Group is not subject to the
provisions of UK Corporate Governance Code,
it seeks to maintain the highest global
standards of corporate governance and adopt
best practices from international peers. Strong
corporate governance institutions and
transparency make the Group more efficient
and ensure Global Ports remains a standard
bearer for the Russian port sector.
Role of the Board of Directors
Global Ports is governed by its Board of
Directors (“the Board”), which is collectively
responsible under the Group’s corporate
governance framework to the shareholders
for the Group’s successful performance. Its
goal is to promote adherence to best-in-class
corporate governance.
The Board’s role is to provide entrepreneurial
leadership to the Group by setting the
corporate strategic objectives, ensuring that
the necessary financial and human resources
are in place to meet those objectives and
reviewing management performance. The
Group seeks directors who bring strong track
records and a deep understanding of the
industry. The Board sets the Group’s values
and standards as well as ensuring that
employees understand and meet all
obligations to shareholders. The Board
maintains a sound system of internal control
and enterprise risk management to safeguard
the Group’s assets and shareholders’ and
bondholders’ investments.
The latest version of the Terms of Reference
of the Board of Directors was approved by the
shareholders on 16 October 2012 and came
into force on 28 November 2012. It is available
on the Global Ports’ website.
Code of ethics and conduct
Global Ports’ code of ethics and conduct
outlines the general business ethics and
acceptable standards of professional
behaviour that we expect of all our Directors,
employees and contractors. This code, given
to all new staff as part of their induction,
means that everyone at Global Ports is
accountable for their own decisions and
30
conduct. As well as general standards
of behaviour, the code covers fraud and
corruption (including approaches on
acceptance of gifts and benefits), ethics
and conflicts of interest. Employees and
external parties are encouraged to report
any suspected breaches, via various
channels including the dedicated hotline.
The code is available to all staff on Global
Ports’ website (in the Corporate Governance
section) and in the HR department at every
operating facility. There are also other more
detailed rules concerning our anti-fraud and
whistleblowing policies.
For details on the changes in the composition
of the committees of the Board, please refer
to the Management Report included in this
Annual Report.
Mr. Tiemen Meester was the Chairman of
the Board until 14 February 2017. Mr. Peder
Sondergaard was the Chairman of the Board
from 10 April 2017 until 01 February 2018.
Mr. Morten Henrick Engelstoft was elected
the Chairman of the Board of Directors on
26 February 2018.
There were no other significant changes in the
responsibilities of the Directors during 2017.
The Board is updated on a regular basis on
any breaches of various policies, with a
specific focus on fraud incidents and resulting
actions. Significant breaches are reported to
the Board immediately.
The Board reviews the size of the Board,
which currently has twelve members, on an
annual basis and considers the present Board
size as appropriate for the current scope and
nature of the Group’s operations.
For other corporate governance policies,
please see the Group’s website.
Members of the Board of Directors
The Board of Directors leads the process
of making new Board member appointments
and recommends new members to
shareholders. For further details, please refer
to the Management Report included in this
Annual Report.
On 14 February 2017 Mr. Tiemen Meester
resigned from the Board and Mr. Peder
Sondergaard replaced him. On 12 May 2017
Dr. Alexander Nazarchuk and Mrs. Siobhan
Walker resigned from the Board and Mrs. Britta
Dalunde and Mrs. Elia Nicolaou replaced them.
On 01 January 2018 Mrs. Inna Kuznetsova and
Mr. Lambros Papadopoulos joined the Board of
Directors. On 29 January 2018 Mr. Gerard Jan
Van Spall resigned from the Board and
Mrs. Iana Boyd replaced him on the same day.
On 01 February 2018 Mr. Peder Sondergaard
resigned from the Board and Mr. Soren
Jakobsen replaced him on 02 March 2018.
On 12 April 2018 Mr. Mikhail Loganov, Mr. Nikita
Mishin, Ms. Elia Nicolaou and Mr. Konstantin
Shirokov resigned from the Board.
Chairman of the Board of Directors
Mr. Morten Engelstoft was appointed
Chairman of the Board in February 2018,
after the end of reporting period.
The role of the Chairman of the Board of
Directors is to ensure that Board meetings
are held as and when necessary, lead the
Directors, ensure their effectiveness and
review the agenda of Board meetings. The
Chairman together with the Secretary of the
Board review Board materials before they are
presented to the Board and ensures that
Board members are provided with accurate,
timely and clear information. The members
of the management team who have
prepared the papers, or who can provide
additional insights into the issues being
discussed, are invited to present papers or
attend the Board meeting at the relevant
time. Board members regularly hold meetings
with the Group’s management to discuss
their work and evaluate their performance.
The Chairman monitors communications
and relations between the Group and its
shareholders, the Board and management,
and Independent and Non-Independent
GLOBAL PORTS INVESTMENTS PLC
Directors, with a view to encouraging dialogue
and constructive relations.
The Group separates the positions of the
Chairman and CEO to ensure an appropriate
segregation of roles and duties.
Board committees
In December 2008, the Board of Directors
established three committees: an Audit and
Risk Committee, a Nomination Committee
and a Remuneration Committee.
For further details on the Board committees,
please refer to the Management Report in the
Financial Statements.
Non-executive and Independent Directors
There are eleven Non-Executive Directors
(including the chairman).
Captain Bryan Smith (Senior Independent
Director), Ms. Britta Dalunde, Mrs. Inna
Kuznetsova and Mr. Lambros Papadopoulos
are Independent Directors, and have no
relationship with the Group, its related
companies or their officers. This means they
can exercise objective judgment on corporate
affairs independently from management.
The number of Independent Non-Executive
Directors increased in 2017 as a part of further
improvement of Corporate Governance.
Although all Directors have an equal
responsibility for the Group’s operations,
the role of the Independent Non-Executive
Directors is particularly important in ensuring
that the management’s strategies are
constructively challenged. As well as ensuring
the Group’s strategies are fully discussed and
examined. They must take into account the
long-term interests, not only of the major
shareholders, but also of bondholders,
employees, customers, suppliers and the
communities in which the Group conducts
its business.
Managing Director
Alexander Iodchin occupies the position of
Managing Director and the Board granted him
the powers to carry out all business related to
the Group’s business up to a total value per
transaction of USD 500,000. It has also granted
him powers to discharge other managerial
duties related to the ordinary course of
business of the Group, including representing
the Group before any government or
government-backed authority.
The decisions for all other matters are
reserved for the Board. The terms of reference
of the Board of Directors contains the list of
such reserved matters.
In addition, Mr. Iodchin has been acting as
the Board Secretary since December 2008.
Board remuneration
Directors serve on the Board pursuant to
letters of appointment, which specify the
terms of their appointment and remuneration.
Levels of remuneration for Non-Executive
Directors reflect the time commitment,
ANNUAL REPORT 2017
responsibilities of the role and membership
of the respective committees of the Board.
Directors are also reimbursed for expenses
associated with discharge of their duties.
Non-Executive Directors are not eligible for
bonuses, retirement benefits or to participate
in any incentive plans operated by the Group.
The shareholders of the Group approved the
remuneration of the members of the Board
on 29 April 2013, 12 May 2017, 11 December
2017, 29 January 2018 and 02 March 2018.
The total remuneration of the members of
the Board of Directors paid by the Group and
its subsidiaries in 2017 amounted to USD 1,085
thousand (2016: USD 721 thousand).
Company Secretary
The Group maintains a Company Secretary,
who is responsible for safeguarding the rights
and interests of shareholders, including the
establishment of effective and transparent
arrangements for securing the rights of
shareholders.
Team Nominees Limited has been acting
as the Company Secretary since the Group’s
incorporation in February 2008.
The Company Secretary’s responsibilities
include ensuring compliance by the Group,
its management bodies and officers with
the law and the Group’s charter and internal
documents. The Company Secretary
organises the communication process
between the parties to corporate relations,
including the preparation and holding of
general meetings; storage, maintenance
and dissemination of information about the
Group; and review of communications
from shareholders.
Internal audit
The internal audit function is carried out by
Group’s Internal Audit Service (IAS). It is
responsible for analysing the systems of risk
management, internal control procedures
and the corporate governance process for the
Group with a view to obtaining a reasonable
assurance that:
– Risks are appropriately identified, assessed,
–
responded to and managed;
Interaction with the various governance
groups occurs as needed;
– Significant financial, managerial and
operating information is accurate, reliable
and timely;
– Employee’s actions are in compliance with
policies, standards, procedures and
applicable laws and regulations;
– Resources are acquired economically, used
efficiently and adequately protected;
– Programmes, plans and objectives are
achieved;
– Quality and continuous improvement are
fostered in the Group’s control process; and
– Significant legislative or regulatory issues
impacting the Group are recognised and
addressed properly.
The Head of the IAS, Mr. Kirill Gavrilov, reports
directly to the Audit and Risk Committee.
External auditors
At the Global Ports AGM, an external auditor
is appointed on an annual basis to review the
Group’s financial and operating performance.
This follows proposals drafted by the Audit
and Risk Committee for the Board of
Directors regarding the nomination of the
external auditor of the Group, selected from
a list of recognised independent auditors
of high professional repute. While drafting
its proposals, the Audit and Risk Committee
is guided by the following principles:
– Qualifications of the external auditor
and its professional reputation;
– Quality of services; and
– Compliance with requirements for external
auditor independence.
In 2017, the shareholders of Global Ports
re-appointed PricewaterhouseCoopers as the
external auditor for the purposes of auditing
the Group’s IFRS financial statements for 2017.
PricewaterhouseCoopers Limited is proposed
for re-election as the auditor for 2018 at the
Annual General Meeting on 14 May 2018.
Investor relations/disclosures
The Group’s external relations are guided
by its information and disclosure policy
and rules, which is consistent with best
international practices applicable to
shareholder relations. Given that the Group
became public in June 2011 upon placing 25%
of its shares on the London Stock Exchange
(LSE) in the form of Global Depositary
Receipts (GDRs), all of its companies must
meet information disclosure standards set
forth by the LSE, the UK Financial Conduct
Authorities and applicable legislation.
The main principles of the Group’s
information policy are regularity, efficiency,
availability, reliability, completeness, balance,
equality and safety of information resources.
The investor relations (IR) department
interacts with the investor community
on a regular basis, reporting on the most
important matters to the Group’s senior
management. The IR team maintains a
continuous dialogue with the investor and
analyst community by arranging
teleconferences to discuss the Group’s
financial performance, one-on-one meetings
and participation in international investor
conferences. The Group also organises regular
visits to its facilities, thus providing investors
with the opportunity to see the assets
first-hand and meet senior management.
Members of the Board of Directors and senior
management participate in regular meetings
with current and potential investors. During
these meetings, the Group’s representatives
discuss with them strategic areas of
development and take into account
shareholders’ opinions on key strategic
matters when making important decisions.
For further information on Corporate
Governance at the Group, please refer to
the Management Report included in this
Annual Report.
31
CORPORATE GOVERNANCE BOARD OF DIRECTORS
MR. MORTEN
ENGELSTOFT
Chairman of the Board of Directors,
Non-Executive Director
MRS. IANA
BOYD
Member of the Board of Directors,
Non-Executive Director
MR. MICHALAKIS
CHRISTOFIDES
Member of the Board of Directors,
Non-Executive Director
YEAR OF APPOINTMENT
Mr. Engelstoft was appointed as a non-executive
member of the Board of Directors of Global Ports
in October 2016.
Mrs. Boyd was appointed as a non-executive
member of the Board of Directors of the
Company in January 2018.
Mr. Christofides was appointed as a non-executive
member of the Board of Directors of the Company
in July 2014.
SKILLS AND EXPERIENCE
Mr. Engelstoft was appointed APM Terminals CEO
effective 01 November 2016 and to the Executive
Board of A.P. Moller-Maersk A/S on 01 December
2017. Prior to that he was CEO of APM Shipping
Services since 2014 which included the
responsibilities as CEO of Maersk Tankers, Chairman
of DAMCO, Svitzer and Maersk Supply Services.
From 2007 until 2013, he was Chief Operating Officer
of Maersk Line, where he was responsible for global
operations, procurement, fleet, technical vessel
management and the sustainability strategy.
He joined Maersk in 1986 and has three decades of
experience in the container shipping industry. He has
held various senior executive positions at Maersk in
Singapore, Italy, Taiwan and Vietnam.
Mr. Engelstoft holds an Executive MBA from IMD
in Lausanne, Switzerland.
Mrs. Boyd is an experienced professional with diverse
executive and boardroom experience. For the past
five years, she has served as the Portfolio Manager for
Russia and the Baltics at APM Terminals. In this role,
she has represented APM Terminals on the boards of
several operating entities of Global Ports.
Mrs. Boyd joined APM Terminals in 2006 as M&A
and Business Development Manager and later held
the positions of Global Head of HR Operations, Head
of M&A and BDV for Europe and Asia and Chief
Operating Officer for Europe and North Africa.
Prior to joining APM Terminals, Mrs. Boyd worked
for Maersk Line and Sea-Land Service in several
functions, including country management, line
management and strategic marketing.
Mrs. Boyd has a Master’s degree in International
Business Studies from the University of South
Carolina, United States. She grew up in Sofia, Bulgaria
and has lived and worked in the United States and
the Netherlands.
Mr. Christofides has extensive Banking experience
starting in 1969. As the Senior Manager in
International Business Services, he was responsible
for the development and growth of activities of
International Business Units of Bank of Cyprus in
Cyprus and its Representative Offices in Russia,
Ukraine, the USA, Canada, South Africa and
Romania. Between January 2012 and January 2013,
he was a member of the Supervisory Board of
Kreditprombank-Kiev.
Mr. Christofides holds an Advanced Diploma in
Business Administration (Cyprus Institute of
Marketing). He also attended the Senior Manager
Course at Manchester Business School of the
University of Manchester.
EXTERNAL APPOINTMENTS
Chief Executive Officer of APM Terminals,
The Hague, the Netherlands.
Currently does not hold positions
in other companies.
Does not hold positions in other companies.
Executive Board member of A.P. Moller-Maersk A/S,
Copenhagen, Denmark.
COMMITTEE MEMBERSHIP
Member of the Nomination and
Remuneration Committees.
Does not serve on any Board committees.
Does not serve on any Board committees.
32
GLOBAL PORTS INVESTMENTS PLC
MRS. BRITTA
DALUNDE
Member of the Board of Directors,
Independent Non-Executive Director
MR. ALEXANDER
IODCHIN
Member of the Board of Directors,
Executive Director
MR. S. SJOSTRAND
JAKOBSEN
Member of the Board of Directors,
Non-Executive Director
Mrs. Dalunde was appointed as a member of the
Board of Directors of the Company in May 2017
and is an independent Non-Executive Director.
Mr. Iodchin was appointed as an executive member
of the Board of Directors of the Company with the
functions of the Secretary of the Board of Directors
in 2008. Mr Iodchin served as internal auditor of
Global Ports from 2008 until 2011.
Mr. Jakobsen was appointed as a non-executive
member of the Board of Directors of Global Ports
in March 2018.
Mrs. Dalunde has over 25 years of experience as
an executive and a board member of various
companies. Ms. Dalunde was CFO at SJ AB, the
Swedish national rail operator, from 2009 until 2013.
She has almost 20 years of experience working as a
CFO while working in different industries including
transportation, engineering and IT. Mrs. Dalunde
graduated from the University of Uppsala with a
Bachelor’s degree in Business Administration and
International Business. She has also earned an
Executive MBA degree with a specialism in Strategic
Planning from the Edinburgh Business School at
Herriot Watt University.
Mrs. Dalunde owns 21,000 ordinary shares of Global
Ports Investments PLC (7,000 GDRs).
Mr. Iodchin currently also serves as a Secretary of the
Boards of Directors of various Group Companies and
as a member of the Boards of Vostochnaya Stevedoring
Limited Liability Company, First Container Terminal Inc,
Global Ports (Finance) Plc and other companies of the
Group. Mr. Iodchin is the Chairman of the Boards of
Directors of Petrolesport Inc and OJSC Ust-Luga
Container Terminal. Mr. Iodchin is responsible for
corporate governance matters within the Group and
supervises the activities of holding and finance
companies within the Group.
Mr. Iodchin graduated from the Lomonosov Moscow
State University where he obtained a Master’s degree
in Economics. He also completed a post-graduate
programme at the Moscow Institute for Economics and
Linguistics and the Lomonosov Moscow State University,
where he obtained a Ph.D. in Economics. Mr. Iodchin was
a teaching assistant in the Economics Faculty of the
Lomonosov Moscow State University from 2004 until
June 2008. He has a diploma in international finance,
reporting standards and corporate finance.
Mr. Jakobsen brings extensive international experience
in the maritime industry and port development
through his 37-year career in A.P. Moller – Maersk
Group, which includes the last 13 years with APM
Terminals. Since 2013, he has been APM Terminals
Portfolio Manager for Africa, Middle East and South
Asia, based in Dubai, United Arab Emirates, responsible
for eight ports and several logistics entities in the
region. Mr. Jakobsen also serves on the board of various
APM Terminals companies.
His APM Terminals career has included Regional
Manager for Latin America, based in Panama and
as Global Head of Project Implementation, based in
The Hague, the Netherlands.
Prior to joining APM Terminals, Mr. Jakobsen worked
in Maersk Line and Svitzer.
Mr. Jakobsen is a graduate of the A.P. Moller – Maersk
International Shipping Education and executive
education courses at IMD in Lausanne, Switzerland
and INSEAD Business School in Fontainebleau, France.
Mrs. Dalunde currently also serves as Independent
Non-executive director and Chairman of the
audit-committee of HH Ferries Group and
Projektengagemang Sweden AB in addition
to holding several other non-executive
board appointments.
Currently does not hold positions
in other companies.
Portfolio Manager, APM Terminals, Africa, Middle East
& South Asia region.
Mr. Jakobsen holds a number of other Board positions
including: Sogester S.A., Angola; Douala International
Terminal S.A., Cameroon ; Cai Mep International
Terminal Co. Ltd., Vietnam; Aqaba Container Terminal
Company Ltd., Jordan; Salalah Port Services Company
SOAG, Oman; APM Terminals Bahrain B.S.C.; LCB
Container Terminal 1 Ltd, Thailand; Poti Sea Port
Corporation, Georgia; South East Asia Gateway
Terminal Pvt. Ltd, Sri Lanka; and Meridian Port
Services, Ghana.
Chairman of the Audit and Risk Committee.
Currently does not serve on any Board committees.
Member of The Audit and Risk, the Nomination
and Remuneration Committees.
ANNUAL REPORT 2017
33
CORPORATE GOVERNANCE BOARD OF DIRECTORS (CONTINUED)
MR. VADIM
KRYUKOV*
Member of the Board
of Directors, Non-Executive Director
MRS. INNA
KUZNETSOVA
Member of the Board of Directors,
Independent Non-Executive Director
MRS. LAURA
MICHAEL
Member of the Board of Directors,
Non-Executive Director
YEAR OF APPOINTMENT
Mr. Kryukov was appointed as a non-executive
member of the Board of Directors of the Company
in July 2014.
Mrs. Kuznetsova was appointed as Independent
Non-Executive Director of Global Ports in December
2017 effective January 2018.
Mrs. Michael was appointed as a non-executive
member of the Board of Directors of the Company
in January 2013.
SKILLS AND EXPERIENCE
Mr. Kryukov graduated from the Admiral Makarov
State Maritime Academy and has extensive experience
in transportation and logistics and in the areas of
financial planning and budgeting. He was a member
of the Board of Directors of NCC Group Limited and
held that position from 2006 to 2013. Mr. Kryukov was
responsible for development and support of several
significant logistic projects in St. Petersburg.
EXTERNAL APPOINTMENTS
A Member of the Board of Directors of Ilibrinio
Establishment Limited.
Mrs. Kuznetsova is the President and Chief
Operating Officer of INTTRA, a SaaS portal for
ocean shipping, processing over a quarter of all
containers in global trade. Before joining INTTRA she
was the Chief Commercial Officer and member of
the Executive Board at CEVA Logistics. Prior to that
Mrs. Kuznetsova spent 19 years at IBM in a variety of
global roles, primarily focused on fast growth
opportunities or turnaround situations. In her last
role she was the global VP, Marketing & Sales, IBM
Systems Software. Her prior board engagements
include Sage Plc (LSE: SGE) (UK, 2014-2017), a
FTSE100 software company where she served as
Independent Non-Executive Director.
Mrs. Kuznetsova completed her Masters and
Ph. D. study at the Moscow State University and
later earned an Executive MBA from Columbia
Business School.
Mrs. Kuznetsova serves on the board of Avantida
(Belgium), a privately owned company, providing
in-land container management services.
Mrs. Kuznetsova is the President and Chief
Operating Officer of INTTRA.
Mrs. Michael is a member of the Institute of Chartered
Accountants of Scotland (ICAS) and the Certified
Public Accountants of Cyprus (ICPAC). She is the
Finance Manager of Vistra (Cyprus) Ltd. Before joining
Vistra (Cyprus) Ltd, she previously worked at Deloitte
Ltd (Cyprus) between 2009 – 2011 and started her
career at Ernst & Young (London) between 2006 – 2009.
Mrs. Michael has a B.Sc. Accounting and Management
degree from the University of Bristol, England.
Finance Manager of Vistra (Cyprus) Ltd.
COMMITTEE MEMBERSHIP
Does not serve on any Board committees.
Member of The Audit and Risk, the Nomination
and Remuneration Committees.
Does not serve on any Board committees.
* AGM scheduled for 14 May 2018 is proposed to approve resignation of Mr. Vadim Kryukov and Captain Bryan Smith.
34
GLOBAL PORTS INVESTMENTS PLC
MR. LAMBROS
PAPADOPOULOS
Member of the Board of Directors,
Independent Non-Executive Director
CAPTAIN
BRYAN SMITH*
Member of the Board of Directors, Senior
Independent Non-Executive Director
MR. NICHOLAS
CHARLES TERRY
Member of the Board of Directors,
Non-Executive Director
Mr. Papadopoulos was appointed as a non-executive
member of the Board of Directors of Global Ports in
December 2017 effective January 2018.
Capt. Smith was appointed as a member of the
Board of Directors of the Company in 2008 and is
the Senior Independent Non-Executive Director. It
was announced on 30 August 2017 that Capt. Smith
would be stepping down from the Board in 2018.
Mr. Terry was appointed as a non-executive member
of the Board of Directors of the Company in
October 2016.
Mr. Papadopoulos has over 24 years of experience
as an executive and a board member of various
companies. In 2013, Mr. Papadopoulos founded
PenteP Advisors Ltd. Prior to that he was with
Citigroup (London), where he was Head of Greece/
Cyprus Equity Research and Head of Continental
European Small and Mid Cap Companies. He started
his career with Ernst & Young in London.
Mr. Papadopoulos studied Accounting with
Computing (B.A.(Hons)) at the University of Kent
at Canterbury in the United Kingdom. He is a
Member of the Institute of Chartered Accountants
in England and Wales.
Mr. Papadopoulos currently also serves as
Non-Executive Director and Chairman of the Audit
Committees of Hellenic Bank Public Company Ltd
(Cyprus) and Trastor Real Estate Investment
Company SA (Greece), which are listed on the
Cyprus and the Greek Stock Exchanges respectively.
Capt. Smith served as vice president and managing
director for South East Asia at DP World until his
retirement from this position in July 2008.
He also served as a member of the Board of
Directors of VSC and VICS from 1999 until 2008,
Railfleet Holdings Limited from 2005 until 2008 and
as deputy chairman of the Board of Directors of LCIT
(Laem Chabang, Thailand) from 1999 until 2008 and
as Chairman of the Board of Directors of SPCT
(Saigon, Vietnam) from 2006 until 2008. Capt.
Smith was a Director and Chairman of Sydney
Ports Corporation from 2009 to 2013.
He received his Master Mariner qualification at
the University of Technology, Sydney, Australia
and is a graduate of the Advanced Management
Program, Macquarie Graduate School of
Management, Macquarie University,
Sydney, Australia.
Mr. Terry is a member of The Institute of Chartered
Accountants in England and Wales (ICAEW). He is
currently Director of Operations at Vistra (Cyprus)
Ltd., having led the client accounting department
since 2011. In 2015, he was also appointed Managing
Director of Orangefield (Cyprus) Ltd. for the interim
period of the merger of the two companies.
He has extensive experience in Finance and Audit
at a range of companies, including land, air and
sea security service provider Hart Security Ltd.
and Global Management Ltd., which offers marine
insurance brokerage and crew management services
to the shipping industry.
Mr. Terry holds a B.Sc. in Mathematics from the
University of Hull, England.
Currently does not hold any positions
in other companies.
Director of Operations at Vistra (Cyprus) Ltd.
Member of the Audit and Risk Committee.
Chairman of the Nomination and
Remuneration Committees.
Does not serve on any Board committees.
ANNUAL REPORT 2017
35
CORPORATE GOVERNANCE Following the completion of the sale of 30.75% stake in Global Ports to LLC Management Company Delo (“Delo Group”) by TIHL
on 12 April 2018, these members resigned from the Board with immediate effect.
BOARD OF DIRECTORS (CONTINUED)
MR. MIKHAIL
LOGANOV
Ex-Member of the Board of Directors,
Executive Director
MR. NIKITA
MISHIN
Ex-Vice-Chairman of the Board of Directors,
Non-Executive Director
MS ELIA
NICOLAOU
Ex-Member of the Board of Directors,
Non-Executive Director
MR. KONSTANTIN
SHIROKOV
MR. PEDER
SONDERGAARD
MR. GERARD
JAN VAN SPALL
Ex-Member of the Board of Directors,
Ex-Chairman of the Board of Directors,
Ex-Member of the Board of Directors,
Non-Executive Director
Non-Executive Director
Non-Executive Director
YEAR OF APPOINTMENT
Mr. Loganov was appointed as the Chief Executive
Officer of Global Ports Management LLC in March
2017. He was the Chief Financial Officer of Global
Ports from October 2013 until September 2017.
Mr. Loganov has served as a member of the Board
of Directors of the Company since December 2008
and was a member of its Audit and Risk and
Remuneration Committees from December 2008
until October 2013 until he took up the position
of CFO.
SKILLS AND EXPERIENCE
Mr. Loganov has extensive experience in corporate
finance, risk management and business
administration acquired during a career primarily
across the transportation and logistics industry
in Russia. Mr. Loganov has served as a Managing
Director and Executive member of the Board of
Directors of Globaltrans Investment PLC since
April 2008 until October 2013. In that role, he was
responsible for financial and reporting activities of
Globaltrans as well as having oversight of capital
markets and M&A transactions in addition to other
responsibilities. Prior to that he held other senior
finance positions within Globaltrans Group.
Mr. Loganov started his career with American
Express (Europe) Ltd in the UK as a financial analyst
in 2001. Mr. Loganov graduated with honours from
the University of Brighton in the UK with a degree
in Business Studies with Finance.
Mr. Mishin was appointed as a non-executive
member of the Board of Directors of Global Ports
and served as its Chairman from 2008 till 2014.
Ms. Nicolaou was appointed as a Non-Executive
member of the Board of Directors in May 2017.
Mr. Shirokov was appointed as a Non-Executive
Mr. Sondergaard was appointed as a non-executive
Mr. van Spall was appointed as a non-executive
member of the Board of Directors of the Company
member of the Board of Directors of Global Ports in
member of the Board of Directors of the Company
in 2008.
February 2017 and was elected Chairman in April 2017.
in April 2016.
YEAR OF APPOINTMENT
In addition, Mr. Mishin has served as the Chairman
of the Board of Directors of Petrolesport since 2007
and the Chairman of the Board of Directors of VSC
since October 2005. Mr. Mishin is one of the
controlling shareholders of TIHL. He graduated from
the Lomonosov Moscow State University where he
studied philosophy.
Ms. Nicolaou has extensive experience in commercial
and corporate law. She is currently the Managing
Director of Amicorp (Cyprus) Ltd. She was previously
Head of the Corporate Legal Department at Polakis
Sarris LLC and worked at C. Patsalides LLC.
Ms. Nicolaou sits on various Boards of the Cyprus
Chamber of Commerce.
She gained an LLB degree in Law from the University
of Nottingham before gaining a Master of Laws
degree in Commercial and Corporate Law from
University College London. She also has a Diploma
in Business Administration from the Cyprus
International Institute of Management.
SKILLS AND EXPERIENCE
Mr. Shirokov has more than ten years of experience
Mr. Sondergaard was appointed Chief Portfolio
Mr. van Spall serves as the Managing Director of Vistra
in the areas of financial planning, budgeting and
Officer of APM Terminals in January 2017.
(Cyprus) Ltd since October 2015. He joined Vistra in
auditing. He is currently financial manager and a
Mr. Sondergaard had previously served as the Head
February 2010, heading up the Vistra Curacao
member of the revision committees of numerous
of APM Terminals’ Asia, Middle East, Africa and
operation as Managing Director. In August 2013,
companies in the TIHL group, positions that he has
North Asian port and terminal operations.
Mr. van Spall took up a new challenge and moved
held since 2005 and 2007, respectively. Mr. Shirokov
has served as a member of the Board of Directors
and an internal auditor for Globaltrans since 2008.
Mr. Sondergaard has been with the A.P. Moller-Maersk
Group for more than 25 years. Previously holding the
to Vistra Malta to take up the new role of Director of
Business Development and deputy Managing Director.
position of APM Terminals’ Senior Vice President and
Mr. van Spall obtained his law degree at the University
Mr. Shirokov graduated from the Finance Academy
Head of New Terminals, he was named A.P. Moller-
of Leiden where he specialised in corporate law.
of the Russian Federation where he studied
Maersk Group Senior Vice President in May 2007. Initially
International Economic Relations. Mr. Shirokov has
serving at sea, Mr. Sondergaard subsequently gained
also completed a course in Business Management at
extensive experience from a variety of shore-based
the Business School of Oxford Brookes University, UK.
managerial positions within the Group in the USA,
Taiwan, China and Denmark.
Mr. Sondergaard has completed a Master’s Certificate,
as well as several Management Courses at the London
Business School, Cornell University in Ithaca, New York,
IMD in Switzerland and the Harvard Business School in
Cambridge, Massachusetts.
EXTERNAL APPOINTMENTS
Does not hold positions in other companies.
Does not hold positions in other companies.
Since 2008, she has also served as a Non-Executive
Director and the Company Secretary of Globaltrans
Investments PLC.
Ms Elia Nicolaou is Managing Director of Amicorp.
A member of the Board of Directors and an internal
auditor for Globaltrans.
COMMITTEE MEMBERSHIP
Does not serve on any Board committees.
Ex-member of the Nomination and
Remuneration Committees.
Ex-member of the Nomination and
Remuneration Committees.
Ex-member of the Audit and Risk Committee.
36
GLOBAL PORTS INVESTMENTS PLC
Mr. Peder Sondergaard and Mr. Gerard Jan Van Spall served as members of the Board as
of 31 December 2017 but resigned on 01 February 2018 and 29 January 2018, respectively.
MR. MIKHAIL
LOGANOV
MR. NIKITA
MISHIN
MS ELIA
NICOLAOU
Ex-Member of the Board of Directors,
Ex-Vice-Chairman of the Board of Directors,
Ex-Member of the Board of Directors,
Executive Director
Non-Executive Director
Non-Executive Director
MR. KONSTANTIN
SHIROKOV
Ex-Member of the Board of Directors,
Non-Executive Director
MR. PEDER
SONDERGAARD
Ex-Chairman of the Board of Directors,
Non-Executive Director
MR. GERARD
JAN VAN SPALL
Ex-Member of the Board of Directors,
Non-Executive Director
YEAR OF APPOINTMENT
YEAR OF APPOINTMENT
Mr. Loganov was appointed as the Chief Executive
Mr. Mishin was appointed as a non-executive
Ms. Nicolaou was appointed as a Non-Executive
Officer of Global Ports Management LLC in March
member of the Board of Directors of Global Ports
member of the Board of Directors in May 2017.
2017. He was the Chief Financial Officer of Global
and served as its Chairman from 2008 till 2014.
Mr. Shirokov was appointed as a Non-Executive
member of the Board of Directors of the Company
in 2008.
Mr. Sondergaard was appointed as a non-executive
member of the Board of Directors of Global Ports in
February 2017 and was elected Chairman in April 2017.
Mr. van Spall was appointed as a non-executive
member of the Board of Directors of the Company
in April 2016.
Ports from October 2013 until September 2017.
Mr. Loganov has served as a member of the Board
of Directors of the Company since December 2008
and was a member of its Audit and Risk and
Remuneration Committees from December 2008
until October 2013 until he took up the position
of CFO.
SKILLS AND EXPERIENCE
April 2008 until October 2013. In that role, he was
responsible for financial and reporting activities of
Globaltrans as well as having oversight of capital
markets and M&A transactions in addition to other
responsibilities. Prior to that he held other senior
finance positions within Globaltrans Group.
Mr. Loganov started his career with American
Express (Europe) Ltd in the UK as a financial analyst
in 2001. Mr. Loganov graduated with honours from
the University of Brighton in the UK with a degree
in Business Studies with Finance.
EXTERNAL APPOINTMENTS
COMMITTEE MEMBERSHIP
Mr. Loganov has extensive experience in corporate
In addition, Mr. Mishin has served as the Chairman
Ms. Nicolaou has extensive experience in commercial
finance, risk management and business
of the Board of Directors of Petrolesport since 2007
and corporate law. She is currently the Managing
administration acquired during a career primarily
and the Chairman of the Board of Directors of VSC
Director of Amicorp (Cyprus) Ltd. She was previously
across the transportation and logistics industry
since October 2005. Mr. Mishin is one of the
Head of the Corporate Legal Department at Polakis
in Russia. Mr. Loganov has served as a Managing
controlling shareholders of TIHL. He graduated from
Sarris LLC and worked at C. Patsalides LLC.
Director and Executive member of the Board of
the Lomonosov Moscow State University where he
Ms. Nicolaou sits on various Boards of the Cyprus
Directors of Globaltrans Investment PLC since
studied philosophy.
Chamber of Commerce.
She gained an LLB degree in Law from the University
of Nottingham before gaining a Master of Laws
degree in Commercial and Corporate Law from
University College London. She also has a Diploma
in Business Administration from the Cyprus
International Institute of Management.
Mr. Shirokov has more than ten years of experience
in the areas of financial planning, budgeting and
auditing. He is currently financial manager and a
member of the revision committees of numerous
companies in the TIHL group, positions that he has
held since 2005 and 2007, respectively. Mr. Shirokov
has served as a member of the Board of Directors
and an internal auditor for Globaltrans since 2008.
Mr. Shirokov graduated from the Finance Academy
of the Russian Federation where he studied
International Economic Relations. Mr. Shirokov has
also completed a course in Business Management at
the Business School of Oxford Brookes University, UK.
SKILLS AND EXPERIENCE
Mr. Sondergaard was appointed Chief Portfolio
Officer of APM Terminals in January 2017.
Mr. Sondergaard had previously served as the Head
of APM Terminals’ Asia, Middle East, Africa and
North Asian port and terminal operations.
Mr. Sondergaard has been with the A.P. Moller-Maersk
Group for more than 25 years. Previously holding the
position of APM Terminals’ Senior Vice President and
Head of New Terminals, he was named A.P. Moller-
Maersk Group Senior Vice President in May 2007. Initially
serving at sea, Mr. Sondergaard subsequently gained
extensive experience from a variety of shore-based
managerial positions within the Group in the USA,
Taiwan, China and Denmark.
Mr. Sondergaard has completed a Master’s Certificate,
as well as several Management Courses at the London
Business School, Cornell University in Ithaca, New York,
IMD in Switzerland and the Harvard Business School in
Cambridge, Massachusetts.
Mr. van Spall serves as the Managing Director of Vistra
(Cyprus) Ltd since October 2015. He joined Vistra in
February 2010, heading up the Vistra Curacao
operation as Managing Director. In August 2013,
Mr. van Spall took up a new challenge and moved
to Vistra Malta to take up the new role of Director of
Business Development and deputy Managing Director.
Mr. van Spall obtained his law degree at the University
of Leiden where he specialised in corporate law.
Does not hold positions in other companies.
Does not hold positions in other companies.
Since 2008, she has also served as a Non-Executive
A member of the Board of Directors and an internal
auditor for Globaltrans.
Director and the Company Secretary of Globaltrans
Investments PLC.
Ms Elia Nicolaou is Managing Director of Amicorp.
Does not serve on any Board committees.
Ex-member of the Nomination and
Remuneration Committees.
Ex-member of the Nomination and
Remuneration Committees.
Ex-member of the Audit and Risk Committee.
ANNUAL REPORT 2017
37
CORPORATE GOVERNANCE EXECUTIVE MANAGEMENT
MR. MIKHAIL
LOGANOV
Chief Executive Officer of Global Ports
Management LLC
MR. BRIAN
BITSCH
Chief Commercial Officer of Global Ports
Management LLC
MR. EDUARD
CHOVUSHYAN
First Deputy CEO of Global Ports
Management LLC and Managing
Director of Petrolesport
MR. ALEXANDER
ROSLAVTSEV
MR. DOUGLAS
SMITH
Chief Financial Officer of Global Ports
Chief Operational Officer of Global Ports
Management LLC
Management LLC
YEAR OF APPOINTMENT
Mr. Loganov was appointed as the Chief Executive
Officer of Global Ports Management LLC in March
2017. He was the Chief Financial Officer of Global
Ports from October 2013 until September 2017.
Mr. Loganov has served as a member of the Board
of Directors of the Company since December 2008
and was a member of its Audit and Risk and
Remuneration Committees from December 2008 until
October 2013 until he took up the position of CFO.
SKILLS AND EXPERIENCE
Mr. Loganov has extensive experience in corporate
finance, risk management and business
administration acquired during a career primarily
across the transportation and logistics industry
in Russia. Mr. Loganov has served as a Managing
Director and Executive member of the Board of
Directors of Globaltrans Investment PLC since April
2008 until October 2013. In that role, he was
responsible for financial and reporting activities of
Globaltrans as well as having oversight of capital
markets and M&A transactions in addition to other
responsibilities. Prior to that he held other senior
finance positions within Globaltrans Group.
Mr. Loganov started his career with American
Express (Europe) Ltd in the UK as a financial analyst
in 2001. Mr Loganov graduated with honours from
the University of Brighton in the UK with a degree
in Business Studies with Finance.
Mr. Bitsch was appointed as Chief Commercial
Officer of Global Ports Investments Management
LLC in July 2017.
Mr. Chovushyan was appointed as the First Deputy
CEO of Global Ports Management LLC in April 2017.
From March 2007 he continues to serve as Managing
Director of Petrolesport.
Mr. Roslavtsev was appointed as the Chief Financial
Mr. Smith was appointed as Chief Operational
Officer of Global Ports Management LLC in
Officer of Global Ports Management LLC in
September 2017.
March 2016.
Prior to his appointment, he was Chief Commercial
Officer at Sogester S.A. in Angola from 2011. Before
that he was a management consultant in Denmark
for several years. Between 2006 and 2008, Mr. Bitsch
served in various senior executive roles at MSC
Scandinavia Holding A/S. He started his career in
1990 as a trainee at Maersk and worked there for
16 years in various departments and regions,
progressing to Senior General Manager. During his
time at Maersk, Mr. Bitsch worked in Denmark, the
USA, Bulgaria and Angola.
Mr. Bitsch has completed A.P. Møller Shipping
School and holds a Graduate Diploma in Business
Administration from Copenhagen Business School
as well as a YMP from INSEAD.
Mr. Chovushyan has more than 15 years’ experience
in various managerial positions in the N-Trans group
of companies. He previously served as a Deputy Chief
Executive Officer of Tuapsinsky morskoy torgovy port
OAO from November 2003 and was appointed CEO
in June 2004. Prior to that, he was the Deputy General
Director of Tuapsinsky sudoremontny zavod OAO for
a year. Following on from his role at Tuapsinsky
morskoy torgovy port OAO, Mr. Chovushyan then
worked as Vice President for Development at NCC
OOO from April 2006 until March 2007. From August
2007, he has served as the Chairman of the Board of
Directors of Porttransservice OOO.
Mr. Chovushyan graduated from the Lomonosov
Moscow State University where he studied Philosophy.
Mr. Roslavtsev has over twelve years of experience
Mr. Smith has over 20 years of experience in port
as a CFO in various industries. Before joining Global
terminal management. Most recently, he was APM
Ports, Alexander Roslavtsev was CFO of Rusagro,
Terminals’ Regional Chief Operating Officer in Africa
one of Russia’s largest agricultural companies.
and the Middle East. Prior to that, he was Director
From January 2010 until May 2016, he was CFO
of Global Field Safety at APM Terminals, driving the
of Hewlett Packard Russia and CIS. From January
corporate safety programme across the Group’s 238
2006 until January 2010 he was CFO and Vice-
global marine and inland container facilities around
President of Rosinter Restaurants Holding. Previously,
the world. Mr. Smith joined AP Moller-Maersk group
Mr. Roslavtsev has also worked for Intel Corporation,
in 1994 and held a number of managerial positions
Ford Motor Company, KPMG UK and KPMG Russia.
with APM Terminals in the USA, Nigeria, UAE and
Mr. Roslavtsev is a Member of the Association of
the Netherlands.
Chartered Certified Accountants (ACCA). In 1995,
He is a graduate of the United States Merchant
Mr. Roslavtsev graduated from the Moscow State
Marine Academy and also holds an MBA in
Aviation Institute with an M.S. Economics and
Global Management.
Engineering and has also attended a number
of business courses at Wharton Business School,
Philadelphia, Pennsylvania.
38
GLOBAL PORTS INVESTMENTS PLC
MR. MIKHAIL
LOGANOV
MR. BRIAN
BITSCH
MR. EDUARD
CHOVUSHYAN
Chief Executive Officer of Global Ports
Chief Commercial Officer of Global Ports
First Deputy CEO of Global Ports
Management LLC
Management LLC
Management LLC and Managing
Director of Petrolesport
YEAR OF APPOINTMENT
MR. ALEXANDER
ROSLAVTSEV
Chief Financial Officer of Global Ports
Management LLC
MR. DOUGLAS
SMITH
Chief Operational Officer of Global Ports
Management LLC
Mr. Loganov was appointed as the Chief Executive
Mr. Bitsch was appointed as Chief Commercial
Mr. Chovushyan was appointed as the First Deputy
Officer of Global Ports Management LLC in March
Officer of Global Ports Investments Management
CEO of Global Ports Management LLC in April 2017.
2017. He was the Chief Financial Officer of Global
LLC in July 2017.
From March 2007 he continues to serve as Managing
Mr. Roslavtsev was appointed as the Chief Financial
Officer of Global Ports Management LLC in
September 2017.
Mr. Smith was appointed as Chief Operational
Officer of Global Ports Management LLC in
March 2016.
Director of Petrolesport.
Ports from October 2013 until September 2017.
Mr. Loganov has served as a member of the Board
of Directors of the Company since December 2008
and was a member of its Audit and Risk and
Remuneration Committees from December 2008 until
October 2013 until he took up the position of CFO.
SKILLS AND EXPERIENCE
Mr. Loganov has extensive experience in corporate
Prior to his appointment, he was Chief Commercial
Mr. Chovushyan has more than 15 years’ experience
finance, risk management and business
Officer at Sogester S.A. in Angola from 2011. Before
in various managerial positions in the N-Trans group
administration acquired during a career primarily
that he was a management consultant in Denmark
of companies. He previously served as a Deputy Chief
across the transportation and logistics industry
for several years. Between 2006 and 2008, Mr. Bitsch
Executive Officer of Tuapsinsky morskoy torgovy port
in Russia. Mr. Loganov has served as a Managing
served in various senior executive roles at MSC
OAO from November 2003 and was appointed CEO
Director and Executive member of the Board of
Scandinavia Holding A/S. He started his career in
in June 2004. Prior to that, he was the Deputy General
Directors of Globaltrans Investment PLC since April
1990 as a trainee at Maersk and worked there for
Director of Tuapsinsky sudoremontny zavod OAO for
2008 until October 2013. In that role, he was
16 years in various departments and regions,
a year. Following on from his role at Tuapsinsky
responsible for financial and reporting activities of
progressing to Senior General Manager. During his
morskoy torgovy port OAO, Mr. Chovushyan then
Globaltrans as well as having oversight of capital
time at Maersk, Mr. Bitsch worked in Denmark, the
worked as Vice President for Development at NCC
markets and M&A transactions in addition to other
USA, Bulgaria and Angola.
responsibilities. Prior to that he held other senior
finance positions within Globaltrans Group.
Mr. Bitsch has completed A.P. Møller Shipping
School and holds a Graduate Diploma in Business
OOO from April 2006 until March 2007. From August
2007, he has served as the Chairman of the Board of
Directors of Porttransservice OOO.
Mr. Loganov started his career with American
Administration from Copenhagen Business School
Mr. Chovushyan graduated from the Lomonosov
Express (Europe) Ltd in the UK as a financial analyst
as well as a YMP from INSEAD.
Moscow State University where he studied Philosophy.
in 2001. Mr Loganov graduated with honours from
the University of Brighton in the UK with a degree
in Business Studies with Finance.
Mr. Roslavtsev has over twelve years of experience
as a CFO in various industries. Before joining Global
Ports, Alexander Roslavtsev was CFO of Rusagro,
one of Russia’s largest agricultural companies.
From January 2010 until May 2016, he was CFO
of Hewlett Packard Russia and CIS. From January
2006 until January 2010 he was CFO and Vice-
President of Rosinter Restaurants Holding. Previously,
Mr. Roslavtsev has also worked for Intel Corporation,
Ford Motor Company, KPMG UK and KPMG Russia.
Mr. Roslavtsev is a Member of the Association of
Chartered Certified Accountants (ACCA). In 1995,
Mr. Roslavtsev graduated from the Moscow State
Aviation Institute with an M.S. Economics and
Engineering and has also attended a number
of business courses at Wharton Business School,
Philadelphia, Pennsylvania.
Mr. Smith has over 20 years of experience in port
terminal management. Most recently, he was APM
Terminals’ Regional Chief Operating Officer in Africa
and the Middle East. Prior to that, he was Director
of Global Field Safety at APM Terminals, driving the
corporate safety programme across the Group’s 238
global marine and inland container facilities around
the world. Mr. Smith joined AP Moller-Maersk group
in 1994 and held a number of managerial positions
with APM Terminals in the USA, Nigeria, UAE and
the Netherlands.
He is a graduate of the United States Merchant
Marine Academy and also holds an MBA in
Global Management.
ANNUAL REPORT 2017
39
CORPORATE GOVERNANCE TERMINAL DIRECTORS
MS. VICTORIA
SCHERBAKOVA-
SLUSARENKO
Yanino Logistic Park and
Logistica Terminal
MR. EDUARD
CHOVUSHYAN
MR. ANDREY
BOGDANOV
MR. ALEXANDER
DUDKO
MR. ARNOUT DIRK
LUGTMEIJER
MR. VITALY
MISHIN
MR. ALEXANDER
TIKHOV
MR. DIRK VAN
ASSENDELFT
First Deputy CEO of Global Ports
Management LLC and
Managing Director
of Petrolesport
YEAR OF APPOINTMENT
Managing Director of
Ust-Luga Container Terminal
Managing Director of VSC
General Manager
of Vopak E.O.S.
General Manager of Moby Dik
General Manager of
Managing Director of
First Container Terminal
General Manager of
Multi-Link Terminals
Mr. Chovushyan was appointed as the
First Deputy CEO of Global Ports
Management LLC in April 2017. From
March 2007 he has also served as
General Manager of Petrolesport.
Mr. Bogdanov was appointed as the
Managing Director of the Ust-Luga
Container Terminal in 2018, before
he served as its General Manager
since 2012.
Mr. Dudko was appointed Managing
Director of VSC in February 2015.
Mr. Lugtmeijer has served as the
Chairman of the Management Board
of Vopak E.O.S. since 1996 (and as a
member of the Management Board
since 1994).
Mr. Mishin was appointed as General
Ms. Scherbakova-Slusarenko has been
Mr. Tikhov was appointed as the
Mr. van Assendelft has served as
Manager of Moby Dik in 2015. Prior to
working with the Group as Director of
Managing Director of the First
the managing director of Multi-Link
that, from 2010 to 2014 he has served as
Forwarding Companies since 2009.
Container Terminal in 2014 before
Terminals Ltd Oy since December
General Director of Logistika-Terminal.
She has been holding the position of
he served there as General Manager
2004 and was the chief executive
General Director of Yanino Logistics
since 2001.
officer of Moby Dik from June 2004
Park LLC from 2013, in March 2015 she
was appointed as General Manager
of Logistica Terminal.
until July 2010.
SKILLS AND EXPERIENCE
Mr. Chovushyan has more than 15
years’ experience in various
managerial positions in the N-Trans
group of companies. He previously
served as a Deputy Chief Executive
Officer of Tuapsinsky morskoy torgovy
port OAO from November 2003 and
was appointed CEO in June 2004. Prior
to that, he was the Deputy General
Director of Tuapsinsky sudoremontny
zavod OAO for a year. Following on
from his role at Tuapsinsky morskoy
torgovy port OAO, Mr. Chovushyan
then worked as Vice President for
Development at NCC OOO from April
2006 until March 2007. From August
2007, he has served as the Chairman
of the Board of Directors of
Porttransservice OOO.
Mr. Chovushyan graduated from the
Lomonosov Moscow State University
where he studied Philosophy.
For five years prior to 2012 he was the
Commercial Director of First Container
Terminal. He served as Director for
Operations in the Sea Port of
St. Petersburg from 2003. From 2000
to 2003 he held the position of Chief
Executive Officer of MCT PORT.
From 1993 he served as Head of
Department of MCT Petersburg, before
being promoted to Chief Operations
Officer. In 1984-1993 Mr. Bogdanov
worked for Leningrad Sea Commercial
Port (from 1992 known as the Sea Port
of St. Petersburg). Mr. Bogdanov
graduated from Admiral Makarov
State Maritime Academy.
Mr. Dudko has served for three years as
the General Director of Moby Dik, one of
the Group’s container terminals in the
Big Port of St. Petersburg, and had been
the Director for Operations of VSC from
2011 to 2012. He joined the company
from DP World Southampton (UK),
where he spent three years in various
positions. Mr. Dudko started his career
in the ports industry working for First
Container Terminal in St. Petersburg
where he had a role in the Finance
Department between 2004 and 2006.
Mr. Dudko has a degree from the
State Marine Technical University of
St. Petersburg and an M.Sc. in Logistics,
Trade and Finance from Cass Business
School, London.
Mr. Dudko graduated from the
APM Terminals MAGNUM program,
a corporate-led programme in
partnership with a ESADE Business
School, in 2014.
He has also served as member of
the Management Board of E.R.S.
since April 2008 and EK Holding AS
since September 2005 and as member
of the Supervisory Board of Stivterminal
(a subsidiary, which was merged into
Vopak E.O.S. in 2011) since June 2006
and Pakterminal (which was acquired
by Vopak E.O.S. in May 2008 and
merged into Vopak E.O.S. in May 2010)
since June 2008.
Mr. Lugtmeijer studied at Delft
Technical University in Holland and
graduated in 1991.
From 2006 to 2010, he served as
Ms. Scherbakova-Slusarenko has
Mr. Tikhov has extensive experience
Mr. van Assendelft has also held a
Operations Manager and Managing
ten years of teaching experience.
in the transportation and logistics
position as a member of the board
Director in Sea Port of St. Petersburg.
Since 2017 she is a member of the
industry in Russia. From 2003 to 2004,
of directors of Niinisaaren Portti
From 1999 till then, he served as Chief
Interindustry Expert Council for the
he was Chief Executive Officer and
Osakeyhtio Oy (NiPO) since April 2007.
Executive Officer in Fourth Stevedoring
Development of the Truck Automotive
Chairman of the Board of Directors
Company. Between 1994 and 1999 he
and Road Industry (IEC).
was Chief Executive Officer at First
Stevedoring Company. He began his
career in 1980 at Leningrad Sea
Commercial Port (since 1992 – Sea Port
of St. Petersburg).
Prior to joining the Group,
Ms. Scherbakova-Slusarenko held
executive positions in Russia’s largest
transport companies such as Concern
From 1991 until 2000 he was Chief
SVT (Moscow) and Magistral Container
Executive Officer in MCT St. Petersburg
Mr. Mishin graduated from the Admiral
Lines (Moscow), as well as others. Since
and from 1984 to 1991 he worked for
Makarov State Maritime Academy.
2005 she has been a senior lecturer at
Leningrad Sea Commercial Port
the Moscow State Academy of Water
(from 1992 known as the Sea Port
Transport where she lectures on
of St. Petersburg).
of Sea Port of St. Petersburg and
previously held the position of Sales
Director of Sea Port of St. Petersburg
from 2000.
Prior to his appointment as the
managing director of Multi-Link
Terminals Ltd Oy, he worked for
Container-Depot Ltd Oy as a director
until December 2005.
He studied at the Helsinki University
of Technology and the Kotka
Svenska Samskola.
Mr. Tikhov is a graduate of the Admiral
Makarov State Maritime Academy.
economics. Ms. Scherbakova-
Slusarenko has over 20 years’
experience in the transport.
She graduated from Odessa State
Academy of Refrigeration where she
majored in thermal physics; she also
holds a degree in economics
and psychology.
40
GLOBAL PORTS INVESTMENTS PLC
MR. EDUARD
CHOVUSHYAN
MR. ANDREY
BOGDANOV
MR. ALEXANDER
MR. ARNOUT DIRK
DUDKO
LUGTMEIJER
MR. VITALY
MISHIN
First Deputy CEO of Global Ports
Managing Director of
Managing Director of VSC
General Manager of Moby Dik
Ust-Luga Container Terminal
General Manager
of Vopak E.O.S.
MS. VICTORIA
SCHERBAKOVA-
SLUSARENKO
General Manager of
Yanino Logistic Park and
Logistica Terminal
MR. ALEXANDER
TIKHOV
MR. DIRK VAN
ASSENDELFT
Managing Director of
First Container Terminal
General Manager of
Multi-Link Terminals
Management LLC and
Managing Director
of Petrolesport
YEAR OF APPOINTMENT
Mr. Chovushyan was appointed as the
Mr. Bogdanov was appointed as the
Mr. Dudko was appointed Managing
Mr. Lugtmeijer has served as the
First Deputy CEO of Global Ports
Managing Director of the Ust-Luga
Director of VSC in February 2015.
Chairman of the Management Board
Management LLC in April 2017. From
Container Terminal in 2018, before
March 2007 he has also served as
he served as its General Manager
General Manager of Petrolesport.
since 2012.
of Vopak E.O.S. since 1996 (and as a
member of the Management Board
since 1994).
Mr. Mishin was appointed as General
Manager of Moby Dik in 2015. Prior to
that, from 2010 to 2014 he has served as
General Director of Logistika-Terminal.
SKILLS AND EXPERIENCE
Mr. Chovushyan has more than 15
For five years prior to 2012 he was the
Mr. Dudko has served for three years as
He has also served as member of
years’ experience in various
Commercial Director of First Container
the General Director of Moby Dik, one of
the Management Board of E.R.S.
managerial positions in the N-Trans
Terminal. He served as Director for
the Group’s container terminals in the
since April 2008 and EK Holding AS
group of companies. He previously
Operations in the Sea Port of
Big Port of St. Petersburg, and had been
since September 2005 and as member
served as a Deputy Chief Executive
St. Petersburg from 2003. From 2000
the Director for Operations of VSC from
of the Supervisory Board of Stivterminal
Officer of Tuapsinsky morskoy torgovy
to 2003 he held the position of Chief
2011 to 2012. He joined the company
(a subsidiary, which was merged into
port OAO from November 2003 and
Executive Officer of MCT PORT.
from DP World Southampton (UK),
Vopak E.O.S. in 2011) since June 2006
was appointed CEO in June 2004. Prior
From 1993 he served as Head of
where he spent three years in various
and Pakterminal (which was acquired
to that, he was the Deputy General
Department of MCT Petersburg, before
positions. Mr. Dudko started his career
by Vopak E.O.S. in May 2008 and
Director of Tuapsinsky sudoremontny
being promoted to Chief Operations
in the ports industry working for First
merged into Vopak E.O.S. in May 2010)
zavod OAO for a year. Following on
Officer. In 1984-1993 Mr. Bogdanov
Container Terminal in St. Petersburg
since June 2008.
from his role at Tuapsinsky morskoy
worked for Leningrad Sea Commercial
where he had a role in the Finance
torgovy port OAO, Mr. Chovushyan
Port (from 1992 known as the Sea Port
Department between 2004 and 2006.
Mr. Lugtmeijer studied at Delft
Technical University in Holland and
Mr. Dudko has a degree from the
graduated in 1991.
then worked as Vice President for
of St. Petersburg). Mr. Bogdanov
Development at NCC OOO from April
graduated from Admiral Makarov
2006 until March 2007. From August
State Maritime Academy.
2007, he has served as the Chairman
of the Board of Directors of
Porttransservice OOO.
Mr. Chovushyan graduated from the
Lomonosov Moscow State University
where he studied Philosophy.
State Marine Technical University of
St. Petersburg and an M.Sc. in Logistics,
Trade and Finance from Cass Business
School, London.
Mr. Dudko graduated from the
APM Terminals MAGNUM program,
a corporate-led programme in
partnership with a ESADE Business
School, in 2014.
From 2006 to 2010, he served as
Operations Manager and Managing
Director in Sea Port of St. Petersburg.
From 1999 till then, he served as Chief
Executive Officer in Fourth Stevedoring
Company. Between 1994 and 1999 he
was Chief Executive Officer at First
Stevedoring Company. He began his
career in 1980 at Leningrad Sea
Commercial Port (since 1992 – Sea Port
of St. Petersburg).
Mr. Mishin graduated from the Admiral
Makarov State Maritime Academy.
Mr. Tikhov was appointed as the
Managing Director of the First
Container Terminal in 2014 before
he served there as General Manager
since 2001.
Mr. van Assendelft has served as
the managing director of Multi-Link
Terminals Ltd Oy since December
2004 and was the chief executive
officer of Moby Dik from June 2004
until July 2010.
Mr. van Assendelft has also held a
position as a member of the board
of directors of Niinisaaren Portti
Osakeyhtio Oy (NiPO) since April 2007.
Prior to his appointment as the
managing director of Multi-Link
Terminals Ltd Oy, he worked for
Container-Depot Ltd Oy as a director
until December 2005.
He studied at the Helsinki University
of Technology and the Kotka
Svenska Samskola.
Mr. Tikhov has extensive experience
in the transportation and logistics
industry in Russia. From 2003 to 2004,
he was Chief Executive Officer and
Chairman of the Board of Directors
of Sea Port of St. Petersburg and
previously held the position of Sales
Director of Sea Port of St. Petersburg
from 2000.
From 1991 until 2000 he was Chief
Executive Officer in MCT St. Petersburg
and from 1984 to 1991 he worked for
Leningrad Sea Commercial Port
(from 1992 known as the Sea Port
of St. Petersburg).
Mr. Tikhov is a graduate of the Admiral
Makarov State Maritime Academy.
Ms. Scherbakova-Slusarenko has been
working with the Group as Director of
Forwarding Companies since 2009.
She has been holding the position of
General Director of Yanino Logistics
Park LLC from 2013, in March 2015 she
was appointed as General Manager
of Logistica Terminal.
Ms. Scherbakova-Slusarenko has
ten years of teaching experience.
Since 2017 she is a member of the
Interindustry Expert Council for the
Development of the Truck Automotive
and Road Industry (IEC).
Prior to joining the Group,
Ms. Scherbakova-Slusarenko held
executive positions in Russia’s largest
transport companies such as Concern
SVT (Moscow) and Magistral Container
Lines (Moscow), as well as others. Since
2005 she has been a senior lecturer at
the Moscow State Academy of Water
Transport where she lectures on
economics. Ms. Scherbakova-
Slusarenko has over 20 years’
experience in the transport.
She graduated from Odessa State
Academy of Refrigeration where she
majored in thermal physics; she also
holds a degree in economics
and psychology.
ANNUAL REPORT 2017
41
CORPORATE GOVERNANCE RISK MANAGEMENT
RISK MANAGEMENT
AND PRINCIPAL RISKS
Global Ports (GPI) is exposed to a variety of risks that can have financial, operational
and compliance impacts on its business performance, reputation and licence to operate.
The Board recognises that creating shareholder value involves the acceptance of risk.
Effective management of risk is therefore critical to achieving the corporate objective
of delivering long-term growth and added value to our shareholders.
Risk management process, principal
risks and uncertainties
Global Ports has a well-established enterprise
risk management system (the ERM) that is
designed to identify, assess, respond, monitor
and, where possible, mitigate or eliminate
threats to the business caused by changes in
the external and internal business, financial,
regulatory and operating environment.
Global Ports bases its risk management
activities on a series of well-defined risk
management principles, derived from
experience, leading practice and corporate
governance regimes. The Group updates
and improves its risk management framework
on a regular basis to remain competitive in
a changing and uncertain environment.
The GPI Board has overall oversight
responsibility for the GPI’s risk management
and it systematically monitors and assesses
the risks attributable to the Group’s
performance and delivery of the GPI strategy.
After identifying and assessing a risk, the
Group selects and deploys the appropriate risk
response aimed at reducing the likelihood of its
occurrence and/or potential adverse impact.
The GPI Board delegates to the Chief
Executive Officer responsibility for effective
and efficient implementation and
maintenance of the risk management system.
Day-to-day responsibility for the risk
management lies with management team.
The Audit and Risk Committee is authorised
by the Board to monitor, review and report
on the organisation, functionality and
effectiveness of the Group’s ERM system.
Global Ports is exposed to a variety of risks
which are listed below. The order in which the
risks are presented is not intended to be an
indication of the probability of their occurrence
or the magnitude of their potential effects.
Not all of these risks are within the Group’s
control, and the list cannot be considered to
be exhaustive, as other risks and uncertainties
may emerge in a changing external and
internal environment that could have a
material adverse effect on the Group’s ability
to achieve its business objectives and deliver
its overall strategy.
Further information on our risk management
system including a detailed description of
identified risk factors is contained in the notes
to the Financial Statements attached to
this report.
RISK FACTOR
DESCRIPTION
RISK MANAGEMENT APPROACH
Strategic risk
Market
conditions
Global Ports’ operations are dependent on the global
macroeconomic environment and resulting trade flows, including
in particular container volumes.
Container market throughput is closely correlated to the volume of
imported goods, which in turn is driven by domestic consumer demand.
The Group remains exposed to the risk of contraction in the Russian
economy which if it were to occur could further dampen consumer
demand and lead to a deterioration in the container market which
could have a materially adverse impact on the Group.
The Group has reacted to the declining throughput in the container
market by:
– Focusing on quality service
– Offering operational flexibility to the clients
– Effective management of costs
– Adopting new revenue streams
In addition, the Group aims to position itself to lead a future market
recovery through superior service and cost discipline.
42
GLOBAL PORTS INVESTMENTS PLC
RISK FACTOR
DESCRIPTION
Strategic risk (continued)
RISK MANAGEMENT APPROACH
Competition
Political,
economic
and social
stability
Challenging market trading conditions mean that competition
pressures from other container terminals remains high. Further
consolidation between container terminal operators and container
shipping companies, introduction of new capacity and carrier
consolidation could result in greater price competition, lower
utilisation and a potential deterioration in profitability.
In recent years, the Russian market has observed significant new
container handling capacity coming on-stream, for example the
new port terminal at Bronka, which competes with the Group’s ports
in the Baltic Sea Basin.
Additionally, strategic international investors may develop or acquire
stakes in existing competitor Russian container terminals, which
could bring new expertise into the market and divert clients and
cargoes away from the Group.
Given the historically high margins in the Russian container handling
industry, this trend may continue.
The Group actively monitors the competitive landscape and adjusts
its commercial strategy accordingly, i.e. the Group builds long-term
relationships with top customers based on a global approach to
account management and contractual agreements incentivising
growth of throughput.
The Group’s focus on service quality is a key differentiator to its
competition and the Group believes this is one of its key
competitive advantages.
The Group has made long-term investments in its terminals and modern
equipment to ensure competitive levels of service. It operates on a
long-term horizon and its terminals represent core infrastructure in
Russia that will continue to operate for the next ten-20 years or beyond.
Because the Group possesses modern, up-to-date facilities and available
capacity, it requires only minimal additional capital expenditure in the
short to medium term thus preserving its ability to offer capacity to the
market when necessary without sizeable additional investments.
Instability in the Russian economy, as well as social and political
instability, could create an uncertain operating environment and
affect the Group’s ability to sell its services due to significant
economic, political, legal and legislative risks.
Certain government policies or the selective and arbitrary
enforcement of such policies could make it more difficult for the
Group to compete effectively and/or impact its profitability.
The Group may also be adversely affected by US, EU and other
government sanctions against Russian business whose measures
have had and may continue to have an adverse effect on the
Russian economy and demand for commodities. Ongoing sanctions
could also adversely impact the Group’s ability to obtain financing
on favourable terms and to deal with certain persons and entities
in Russia or in other countries.
The Group has adapted to the macroeconomic challenges posed
since the second half of 2014. Its approach of effective cost
management, focus on deleveraging and refinancing of its debt
portfolio by switching all borrowings to fixed rates and moving to
longer maturities are designed to make the Group more resilient
to short-term economic challenges in Russia as well as the wider
regional and global environment.
The Group has developed a system to monitor compliance with
restrictions posed by international sanctions.
The Group continues to maintain an international base of
shareholders, bondholders and business partners.
The Group is not aware of any specific sanctions.
Operational risks
Leases of
terminal land
The Group leases a significant amount of the land and quays
required to operate its terminals from government agencies and any
revision or alteration of the terms of these leases or the termination
of these leases, or changes to the underlying property rights under
these leases, could adversely affect the Group’s business.
The Group believes it has a stable situation at present regarding its
land leases and its terminals have been in operation for a number
of years. The Group owns the freehold on 66% of the total land of its
terminals and 70% of the land of its container and inland terminals
in Russia. The rest of the Group’s land is held under long-term leases
(up to 49 years).
Customer
profile and
concentration
The Group is dependent on a relatively limited number of
major customers (shipping lines etc.) for a significant portion
of its business.
The Group conducts extensive and regular dialogue with key
customers and actively monitors changes that might affect our
customers’ demand for our services.
These customers are affected by conditions in their market sector
which can result in contract changes and renegotiations as well
as spending constraints, this is further exacerbated by carrier
consolidation process.
The Group has a clear strategy to reduce its dependence on its
major customers, targeting new potential customers and new
cargo segments.
The Group is also growing its share of non-container revenues
through successfully building its presence in marine bulk cargo
like coal (2017: share of non-container revenue was 23% and 19%
in 2016).
The Group strives to maintain a continuous dialog with third parties
across the supply chain. In addition, its geographic diversification
provides it with some flexibility in its logistics, should bottlenecks
develop in one area.
Reliance on
third parties
The Group is dependent on the performance of services by third
parties outside its control, including the performance by all other
participants in the logistics chain, such as customs inspectors,
supervisory authorities and others, and the performance of
security procedures carried out at other port facilities and by
its shipping line customers.
Oil products
The Group’s oil products business could be affected by changes in
Russia’s exports of oil products and handling of such exports at its
oil products terminal in Estonia, a decline in global demand for oil
products or in Russian oil product export volumes or any change
in trade relationships with Estonia.
The Group believes, like most international forecasters, that the
global demand for oil products remains cyclical and might grow
again over the medium term.
ANNUAL REPORT 2017
43
CORPORATE GOVERNANCE RISK MANAGEMENT (CONTINUED)
RISK FACTOR
DESCRIPTION
Operational risks (continued)
RISK MANAGEMENT APPROACH
Tariff
regulation
Tariffs for certain services at certain of the Group’s terminals have
been in the past regulated by the Russian Federal Antimonopoly
Service and, as a result, the tariffs charged for such services were,
and may potentially in the future be, subject to a maximum tariff
rate and/or fixed in Russian roubles as PLP, VSC and FCT, like many
other Russian seaport operators, are classified as natural monopolies
under Russian law.
The Group continues to monitor for any legislative proposals and
regulatory actions that could lead to changes to the existing tariff
regulations. It seeks a proactive dialog with the relevant Russian
federal authorities. It believes it is as well placed as any market
participant to adapt to any – future changes in tariff regulation.
Human
resources
management
The Group’s competitive position and prospects depend on the
expertise and experience of its key management team and its ability
to continue to attract, retain and motivate qualified personnel.
Industrial action or adverse labour relations could disrupt the
Group’s operating activities and have an adverse effect on
performance results.
Health, safety,
security and
environment
Accidents involving the handling of hazardous materials and oil
products at the Group’s terminals could disrupt its business and
operations and/or subject the Group to environmental and
other liabilities.
The risk of safety incidents is inherent in the Group’s businesses.
The Group’s operations could be adversely affected by terrorist
attacks, natural disasters or other catastrophic events beyond
its control.
The Group is committed to recruiting and engaging Russian and
international managers and experts to meet its needs. The Group offers
competitive salaries and benefits to employees at all levels to foster
and retain top talent. In addition the Group pays special attention to
professional development as well as engagement in socially responsible
business practices and supporting local communities.
The Group strives to maintain a positive working relationship with
labour unions at its facilities. Moreover, it pursues overall labour
policies designed to provide a salary and benefit package in line with
the expectations of our employees.
The Group has implemented clear environmental and safety policies
designed around international best practices and benchmark using
such measures as GPI Global Minimum Requirements.
Safety is one of the Group’s top priorities. A safety strategy
and annual action plan have been developed, aiming to build a
sustainable safety culture covering the whole Group. The detailed
roadmap is designed to ensure sustainable implementation of safety
culture over the medium term.
Similarly, GPI works with all its stakeholders to maintain high levels of
security around port facilities and vessel operations to minimise the
risk of terrorist attack.
Regulatory risks
Regulatory
compliance
The Group is subject to a wide variety of regulations, standards and
requirements and may face substantial liability if it fails to comply
with existing regulations applicable to its businesses.
The Group strives to be in compliance at all times with all regulations
governing its activities and devotes considerable management and
financial resources to ensure compliance.
Changes in
regulations
The Group’s terminal operations are subject to extensive laws and
regulations governing, among other things, the loading, unloading
and storage of hazardous materials, environmental protection and
health and safety.
Changes to existing regulations or the introduction of new
regulations, procedures or licensing requirements are beyond the
Group’s control and may be influenced by political or commercial
considerations not aligned with the Group’s interests. Any expansion
of the scope of the regulations governing the Group’s environmental
obligations, in particular, would likely involve substantial additional
costs, including costs relating to maintenance and inspection,
development and implementation of emergency procedures and
insurance coverage or other financial assurance of its ability to
address environmental incidents or external threats.
The Group maintains a constructive dialog with relevant federal,
regional and local authorities regarding existing and planned
regulations. The Group does not have the power to block any or all
regulations it may judge to be harmful, but this dialog should ensure
it has time to react to changes in the regulatory environment.
Compliance and shareholder risk
Conflict of
interests
The Group’s controlling beneficial shareholders may have interests
that conflict with those of the holders of the GDRs or notes.
The major implications of this risk are that: (i) co-controlling
shareholders pursue other businesses not related to GPI and hence
may not be deeply involved with developing GPI; and (ii) one of
the major shareholders is also a major customer of the Group.
The Group’s corporate governance system is designed to maximise
the company’s value for all shareholders and ensure the interests
of all stakeholders are taken into account. The Group’s LSE listing
ensures our compliance with the highest international standards.
In addition, the Board has highly experienced members, including
strong Independent Directors.
44
GLOBAL PORTS INVESTMENTS PLC
RISK FACTOR
DESCRIPTION
RISK MANAGEMENT APPROACH
Compliance and shareholder risk (continued)
Legal and
tax risks
Financial risks
FOREX risks
Adverse determination of pending and potential legal actions
involving the Group’s subsidiaries could have an adverse effect on
the Group’s business, revenues and cash flows and the price of the
GDRs. Weaknesses relating to the Russian legal and tax system
and appropriate Russian law create an uncertain environment
for investment and business activity and legislation may not
adequately protect against expropriation and nationalisation.
The lack of independence of certain members of the judiciary,
the difficulty of enforcing court decisions and governmental
discretion claims could prevent the Group from obtaining
effective redress in court proceedings.
The Group maintains a strong and professional legal function
designed to monitor legal risks, avoid legal actions where possible
and carefully oversee any legal actions that may occur.
The Group performs ongoing monitoring of changes in Russian
and international tax legislation and court practice and develops
the Group’s legal and tax position accordingly.
The Group is subject to foreign-exchange risk arising from various
currency exposures, primarily the Russian rouble and the US dollar.
Foreign-exchange risk is the risk to profits and cash flows of the
Group arising from movement of foreign-exchange rates due to
inability to timely plan for and appropriately react to fluctuations
in foreign-exchange rates. Risk also arises from revaluation of assets
and liabilities denominated in foreign currency.
Currently, a significant part of the Group’s revenue, and a major
part of the Group’s debt is denominated in US dollars, whereas
most of the Group’s operating expenses are and will continue to be
denominated and settled in Russian roubles. The Group uses several
different instruments and approaches to minimise future risks from
volatility in the value of the Russian rouble and US dollar. To date,
this strategy has proved effective. Should the Group have to switch
the currency of its tariffs to RUR, it will need to convert the existing
debt into the same currency to avoid significant foreign exchange
risks arising from such a mismatch.
Credit risk
The Group may be subject to credit risk due to its dependence
on key customers and suppliers.
The Group closely tracks its accounts receivables overall and the
creditworthiness of key customers and suppliers.
Debt, leverage
and liquidity
The Group’s indebtedness or the enforcement of certain
provisions of its financing arrangements could affect its
business or growth prospects.
Failure to promptly monitor and forecast compliance with loan
covenants both at the Group and individual terminal levels may
result in covenant breaches and technical defaults.
If the Group is unable to access funds (liquidity) it may be unable
to meet financial obligations when they fall due, or on an ongoing
basis, to borrow funds in the market at an acceptable price to fund
its commitments.
Information
technology
and security
The Group’s container terminals rely on IT and technology systems
to keep their operations running efficiently, prevent disruptions
to logistic supply chains, and monitor and control all aspects of
their operations.
Any IT glitches can create major disruptions for complex logistic
supply chains.
Any prolonged failure or disruption of these IT systems, whether a
result of a human error, a deliberate data breech or an external cyber
threat could create major disruptions in terminal operations. This
could dramatically affect the Group’s ability to render its services to
customers, leading to reputational damage, disruption to business
operations and an inability to meet its contractual obligations.
The Group has been able to reduce its total debt level, as planned,
in 2017 and continued reduction of the debt above and beyond
minimum repayment requirements remains a management
priority in 2018.
Liquidity risk is carefully monitored, with regular forecasts prepared
for the Group and its operating entities.
Although the risk of liquidity shortfalls within the following 18-24
months has been significantly reduced via extensions of debt
maturities through public debt issuances in 2016, the liquidity
position is carefully monitored in case of further deterioration of
financial performance.
The Group regularly stress tests scenarios when different negative
trends that could affect cash flows are identified.
The Group has centralised its IT function in recent years and believes
this is an important step in ensuring both the efficiency and
consistency of the Group’s security protocols implementation.
The Group has further enhanced its IT security and security
awareness during the year. As part of its ongoing response to the
threat of cyber-attacks, the Group is currently rolling out additional
enhancements to its threat detection systems across all subsidiaries.
The Group continuously improves the cyber threats awareness and
training among its employees and develops the business continuity
plans in case of any disruptions.
ANNUAL REPORT 2017
45
CORPORATE GOVERNANCE FINANCIAL
STATEMENTS
GLOBAL PORTS INVESTMENTS PLC
ANNUAL REPORT 2017
FINANCIAL STATEMENTS DIRECTORS’ REPORT AND CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
TABLE OF CONTENTS
Board of Directors and other officers
Management report
Directors’ Responsibility Statement
Consolidated income statement for the year ended 31 December 2017
Consolidated statement of comprehensive income for the year ended 31 December 2017
Consolidated balance sheet as at 31 December 2017
Consolidated statement of changes in equity for the year ended 31 December 2017
Consolidated statement of cash flows for the year ended 31 December 2017
Notes to the consolidated financial statements
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
General information
Basis of preparation and summary of significant accounting policies
Financial risk management
Critical accounting estimates and judgements
Segmental information
Expenses by nature
Other gains/(losses) – net
Employee benefit expense
Finance income/(costs) – net
Net foreign exchange gains/(losses)
Income tax expense
Basic and diluted earnings per share
Dividend distribution
Property, plant and equipment
Intangible assets
Financial instruments by category
Credit quality of financial assets
Inventories
Trade and other receivables
Cash and cash equivalents
Share capital, share premium
Borrowings
Derivative financial instruments
Deferred income tax liabilities
Trade and other payables
Assets held for sale
Joint ventures
Contingencies
Commitments
Related party transactions
Events after the balance sheet date
Independent Auditor’s Report
1
3
16
17
18
19
20
21
22
22
23
33
36
37
45
46
46
47
47
47
48
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65
GLOBAL PORTS INVESTMENTS PLC
GLOBAL PORTS INVESTMENTS PLC
BOARD OF DIRECTORS AND OTHER OFFICERS
Board of Directors and Other Officers
Board of Directors
Mr. Morten Henrick Engelstoft (appointed 31 October 2016)
(Mrs. Iana Boyd Penkova and Mrs. Olga Gorbarenko are the alternates to Mr. Morten Henrick Engelstoft)
Chairman of the Board of Directors
Non-Executive Director
Member of Remuneration and Nomination Committees
Mr. Nikita Mishin (appointed 15 December 2008)
(Mr. Mikhail Loganov is the alternate to Mr. Nikita Mishin)
Vice-Chairman of the Board of Directors
Non-Executive Director
Member of Remuneration and Nomination Committees
Capt. Bryan Smith (appointed 19 August 2008)
Senior Independent Non-Executive Director
Chairman of Remuneration and Nomination Committees
Mrs. Britta Dalunde (appointed 12 May 2017)
Independent Non-Executive Director
Chairman of Audit and Risk Committee
Mrs. Inna Kuznetsova (appointed 01 January 2018)
Independent Non-Executive Director
Member of Audit and Risk, Nomination and Remuneration Committees
Mr. Lambros Papadopoulos (appointed 01 January 2018)
Independent Non-Executive Director
Member of Audit and Risk Committee
Mr. Soren Jakobsen (appointed 02 March 2018)
(Mrs. Olga Gorbarenko is the alternate to Mr. Soren Jakobsen)
Non-Executive Director
Member of Audit and Risk, Nomination and Remuneration Committees
Mrs. Elia Nicolaou (appointed 12 May 2017)
Non-Executive Director
Member of Remuneration and Nomination Committees
Mr. Konstantin Shirokov (appointed 15 December 2008)
Non-Executive Director
Member of Audit and Risk Committee
Mr. Alexander Iodchin (appointed 15 August 2008)
Executive Director
Mr. Mikhail Loganov (appointed 15 December 2008)
Executive Director
ANNUAL REPORT 2017
1
FINANCIAL STATEMENTS BOARD OF DIRECTORS AND OTHER OFFICERS (CONTINUED)
Board of Directors (continued)
Mrs. Laura Michael (appointed 23 January 2013)
(Mr. Nicholas Charles Terry is the alternate to Mrs. Laoura Michael)
Non-Executive Director
Mr. Michalakis Christofides (appointed 30 July 2014)
Non-Executive Director
Mr. Vadim Kryukov (appointed 30 July 2014)
Non-Executive Director
Mr. Nicholas Charles Terry (appointed 31 October 2016)
(Mrs. Laoura Michael is the alternate to Mr. Nicholas Charles Terry)
Non-executive Director
Mrs. Iana Boyd (appointed 29 January 2018)
Non-executive Director
Mr. Tiemen Meester (resigned on 14 February 2017)
Mrs. Siobhan Walker (resigned on 12 May 2017)
Dr. Alexander Nazarchuk (resigned on 12 May 2017)
Mr. Gerard Jan van Spall (resigned on 29 January 2018)
Mr. Peder Sondergaard (resigned on 01 February 2018)
Board support
The Company Secretary is available to advise all Directors to ensure compliance with the Board procedures. Also a procedure is in place to enable
Directors, if they so wish, to seek independent professional advice at the Company’s expense.
Company Secretary
Team Nominees Limited
20 Omirou Street
Ayios Nicolaos
CY-3095 Limassol
Cyprus
Registered office
20 Omirou Street
Ayios Nicolaos
CY-3095 Limassol
Cyprus
2
GLOBAL PORTS INVESTMENTS PLC
MANAGEMENT REPORT
1.
The Board of Directors presents its report together with the audited consolidated financial statements of Global Ports Investments Plc
(hereafter also referred to as “GPI” or the “Company”) and its subsidiaries and joint ventures (hereafter collectively referred to as the
“Group”) for the year ended 31 December 2017. The Group’s financial statements have been prepared in accordance with International
Financial Reporting Standards (hereafter also referred as “IFRS”) as adopted by the European Union (“EU”) and the requirements of Cyprus
Companies Law, Cap. 113.
Principal activities and nature of operations of the Group
2.
The principal activities of the Group, which are unchanged from the previous year, are the operation of container and oil products terminals
in Russia and the Baltics. The Group offers its customers a wide range of services for their import and export logistics operations.
Changes in group structure
3. During the year ended 31 December 2017 the management of the Group continued its efforts in optimisation of the Group structure. LLC
Rolis was sold by JSC Logistica-Terminal to NCC Pacific Investments Ltd. T.O. Services Ltd, LLC Kran-1, LLC Kran-2, LLC Kran-3 were liquidated.
LLC Shahovo-19 merged with LLC Shahovo-18. LLC ZASM was sold to LLC Farwater. The management launched the liquidation of LLC
Container-Depot East and LLC Cargo Connexion East which was finalised in February-March 2018.
4.
There were no other material changes in the group structure.
Review of developments, position and performance of the Group’s business
5.
The strong recovery in the Russian container market continued in the second half of 2017, posting 16%* growth in volumes for the full year. This
growth was principally driven by a revival in imports, due to improved consumer demand, along with increased containerisation of exports.
6. Against this backdrop, the Group continued to implement its strategy of harnessing the recovery of the container market, developing
additional revenue streams, improving operational efficiency, maximising free cash flow generation and deleveraging.
7.
The growth of Global Ports’ Consolidated Marine Container Throughput accelerated to 11.8%* in the second half of 2017, resulting in 6.8%*
growth for 2017 as a whole. This acceleration in growth has continued into 2018 with a 23%* increase in Consolidated Marine Container
Throughput in January-February 2018, significantly outpacing the Russian container market growth of 16%* for the same two-month period.
8.
The Group also delivered a record 21.9%* year-on-year increase in Consolidated Marine Bulk Throughput in 2017 which reached an all-time
high of 2.7 million tonnes*.
9. Based on these operational achievements, Global Ports generated Revenue of USD 330.5 million, Adjusted EBITDA of USD 201.6 million*,
Gross profit of USD 182.0 million and strong Free Cash Flow of USD 145.9 million*. The Group reduced Total Debt by a further USD 70.2 million*
over the period.
10. The loss of the Group for the year ended 31 December 2017 was USD 52,947 thousand (2016: net profit USD 61,263 thousand). On
31 December 2017 the total assets of the Group were USD 1,655,559 thousand (2016: USD 1,643,007 thousand) and the net assets were
USD 377,238 thousand (2016: USD 324,916 thousand). The financial position, development and performance of the Group as presented
in these consolidated financial statements are considered satisfactory.
11.
In December 2017 Moscow Arbitrage Court has approved the terms of a settlement agreement between the Russian Federal Antimonopoly
Service (FAS) and the Group’s VSC, PLP and FCT terminals with respect to the findings of FAS in April 2017 that these terminals (as well as a
number of other Russian terminal operators) was in breach of antimonopoly laws in relation to the pricing of stevedoring services in Russian
ports. The Group challenged the FAS findings with respect to each of FCT, VSC and PLP and appealed against the orders in court. The terms
of the settlement will not have any material impact on the Group’s financial position or cash flow and will not negatively affect operating
activities in any significant way.
12. Certain non-IFRS financial measures and operational information above which is derived from the management accounts is marked in this
announcement with an asterisk {*}. Terms used above are defined as follows:
Adjusted EBITDA (a non-IFRS financial measure) for Global Ports Group is defined as profit for the period before income tax expense, finance
income/(costs) – net, depreciation of property, plant and equipment, amortisation of intangible assets, share of profit/(loss) of joint ventures
accounted for using the equity method, other gains/(losses)—net and impairment of goodwill and property, plant and equipment and
intangible assets.
Consolidated Marine Bulk Throughput is defined as combined marine bulk throughput by consolidated terminals: PLP, VSC, FCT and ULCT.
Consolidated Marine Container Throughput is defined as combined marine container throughput by consolidated marine terminals: PLP, VSC,
FCT and ULCT.
ANNUAL REPORT 2017
3
FINANCIAL STATEMENTS
MANAGEMENT REPORT (CONTINUED)
Review of developments, position and performance of the Group’s business (continued)
Free Cash Flow (a non-IFRS financial measure) is calculated as Net cash from operating activities less Purchase of property, plant
and equipment.
Total Debt (a non-IFRS financial measure) is defined as a sum of current borrowings, non-current borrowings and derivative
financial instruments.
Risk management process, principal risks and uncertainties
13. GPI is exposed to a variety of risks that can have financial, operational and compliance impacts on its business performance, reputation
and licence to operate. The Board recognises that creating shareholder value involves the acceptance of risk. Effective management of risk
is therefore critical to achieving the corporate objective of delivering long-term growth and added value to our shareholders.
14. Global Ports has been developing and embedding Enterprise Risk Management system (the ERM) that is designed to identify, assess, respond,
monitor and, where possible, mitigate or eliminate threats to the business caused by changes in the external and internal business, financial,
regulatory and operating environment.
15. Global Ports bases its risk management activities on a series of well-defined risk management principles, derived from experience, leading
practice, and corporate governance regimes. The Group updates and improves its risk management framework on a regular basis to remain
competitive in a changing and uncertain environment. Within 2017 a better overview and summary of major risks facing the Group was
developed and presented to the Board. It facilitates the analysis of risk ratings and their trends.
16. The GPI Board has overall oversight responsibility for the GPI’s risk management and it systematically monitors and assesses the risks
attributable to the Group’s performance and delivery of the GPI strategy. After identifying and assessing a risk, the Group selects and deploys
the appropriate risk response aimed at reducing the likelihood of its occurrence and/or potential adverse impact.
17. The GPI Board delegates to the Chief Executive Officer responsibility for effective and efficient implementation and maintenance of the risk
management system. Day-to-day responsibility for the risk management lies with the management team. The Audit and Risk Committee
is authorised by the Board to monitor, review and report on the organization, functionality and effectiveness of the Group’s ERM system.
18. Global Ports is exposed to a variety of risks which are listed below. The order in which the risks are presented is not intended to be an
indication of the probability of their occurrence or the magnitude of their potential effects.
19. Not all of these risks are within the Group’s control, and the list cannot be considered to be exhaustive, as other risks and uncertainties may
emerge in a changing external and internal environment that could have a material adverse effect on the Group’s ability to achieve its
business objectives and deliver its overall strategy.
20. Further information on our risk management system including a detailed description of identified risk factors is contained in the notes to the
Financial Statements attached to this report.
21. The Group’s financial risk management and critical accounting estimates and judgments are disclosed in Notes 3 and 4 to the consolidated
financial statements.
22. The Group’s contingencies are disclosed in Note 28 to the consolidated financial statements.
4
GLOBAL PORTS INVESTMENTS PLC
Risk factor
Strategic risks
Risk management approach
Market conditions:
Global Ports’ operations are dependent on the global macroeconomic
environment and resulting trade flows, including in particular
container volumes.
Container market throughput is closely correlated to the volume of
imported goods, which in turn is driven by domestic consumer demand.
The Group remains exposed to the risk of contraction in the Russian
economy which if it were to occur could further dampen consumer
demand and lead to a deterioration in the container market which
could have a materially adverse impact on the Group.
Competition:
Challenging market trading conditions mean that competition
pressures from other container terminals remains high. Further
consolidation between container terminal operators and container
shipping companies, introduction of new capacity and carrier
consolidation could result in greater price competition, lower
utilisation, and a potential deterioration in profitability.
In recent years, the Russian market has observed significant new
container handling capacity coming on-stream, for example the
new port terminal at Bronka, which competes with the Group’s ports
in the Baltic Sea Basin.
Additionally, strategic international investors may develop or acquire
stakes in existing competitor Russian container terminals, which could
bring new expertise into the market and divert clients and cargoes
away from the Group.
Given the historically high margins in the Russian container handling
industry, this trend may continue.
Political, economic and social stability:
Instability in the Russian economy as well as social and political
instability could create an uncertain operating environment and
affect the Group’s ability to sell its services due to significant
economic, political, legal and legislative risks.
Certain government policies or the selective and arbitrary enforcement
of such policies could make it more difficult for the Group to compete
effectively and/or impact its profitability.
The Group may also be adversely affected by US, EU and other
government sanctions against Russian business whose measures
have had and may continue to have an adverse effect on the Russian
economy and demand for commodities. Ongoing sanctions could also
adversely impact the Group’s ability to obtain financing on favourable
terms and to deal with certain persons and entities in Russia or in
other countries.
Operational risks
Leases of terminal land:
The Group leases a significant amount of the land and quays required
to operate its terminals from government agencies and any revision
or alteration of the terms of these leases or the termination of these
leases, or changes to the underlying property rights under these leases,
could adversely affect the Group’s business.
The Group has reacted to the declining throughput in the container
market by:
–
–
–
–
Focusing on quality service;
Offering operational flexibility to the clients;
Effective management of costs; and
Adopting new revenue streams.
In addition, the Group aims to position itself to lead a future market
recovery through superior service and cost discipline.
The Group actively monitors the competitive landscape and adjusts
its commercial strategy accordingly, i.e. the Group builds long-term
relationships with top customers based on a global approach to account
management and contractual agreements incentivizing growth
of throughput.
The Group’s focus on service quality is a key differentiator to its
competition and the Group believes this is one of its key
competitive advantages.
The Group has made long-term investments in its terminals and modern
equipment to ensure competitive levels of service. It operates on a
long-term horizon and its terminals represent core infrastructure in
Russia that will continue to operate for the next 10-20 years or beyond.
Because the Group possesses modern, up-to-date facilities and available
capacity, it requires only minimal additional capital expenditure in the
short to medium term thus preserving its ability to offer capacity to the
market when necessary without sizeable additional investments.
The Group has adapted to the macroeconomic challenges posed
since the second half of 2014. Its approach of effective cost
management, focus on deleveraging and refinancing of its debt portfolio
by switching all borrowings to fixed rates and moving to longer
maturities are designed to make the Group more resilient to short term
economic challenges in Russia as well as the wider regional and
global environment.
The Group has developed a system to monitor compliance with
restrictions posed by international sanctions.
The Group continues to maintain an international base of shareholders,
bondholders and business partners.
The Group is not aware of any specific sanctions risks related to its
ownership or operations.
The Group believes it has a stable situation at present regarding its land
leases and its terminals have been in operation for a number of years.
The Group owns the freehold on 66% of the total land of its terminals
and 70% of the land of its container and inland terminals in Russia. The
rest of the Group’s land is held under long-term leases (up-to 49 years).
ANNUAL REPORT 2017
5
FINANCIAL STATEMENTS MANAGEMENT REPORT (CONTINUED)
Risk management process, principal risks and uncertainties (continued)
Risk factor
Risk management approach
Customer Profile and Concentration:
The Group is dependent on a relatively limited number of major
customers (shipping lines etc.) for a significant portion of its business.
These customers are affected by conditions in their market sector
which can result in contract changes and renegotiations as well as
spending constraints, this is further exacerbated by carrier
consolidation process.
Reliance on third parties:
The Group is dependent on the performance of services by third parties
outside its control, including the performance by all other participants
in the logistics chain, such as customs inspectors, supervisory
authorities and others, and the performance of security procedures
carried out at other port facilities and by its shipping line customers.
Oil products:
The Group’s oil products business could be affected by changes in
Russia’s exports of oil products and handling of such exports at its
oil products terminal in Estonia, a decline in global demand for oil
products or in Russian oil product export volumes or any change
in trade relationships with Estonia.
Tariff regulation:
Tariffs for certain services at certain of the Group’s terminals have
been in the past regulated by the Russian Federal Antimonopoly
Service and, as a result, the tariffs charged for such services were,
and may potentially in the future be, subject to a maximum tariff
rate and/or fixed in Russian roubles as PLP, VSC, and FCT, like many
other Russian seaport operators, are classified as natural monopolies
under Russian law.
Human resources management:
The Group’s competitive position and prospects depend on the
expertise and experience of its key management team and its ability
to continue to attract, retain and motivate qualified personnel.
Industrial action or adverse labour relations could disrupt the
Group’s operating activities and have an adverse effect on
performance results.
Health, safety, security and environment:
Accidents involving the handling of hazardous materials and oil
products at the Group’s terminals could disrupt its business and
operations and/or subject the Group to environmental and
other liabilities.
The risk of safety incidents is inherent in the Group’s businesses.
The Group’s operations could be adversely affected by terrorist attacks,
natural disasters or other catastrophic events beyond its control.
The Group conducts extensive and regular dialogue with key customers
and actively monitors changes that might affect our customers’
demand for our services.
The Group has a clear strategy to reduce its dependence on its major
customers, targeting new potential customers and new cargo segments.
The Group is also growing its share of non-container revenues through
successfully building its presence in marine bulk cargo like coal (2017:
share of non-container revenue was 23% and 19% in 2016).
The Group strives to maintain a continuous dialog with third parties
across the supply chain. In addition, its geographic diversification
provides it with some flexibility in its logistics, should bottlenecks
develop in one area.
The Group believes, like most international forecasters, that the global
demand for oil products remains cyclical and might grow again over
the medium term.
The Group continues to monitor for any legislative proposals and
regulatory actions that could lead to changes to the existing tariff
regulations. It seeks a proactive dialog with the relevant Russian federal
authorities. It believes it is as well placed as any market participant to
adapt to any – future changes in tariff regulation.
The Group is committed to recruiting and engaging Russian and
international managers and experts to meet its needs. The Group offers
competitive salaries and benefits to employees at all levels to foster
and retain top talent. In addition the Group pays special attention to
professional development as well as engagement in socially responsible
business practices and supporting local communities.
The Group strives to maintain a positive working relationship with
labour unions at its facilities. Moreover, it pursues overall labour policies
designed to provide a salary and benefit package in line with the
expectations of our employees.
The Group has implemented clear environmental and safety policies
designed around international best practices and benchmark using such
measures as GPI Global Minimum Requirements.
Safety is one of the Group’s top priorities. A safety strategy and annual
action plan have been developed, aiming to build a sustainable safety
culture covering the whole Group. The detailed roadmap is designed
to ensure sustainable implementation of safety culture over the
medium term.
Similarly, GPI works with all its stakeholders to maintain high levels of
security around port facilities and vessel operations to minimise the risk
of terrorist attack.
6
GLOBAL PORTS INVESTMENTS PLC
Risk factor
Regulatory risks
Risk management approach
Regulatory compliance:
The Group is subject to a wide variety of regulations, standards and
requirements and may face substantial liability if it fails to comply
with existing regulations applicable to its businesses. The Group’s
terminal operations are subject to extensive laws and regulations
governing, among other things, the loading, unloading and storage of
hazardous materials, environmental protection and health and safety.
Changes in regulations:
Changes to existing regulations or the introduction of new regulations,
procedures or licensing requirements are beyond the Group’s control
and may be influenced by political or commercial considerations not
aligned with the Group’s interests. Any expansion of the scope of the
regulations governing the Group’s environmental obligations, in
particular, would likely involve substantial additional costs, including
costs relating to maintenance and inspection, development and
implementation of emergency procedures and insurance coverage
or other financial assurance of its ability to address environmental
incidents or external threats.
Compliance and shareholder risk
Conflict of interests:
The Group’s controlling beneficial shareholders may have interests
that conflict with those of the holders of the GDRs or notes.
The major implications of this risk are that (i) co-controlling
shareholders pursue other businesses not related to GPI and hence
may not be deeply involved with developing GPI and (ii) one of the
major shareholders is also a major customer of the Group.
Legal and tax risks:
Adverse determination of pending and potential legal actions
involving the Group’s subsidiaries could have an adverse effect on
the Group’s business, revenues and cash flows and the price of the
GDRs. Weaknesses relating to the Russian legal and tax system
and appropriate Russian law create an uncertain environment for
investment and business activity and legislation may not adequately
protect against expropriation and nationalisation. The lack of
independence of certain members of the judiciary, the difficulty
of enforcing court decisions and governmental discretion claims
could prevent the Group from obtaining effective redress in
court proceedings.
Financial risks
FOREX risks:
The Group is subject to foreign-exchange risk arising from various
currency exposures, primarily the Russian rouble and the US dollar.
Foreign-exchange risk is the risk to profits and cash flows of the
Group arising from movement of foreign-exchange rates due to
inability to timely plan for and appropriately react to fluctuations
in foreign-exchange rates. Risk also arises from revaluation of assets
and liabilities denominated in foreign currency.
The Group strives to be in compliance at all times with all regulations
governing its activities and devotes considerable management and
financial resources to ensure compliance.
The Group maintains a constructive dialog with relevant federal,
regional and local authorities regarding existing and planned
regulations. The Group does not have the power to block any or all
regulations it may judge to be harmful, but this dialog should ensure
it has time to react to changes in the regulatory environment.
The Group’s corporate governance system is designed to maximise
the company’s value for all shareholders and ensure the interests of
all stakeholders are taken into account. The Group’s LSE listing ensures
our compliance with the highest international standards. In addition,
the Board has highly experienced members, including strong
independent directors.
The Group maintains a strong and professional legal function designed
to monitor legal risks, avoid legal actions where possible and carefully
oversee any legal actions that may occur.
The Group performs ongoing monitoring of changes in Russian and
international tax legislation and court practice and develops the
Group’s legal and tax position accordingly.
Currently, a significant part of the Group’s revenue, and a major part
of the Group’s debt is denominated in U.S. dollars, whereas most of the
Group’s operating expenses are and will continue to be denominated
and settled in Russian roubles. The Group uses several different
instruments and approaches to minimise future risks from volatility in
the value of the Russian rouble and US dollar. To date, this strategy has
proved effective. Should the Group have to switch the currency of its
tariffs to RUR, it will need to convert the existing debt into the same
currency to avoid significant foreign exchange risks arising from such
a mismatch.
Credit risk:
The Group may be subject to credit risk due to its dependence on
key customers and suppliers.
The Group closely tracks its accounts receivables overall and the
creditworthiness of key customers and suppliers.
ANNUAL REPORT 2017
7
FINANCIAL STATEMENTS MANAGEMENT REPORT (CONTINUED)
Risk management process, principal risks and uncertainties (continued)
Risk factor
Risk management approach
Debt, leverage and liquidity:
The Group’s indebtedness or the enforcement of certain provisions
of its financing arrangements could affect its business or
growth prospects.
Failure to promptly monitor and forecast compliance with loan
covenants both at the Group and individual terminal levels may
result in covenant breaches and technical defaults.
If the Group is unable to access funds (liquidity) it may be unable
to meet financial obligations when they fall due, or on an ongoing
basis, to borrow funds in the market at an acceptable price to fund
its commitments.
The Group has been able to reduce its total debt level, as planned, in
2017 and continued reduction of the debt above and beyond minimum
repayment requirements remains a management priority in 2018.
Liquidity risk is carefully monitored, with regular forecasts prepared
for the Group and its operating entities.
Although the risk of liquidity shortfalls within the following 18-24
months has been significantly reduced via extensions of debt maturities
through public debt issuances in 2016, the liquidity position is carefully
monitored in case of further deterioration of financial performance.
The Group regularly stress tests scenarios when different negative
trends that could affect cash flows are identified.
Information technology and security:
The Group’s container terminals rely on IT and technology systems to
keep their operations running efficiently, prevent disruptions to logistic
supply chains, and monitor and control all aspects of their operations.
The Group has centralised its IT function in recent years and believes
this is an important step in ensuring both the efficiency and consistency
of the Group’s security protocols implementation.
Any IT glitches can create major disruptions for complex logistic
supply chains.
Any prolonged failure or disruption of these IT systems, whether the
result of human error, deliberate data breech or external cyber threat
could create major disruptions in terminal operations. This could
dramatically affect the Group’s ability to render its services to
customers, leading to reputational damage, disruption to business
operations and an inability to meet its contractual obligations.
The Group has further enhanced its IT security and security awareness
during the year. As part of its ongoing response to the threat of
cyber-attacks, the Group is currently rolling out additional
enhancements to its threat detection systems across all subsidiaries.
The Group continuously improves the cyber threats awareness and
training among its employees and develops the business continuity
plans in case of any disruptions.
Internal control and risk management systems in relation to the financial reporting process
23. The internal control and risk management systems relating to financial reporting are designed to provide reasonable assurance regarding
the reliability of financial reporting and to ensure compliance with applicable laws and regulations.
24. Financial reporting and supervision are based on approved budgets and on monthly performance reporting.
25. The Audit and Risk Committee of the Board of directors of the Company reviews certain high-risk areas at least once a year, including
the following:
– Significant accounting estimates;
– Material changes to the accounting policies;
26. Reporting from various Group entities to the centralised unit is supervised on an ongoing basis and procedures have been established for
control and checking of such reporting. Procedures have also been set up to ensure that any errors are communicated to and corrected by
the reporting entities. The internal controls are subject to ongoing reviews, including in connection with the regular control inspections at
subsidiaries conducted by the central unit. The results from these reviews are submitted to the executive management, the Audit and Risk
Committee and Board of Directors. The internal financial reporting ensures an effective process to monitor the Company’s financial results,
making it possible to identify and correct any errors or omissions. The monthly financial reporting from the respective entities is analysed
and monitored by the centralised department in order to assess the financial and operating performance as well as to identify any
weaknesses in the internal reporting, failures to comply with procedures and the Group accounting policies. The Audit and Risk Committee
follows up to ensure that any internal control weaknesses are mitigated and that any errors or omissions in the financial statements
identified and reported by the auditors are corrected, including controls or procedures implemented to prevent such errors or omissions.
8
GLOBAL PORTS INVESTMENTS PLC
Use of financial instruments by the Group
27. The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, cash flow and fair value interest
rate risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets
and seeks to minimise potential adverse effects on the Group’s financial results. Risk management is carried out by a centralised financial
department as well as financial departments in operating entities under policies approved by the Board of Directors. These departments
identify, evaluate and take actions to mitigate financial risks in close co-operation with the operating units. The Board provides principles
for overall risk management, covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial
instruments and non-derivative financial instruments, and investment of excess liquidity.
(a) Market risk
(i) Foreign exchange risk
28. Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities are denominated in the currency different
from the functional currency of each of the entities of the Group.
29. The revenues of Russian operations are mainly priced in US dollars and Russian roubles, whereas most of expenses are denominated and
settled in Russian roubles.
30. The Group uses from time to time foreign currency swaps (derivatives) to manage its exposures to foreign exchange risk.
31. The Group will continue to review its borrowing policy in order to maintain a balance between term and interest rate of available financing
and its currency.
32. Currently the long-term debt of the Group is denominated in US dollars and Russian roubles. Most of Rouble-denominated debt is effectively
swapped to USD-debt with a lower interest rate.
33. The US dollar and Euro interest rates are relatively more attractive compared to the Russian rouble interest rate.
(b) Cash flow and fair value interest rate risk
34. The Group is not significantly exposed to changes in market interest rates as substantially all of its borrowings portfolio consists of fixed
rate debt.
35. However, the Group is exposed to fair value interest rate risk through market value fluctuations of loans receivable, borrowings and lease
liabilities with fixed rates.
36. Management monitors changes in interest rates and takes steps to mitigate these risks as far as practicable and economically feasible.
(c) Credit risk
37. Financial assets, which potentially subject the Group to credit risk, consist principally of trade receivables and loans receivable (Note 19) and
cash and cash equivalents (Note 20). The Group has policies in place to ensure that sales of goods and services are made to customers with
an appropriate credit history. However, the Group’s business is heavily dependent on several large key customers accounting for substantial
part of the Group’s revenue. Cash and cash equivalents are placed in reliable banks with good history.
(d) Liquidity risk
38. Management controls current liquidity based on expected cash flows and expected revenue receipts.
39. Cash flow forecasting is performed at the level of operating entities of the Group and at consolidated level by the centralised department.
Group finance department monitors forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to meet operational needs
as well as scheduled debt service while maintaining sufficient headroom to ensure that the group does not breach covenants (where
applicable) on any of its borrowing facilities. Such forecasting takes into consideration potential variations in operating cash flows due to
market conditions, the Group’s debt repayments and covenant compliance. Taking into account expected levels of operating cash flows,
availability of cash and cash equivalents and long-term nature of the debt portfolio, the Group has the ability to meet its liabilities as they
fall due and mitigate risks of adverse changes in the financial markets environment.
ANNUAL REPORT 2017
9
FINANCIAL STATEMENTS MANAGEMENT REPORT (CONTINUED)
Use of financial instruments by the Group (continued)
(e) Capital risk management
40. The Group’s main objective when managing capital is to maintain the ability to continue as a going concern in order to ensure the
profitability of the Group, maintain optimum equity structure and reduce its cost of capital.
41. Defining capital, the Group uses the amount of equity and the Group’s borrowings.
42. The Group manages the capital based on borrowings to total capitalisation ratio. Borrowings include lease liabilities, loan liabilities and
public bonds.
43. Total capitalisation is calculated as the sum of the total Group borrowings and equity at the date of calculation. The management does
not currently have any specific target for the rate of borrowings to total capitalisation.
Future Developments of the Group
44. The Board of Directors does not expect any significant changes in the activities of the Group in the foreseeable future.
Results
45. The Group’s results for the year are set out on pages 17 and 18.
Dividends
46. Pursuant to the Articles of Association the Company may pay dividends out of its profits. To the extent that the Company declares and pays
dividends, owners of Global Depositary Receipts (hereafter also referred as “GDRs”) on the relevant record date will be entitled to receive
dividends payable in respect of Ordinary Shares underlying the GDRs, subject to the terms of the Deposit Agreement. The Company expects
to pay dividends in US dollars. If dividends are not paid in US dollars, they will be converted into US dollars by the Depositary and paid to
holders of GDRs net of currency conversion expenses.
47. The Company is a holding company and thus its ability to pay dividends depends on the ability of its subsidiaries and joint ventures to pay
dividends to the Company in accordance with the relevant legislation and contractual restrictions (shareholder agreements, bank borrowings
covenants, terms of the issuance of the public debt instruments). The payment of such dividends by its subsidiaries and joint ventures is
contingent upon the sufficiency of their earnings, cash flows and distributable reserves. The maximum dividend payable by the Company’s
subsidiaries and joint ventures is restricted to the total accumulated retained earnings of the relevant subsidiary or joint venture, determined
according to the law applicable to each entity.
48. The Company has a Dividend Policy in place which provides for the payment of not less than 30% of any imputed consolidated net profit for
the relevant financial year of the Group. Imputed profit is calculated as the consolidated net profit for the period of the Group attributable to
the owners of the Company as shown in the Company’s consolidated financial statements for the relevant financial year prepared under EU
IFRS and in accordance with the requirements of the Cyprus Companies Law, Cap. 113, less certain non-monetary consolidation adjustments.
The Company’s dividend policy is subject to modification from time to time as the Board of Directors may deem appropriate.
49.
In the year 2015 following the revision of current market situation, market prospects and prioritising the deleveraging strategy over dividend
distribution, which should ensure the long-term robustness of the Group’s finances, the Board suspended the payment of the dividends in
the mid-term. The Board continues to monitor the container market for recovery as well as for levels of volatility in order to identify the
appropriate timing for a resumption of the payment of a dividend, always consistent with sustaining conservative leverage ratios.
50. During the years 2016 and 2017 the Company did not declare or pay any dividends.
51. The Board of Directors of the Company does not recommend the payment of a final dividend for the year 2017.
Share Capital
Authorised share capital
52. The authorised share capital of the Company amounts to USD 175,000,000.00 divided into 750,000,000 ordinary shares and 1,000,000,000
ordinary non-voting shares with a par value of USD 0.10 each.
Issued share capital
53. The issued share capital of the Company amounts to USD 57,317,073.10 divided into 422,713,415 ordinary shares and 150,457,316 ordinary
non-voting shares with a par value of USD 0.10 each.
54. The ordinary shares and the ordinary non-voting shares rank pari passu in all respects save that, the ordinary non-voting shares do not have
the right to receive notice, attend or vote at any general meeting, nor to be taken into account for the purpose of determining the quorum
of any general meeting.
10
GLOBAL PORTS INVESTMENTS PLC
Rules for amending articles
55. The Articles of association of the Company may be amended from time to time by the special resolution of the General Meeting of
the shareholders.
The role of the Board of Directors
56. The Company is governed by its Board of Directors (hereafter also referred as “the Board”) which is collectively responsible to the
shareholders for the short – and long-term successful performance of the Group for the benefit of the shareholders as a whole.
57. The Board of Directors’ role is to provide entrepreneurial leadership to the Group through setting the corporate strategic objectives, ensuring
that the necessary financial and human resources are in place for the Group to meet its objectives and reviewing management performance.
The Board sets the Group’s values and standards and ensures all obligations to shareholders are understood and met. The Board ensures the
Group maintains a sound system of internal control and enterprise risk management to safeguard the Group’s assets and shareholders’
investments in the Group.
Members of the Board of Directors
58. The Board of Directors leads the process in making new Board member appointments and makes recommendations on appointments to
shareholders. In accordance with the Terms of Reference of the Board, all Directors are subject to election by shareholders at the first Annual
General Meeting after their appointment, and to re-election at intervals of no more than three years. Following the best practice guidance,
the members of the Board of Directors are being re-elected on an annual basis. Any term beyond six years for a Non-Executive Director is
subject to particularly rigorous review, and takes into account the need to refresh the Board on a regular basis.
59. The Board currently has 16 members and they were appointed as shown on pages 1 and 2.
60. On 14 February 2017 Mr. Tiemen Meester resigned from the Board and Mr. Peder Sondergaard replaced him. On 12 May 2017 Dr. Alexander
Nazarchuk and Mrs. Siobhan Walker resigned from the Board and Mrs. Britta Dalunde and Mrs. Elia Nicolaou replaced them.
61. All other Directors were members of the Board throughout the year ended 31 December 2017.
62. On 01 January 2018 Mrs. Inna Kuznetsova and Mr. Lambros Papadopoulos joined the Board of Directors.
63. On 29 January 2018 Mr. Gerard Jan Van Spall resigned from the Board and Mrs. Iana Boyd replaced him on the same day. On 01 February 2018
Mr. Peder Sondergaard resigned from the Board and Mr. Soren Jakobsen replaced him on 02 March 2018.
64. There is no provision in the Company’s Articles of Association for retirement of Directors by rotation. However in accordance with the Terms
of Reference of the Board of Directors and the resolutions adopted by the Shareholders at the Annual General Meetings held 29 April 2015 and
12 May 2017 and Extraordinary General Meetings held on 12 December 2017, 29 January 2018 and 02 March 2018 all present directors, except
for Capt. Bryan Smith, will be offered for re-election at the next Annual General Meeting of the Shareholders of the Company. Capt. Bryan
Smith will step down from the Board of Directors at the next AGM as his nine years term as Independent Non-Executive Director ended.
65. Team Nominees Limited has been acting as the Company Secretary since its incorporation in February 2008. Mr. Alexander Iodchin has been
acting as the Board Secretary since December 2008.
66. The changes in the composition of the committees of the Board of Directors are described below.
67. Mr. Tiemen Meester was the Chairman of the Board until 14 February 2017. Mr. Peder Sondergaard was the Chairman of the Board from
10 April 2017 until 01 February 2018. Mr. Morten Henrick Engelstoft was elected the Chairman of the Board of Directors on 26 February 2018.
There were no other significant changes in the responsibilities of the Directors during 2017.
Directors’ interests
68. The interests in the share capital of Global Ports Investments Plc, both direct and indirect, of those who were Directors as at 31 December
2017 and 31 December 2016 are shown below:
Name
Type of holding
Nikita Mishin
Through shareholding in Transportation Investments
Holding Limited and other related entities
Shares held at
31 December 2017
Shares held at
31 December 2016
42,267,114 ordinary shares
42,267,114 ordinary shares
16,477,011 ordinary
non-voting shares
16,477,011 ordinary
non-voting shares
Britta Dalunde
Through holding of the GDRs
7,000 GDRs representing
21,000 ordinary shares
ANNUAL REPORT 2017
NIL
11
FINANCIAL STATEMENTS MANAGEMENT REPORT (CONTINUED)
Board performance
69. The Board meets at least four times a year. Fixed meetings are scheduled at the start of each year. Ad hoc meetings are called when there
are pressing matters requiring the Board’s consideration and decision in between the scheduled meetings.
70.
In 2017 the Board met formally 25 (2016: 21) times to review current performance and to discuss and approve important business decisions.
71.
In 2017 the Board met to discuss and approve important business decisions:
(a) FY2016 financial statements, 1H2017 interim financial statements and Annual Report;
(b) Changes in Group management and the Board of Directors;
(c) Remuneration guidelines;
(d) Review of segments financial and operational performance;
(e) Consideration of 2018 financial budget, major risks and uncertainties, commercial strategy, corporate social responsibility matters,
internal control framework;
(f) Consideration and approval of the intragroup financing and organizational restructurings;
(g) Consideration and approval of major capital expenditures and operating expenditures; and
(h) Consideration and approval of various resolutions related to the operations of the Company’s subsidiaries and joint ventures.
72. The number of Board and Board Committee meetings held in the year 2017 and the attendance of directors during these meetings was
as follows:
Alexander Iodchin
Bryan Smith
Nikita Mishin
Alexander Nazarchuk
Mikhail Loganov
Konstantin Shirokov
Siobhan Walker
Morten Henrick Engelstoft
Tiemen Meester
Laura Michael
Gerard Jan van Spall
Nicholas Charles Terry
Vadim Kryukov
Michalakis Christofides
Peder Sondergaard
Britta Dalunde
Elia Nicoalou
Board of Directors
B
A
25
25
17
7
13
25
4
25
-
25
25
25
25
25
25
18
17
25
25
25
7
25
25
7
25
-
25
25
25
25
25
25
18
18
Nomination Committee
Remuneration Committee
Audit and Risk Committee
A
-
7
4
3
-
-
-
7
-
-
-
-
-
-
7
-
3
B
-
7
7
3
-
-
-
7
-
-
-
-
-
-
7
-
4
A
-
10
6
3
-
-
-
10
1
-
-
-
-
-
9
-
6
B
-
10
10
3
-
-
-
10
1
-
-
-
-
-
9
-
7
A
-
-
-
-
-
10
3
10
-
-
-
-
-
-
-
7
-
B
-
-
-
-
-
10
3
10
-
-
-
-
-
-
-
7
-
A = Number of meetings attended.
B = Number of meetings eligible to attend during the year.
73. The operation of the Board, its Committees and individual Directors is subject to regular evaluation. The evaluation of the Board and
individual Directors’ performance can be conducted through self-assessment, cross-assessment or by an external third party. The Non-
Executive Directors, led by the Senior Independent Director, are responsible for the performance evaluation of the Chairman of the Board.
The Board did not engage any external advisors for evaluation of its performance in the years 2016 and 2017.
The Board diversity
74. The Company does not have a formal Board diversity policy to aspects such as age, gender or educational and professional backgrounds,
but following the best practice while making the new appointments and considering the current composition of the Board of Directors,
these aspects are taken into account.
75. As of the date of publication of these financial statements the Board has 5 females representing approximately 30% from the total number
of directors. The average age of directors is 49 years ranging from 32 to 72 years. The Board members have the following educational
backgrounds: port and transportation industry, accounting and financial, banking sector and legal. The Board has a necessary balance of
skills and expertise to run the Company and the Group. There are 7 nationalities present in the Board and the majority of the Board members
reside in Cyprus.
12
GLOBAL PORTS INVESTMENTS PLC
The Board committees
76. Since December 2008 the Board of Directors established the operation of three committees: an Audit and Risk Committee, a Nomination
Committee and a Remuneration Committee.
77. The Audit and Risk Committee comprises of five Non-Executive Directors, three of whom are independent, and meets at least four times
a year. The Audit and Risk Committee is chaired by Mrs. Britta Dalunde (an Independent Non-Executive Director) who replaced Mrs. Siobhan
Walker on 12 May 2017 and the other members are Mrs. Inna Kuznetsova (an Independent Non-Executive Director appointed as of 01 January
2018), Mr. Lambros Papadopoulos (an Independent Non-Executive Director appointed as of 01 January 2018), Mr. Konstantin Shirokov and
Mr. Soren Jakobsen (appointed as of 02 March 2018). Mr. Morten Henrick Engelstoft resigned from the Audit and Risk Committee on
26 February 2018 following his appointment as the Chairman of the Board of Directors.
78. The Committee is responsible for considering, among other matters: (i) the integrity of the Company’s financial information, including
its annual and interim condensed consolidated financial information, and the effectiveness of the Company’s internal controls, risk
management systems and the work of the Internal Auditor; (ii) external and internal auditors’ reports; and (iii) the terms of appointment
and remuneration of the external auditors. The Committee supervises and monitors the financial reporting process and the submission of
financial information by the Company and makes recommendations or proposals to ensure its integrity. The Committee informs the board
of the outcome of the external audit and explain how the audit contributed to the integrity of financial reporting and what the role of the
committee was in that process. The Committee recommends the Board on appointment, re-appointment and removal of the external
auditor, reviews and monitors its independence, objectivity and effectiveness of the audit process. The Committee implements the policy
on the engagement of the external auditors to perform non-audit services. In addition, the Committee supervises, monitors, and advises the
Board of Directors on effectiveness of risk management and internal control systems and the implementation of Code of Ethics and Conduct,
Authority Matrix and various other internal policies and regulations.
79.
In the year 2017 the Audit and Risk Committee met 10 times to review and discuss inter alia (on top of the topics listed above):
(a) Review of the press releases containing financial information;
(b) Consideration and approval of audit schedules and review of the impairment models and the impact of the new IFRS standards
on the Company’s financial statements;
(c) Review of the major risks, including but not limited to strategic, fraud and compliance, commercial, operational, financial, human
resources, environmental and other risks;
(d) Review of internal control framework and its deficiencies, consideration of management proposals on its further development
and improvement;
(e) Review of IT security setup, budgeting process, sanctions monitoring and compliance process, corporate social responsibility report,
whistle-blowing system;
(f) Making proposals to the Board of Directors to approve the amended and restated Terms of Reference of the Committee and on the
new composition of the Committee;
(g) Consideration of various reports from the management and external consultants;
(h) Consideration of various updated and restated Group Policies;
(i) Consideration of the authority matrix framework.
80. The Nomination Committee as of the date of this report comprises six Directors, two of whom are independent. The Committee meets
at least once each year. Currently the Nomination Committee is chaired by Capt. Bryan Smith (an Independent Non-Executive Director)
and the other members are Mrs. Inna Kuznetsova (an Independent Non-Executive Director appointed as of 01 January 2018), Mr. Nikita
Mishin, Mrs. Elia Nicolaou (appointed on 12 May 2017), Mr. Morten Henrick Engelstoft and Mr. Soren Jakobsen (appointed on 02 March 2018).
Dr. Alexander Nazarchuk and Mr. Peder Sondergaard resigned from the position of the members of the Nomination Committee in May 2017
and February 2018 respectively.
81. The Committee’s role is to prepare selection criteria and appointment procedures for members of the Board of Directors as well as the Senior
Management of the companies of the Group and to review on a regular basis the structure, size, diversity and composition of the Board of
Directors of the Company. In undertaking this role, the Committee refers to the skills, knowledge and experience required of the Board and
Senior Management given the Company’s and Group’s stage of development and makes recommendations to directors as to any changes.
The Committee also considers future appointments in respect to the composition of the Board of Directors and Senior Management as well
as making recommendations regarding the membership of the Audit and Risk Committee and the Remuneration Committee. The
Committee relies on both independent search consultancy and internal sources in making the proposals for the Board and Senior
Management appointments.
82.
In 2017 the Nomination Committee met seven times to discuss and recommend to the Board the appointment of senior management
of the Group companies and also to recommend the Directors the candidates to the Board and discuss and recommend the composition
of the Board Committees. In the year 2018 one of the key focuses of the work of Nomination Committee will be the succession planning
for the Board and the Senior Management.
ANNUAL REPORT 2017
13
FINANCIAL STATEMENTS MANAGEMENT REPORT (CONTINUED)
83. The Remuneration Committee as of the date of this report comprises six Directors, two of whom are independent. The Committee meets
at least once each year. Currently the Remuneration Committee is chaired by Capt. Bryan Smith (an Independent Non-Executive Director)
and the other members are Mrs. Inna Kuznetsova (an Independent Non-Executive Director appointed as of 01 January 2018), Mr. Nikita
Mishin, Mrs. Elia Nicolaou (appointed on 12 May 2017), Mr. Morten Henrick Engelstoft and Mr. Soren Jakobsen (appointed on 02 March 2018).
Dr. Alexander Nazarchuk and Mr. Peder Sondergaard resigned from the position of the members of the Remuneration Committee in May 2017
and February 2018 respectively.
84. The Committee is responsible for determining and reviewing the remuneration of the executive directors, Chairman and the Senior
Management and the Company’s remuneration policies. The remuneration of independent Directors is a matter for the chairman of the
Board of Directors and is subject to approval of the shareholders. Remuneration of the executive directors in their executive capacity is
subject to the Board approval. No director or manager may be involved in any decisions and discussions as to his or her own remuneration.
85.
In 2017 the Remuneration Committee met 10 times to discuss and recommend to the Board the Group management remuneration guidelines
and the remuneration of the new Board members and the Senior Management of the Group.
Corporate governance
86. The Company is not subject to the provisions of UK Corporate Governance Code, but follows internationally recognised best practices
87.
customary to the public companies having GDRs having standard listing and admitted to trading at London Stock Exchange.
Improving its corporate governance structure in accordance with the internationally recognised best practices the Company adopted in 2008,
2012, 2015 and 2016 important policies and procedures. The Group is regularly reviewing and updating its policies and procedures. The new
Code of Ethics was approved by the Board of Directors on 08 December 2016 and was introduced in the companies of the Group in the course
of the year 2017. On 03 October 2017 the Board of Directors approved the revised Terms of reference of the Audit and Risk Committee and
Charity and Sponsorship Policy.
88. The Company’s corporate governance policies and practices are designed to ensure that the Company is focused on upholding its
responsibilities to the shareholders. They include, inter alia:
– Appointment policy;
– Terms of reference of the Board of Directors;
– Terms of reference of the Audit and Risk Committee;
– Terms of reference of the Nomination Committee;
– Terms of reference of the Remuneration Committee;
– Code of Ethics and Conduct;
– Antifraud policy;
– Anti-Corruption Policy;
– Foreign Trade Controls Policy;
–
– Charity and Sponsorship Policy; and
– Group Securities Dealing Code.
Insurance Standard;
89.
In order to further strengthen the corporate governance and clearly set the management authority limits within the Group the Board of
Directors approved the Authority Matrix framework at the end of the year 2016. This framework is based on the Board of Directors reserved
matters, which are set in the Terms of reference of the Board of Directors and Shareholder’s reserved matters as set out in Company’s
Charter. All other matters are reserved for the management. The implementation of this framework within the Group started in the year
2017 and will continue in the year 2018.
90. In the course of the year ended 31 December 2017 in order to further strengthen the corporate governance procedures and streamline the
reporting of negligence, non-compliance or any other kind of wrongdoing the Group established a hotline mail-box and telephone line.
It is an important mechanism enabling staff and other members of the Group as well as third parties to voice concerns in a responsible
and effective manner.
Board and management remuneration
91. Non-Executive Directors serve on the Board pursuant to the letters of appointment. Such letters of appointment specify the terms
of appointment and the remuneration of Non-Executive Directors.
92. Levels of remuneration for the Non-Executive Directors reflect the time commitment, responsibilities of the role and membership of the
respective committees of the Board. Directors are also reimbursed for expenses associated with discharge of their duties.
93. The shareholders of the Company approved the remuneration of the members of the Board on 29 April 2013, 12 May 2017, 11 December 2017,
29 January 2018 and 02 March 2018.
94. The Directors did not waive or agreed to waive any emoluments from the company or any company of the Group during the period under
review or future emoluments.
14
GLOBAL PORTS INVESTMENTS PLC
95. The performance based part of the remuneration of the senior (key) management is based on the Key Rules of Awarding and Payment
of Performance Based Bonuses of GPI Group adopted by the Board on 15 June 2016 and regularly updated.
96. Neither the Board members, nor the management have long-term incentive schemes.
97. Refer to Note 30(g) to the consolidated financial statements for details of the remuneration paid to the members of the Board and
key management.
Corporate social responsibility report
98. The Corporate Social Responsibility Report is drawn up as a separate report and will be made public at the Company’s website (the address
of which, at the date of publication of this report, is www.globalports.com) within six months from the balance sheet date.
Events after the balance sheet date
99. The events after the balance sheet date are disclosed in Note 31 to the consolidated financial statements.
Research and development activities
100. The Group is not engaged in research and development activities.
Branches
101. The Group did not have or operate through any branches during the year.
Treasury shares
102. The Company did not acquire either directly or through a person in his own name but on behalf of the Company any of its own shares.
Going concern
103. Directors have access to all information necessary to exercise their duties. The Directors continue to adopt the going concern basis in
preparing the consolidated financial statements based on the fact that, after making enquiries and following a review of the Group’s principle
risks and uncertainties, budget for 2018 and the latest forecasts over a period of 5-7 years reflecting its business and investment cycles,
including cash flows and borrowing facilities, the Directors consider that the Group has adequate resources to meet its liabilities as they fall
due and to continue in operation for the foreseeable future.
Auditors
104. The Independent Auditors, PricewaterhouseCoopers Limited, have expressed their willingness to continue in office. A resolution approving their
reappointment and giving authority to the Board of Directors to fix their remuneration will be proposed at the Annual General Meeting.
By Order of the Board
Konstantin Shirokov
Director
13 March 2018
Alexander Iodchin
Director
ANNUAL REPORT 2017
15
FINANCIAL STATEMENTS DIRECTORS’ RESPONSIBILITY STATEMENT
The Board of Directors of Global Ports Investments Plc (“Company”) is responsible for preparation and fair presentation of these consolidated
financial statements in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union (“EU”) and the
requirements of the Cyprus Companies Law, Cap. 113.
This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial
statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and
making accounting estimates that are reasonable in the circumstances.
Each of the Directors confirms to the best of his or her knowledge that the consolidated financial statements which are presented on pages 17 to
64 have been prepared in accordance with IFRS as adopted by the EU and the requirements of the Cyprus Companies Law, Cap. 113, and give a
true and fair view of the assets, liabilities, financial position and profit of the Company and the undertakings included in the consolidation taken
as whole.
By Order of the Board
Konstantin Shirokov
Director
Limassol
13 March 2018
Alexander Iodchin
Director
16
GLOBAL PORTS INVESTMENTS PLC
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2017
(in thousands of US dollars)
Revenue
Cost of sales
Gross profit
Administrative, selling and marketing expenses
Share of profit/(loss) of joint ventures accounted for using the equity method
Other gains/(losses) – net
Operating profit/(loss)
Finance income
Finance costs
Change in fair value of derivatives
Net foreign exchange gains/(losses) on financial activities
Finance income/(costs) – net
Profit/(loss) before income tax
Income tax expense
Profit/(loss) for the year
Attributable to:
Owners of the Company
Non-controlling interest
For the year ended
31 December
Note
2017
2016
5
6
6
27
7
9
9
9
9
9
11
330,505
(148,511)
331,468
(186,064)
181,994
145,404
(42,731)
(73,267)
(71,329)
(5,333)
2,048
(90,879)
42,089
27,944
(18,798)
(24,131)
(28,816)
(52,947)
(52,973)
26
(52,947)
(36,675)
(40,423)
(68,757)
(451)
1,367
(98,064)
64,432
142,572
110,307
109,856
(48,593)
61,263
61,038
225
61,263
Basic and diluted earnings per share for profit/(loss) attributable to the owners of the parent
of the Company during the year (expressed in US$ per share)
12
(0.09)
0.11
The notes on pages 22 to 64 are an integral part of these consolidated financial statements.
ANNUAL REPORT 2017
17
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2017
(in thousands of US dollars)
Profit/(loss) for the year
Other comprehensive income/(loss)
Items that may be subsequently reclassified to profit or loss
Currency translation differences
Share of currency translation differences of joint ventures accounted for using the equity method
Cumulative other comprehensive income movement relating to asset classified as held for sale
Reclassification to income statement of a loss/(gain) on cash flow hedge termination
Reclassification to currency translation reserve of gain on cash flow hedge termination
Total items that can be reclassified subsequently to profit or loss
Items that may not be subsequently reclassified to profit or loss
Share of currency translation differences attributable to non-controlling interest
Total items that cannot be reclassified subsequently to profit or loss
Other comprehensive income/(loss) for the year, net of tax
Total comprehensive income/(loss) for the year
Total comprehensive income/(loss) attributable to:
Owners of the Company
Non-controlling interest
Total comprehensive income/(loss) for the year
For the year ended
31 December
Note
2017
2016
(52,947)
61,263
27
26
23
23
32,356
13,115
1,560
69,566
(12,140)
30,661
(2,133)
–
63,149
(1,793)
104,457
89,884
812
812
2,638
2,638
105,269
92,522
52,322
153,785
51,484
838
150,922
2,863
52,322
153,785
Items in the statement above are disclosed net of tax. There is no income tax relating to the components of other comprehensive income above.
The notes on pages 22 to 64 are an integral part of these consolidated financial statements.
18
GLOBAL PORTS INVESTMENTS PLC
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2017
(in thousands of US dollars)
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Investments in joint ventures
Prepayments for property, plant and equipment
Deferred tax assets
Derivative financial instruments
Trade and other receivables
Current assets
Inventories
Derivative financial instruments
Trade and other receivables
Income tax receivable
Cash and cash equivalents
Assets classified as held for sale
TOTAL ASSETS
EQUITY AND LIABILITIES
Total equity
Equity attributable to the owners of the Company
Share capital
Share premium
Capital contribution
Currency translation reserve
Cash flow hedge reserve
Transactions with non-controlling interest
Retained earnings
Non-controlling interest
Total liabilities
Non-current liabilities
Borrowings
Trade and other payables
Deferred tax liabilities
Current liabilities
Borrowings
Trade and other payables
Current income tax liabilities
Liabilities directly associated with assets classified as held for sale
TOTAL EQUITY AND LIABILITIES
As at 31 December
Note
2017
2016
1,428,401
1,462,472
14
15
27
14
24
23
19
18
23
19
20
26
21
21
23
22
25
24
22
25
26
553,304
690,858
56,918
8,393
45,529
58,840
14,559
227,158
5,769
19,546
33,630
2,366
130,434
35,413
580,226
666,223
123,149
4,640
44,440
35,529
8,265
180,535
5,013
17,428
38,011
804
119,279
–
1,655,559
1,643,007
377,238
361,107
57,317
923,511
101,300
(759,376)
–
(209,122)
247,477
324,916
309,623
57,317
923,511
101,300
(806,407)
(57,426)
(209,122)
300,450
16,131
15,293
1,278,321
1,318,091
1,178,872
1,211,794
1,005,664
9,266
163,942
99,449
69,089
26,420
1,513
2,427
1,040,875
8,208
162,711
106,297
78,681
26,320
1,296
–
1,655,559
1,643,007
On 13 March 2018 the Board of Directors of Global Ports Investments Plc authorised these consolidated financial statements for issue.
Konstantin Shirokov
Director
Alexander Iodchin
Director
The notes on pages 22 to 64 are an integral part of these consolidated financial statements.
ANNUAL REPORT 2017
19
FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2017
(in thousands of US dollars)
Note
Share
capital
Share
premium
Capital
contribution
Translation
reserve
Cash flow
hedge
reserve
Transactions
with non-
controlling
interest
Retained
earnings*
Total
Non-
controlling
interest
Total
Attributable to the owners of the Company
Balance at 1 January
2016
Total other
comprehensive
income/(loss)
Profit/(loss) for the year
Total comprehensive
income/(loss) for the
year ended
31 December 2016
Distributions to
non-controlling interest
Total transactions with
owners for the year
ended 31 December
2016
Balance at 31 December
2016
Total other
comprehensive
income/(loss)
Profit/(loss) for the year
Total comprehensive
income/(loss) for the
year ended
31 December 2017
Balance at 31 December
2017
57,317
923,511
101,300 (834,935)
(118,782)
(209,122)
239,412
158,701
13,231
171,932
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
28,528
–
61,356
–
28,528
61,356
–
–
–
–
–
–
–
–
–
–
61,038
89,884
61,038
2,638
225
92,522
61,263
61,038
150,922
2,863
153,785
–
–
–
(801)
(801)
–
(801)
(801)
57,317
923,511
101,300 (806,407)
(57,426) (209,122) 300,450 309,623
15,293 324,916
–
–
–
–
–
–
–
–
47,031
–
57,426
–
–
–
–
(52,973)
104,457
(52,973)
812
26
105,269
(52,947)
–
47,031
57,426
–
(52,973)
51,484
838
52,322
57,317
923,511
101,300 (759,376)
– (209,122) 247,477
361,107
16,131 377,238
* Retained earnings in the separate financial statements of the Company is the only reserve that is available for distribution in the form of dividends to the
Company’s shareholders.
The notes on pages 22 to 64 are an integral part of these consolidated financial statements.
20
GLOBAL PORTS INVESTMENTS PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2017
(in thousands of US dollars)
Cash flows from operating activities
Profit/(loss) before income tax
Adjustments for:
Depreciation of property, plant and equipment
Impairment of property, plant and equipment
Impairment of intangible assets
(Profit)/loss on sale of property, plant and equipment
Write off of property, plant and equipment
Amortisation of intangible assets
Interest income
Interest expense
Share of (profit)/loss in jointly controlled entities
Change in fair value of swap
Foreign exchange differences on non-operating activities
Other non-cash items
Operating cash flows before working capital changes
Changes in working capital
Inventories
Trade and other receivables
Trade and other payables
Cash generated from operations
Dividends received from joint ventures
Income tax paid
Net cash from operating activities
Cash flows from investing activities
Purchases of intangible assets
Purchases of property, plant and equipment
Proceeds from sale of property, plant and equipment
Loans granted to related parties
Loan repayments received from related parties
Interest received
Net cash used in investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayments of borrowings
Interest paid
Proceeds from derivative financial instruments not used for hedging
Finance lease principal payments (third parties)
Dividends paid to the owners of non-controlling interest
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Exchange gains/(losses) on cash and cash equivalents
Cash and cash equivalents at end of the year
The notes on pages 22 to 64 are an integral part of these consolidated financial statements.
For the year ended 31 December
Note
2017
2016
(24,131)
109,856
14
14
15
14
14
15
9
9,22
27
9
14
30(h)
22
22
22
22,23
22
13
38,007
11,400
–
(162)
80
12,966
(2,048)
90,879
73,267
(42,089)
41,570
(930)
198,809
(637)
(1,810)
366
196,728
10,765
(33,549)
173,944
(1,846)
(28,041)
291
(7,500)
1,183
1,274
(34,639)
–
(57,533)
(89,094)
20,254
(2,741)
–
34,843
–
67,532
(652)
440
13,225
(1,367)
98,064
40,423
(64,432)
(79,432)
(738)
217,762
(379)
(2,439)
3,751
218,695
5,281
(28,135)
195,841
(118)
(18,043)
1,021
(9,900)
444
983
(25,613)
829,308
(943,030)
(70,259)
11,372
(2,514)
(732)
(129,114)
(175,855)
10,191
119,279
964
20
130,434
(5,627)
123,135
1,771
119,279
ANNUAL REPORT 2017
21
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. General information
Country of incorporation
Global Ports Investments Plc (hereafter the “Company” or “GPI”) was incorporated on 29 February 2008 as a private limited liability company
and is domiciled in Cyprus in accordance with the provisions of the Companies Law, Cap. 113. The address of the Company’s registered office
is 20 Omirou Street, Ayios Nicolaos, CY-3095, Limassol, Cyprus.
On 18 August 2008, following a special resolution passed by the shareholder, the name of the Company was changed from “Global Ports
Investments Ltd” to “Global Ports Investments Plc” and the Company was converted into a public limited liability company in accordance with
the provisions of the Companies Law, Cap. 113.
During the first half of 2011, the Company successfully completed an initial public offering (“IPO”) of its shares in the form of global depositary
receipts (“GDRs”). The Company’s GDRs (one GDR representing 3 ordinary shares) are listed on the Main Market of the London Stock Exchange
under the symbol “GLPR”.
Towards the end of 2017 the Company was informed by its shareholder, Transportation Investments Holding Limited (“TIHL”) (see also Note 30),
that it has entered into an agreement to sell its 30.75% stake in Global Ports to Management Company “Delo” LLC, one of the largest private
transportation and logistics holding companies in Russia. The agreement remains subject to various conditions, including antitrust clearances
and other customary arrangements.
Approval of the consolidated financial statements
These consolidated financial statements were authorised for issue by the Board of Directors on 13 March 2017.
Principal activities
The principal activities of the Company, its subsidiaries and joint ventures (hereinafter collectively referred to as the “Group”) are the operation
of container and oil products terminals in Russia and the Baltics. The Group offers its customers a wide range of services for their import and
export logistics operations.
Composition of the Group and its joint ventures
The Group’s terminals are located in the Baltic and Far East Basins, key regions for foreign trade cargo flows. The Group operates:
–
–
–
–
Five container terminals in Russia – Petrolesport, First Container Terminal (FCT, Ust-Luga Container Terminal (ULCT) and Moby Dik in the
St. Petersburg and Ust-Luga port cluster, and Vostochnaya Stevedoring Company (VSC) in Port of Vostochny;
Two container terminals in Finland – Multi-Link Terminals Helsinki and Multi-Link Terminals Kotka;
Inland Logistika-Terminal (see Note 26) and inland Yanino Logistics Park (YLP), both located in the vicinity of St. Petersburg; and
Oil product terminal AS Vopak E.O.S. that is located in Estonia.
See also Note 5 for the description of segmental information of the Group. All entities above are fully consolidated, except for Moby Dik, Multi-Link
Terminals, Yanino Logistics Park and AS Vopak E.O.S. which are joint ventures and accounted for using the equity method of accounting.
The Company fully controls all of the above terminals except for as described below:
–
–
–
MLT and CD Holding groups are joint ventures with Container Finance OY where the Company has 75% effective ownership interest
(Note 27). Moby Dik (a container terminal in the vicinity of St. Petersburg) and Multi-Link Terminals (a container terminal in Vuosaari
(near Helsinki, Finland) and a container terminal in Kotka, Finland) constitute the MLT group. Yanino Logistics Park (an inland container
terminal in the vicinity of St. Petersburg), CD Holding and some other entities constitute the CD Holding group.
AS Vopak E.O.S. and its subsidiaries (VEOS) is a joint venture with Royal Vopak, the world’s largest independent tank storage provider,
specialising in the storage and handling of liquid chemicals, gasses and oil products, where the Company has a 50% effective ownership
interest (Note 27). VEOS facilities are located in Estonia.
Ust-Luga Container Terminal (located in Ust-Luga, North-West Russia) is an 80% subsidiary where Eurogate, one of the leading container
terminal operators in Europe has a 20% non-controlling interest.
22
GLOBAL PORTS INVESTMENTS PLC
2. Basis of preparation and summary of significant accounting policies
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been
consistently applied to all years presented in these consolidated financial statements, unless otherwise stated.
Basis of preparation
The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (“IFRSs”)
as adopted by the European Union (“EU”) and the requirements of the Cyprus Companies Law, Cap. 113.
As of the date of the authorisation of these consolidated financial statements all International Financial Reporting Standards issued by
International Accounting Standards Board (IASB) that are effective as at 1 January 2017 have been adopted by the EU through the endorsement
procedure established by the European Commission with the exception of certain provisions of IAS 39 “Financial Instruments: Recognition and
Measurement” relating to portfolio hedge accounting and IFRS 14 “Regulatory Deferral Accounts”.
The consolidated financial statements have been prepared under the historical cost convention as modified by the revaluation of derivatives and
measurement of assets held for sale at fair value less cost of disposal.
The preparation of consolidated financial statements in conformity with IFRS requires the use of certain critical accounting estimates and requires
management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment
or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 4.
New and amended standards adopted by the Group
The Group adopted all the new and revised IFRS as adopted by the EU that are relevant to its operations and are effective for accounting periods
beginning on 1 January 2017:
–
–
Disclosure Initiative – Amendments to IAS 7 (issued on 29 January 2016 and effective for annual periods beginning on or after 1 January
2017). As a result of this amendment, the Company has disclosed a reconciliation of movements in liabilities arising from financing
activities. Refer to Note 22.
Annual Improvements to IFRSs 2014-2016 cycle – amendments to IFRS 12 (issued on 8 December 2016 and effective for annual periods
beginning on or after 1 January 2017). The amendments clarify the scope of the disclosure requirements in IFRS 12 by specifying that the
disclosure requirements in IFRS 12, other than those relating to summarised financial information for subsidiaries, joint ventures and
associates, apply to an entity’s interests in other entities that are classified as held for sale or discontinued operations in accordance
with IFRS 5.
The adoption did not have a material effect on the accounting policies of the Group.
New standards and interpretations not yet adopted by the Group
At the date of approval of these financial statements a number of new standards and amendments to standards and interpretations are effective
for annual periods beginning after 1 January 2017, and have not been applied in preparing these consolidated financial statements. None of these
is expected to have a significant effect on these consolidated financial statements, except the following set out below:
(a) Adopted by the European Union
–
IFRS 16, Leases (issued on 13 January 2016 and effective for annual periods beginning on or after 1 January 2019). The new standard sets out
the principles for the recognition, measurement, presentation and disclosure of leases. All leases result in the lessee obtaining the right to
use an asset at the start of the lease and, if lease payments are made over time, also obtaining financing. Accordingly, IFRS 16 eliminates
the classification of leases as either operating leases or finance leases as is required by IAS 17 and, instead, introduces a single lessee
accounting model. Lessees will be required to recognise: (a) assets and liabilities for all leases with a term of more than 12 months, unless
the underlying asset is of low value; and (b) depreciation of lease assets separately from interest on lease liabilities in the income
statement. IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17. Accordingly, a lessor continues to classify
its leases as operating leases or finance leases, and to account for those two types of leases differently.
The Group has not yet finalised a detailed assessment of the effect of the implementation of this standard. According to preliminary estimates
the implementation of the standard will result in material changes in the assets, liabilities, operating profit (i.e. increase of non-current assets
(subject to impairment tests), increase of borrowings, decrease of rental expenses, certain increase of depreciation and interest costs).
–
IFRS 9 “Financial Instruments: Classification and Measurement” (issued in July 2014 and effective for annual periods beginning on or after
1 January 2018). Key features of the new standard are:
– Financial assets are required to be classified into three measurement categories: those to be measured subsequently at amortised cost,
those to be measured subsequently at fair value through other comprehensive income (FVOCI) and those to be measured subsequently
at fair value through profit or loss (FVPL).
– Classification for debt instruments is driven by the entity’s business model for managing the financial assets and whether the
contractual cash flows represent solely payments of principal and interest (SPPI). If a debt instrument is held to collect, it may be carried
at amortised cost if it also meets the SPPI requirement. Debt instruments that meet the SPPI requirement that are held in a portfolio
where an entity both holds to collect assets’ cash flows and sells assets may be classified as FVOCI.
– Financial assets that do not contain cash flows that are SPPI must be measured at FVPL (for example, derivatives). Embedded
derivatives are no longer separated from financial assets but will be included in assessing the SPPI condition.
ANNUAL REPORT 2017
23
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
2. Basis of preparation and summary of significant accounting policies (continued)
–
Investments in equity instruments are always measured at fair value. However, management can make an irrevocable election to present
changes in fair value in other comprehensive income, provided the instrument is not held for trading. If the equity instrument is held for
trading, changes in fair value are presented in profit or loss.
– Most of the requirements in IAS 39 for classification and measurement of financial liabilities were carried forward unchanged to IFRS 9.
–
The key change is that an entity will be required to present the effects of changes in own credit risk of financial liabilities designated at fair
value through profit or loss in other comprehensive income.
IFRS 9 introduces a new model for the recognition of impairment losses – the expected credit losses (ECL) model. There is a ‘three stage’
approach which is based on the change in credit quality of financial assets since initial recognition. In practice, the new rules mean that
entities will have to record an immediate loss equal to the 12-month ECL on initial recognition of financial assets that are not credit impaired
(or lifetime ECL for trade receivables). Where there has been a significant increase in credit risk, impairment is measured using lifetime ECL
rather than 12-month ECL. The model includes operational simplifications for lease and trade receivables.
– Hedge accounting requirements were amended to align accounting more closely with risk management. The standard provides entities
with an accounting policy choice between applying the hedge accounting requirements of IFRS 9 and continuing to apply IAS 39 to all
hedges because the standard currently does not address accounting for macro hedging.
While the Group has yet to finalise a detailed assessment of the classification and measurement of the financial instruments it holds the Group
does not expect the new guidance to have a material impact on the classification and measurement of its financial assets.
After taking into consideration the risk profile of its trade and loan receivables, their repayment terms, the history and probability of default
(including assessment of their capability to meet their obligations to the group) and the expected loss in case of default the Group does not
expect that there will be material impairment loss.
There will be no impact on the Group’s accounting for financial liabilities, as the new requirements only affect the accounting for financial
liabilities that are designated at fair value through profit or loss and the Group does not have any such liabilities.
The derecognition rules have been transferred from IAS 39 Financial Instruments: Recognition and Measurement and have not been changed.
The new standard also introduces expanded disclosure requirements and changes in presentation. These are expected to change the nature
and extent of the Group’s disclosures about its financial instruments particularly in the year of the adoption of the new standard.
IFRS 15, Revenue from Contracts with Customers (issued on 28 May 2014 and effective for the periods beginning on or after 1 January 2018).
The new standard introduces the core principle that revenue must be recognised when the goods or services are transferred to the customer,
at the transaction price. Any bundled goods or services that are distinct must be separately recognised, and any discounts or rebates on the
contract price must generally be allocated to the separate elements. When the consideration varies for any reason, minimum amounts must
be recognised if they are not at significant risk of reversal. Costs incurred to secure contracts with customers have to be capitalised and
amortised over the period when the benefits of the contract are consumed. The Group has not yet finalised a detailed assessment of the
effect of the implementation of this standard. According to preliminary estimates the implementation of the standard will not materially
affect the financial position and the result of operations of the Group.
Amendments to IFRS 15, Revenue from Contracts with Customers (issued on 12 April 2016 and effective for annual periods beginning on or
after 1 January 2018). The amendments do not change the underlying principles of the Standard but clarify how those principles should be
applied. The amendments clarify how to identify a performance obligation (the promise to transfer a good or a service to a customer) in a
contract; how to determine whether a company is a principal (the provider of a good or service) or an agent (responsible for arranging for the
good or service to be provided); and how to determine whether the revenue from granting a licence should be recognised at a point in time or
over time. In addition to the clarifications, the amendments include two additional reliefs to reduce cost and complexity for a company when
it first applies the new Standard.
Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts – Amendments to IFRS 4 (issued on 12 September 2016 and effective,
depending on the approach, for annual periods beginning on or after 1 January 2018 for entities that choose to apply temporary exemption
option, or when the entity first applies IFRS 9 for entities that choose to apply the overlay approach). The amendments address concerns
arising from implementing the new financial instruments Standard, IFRS 9, before implementing the replacement Standard that the IASB is
developing for IFRS 4. These concerns include temporary volatility in reported results. The amendments introduce two approaches: an overlay
approach and a deferral approach. The amended Standard will give all companies that issue insurance contracts the option to recognise in
other comprehensive income, rather than profit or loss, the volatility that could arise when IFRS 9 is applied before the new insurance contracts
Standard is issued. In addition, the amended Standard will give companies whose activities are predominantly connected with insurance an
optional temporary exemption from applying IFRS 9 until 2021. The entities that defer the application of IFRS 9 will continue to apply the
existing financial instruments Standard – IAS 39. The amendments to IFRS 4 supplement existing options in the Standard that can already be
used to address the temporary volatility.
Annual Improvements to IFRSs 2014-2016 cycle (issued on 8 December 2016 and effective for annual periods beginning on or after 1 January 2018
for amendments to IFRS 1 and IAS 28). The amendments to IAS 28 clarify that an entity has an investment-by-investment choice for measuring
investees at fair value in accordance with IAS 28 by a venture capital organisation, or a mutual fund, unit trust or similar entities including
investment linked insurance funds. Additionally, an entity that is not an investment entity may have an associate or joint venture that is an
investment entity. IAS 28 permits such an entity to retain the fair value measurements used by that investment entity, associate or joint venture
when applying the equity method. The amendments clarify that this choice is also available on an investment-by-investment basis.
–
–
–
–
24
GLOBAL PORTS INVESTMENTS PLC
(b) Other accounting standards that have not been endorsed by EU or are not considered to be relevant to the Group
IFRS 14, Regulatory Deferral Accounts (issued in January 2014 and effective for annual periods beginning on or after 1 January 2016). The
–
European Commission has decided not to launch the endorsement process of this interim standard and to wait for the final standard. IFRS 14
permits first-time adopters to continue to recognise amounts related to rate regulation in accordance with their previous GAAP requirements
when they adopt IFRS. However, to enhance comparability with entities that already apply IFRS and do not recognise such amounts, the
standard requires that the effect of rate regulation must be presented separately from other items. An entity that already presents IFRS
financial statements is not eligible to apply the standard.
–
–
–
–
–
Amendments to IFRS 2, Share-based Payment (issued on 20 June 2016 and effective for annual periods beginning on or after 1 January 2018).
The amendments mean that non-market performance vesting conditions will impact measurement of cash-settled share-based payment
transactions in the same manner as equity-settled awards. The amendments also clarify classification of a transaction with a net settlement
feature in which the entity withholds a specified portion of the equity instruments, that would otherwise be issued to the counterparty upon
exercise (or vesting), in return for settling the counterparty’s tax obligation that is associated with the share-based payment. Such
arrangements will be classified as equity-settled in their entirety. Finally, the amendments also clarify accounting for cash-settled share based
payments that are modified to become equity-settled, as follows (a) the share-based payment is measured by reference to the modification-
date fair value of the equity instruments granted as a result of the modification; (b) the liability is derecognised upon the modification, (c) the
equity-settled share-based payment is recognised to the extent that the services have been rendered up to the modification date, and (d) the
difference between the carrying amount of the liability as at the modification date and the amount recognised in equity at the same date is
recorded in profit or loss immediately.
IFRIC 22 – Foreign Currency Transactions and Advance Consideration (issued on 8 December 2016 and effective for annual periods beginning
on or after 1 January 2018). The interpretation addresses how to determine the date of the transaction for the purpose of determining the
exchange rate to use on initial recognition of the related asset, expense or income (or part thereof) on the derecognition of a non-monetary
asset or non-monetary liability arising from an advance consideration in a foreign currency. Under IAS 21, the date of the transaction for the
purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income (or part thereof) is the date on
which an entity initially recognises the non-monetary asset or non-monetary liability arising from the advance consideration. If there are
multiple payments or receipts in advance, then the entity must determine the date of the transaction for each payment or receipt of advance
consideration. IFRIC 22 only applies in circumstances in which an entity recognises a non-monetary asset or non-monetary liability arising from
an advance consideration. IFRIC 22 does not provide application guidance on the definition of monetary and non-monetary items. An advance
payment or receipt of consideration generally gives rise to the recognition of a non-monetary asset or non-monetary liability, however, it may
also give rise to a monetary asset or liability. An entity may need to apply judgment in determining whether an item is monetary or
non-monetary.
Transfers of Investment Property – Amendments to IAS 40 (issued on 8 December 2016 and effective for annual periods beginning on or
after 1 January 2018). The amendments clarify the requirements on transfers to, or from, investment property in respect of properties under
construction. Prior to the amendments, there was no specific guidance on transfers into, or out of, investment properties under construction
in IAS 40. The amendment clarifies that there was no intention to prohibit transfers of a property under construction or development,
previously classified as inventory, to investment property when there is an evident change in use. IAS 40 was amended to reinforce the principle
of transfers into, or out of, investment property in IAS 40 to specify that a transfer into, or out of investment property should only be made
when there has been a change in use of the property; and such a change in use would involve an assessment of whether the property qualifies
as an investment property. Such a change in use should be supported by evidence.
Sale or Contribution of Assets between an Investor and its Associate or Joint Venture – Amendments to IFRS 10 and IAS 28 (issued on
11 September 2014 and effective for annual periods beginning on or after a date to be determined by the IASB). The EU endorsement is
postponed as IASB effective date is deferred indefinitely. These amendments address an inconsistency between the requirements in IFRS 10
and those in IAS 28 in dealing with the sale or contribution of assets between an investor and its associate or joint venture. The main
consequence of the amendments is that a full gain or loss is recognised when a transaction involves a business. A partial gain or loss is
recognised when a transaction involves assets that do not constitute a business, even if these assets are held by a subsidiary.
IFRIC 23 “Uncertainty over Income Tax Treatments” (issued on 7 June 2017 and effective for annual periods beginning on or after 1 January
2019). IAS 12 specifies how to account for current and deferred tax, but not how to reflect the effects of uncertainty. The interpretation clarifies
how to apply the recognition and measurement requirements in IAS 12 when there is uncertainty over income tax treatments. An entity should
determine whether to consider each uncertain tax treatment separately or together with one or more other uncertain tax treatments based
on which approach better predicts the resolution of the uncertainty. An entity should assume that a taxation authority will examine amounts
it has a right to examine and have full knowledge of all related information when making those examinations. If an entity concludes it is not
probable that the taxation authority will accept an uncertain tax treatment, the effect of uncertainty will be reflected in determining the
related taxable profit or loss, tax bases, unused tax losses, unused tax credits or tax rates, by using either the most likely amount or the
expected value, depending on which method the entity expects to better predict the resolution of the uncertainty. An entity will reflect the
effect of a change in facts and circumstances or of new information that affects the judgments or estimates required by the interpretation
as a change in accounting estimate. Examples of changes in facts and circumstances or new information that can result in the reassessment
of a judgment or estimate include, but are not limited to, examinations or actions by a taxation authority, changes in rules established by
a taxation authority or the expiry of a taxation authority’s right to examine or re-examine a tax treatment. The absence of agreement or
disagreement by a taxation authority with a tax treatment, in isolation, is unlikely to constitute a change in facts and circumstances or new
information that affects the judgments and estimates required by the Interpretation.
ANNUAL REPORT 2017
25
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
2. Basis of preparation and summary of significant accounting policies (continued)
–
IFRS 17 “Insurance Contracts”(issued on 18 May 2017 and effective for annual periods beginning on or after 1 January 2021).IFRS 17 replaces
IFRS 4, which has given companies dispensation to carry on accounting for insurance contracts using existing practices. As a consequence,
it was difficult for investors to compare and contrast the financial performance of otherwise similar insurance companies. IFRS 17 is a single
principle-based standard to account for all types of insurance contracts, including reinsurance contracts that an insurer holds. The standard
requires recognition and measurement of groups of insurance contracts at: (i) a risk-adjusted present value of the future cash flows (the
fulfilment cash flows) that incorporates all of the available information about the fulfilment cash flows in a way that is consistent with
observable market information; plus (if this value is a liability) or minus (if this value is an asset) (ii) an amount representing the unearned
profit in the group of contracts (the contractual service margin). Insurers will be recognising the profit from a group of insurance contracts
over the period they provide insurance coverage, and as they are released from risk. If a group of contracts is or becomes loss-making, an
entity will be recognising the loss immediately.
–
–
Amendments to IAS 28: Long-term Interests in Associates and Joint Ventures (issued on 12 October 2017 and effective for annual periods
beginning on or after 1 January 2019). The Amendments clarify that an entity applies IFRS 9 Financial Instruments to long-term interests
in an associate or joint venture that, in substance, form part of the net investment in the associate or joint venture but to which the equity
method is not applied. An entity applies IFRS 9 to such long-term interests before it applies IAS 28. In applying IFRS 9, the entity does not
take account of any adjustments to the carrying amount of long-term interests that arise from applying IAS 28. An entity applies the
Amendments retrospectively for annual reporting periods beginning on or after 1 January 2019. Earlier application is permitted.
Amendments to IFRS 9: Prepayment Features with Negative Compensation (issued on 12 October 2017 and effective for annual periods
beginning on or after 1 January 2019). For financial instruments which contain a prepayment amount that may result in negative
compensation, the Amendments propose that such a financial asset would be eligible to be measured at amortised cost or at fair value
through other comprehensive income, subject to the assessment of the business model in which it is held.
The Board of Directors assesses the impact of new standards and interpretations at the point when these are endorsed by the European Union.
As a result the impact of the above new standards and interpretations that have not been endorsed by the European Union has not been assessed.
Basis of consolidation
(a) Subsidiaries
Subsidiaries are all entities (including special purpose entities) over which the Group has control. The Group controls an entity when the Group
is exposed to, or has the rights to variable returns from its involvement with the entity and has the ability to affect those returns through its power
over the entity. Subsidiaries are fully included in the consolidated financial statements from the date on which control was transferred to the
Group or to the extent that the subsidiaries were obtained through a transaction between entities under common control from the date which
control was transferred to its shareholders. They are derecognised from the financial statements from the date that control ceases.
Business combinations involving entities under common control (ultimately controlled by the same party, before and after the business
combination, and that control is not transitory) are accounted using the predecessor basis of accounting. Under this method, the financial
statements of the acquiree are included in the consolidated financial statements using pre-acquisition IFRS carrying amounts using uniform
accounting policies, on the assumption that the Group was in existence from the date where common control was established. For these
transactions, the excess of the cost of acquisition over the carrying amount of the Group’s share of identifiable net assets acquired, including
goodwill, arising at the date of acquisition by the shareholders, is recorded in equity in retained earnings at the date of the legal restructuring.
The purchase method of accounting is used for acquisitions of subsidiaries that do not involve entities or businesses under common control with
the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed
at the date of exchange. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognises any non-controlling
interest in the acquiree on an acquisition-by-acquisition basis at the non-controlling interest’s proportionate share of the recognised amounts
of acquiree’s identifiable net assets. Goodwill is initially measured as the excess of the aggregate of the consideration transferred over the net
identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired,
the difference is recognised in the consolidated income statement.
All intra-company transactions, balances, income, expenses and unrealised gains and losses are eliminated on consolidation. Unrealised losses
are also eliminated but considered as an impairment indicator of the asset transferred. Where necessary, adjustments are made to the financial
statements of subsidiaries to bring their accounting policies into compliance with those used by the Group.
(b) Transactions with non-controlling interests
Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is, as transactions with
the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying
value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.
(c) Joint arrangements
Under IFRS 11 investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and
obligations each investor has rather than the legal structure of the joint arrangement. Group has assessed the nature of its joint arrangements
and determined them to be joint ventures. Joint ventures are accounted for using equity method of accounting.
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GLOBAL PORTS INVESTMENTS PLC
Under the equity method of accounting, interests in joint ventures are initially recognised in the consolidated balance sheet at cost and adjusted
thereafter to recognise the Group’s share of the post-acquisition profits or losses and movements in other comprehensive income. When the
Group’s share of losses in a joint venture equals or exceeds its interests in the joint ventures (which includes any long-term interests that, in
substance, form part of the Group’s net investment in the joint ventures), the Group does not recognise further losses, unless it has incurred
obligations or made payments on behalf of the joint ventures. The Group applies the requirements of IAS 39 to determine whether any additional
impairment loss needs to be recognised in respect of loans given to joint ventures.
The Group’s share of losses in a joint venture is first allocated against the Group’s investment in the joint venture and then to any other long term
interests that in substance form part of the Group’s net investment.
Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group’s interest in the joint ventures.
Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Investments in joint ventures are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may
not be recoverable. An impairment loss is recognised through profit or loss for the amount by which the asset’s carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. Value in use is calculated by
estimating the Group’s share of the present value of the estimated future cash flows expected to be generated from the asset, including the cash
flows from the operations of the asset and the proceeds from the ultimate disposal of the asset. An impairment loss recognised in prior years is
reversed where appropriate if there has been a change in the estimates used to determine the recoverable amount.
Revenue recognition
Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group’s
activities. Revenue is shown net of value-added tax, returns, rebates and discounts and after eliminating sales within the Group.
The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the
entity and when specific criteria have been met for each of the Group’s activities as described below. The amount of revenue is not considered to
be reliably measurable until all contingencies relating to the sale have been resolved. The Group bases its estimates on historical results, taking into
consideration the type of customer, the type of transaction and the specifics of each arrangement. Revenues earned by the Group are recognised
on the following bases:
(a) Sales of services
The Group provides container handling, general cargoes handling, ro-ro cargoes handling, reefer cargoes handling, oil products handling and other
related stevedoring services. Revenue from rendering of services is recognised based on the stage of completion determined by reference to
services performed to date as a percentage of total services to be provided. If the income from rendering of services cannot be reliably measured,
only the income up to the level of the expenses to be claimed is recognised.
(b) Sales of goods
The Group sells unused materials and goods. These sales are ex works from the sales of the terminals and with usual payment terms. Revenue from
the sale of goods is recognised when the customer takes the goods out of the territory of the terminal (i.e. risks and rewards of ownership are
transferred to the buyer).
(c) Rental income
See accounting policy for leases below.
(d) Interest income
Interest income is recognised on a time-proportion basis using the effective interest method and is included within finance income.
(e) Dividend income
Dividend income is recognised when the right to receive payment is established.
Transactions with equity holders
The Group enters into transactions with its shareholders. When consistent with the nature of the transaction (i.e. when these transactions are not
at arm’s length prices), the Group’s accounting policy is to recognise any gains or losses with equity holders, directly through equity and consider
these transactions as the receipt of additional capital contribution or the distribution of dividends. Similar transactions with non-equity holders,
or parties which are not under the control of the parent company, are recognised through the income statement.
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief
operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified
as the Board of Directors that makes strategic decisions.
ANNUAL REPORT 2017
27
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
2. Basis of preparation and summary of significant accounting policies (continued)
Foreign currency translation
(a) Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment
in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in United States dollars (US$), which
is the Company’s functional and presentation currency.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions.
Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of
monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.
Foreign exchange gains and losses that relate to loans receivable, cash and cash equivalents and borrowings are presented net in the income
statement within ‘net foreign exchange losses on financing activities’. All other foreign exchange gains and losses are presented in the income
statement within ‘other gains/(losses) – net’.
(c) Group companies
The results and financial position of all the Group entities (none of which has the currency of a hyper-inflationary economy) that have a functional
currency different from the presentation currency are translated into the presentation currency as follows:
–
–
–
–
Assets and liabilities are translated at the closing rate existing at the date of the balance sheet presented;
Income and expense items at the exchange rates prevailing at the date of transaction or using average rates as a reasonable approximation;
Share capital, share premium and all other reserves are translated using the historic rate; and
All exchange differences resulting from the above translation are recognised in other comprehensive income.
On consolidation, exchange differences arising from the translation of the net investment in foreign operations are taken to shareholders’ equity.
On disposal of a foreign operation (including partial disposals which result in loss of control, significant influence or joint control of a subsidiary,
associate or joint venture respectively, that include a foreign operation), the cumulative amount of the exchange differences relating to that foreign
operation, recognised in other comprehensive income and accumulated in the separate component of equity is reclassified from equity to profit or
loss (as a reclassification adjustment) when the gain or loss is recognised. In these cases, the cumulative amount of exchange differences relating
to the foreign operation sold that have been attributed to the non-controlling interests are derecognised but are not reclassified to profit or loss.
On partial disposal of a subsidiary that includes a foreign operation, the Group re-attributes the proportionate share of the cumulative amount
of the exchange differences recognised in other comprehensive income to the non-controlling interests in that foreign operation. In any other
partial disposal of a foreign operation, the Group reclassifies to profit or loss only the proportionate share of the cumulative amount of the
exchange differences recognised in other comprehensive income.
Impairment of non-financial assets
Non-financial assets that are subject to depreciation or amortisation are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable (refer to accounting policy for intangible assets in relation to the impairment of
goodwill) An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable
amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the
lowest levels for which there are separately identifiable cash inflows (cash-generating units). Non-financial assets other than goodwill that
suffered impairment are reviewed for possible reversal of impairment at each reporting date.
Property, plant and equipment (“PPE”)
Property, plant and equipment are recorded at purchase or construction cost less depreciation. Historical cost includes expenditure that is directly
attributable to the acquisition or construction of the items.
Land is not depreciated.
Depreciation on property, plant and equipment is calculated using the straight-line method to allocate their cost, less residual value, over their
estimated useful lives, as follows:
Buildings and facilities
Loading equipment and machinery
Other production equipment
Office equipment
Number of years
5 to 50
3 to 25
3 to 25
1 to 10
Assets under construction are not depreciated until they are completed and brought into use, at which time they are reclassified in the relevant
class of property, plant and equipment and depreciated accordingly.
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
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GLOBAL PORTS INVESTMENTS PLC
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated
recoverable amount.
Expenditure for repairs and maintenance of property, plant and equipment is charged to the income statement of the year in which they are
incurred. The cost of major renovations and other subsequent expenditure are included in the carrying amount of the asset or recognised as a
separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost
of the item can be measured reliably.
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time
to get ready for intended use or sale are capitalised and amortised over the useful life of the asset. Other borrowing costs are recognised as an
expense in the reporting period incurred. Interest is capitalised at a rate based on the Group’s weighted average cost of borrowing or at the rate
on project specific debt, where applicable.
Gains and losses on disposal of property, plant and equipment are determined by comparing the proceeds with carrying amount and these are
included within operating income.
Intangible assets
(a) Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired
subsidiary/joint venture at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in ‘intangible assets’. Goodwill on acquisition
of joint ventures is included in the carrying amount of the Group’s investment in the joint venture (refer to Note 2, Basis of consolidation, (c)).
Separately recognised goodwill is tested for impairment annually and whenever there is indication that goodwill may be impaired. Goodwill is
carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity
include the carrying amount of goodwill relating to the entity sold. Goodwill related to the partial disposal of an entity is not derecognised unless
there is loss of control.
If the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised exceeds the cost of the business
combination, the Group reassesses the identification and measurement of the acquiree’s identifiable assets, liabilities and contingent liabilities and
the measurement of the cost of the combination and recognises immediately in profit or loss any excess remaining after that reassessment.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or
groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose. The Group allocates
goodwill to each CGU.
(b) Computer software
Acquired computer software licenses are capitalised on the basis of the costs incurred to acquire and bring to use the specific software.
Subsequently computer software is carried at cost less any accumulated amortisation and any accumulated impairment losses. These costs are
amortised using straight line method over their estimated useful lives (3 to 5 years). Costs associated with maintaining computer software
programmes are recognised as an expense as incurred.
(c) Contractual rights
Contractual rights acquired as a result of business combinations are shown at the cost of acquisition. Contractual rights relate primarily to
quay and land lease agreements. These contractual rights are renewable. Contractual rights have a finite useful life and are carried at cost less
accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost of contractual rights over their
estimated useful lives (being up to 55 years as of 31 December 2017) which are in accordance with the underlying agreements, including renewal
periods whenever renewal is at no significant cost and the Group has evidence, based on past experience that the contract will be renewed.
Leases
A lease is an agreement whereby the lessor conveys to the lessee in return for a payment or series of payments, the right to use an asset for an
agreed period of time.
The Group is the lessee
(a) Finance leases
Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership are classified as finance leases.
Finance leases are capitalised at the lease’s commencement at the lower of the fair value of the leased assets and the present value of the
minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the
finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in borrowings. The interest element of
the finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining
balance of the liability for each period.
Property, plant and equipment acquired under finance leases are depreciated over the shorter of the useful life of the asset or the lease term.
ANNUAL REPORT 2017
29
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
2. Basis of preparation and summary of significant accounting policies (continued)
(b) Operating leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments
made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over
the period of the lease.
The Group is the lessor
Operating leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Rental
income (net of any incentives given to lessees) is recognised on a straight-line basis over the lease term. Assets leased out under operating leases
include insignificant portions of some properties which are not used by the Group which cannot be sold or leased out separately under a finance
lease. These properties are included in property, plant and equipment in the balance sheet based on the nature of the asset.
Loans and receivables
The Group classifies its financial assets as loans and receivables.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and for
which there is no intention of trading the receivable. They are included in current assets, except for maturities greater than twelve months after
the balance sheet date. These are classified as non-current assets. The Group’s loans and receivables comprise cash and cash equivalents, bank
deposits with maturity over 90 days, trade and other receivables and loans to related and third parties.
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less
provision for impairment.
Loans and trade receivables are initially recognised at fair value plus transaction costs. Loans and trade receivables are derecognised when the
rights to receive cash flows from the loans and receivables have expired or have been transferred and the Group has transferred substantially all
risks and rewards of ownership. Loans and trade receivables are carried at amortised cost using the effective interest method.
The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired.
A provision for impairment of loans and trade receivables is established when there is objective evidence that the Group will not be able to collect
all amounts due according to the original terms of loans or trade receivables. Significant financial difficulties of the debtor, probability that the
debtor will enter bankruptcy or financial difficulty, and default or delinquency in payments are considered indicators that the receivable is
impaired. The amount of the provision is the difference between the carrying amount of and the recoverable amount, being the present value
of estimated future cash flows, discounted at the original effective interest rate. For trade receivables the amount of the provision is recognised
in the income statement against ‘administrative, selling and marketing expenses’. For loans receivable the amount of the provision is recognised
in the income statement against ‘other gains/(losses) – net’.
Derivative financial instruments and hedging activities
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair
value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so,
the nature of the item being hedged. The Group designates certain derivatives as hedges of a particular risk associated with a recognised asset
or a liability or highly probable forecast transaction (cash flow hedge).
Derivative financial instruments not designated as a hedging instrument are included within financial assets at fair value through profit or loss
when fair value is positive and within financial liabilities at fair value through profit or loss when fair value is negative. They are presented as current
assets or liabilities if they are expected to be settled within 12 months after the end of the reporting period. Changes in the fair value of foreign
currency derivatives (cross currency swaps) are presented in the income statement within ‘change in fair value of derivatives’ as part of ‘finance
income/(costs) – net’.
The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk
management objectives and strategy for undertaking various hedging transactions. The Group also documents its assessment, both at hedge
inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes
in fair values or cash flows of hedged items.
The fair values of various derivative instruments used for hedging purposes are disclosed in Note 23. Movements on the hedging reserve are shown
in the statement of other comprehensive income. The full fair value of hedging derivatives is classified as a non-current asset or liability when the
maturity of the hedging relationship is more than 12 months and as a current asset or liability when the remaining maturity of the hedging
relationship is less than 12 months.
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other
comprehensive income. The gain or loss relating to the ineffective portion of cross-currency interest rate swap hedging variable rate borrowings
is recognised immediately in the income statement within ‘finance costs’ and gain or loss relating to the hedging of currency risk in forecast sale
is recognised in ‘other gains/(losses)-net’.
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GLOBAL PORTS INVESTMENTS PLC
Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss (for example, when the
forecast sale that is hedged takes place). The gain or loss relating to the effective portion of cross-currency interest rate swap hedging variable
rate borrowings is recognised in the income statement within ‘finance costs’ and gain or loss relating to the hedging of currency risk in forecast
sale is recognised in ‘other gains/(losses)-net’.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss
existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement.
Gain or loss existing in equity is recognised immediately in the income statement if the forecast transaction is no longer expected to occur.
Prepayments
Prepayments are carried at cost less provision for impairment. A prepayment is classified as non-current when the goods or services relating to the
prepayment are expected to be obtained after one year, or when the prepayment relates to an asset which will itself be classified as non-current
upon initial recognition. Prepayments to acquire assets are transferred to the carrying amount of the asset once the Group has obtained control
of the asset and it is probable that future economic benefits associated with the asset will flow to the Group. Other prepayments are written off
to profit or loss when the goods or services relating to the prepayments are received. If there is an indication that the assets, goods or services
relating to a prepayment will not be received, the carrying value of the prepayment is written down accordingly and a corresponding impairment
loss is recognised in profit or loss for the year.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted average cost method. It excludes
borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business less applicable variable selling expenses.
Non-current assets held for sale
Non-current assets are classified as assets held for sale when their carrying amount is to be recovered principally through a sale transaction and
a sale is considered highly probable. They are stated at the lower of carrying amount and fair value less costs to sell.
Cash and cash equivalents
In the cash flow statement cash and cash equivalents include cash in hand and deposits held at call with original maturity up to 90 days with
banks. Cash and cash equivalents are carried at amortised cost using the effective interest method. Deposits with original maturity over 90 days
are included in the cash flow from investing activities.
Cash flow statement
The cash flow statement is prepared under the indirect method. Purchases of property, plant and equipment (including prepayments for PPE) are
presented within cash flows from investing activities and finance lease repayments within cash flows from financing activities are shown net of
VAT. Related input VAT is included in movement in changes of working capital, within trade and other receivables.
Share capital, share premium and capital contribution
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds.
Any excess of the fair value of consideration received over the par value of shares issued is recognised as share premium. Share premium is subject
to the provision of the Cyprus Companies Law on reduction of share capital.
Capital contribution represents contributions by the shareholders directly in the reserves of the Company. The Company does not have any
contractual obligation to repay these amounts. However, these are distributable to the Company’s shareholders at the discretion of the Board
of Directors subject to the shareholders’ approval.
Trade payables
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
Provisions and contingent liabilities
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is more likely than not that an
outflow of resources will be required to settle the obligation, and the amount has been reliably estimated. Provisions are not recognised for future
operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class
of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of
obligations may be small.
ANNUAL REPORT 2017
31
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
2. Basis of preparation and summary of significant accounting policies (continued)
Provisions are measured at the present value of the expenditure expected to be required to settle the obligation using a pre-tax rate that reflects
current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of
time is recognised as interest expense.
Provisions are only used to cover those expenses which they had been set up for. Other possible or present obligations that arise from past events
but it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or the amount of the
obligation cannot be measured with sufficient reliability, are disclosed in the notes to the financial statements as contingent liabilities.
Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost. Any
difference between the proceeds (net of transaction costs) and the redemption value is recognised over the period of the borrowings using the
effective interest method.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least twelve
months after the balance sheet date.
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time
to get ready for its intended use or sale are capitalised and amortised over the useful life of the asset. Other borrowing costs are recognised as an
expense in the reporting period incurred. Interest is capitalised at a rate based on the Group’s weighted average cost of borrowing or at the rate
on project specific debt, where applicable.
Dividend distribution
Dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s financial statements in the period in which the
dividends are approved, appropriately authorised and are no longer at the discretion of the Company.
More specifically, interim dividends are recognised as liability in the period in which these are approved by the Board of Directors and in the case
of final dividends, they are recognised in the period in which these are approved by the Company’s shareholders.
Financial guarantee contracts
Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs because
a specified debtor fails to make payments when due, in accordance with the terms of a debt instrument.
Financial guarantees are initially recognised in the financial statements at fair value on the date the guarantee was given. Subsequent to initial
recognition, the Group’s liabilities under such guarantees are measured at the higher of the initial measurement, less amortisation calculated to
recognise in the income statement the fee income earned on a straight line basis over the life of the guarantee and the probability of realising the
expenditure required to settle any financial obligation arising at the balance sheet date. These estimates are determined based on experience of
similar transactions and history of past losses, supplemented by the judgment of management. Any increase in the liability relating to guarantees
is taken to the income statement in ‘other gains/(losses) – net’.
Income taxes
The tax expense for the period comprises current and deferred tax. Tax is recognised on profit or loss, except to the extent that it relates to items
recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly
in equity respectively.
Current tax liabilities and assets for the current and prior periods are measured at the amount expected to be paid to or recovered from the
taxation authorities using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date in the country where
the entity operates and generates taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in
which applicable tax regulations is subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be
paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities
and their carrying amounts in the consolidated financial statements. In accordance with the initial recognition exemption, deferred taxes are not
recorded for temporary differences on initial recognition of an asset or a liability in a transaction other than a business combination if the
transaction, when initially recorded, affects neither accounting, nor taxable profit or loss. Deferred income tax is determined using tax rates and
laws that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income
tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary
differences can be utilised.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries, associates and joint ventures, except where the
timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the
foreseeable future.
32
GLOBAL PORTS INVESTMENTS PLC
Value Added Tax (“VAT”)
In the Russian Federation, output value added tax related to sales is payable to tax authorities on the earlier of (a) collection of the receivables
from customers or (b) delivery of the goods or services to customers. Input VAT is generally recoverable against output VAT upon receipt of the VAT
invoice except for export sales related input VAT which is reclaimable upon confirmation of export. The tax authorities permit the settlement of VAT
on a net basis. Where provision has been made for impairment of receivables, impairment loss is recognised for the gross amount of the debtor,
including VAT. The lease liabilities are disclosed net of VAT. While the leasing payment includes VAT, the amount of VAT from the lease payment
made is reclaimable against sales VAT. VAT related to sales and purchases is recognised in the balance sheet on a gross basis and disclosed
separately as an asset and liability.
Employee benefits
Wages, salaries, contributions to state pension and social insurance funds, paid annual leave and sick leave, bonuses and other benefits (such
as health services) are accrued in the year in which the associated services are rendered by the employees of the Group. These are included in
staff costs and the Group has no further obligations once the contributions have been paid. Staff costs of the Group mainly consists of salaries.
The Group recognises a liability and an expense for bonuses where contractually obliged or where there is a past practice that has created
a constructive obligation.
Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset
the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The legally
enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default,
insolvency or bankruptcy of the company or the counterparty.
3. Financial risk management
Financial risk factors
The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, cash flow and fair value interest rate risk),
credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to
minimise potential adverse effects on the Group’s financial results.
(a) Market risk
(i) Foreign exchange risk
Foreign exchange risk arises on monetary items like cash in banks, short-term investments, trade and other receivables, borrowings and trade
and other payables denominated in currency other than functional currency of each of the entities of the Group.
The analysis below demonstrates the effect of a change in a key assumption while other assumptions remain unchanged. In reality, there is
a correlation between the assumptions and other factors. It should also be noted that these sensitivities are usually non-linear, and larger or
smaller impacts should not be interpolated or extrapolated from these results. The sensitivity analysis does not take into consideration that the
Group’s assets and liabilities are actively managed. Additionally, the financial position of the Group may vary at the time that any actual market
movement occurs. Other limitations in the above sensitivity analysis include the use of hypothetical market movements to demonstrate potential
risk that only represent the Group’s view of possible near-term market changes that cannot be predicted with any certainty; and the assumption
that all interest rates move in an identical fashion.
Currently the long-term debt of the Group is denominated in US dollars and Russian roubles. The US dollar interest rates are relatively more
attractive compared to the Russian rouble interest rate. The revenues of Russian operations are mainly priced in US dollars and Russian roubles,
whereas most of expenses are denominated and settled in Russian roubles. The Group uses from time to time foreign currency swaps (derivatives)
to manage its exposures to foreign exchange risk. The analysis below does not cover borrowings in joint ventures as they are not included in the
financial position of the Group.
The carrying amount of financial assets and liabilities in Russian operations denominated in US dollars are as follows:
(in thousands of US dollars)
Assets
Liabilities
Capital commitments
As at 31 December
2017
2016
118,257
323,848
–
104,233
399,074
–
Had US dollar exchange rate strengthened/weakened by 15% against the Russian rouble and all other variables remained unchanged, the
post-tax profit of the Group for the year ended 31 December 2017, would have (decreased)/increased by US$ 24,671 thousand (2016: 30% change,
effect US$ 70,762 thousand) and the equity would have (decreased)/increased by US$ 24,671 thousand (2016: 30% change, effect US$ 70,762
thousand). This is mainly due to foreign exchange gains and losses arising upon retranslation of lease liabilities, loans, borrowings, cash and cash
equivalents and accounts receivable denominated in US dollars.
ANNUAL REPORT 2017
33
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
3 Financial risk management (continued)
The carrying amount of financial assets and liabilities in Russian operations denominated in Euros as at 31 December 2017 and 31 December 2016
are as follows:
(in thousands of US dollars)
Assets
Liabilities
Capital commitments
As at 31 December
2017
102
40
18,916
2016
424
–
6,915
Had Euro exchange rate strengthened/weakened by 15% against the Russian rouble and all other variables remained unchanged, the post-tax
profit and the equity of the Group for the year ended 31 December 2017, would have increased/(decreased) by US$ 7 thousand (2016: 30% change,
effect US$ 102 thousand). This is mainly due to foreign exchange gains and losses arising upon retranslation of lease liabilities, loans, borrowings,
cash and cash equivalents and accounts receivable denominated in Euros.
(ii) Cash flow and fair value interest rate risk
The Group is not significantly exposed to changes in market interest rates as substantially all of its borrowings portfolio consists of fixed rate debt.
However, the Group is exposed to fair value interest rate risk through market value fluctuations of loans receivable, borrowings and lease liabilities
with fixed rates.
Had market interest rates on US dollars, Euro and Russian rouble denominated floating interest bearing financial assets and liabilities shift by 100
basis points and all other variables remained unchanged, the post-tax profit of the Group would have decreased by US$ 8 thousand for the year
ended 31 December 2017 (2016: US$ 29 thousand).
The Group obtains borrowings at current market interest rates and usually does not hedge the interest rate risk. In the course of NCC Acquisition
the Group has inherited a cross-currency interest rate swap (see Note 23(ii)).
Management monitors changes in interest rates and takes steps to mitigate these risks as far as practicable and economically feasible.
(b) Credit risk
Financial assets, which potentially subject the Group to credit risk, consist principally of trade receivables and loans receivable (Note 19) and cash
and cash equivalents (Note 20). The Group has policies in place to ensure that sales of goods and services are made to customers with an
appropriate credit history. These policies enable the Group to reduce its credit risk significantly. However, the Group’s business is heavily dependent
on several large key customers accounting for 57% and 57% of the Group’s revenue for the year ended 31 December 2017 and 31 December 2016,
respectively.
The table below summarises the analysis of trade and accounts receivables under contractual terms of settlement at the balance sheet date.
(in thousands of US dollars)
As at 31 December 2017
Trade receivables
Loans receivable
Other receivables
Total
As at 31 December 2016
Trade receivables
Loans receivable
Other receivables
Total
Fully performing
Past due
Impaired
Impairment
provision
16,837
14,559
988
32,384
18,076
8,472
4,452
31,000
2,855
–
192
3,047
2,584
169
–
2,753
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
19,692
14,559
1,180
35,431
20,660
8,641
4,452
33,753
(c) Liquidity risk
Management controls current liquidity based on expected cash flows and expected revenue receipts.
Cash flow forecasting is performed at the level of operating entities of the Group and at consolidated level by Group finance department. Group
finance department monitors forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to meet operational needs as well as
scheduled debt service while maintaining sufficient headroom to ensure that the Group does not breach covenants (where applicable) on any of
its borrowing facilities. Such forecasting takes into consideration potential variations in operating cash flows due to market conditions, the Group’s
debt repayments and covenant compliance.
34
GLOBAL PORTS INVESTMENTS PLC
Taking into account expected levels of operating cash flows, availability of cash and cash equivalents amounting to US$ 130,434 thousand
(31 December 2016: US$ 119,279 thousand) (Note 20) the Group has the ability to meet its liabilities as they fall due and mitigate risks of adverse
changes in the financial markets environment.
The management of the Group believes that it is successfully managing the exposure of the Group to liquidity risk.
The table below summarises the analysis of financial liabilities by maturity as of 31 December 2017 and 2016. The amounts in the table are
contractual undiscounted cash flows. Trade and other payables balances due within 12 months equal their carrying balances as the impact
of discounting is not significant.
(in thousands of US dollars)
As at 31 December 2017
Borrowings
Trade and other payables
Derivative financial instruments:
– payments
– receipts
Less than 1
month
1-3 months
3-6 months
6 months – 1
year
1-2 years
2-5 years
Over 5 years
Total
12,145
4,407
24,393
11,538
30,315
361
64,306
1,572
126,678
–
787,784
10,609
436,543 1,482,164
28,487
–
–
–
4,152
(11,081)
2,324
(5,670)
6,476
(16,751)
12,952
225,799
(33,502) (304,998)
–
–
251,703
(372,002)
Total
16,552
29,002
27,330
55,603
106,128
719,194
436,543 1,390,352
As at 31 December 2016
Borrowings
Trade and other payables
Derivative financial instruments:
– payments
– receipts
13,435
4,711
25,800
12,336
31,813
610
70,914
434
134,016
–
512,149
9,931
818,254
–
1,606,381
28,022
–
–
4,152
(10,522)
2,324
(5,384)
6,476
(15,907)
12,952
(31,813)
238,751
(321,441)
–
–
264,655
(385,067)
Total
18,146
31,766
29,363
61,917
115,155
439,390
818,254
1,513,991
(d) Capital risk management
The Group’s main objective when managing capital is to maintain the ability to continue as a going concern in order to ensure the profitability
of the Group, maintain optimum equity structure and reduce its cost of capital.
Defining capital, the Group uses the amount of equity and the Group’s borrowings.
The Group manages the capital based on borrowings to total capitalisation ratio. Borrowings include lease liabilities and loan liabilities.
Total capitalisation is calculated as the sum of the total Group borrowings and equity at the date of calculation. The management does not
currently have any specific target for the rate of borrowings to total capitalisation.
The rate of borrowings to total capitalisation is as follows:
(in thousands of US dollars)
Total borrowings
Total capitalisation
Total borrowings to total capitalisation ratio (percentage)
As at 31 December
2017
2016
1,074,753
1,451,992
74%
1,119,556
1,444,472
78%
(e) Fair value estimation
Fair value is the amount at which a financial asset could be exchanged or a liability settled in a transaction between knowledgeable willing parties
in an arm’s length transaction, other than in a forced sale or liquidation, and is best evidenced by an active quoted market price.
The estimated fair values of financial instruments have been determined by the Group, using available market information, where it exists, and
appropriate valuation methodologies and assistance of experts. However, judgment is necessarily required to interpret market data to dete
rmine the estimated fair value. The Russian Federation continues to display some characteristics of an emerging market and economic conditions
continue to limit the volume of activity in the financial markets. Market quotations may be outdated or reflect distress sale transactions and
therefore do not always represent the fair values of financial instruments. The Group has used all available market information in estimating the
fair value of financial instruments.
The fair value of floating rate instruments is normally their carrying amount. The estimated fair value of fixed interest rate instruments is based
on estimated future cash flows expected to be received, discounted at current interest rates for instruments with similar credit risk and remaining
maturity. Discount rates used depend on credit risk of the counterparty. Carrying amounts of trade receivables approximate their fair values.
ANNUAL REPORT 2017
35
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
3. Financial risk management (continued)
The estimated fair value of fixed interest rate instruments with stated maturity, for which a quoted market price is not available, was estimated
based on expected cash flows, discounted at current interest rates for new instruments with similar credit risk and remaining maturity. Carrying
amounts of trade and other payables which are due within twelve months approximate their fair values.
The disclosure of the fair value of financial instruments carried at amortised cost and the fair value of financial instruments carried at fair value
is determined using the following valuation methods:
–
–
–
Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 – The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. These
valuation techniques maximise the use of observable market data where it is available and rely as little as possible on Group’s specific estimates.
Level 3 – Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).
The Group’s only financial instrument carried at fair value is disclosed in Note 23. It is valued using Level 2 valuation technique from the table
above. There are no changes in the valuation techniques during the year.
4. Critical accounting estimates and judgements
Estimates and judgments are continually evaluated and they are based on historical experience and other factors, including expectations of future
events that are believed to be reasonable under the circumstances.
(a) Critical accounting estimates and assumptions
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the
related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts
of assets and liabilities within the next financial year are discussed below:
(i) Estimated impairment of goodwill and property, plant and equipment and investments in joint ventures
The Group follows its accounting policies to test goodwill and other non-financial assets for possible impairment or reversal of impairment.
For Logistika-Terminal (LT), the inland terminal in Shushary, near St.-Petersburg, North-West Russia, see Note 26.
Based on the current world-wide economic circumstances and also taking into account developments within the Russian Federation, the Group
performed a test of the estimated recoverable amount of the cash-generating units (CGUs), compared to their carrying value. For VEOS
impairment test was carried out taking into account the structural deterioration of the business environment in which the terminal operates,
which is heavily dependent on the flows of Russian oil products, and major uncertainty regarding the prospects of the oil products’ handling
business. The assessment requires making judgments about long-term forecasts related to the CGUs subject to review for which the recoverable
amount was calculated based on estimated discounted future cash flows. These forecasts are uncertain as they require assumptions about
volumes, prices for the products and services, discount rates, future market conditions and future technological developments. Significant and
unanticipated changes in these assumptions could require a provision for impairment in a future period.
For all CGUs tested based on discounted future cash flows, except for ULCT, cash flow projections cover a period of five years based on the
assumptions of the next 12 months. In case of ULCT cash flow projections cover an eight year period as management considers that this terminal
is still at a development stage. Cash flows beyond that five-year (eight-year period in case of ULCT) period have been extrapolated using a steady
terminal growth rate. The terminal growth rate used does not exceed the long-term average growth rate for the market in which entities operate.
For projections prepared for CGUs in Russian ports segments a terminal growth rate of 3% has been applied (2016: 3%). For projections prepared
for VEOS CGU as at 31 December 2017 a terminal growth rate of 2% was applied (2016: 2%). The discount rate applied for Russian ports CGUs in
projections prepared as at 31 December 2017 is 10.4% (2016: 11.2%) and for VEOS the discount rate is 9% (2016: 8.6%).
Key assumptions for Russian ports CGUs are throughput volume, price per unit, growth rates, and discount rates. The projected volumes reflect
past experience adjusted by the management view on the prospective market developments. For CGUs in the Russian ports segment volume
growth is estimated to be in line with the long-term market development, position of each terminal on the market and its pricing power. As
supported by historical market performance and in view of relatively low containerisation level in Russia, the long-term average throughput
growth rate for the Russian container market is higher than in developed markets.
For VEOS CGU, given the high degree of volatility in performance of VEOS in recent years as well as perceived risk profile of the terminal operations
there is significant judgement and subjectivity in relation to the 2018 expectation. The investment in VEOS has been impaired to the carrying
amount of US$ 7,341 thousand (see Note 27). It is reasonably possible on the basis of existing knowledge that outcomes within the next financial
year that are different from the assumption could require a material adjustment to the carrying amount of the CGU. In addition, if the estimated
free cash flows are 5% higher/lower each year as opposed to projections used by the management, or the terminal growth rate is 0.5% higher/
lower or discounting rate is 1% lower/higher, then impairment would be higher/lower by approximately US$ 1.5 million, approximately US$ 1.5
million and approximately US$ 0.6 million respectively.
36
GLOBAL PORTS INVESTMENTS PLC
Based on the results of the impairment tests for other CGUs carried out in 2017, the Board of Directors believes that there are no indications
for reversal of impairments recognised in previous periods for non-financial assets other than goodwill.
For all CGU units except for ULCT, FCT and PLP CGUs management believes that any reasonably possible change in the key assumptions on which
these units’ recoverable amounts are based would not cause carrying amounts of these units to exceed their recoverable amounts.
In ULCT, the recoverable amount calculated based on the value in use exceeded the carrying value by US$ 15 million. A decrease of handling
volumes by approximately 2% each year as opposed to volume projections used by the management or a decrease in the average revenue per TEU
by approximately 2% each year as opposed to the used in projections would remove the remaining headroom. Reasonable changes in other key
parameters do not result in the elimination of the existing remaining headroom.
In FCT, the recoverable amount calculated based on value in use exceeded the carrying value by US$ 132 million. A decrease of handling volumes
by approximately 3% each year as opposed to volume projections used by the management or a decrease in the average revenue per TEU by
approximately 3% each year as opposed to the used in projections would remove the remaining headroom. Reasonable changes in other key
parameters do not result in the elimination of the existing remaining headroom.
In PLP, the recoverable amount calculated based on value in use exceeded the carrying value by US$ 66 million. A decrease of handling volumes
by 5% each year as opposed to volume projections used by the management or a decrease in the average revenue per TEU by approximately 4%
each year as opposed to the used in projections would remove the remaining headroom. Reasonable changes in other key parameters do not
result in the elimination of the existing remaining headroom.
(ii) Russian legislation
Russian tax, currency and customs legislation is subject to varying interpretations (Note 28).
5. Segmental information
The chief operating decision-maker (CODM) has been identified as the Board of Directors. They review the Group’s internal reporting in order
to assess performance and allocate resources. The operating segments were determined based on these reports.
Group operations consist of several major business units which are usually and mainly organised as separate legal entities. Segment profit is
obtained directly from the accounting records of each business unit and adjustments are made to bring their accounting records in line with IFRS
as adopted by the EU; therefore there are no arbitrary allocations between segments. Certain business units are operating with one major
operating company and some supporting companies.
The Board of Directors considers the business from both a geographic (which is represented by different port locations managed by separate legal
entities) and services perspective regularly monitoring the performance of each major business unit.
The Board of Directors assesses the performance of the operating segments based on revenue (both in monetary and quantity terms) major costs
items and net profit after the accounting records of business units are converted to be in line with IFRS as adopted by the EU with the exclusion
of joint ventures and the netting off of deferred tax assets and liabilities. For the purposes of the internal reporting, joint ventures are assessed
on a 100% ownership basis.
Assets are allocated based on the operations of the segment and the physical location of the asset.
For segmental reporting purposes the Group’s consolidated financial position and consolidated results are presented by using the proportionate
consolidation in relation to interests in jointly controlled entities (VEOS and MLT and CD groups). There are additional disclosures to reconcile
segmental information with the consolidated income statement and the consolidated balance sheet.
According to this method of accounting, the Group combined its share of the joint ventures’ individual income and expenses, assets and liabilities
and cash flows on a line-by-line basis with similar items in the Group’s financial statements. The Group recognised the portion of gains or losses on
the sale of assets by the Group to the joint venture that is attributable to the other venturers. Unrealised gains on transactions between the Group
and its joint venturers were eliminated to the extent of the Group’s interest in the joint venture. Unrealised losses were also eliminated unless the
transaction provided evidence of an impairment of the asset transferred.
ANNUAL REPORT 2017
37
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
5. Segmental information (continued)
The brief description of segments is as follows:
Russian ports
The segment consists of the following operating units:
–
–
–
–
–
–
Petrolesport, Farwater (PLP) and various other entities (including some intermediate holdings) that own and manage a container terminal
in St. Petersburg port, North-West Russia. PLP is engaged in handling of containers, ro-ro, general cargo and scrap metal.
First Container Terminal (FCT), the biggest container terminal in Russia, located in St. Petersburg port, North-West Russia.
Ust-Luga Container Terminal (ULCT), a container terminal in Ust-Luga, near St. Petersburg, North-West Russia. Vostochnaya Stevedoring
Company (VSC) and various other entities (including some intermediate holdings) that own and manage a container terminal in Port of
Vostochny near Nahodka, Far-East Russia.
Moby Dik (MD) and various other entities (including some intermediate holdings) that own and manage a container terminal in Kronstadt
near St. Petersburg, North-West Russia.
Logistika-Terminal (LT), an in-land container terminal in Shushary near St. Petersburg, North-West Russia. See Note 26.
Yanino Logistics Park (YLP) being an in-land container terminal in Yanino near St. Petersburg, North-West Russia.
Finnish ports
The segment consists of container terminals in the ports of Vuosaari (Helsinki) and Kotka, Finland owned and operated by Multi-Link Terminals Ltd Oy.
VEOS
The segment consists of AS Vopak E.O.S., various other entities and the intermediate holding company that own and manage an oil products
terminal in Muuga port near Tallinn, Estonia.
The following items do not represent operating segments, however are provided to the CODM together with segment information:
Holding companies (all other)
The segment consists of Global Ports Investments Plc (GPI) and some intermediate managing, holding and service companies.
Reconciliation adjustments
Reconciliation adjustments consist of two major components:
–
–
Effect of proportionate consolidation – demonstrates the effect of proportionate consolidation of MD, YLP, Finnish ports and VEOS. In the
financial statements the financial position and financial results of these segments are incorporated using the proportionate consolidation
method (using respectively 75%, 75%, 75% and 50% proportion). In the current segment reporting the information is presented on the 100%
basis and then the portion which is not consolidated is deducted as a ‘Reconciliation Adjustment’.
Other adjustments – all other consolidation adjustments including but not limited to:
– Elimination of intragroup transactions (mainly intragroup sales and dividends) and balances (mainly intragroup loans and investments
in subsidiaries and joint ventures);
– Consolidation adjustments of results of sale or purchase of shares of subsidiaries; and
– Other consolidation adjustments.
The Group does not have any material regular transactions between segments except for those which mainly relate to management and
financing activities.
38
GLOBAL PORTS INVESTMENTS PLC
The segment results for the year ended 31 December 2017 are as follows:
386,828
–
386,828
(267,949)
(49,748)
(71,300)
(2,169)
(19,675)
1,570
(91,473)
Russian
ports
VEOS Finnish ports
Total
operating
segments
Holdings
Effect of
proportionate
consolidation
Other
adjustments
Group as per
proportionate
consolidation
Reconciliation adjustments
(in thousands of US dollars)
Sales to third parties
Inter-segment revenue
Total revenue
Cost of sales
Administrative, selling and marketing
expenses
Other gains/(losses) – net
360,470
–
51,348
–
10,916
11
422,734
11
360,470
51,348
10,927
422,745
(166,245)
(197,102)
(10,160) (373,507)
–
–
–
–
(35,906)
(3)
(35,909)
105,514
–
(8)
(8)
44
(17,953)
(71,195)
(8,703)
196
(729)
20
(27,385)
(70,979)
(27,669)
7,212
5,221
(45)
85
(7,488)
Operating profit/(loss)
105,077
(154,261)
58
(49,126)
(20,457)
74,781
(7,367)
Finance income/(costs) – net
incl. interest income
incl. interest expenses
incl. change in the fair value of derivative
(18,842)
2,968
(92,228)
(721)
18
(481)
(70)
–
(85)
(19,633)
2,986
(92,794)
(530)
872
(1,476)
521
(40)
549
(31)
(2,248)
2,248
instruments
incl. net foreign exchange gains/
(losses) on financing activities
42,089
–
–
42,089
28,329
(258)
15
28,086
–
74
–
11
–
42,089
(31)
28,140
Profit/(loss) before income tax
Income tax expense
86,235
(31,923)
(154,982)
–
(12)
(1)
(68,759)
(31,924)
(20,987)
59
75,302
762
(7,398)
–
Profit/(loss) after tax
CAPEX* on cash basis
54,312
(154,982)
(13) (100,683)
(20,928)
76,064
(7,398)
28,477
1,716
–
30,193
3,445
(1,828)
–
(21,844)
(31,103)
(52,947)
31,810
* CAPEX represents purchases of property, plant and equipment.
The reconciliation of results for the year ended 31 December 2017 calculated with proportional consolidation to the results presented
in consolidated income statement above is as follows:
(in thousands of US dollars)
Sales to third parties
Inter-segment revenue
Total revenue
Cost of sales
Administrative, selling and marketing expenses
Share of profit/(loss) of joint ventures accounted for using the equity method
Other gains/(losses) – net
Operating profit/(loss)
Finance income/(costs) – net
incl. interest income
incl. interest expenses
incl. change in the fair value of derivative instruments
incl. net foreign exchange gains/(losses) on financing activities
Profit/(loss) before income tax
Income tax expense
Profit/(loss) after tax
CAPEX on cash basis
Group as per
proportionate
consolidation
Equity method
and other
adjustments
Group as per
equity method
consolidation of
joint ventures
386,828
–
386,828
(267,949)
(49,748)
–
(71,300)
(56,323)
–
(56,323)
119,438
7,017
(73,267)
(29)
330,505
–
330,505
(148,511)
(42,731)
(73,267)
(71,329)
(2,169)
(3,164)
(5,333)
(19,674)
1,570
(91,473)
42,089
28,140
(21,844)
(31,103)
(52,947)
31,810
876
478
594
–
(196)
(2,287)
2,287
–
(3,769)
(18,798)
2,048
(90,879)
42,089
27,944
(24,131)
(28,816)
(52,947)
28,041
ANNUAL REPORT 2017
39
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
5. Segmental information (continued)
The segment items operating expenses for the year ended 31 December 2017 are as follows:
(in thousands of US dollars)
Depreciation of property, plant and
equipment
Amortisation of intangible assets
Impairment of property, plant and
equipment
Staff costs
Transportation expenses
Fuel, electricity and gas
Repair and maintenance of property, plant
and equipment
Total
Other operating expenses
Total cost of sales, administrative, selling and
Reconciliation adjustments
Total
operating
segments
Effect of
proportionate
consolidation
Other
adjustments
Group as per
proportionate
consolidation
Holdings
Russian
ports
VEOS
41,051
13,211
18,826
103
11,400
56,061
10,814
9,237
143,155
15,331
11,452
8,561
Finnish
ports
1,744
–
–
5,612
367
514
61,621
13,314
154,555
77,004
22,633
18,312
73
–
(10,624)
(113)
–
18,426
–
6
(71,578)
(10,652)
(6,435)
(4,747)
10,123
2,937
1,194
14,254
4
(2,269)
151,897
32,301
200,365
5,440
9,431
1,458
361,693
39,199
18,509
9,160
(106,418)
(4,317)
–
(129)
–
–
–
–
–
–
–
51,070
13,201
82,977
84,778
16,198
13,571
11,989
273,784
43,913
marketing expenses
184,198
205,805
10,889
400,892
27,669
(110,735)
(129)
317,697
The reconciliation of operating expenses for the year ended 31 December 2017 calculated with proportional consolidation to the results presented
in consolidated income statement above is as follows:
(in thousands of US dollars)
Depreciation of property, plant and equipment
Amortisation of intangible assets
Impairment of property, plant and equipment
Staff costs
Transportation expenses
Fuel, electricity and gas
Repair and maintenance of property, plant and equipment
Total
Other operating expenses
Group as per
proportionate
consolidation
Equity method
and other
adjustments
Group as per
equity method
consolidation of
joint ventures
51,070
13,201
82,977
84,778
16,198
13,571
11,989
273,784
43,913
(13,063)
(235)
(71,577)
(16,625)
(7,852)
(5,679)
(3,871)
(118,902)
(7,553)
38,007
12,966
11,400
68,153
8,346
7,892
8,118
154,882
36,360
191,242
Total cost of sales, administrative, selling and marketing expenses
317,697
(126,455)
The segment assets and liabilities as at 31 December 2017 are as follows:
(in thousands of US dollars)
Property, plant and equipment
(including prepayments for PPE)
Investments in joint ventures
Intangible assets
Other non-current assets
Inventories
Trade and other receivables
(including income tax prepayment)
Cash and cash equivalents
Russian
ports
627,910
784
718,925
148,023
6,725
59,247
135,371
VEOS Finnish ports
Total
operating
segments
Effect of
proportionate
consolidation
Other
adjustments
Group as per
proportionate
consolidation
Holdings
Reconciliation adjustments
10,517
–
219
–
1,928
15,417
3,487
6,125
–
–
126,713
–
4,792
644,552
165,853
784
719,144
–
274,736 1,062,679
–
8,653
(16,112)
–
(2,138)
(33,713)
(166,637)
–
(33,017) (1,241,837)
(154)
(1,165)
599,519
–
717,006
62,561
7,334
2,313
4,139
76,977
142,997
15,232
3,097
(9,253)
(4,539)
20,341
(835)
103,297
140,720
Total assets
1,696,985
31,568
139,290 1,867,843 1,251,653
(66,224) (1,422,835)
1,630,437
Long-term borrowings
Other long-term liabilities
Trade and other payables
Short-term borrowings
Other short-term liabilities
1,012,589
180,542
21,736
83,590
1,615
5,648
–
7,209
3,884
–
1,307 1,019,544
180,626
30,828
88,230
1,670
84
1,883
756
55
21,000
41
8,165
–
–
(7,601)
(1,405)
(4,618)
(2,352)
(41)
(21,000)
(47,366)
(1,304)
(13,661)
2,427
1,011,943
131,896
33,071
72,217
4,056
Total liabilities
1,300,072
16,741
4,085 1,320,898
29,206
(16,017)
(80,904)
1,253,183
Non-controlling interest
16,131
–
–
16,131
–
–
–
16,131
40
GLOBAL PORTS INVESTMENTS PLC
Included within ‘Russian ports’, ‘Finnish ports’ and ‘Holdings’ segments ‘Other non-current assets’ are investments in subsidiaries in the total
amount of US$ 19,665 thousand, US$ 126,614 thousand and US$ 1,062,015 thousand respectively (fully eliminated on consolidation).
The reconciliation of total segment assets and liabilities as at 31 December 2017 calculated with proportional consolidation to the results presented
in consolidated balance sheet above is as follows:
(in thousands of US dollars)
Property, plant and equipment (including prepayments for PPE)
Investments in joint ventures
Intangible assets
Other non-current assets
Inventories
Trade and other receivables (including income tax prepayment)
Cash and cash equivalents
Assets classified as held for sale
Total assets
Long-term borrowings
Other long-term liabilities
Trade and other payables
Short-term borrowings
Other short-term liabilities
Liabilities directly associated with assets classified as held for sale
Total liabilities
Non-controlling interest
Group as per
proportionate
consolidation
Equity method
and other
adjustments
Group as per
equity method
consolidation of
joint ventures
599,519
–
717,006
62,561
7,334
103,297
140,720
–
(37,822)
56,918
(26,148)
56,367
(1,565)
(47,755)
(10,286)
35,413
561,697
56,918
690,858
118,928
5,769
55,542
130,434
35,413
1,630,437
25,122
1,655,559
1,011,943
131,896
33,071
72,217
4,056
–
1,253,183
16,131
(6,279)
41,312
(6,651)
(3,128)
(2,544)
2,427
1,005,664
173,208
26,420
69,089
1,513
2,427
25,137
1,278,321
–
16,131
The segment results for the year ended 31 December 2016 are as follows:
(in thousands of US dollars)
Sales to third parties
Inter-segment revenue
Total revenue
Cost of sales
Administrative, selling and marketing expenses
Other gains/(losses) – net
Russian ports
VEOS
Finnish ports
359,681
–
359,681
(199,728)
(14,754)
(68,526)
58,970
–
58,970
(105,877)
(7,765)
(270)
12,864
45
12,909
(12,381)
(887)
244
Total
operating
segments
431,515
45
431,560
(317,986)
(23,406)
(68,552)
Reconciliation adjustments
Effect of
proportionate
consolidation
Other
adjustments
Group as per
proportionate
consolidation
Holdings
–
–
–
–
(23,361)
101,623
(39,759)
(11)
(39,770)
39,844
4,431
144
–
(34)
391,756
–
(34)
33
61
(102,210)
391,756
(278,109)
(42,275)
(68,995)
Operating profit/(loss)
76,673
(54,942)
(115)
21,616
78,262
4,649
(102,150)
2,377
Finance costs – net
incl. interest income
incl. interest expenses
incl. change in the fair value of derivative
instruments
incl. net foreign exchange gains/(losses)
on financing activities
Profit/(loss) before income tax
Income tax expense
Profit/(loss) after tax
CAPEX* on cash basis
112,126
4,060
(102,441)
64,884
146,078
188,799
(51,132)
(693)
18
(709)
–
(3)
(55,635)
1,956
137,667
(53,679)
18,386
4,637
* CAPEX represents purchases of property, plant and equipment.
–
–
(283)
206
(77)
120
(168)
–
(168)
111,265
4,078
(103,318)
66
3,244
(2,891)
64,884
–
(57)
(28)
774
–
(104)
(6,186)
6,186
111,170
1,108
(99,249)
–
64,884
146,075
(286)
132,881
(48,970)
78,328
(595)
(803)
4,592
(246)
(104)
144,882
(102,254)
–
113,547
(49,811)
83,911
77,733
4,346
(102,254)
63,736
23,143
463
(2,550)
–
21,055
Included within ‘Other adjustments’ on the line ‘Other gains/(losses) – net’ is the elimination of intragroup dividends.
ANNUAL REPORT 2017
41
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
5. Segmental information (continued)
The reconciliation of results for the year ended 31 December 2016 calculated with proportional consolidation to the results presented
in consolidated income statement above is as follows:
(in thousands of US dollars)
Sales to third parties
Inter-segment revenue
Total revenue
Cost of sales
Administrative, selling and marketing expenses
Share of profit/(loss) of joint ventures accounted for using the equity method
Other gains/(losses) – net
Operating profit/(loss)
Finance costs – net
incl. interest income
incl. interest expenses
incl. change in the fair value of derivative instruments
incl. net foreign exchange gains/(losses) on financing activities
Profit/(loss) before income tax
Income tax expense
Profit/(loss) for the year
CAPEX on cash basis
The segment items operating expenses for the year ended 31 December 2016 are as follows:
(in thousands of US dollars)
Russian ports
VEOS
Finnish ports
Group as per
proportionate
consolidation
Equity method and
other adjustments
Group as per
equity method
consolidation of
joint ventures
391,756
–
391,756
(278,109)
(42,275)
–
(68,995)
2,377
111,170
1,108
(99,249)
64,884
144,882
113,547
(49,811)
63,736
21,055
(60,288)
–
(60,288)
92,045
5,600
(40,423)
238
(2,828)
(863)
259
1,185
(452)
(2,310)
(3,691)
1,218
(2,473)
(3,012)
331,468
–
331,468
(186,064)
(36,675)
(40,423)
(68,757)
(451)
110,307
1,367
(98,064)
64,432
142,572
109,856
(48,593)
61,263
18,043
Reconciliation adjustments
Effect of
proportionate
consolidation
Other
adjustments
Group as per
proportionate
consolidation
Holdings
Depreciation of property, plant and equipment
Amortisation of intangible assets
Impairment of property, plant and equipment
and intangible assets
Staff costs
Transportation expenses
Fuel, electricity and gas
Repair and maintenance of property, plant
and equipment
Total
Other operating expenses
Total cost of sales, administrative, selling
37,956
13,435
67,532
46,139
7,914
7,009
19,359
921
53,026
14,752
10,124
6,862
1,852
–
–
6,174
1,343
503
Total
operating
segments
59,167
14,356
120,558
67,065
19,381
14,374
116
–
(10,950)
(514)
–
15,362
–
6
(6,904)
(10,154)
(5,716)
(3,813)
–
–
–
–
–
–
–
48,333
13,842
113,654
72,273
13,665
10,567
10,699
8,723
2,715
1,422
12,860
2
(2,163)
188,708
25,774
107,759
5,883
11,294
1,974
307,761
33,631
15,486
7,875
(40,214)
(4,060)
–
(94)
283,033
37,352
and marketing expenses
214,482
113,642
13,268
341,392
23,361
(44,274)
(94)
320,385
42
GLOBAL PORTS INVESTMENTS PLC
The reconciliation of operating expenses for the year ended 31 December 2016 calculated with proportional consolidation to the results presented
in consolidated income statement above is as follows:
(in thousands of US dollars)
Depreciation of property, plant and equipment
Amortisation of intangible assets
Impairment of property, plant and equipment and intangible assets
Staff costs
Transportation expenses
Fuel, electricity and gas
Repair and maintenance of property, plant and equipment
Total
Other operating expenses
Total cost of sales, administrative, selling and marketing expenses
The segment assets and liabilities as at 31 December 2016 are as follows:
Group as per
proportionate
consolidation
Equity method and
other adjustments
Group as per
equity method
consolidation of
joint ventures
48,333
13,842
113,654
72,273
13,665
10,567
10,699
283,033
37,352
320,385
(13,490)
(617)
(46,122)
(15,709)
(7,023)
(4,573)
(3,775)
(91,309)
(6,337)
(97,646)
34,843
13,225
67,532
56,564
6,642
5,994
6,924
191,724
31,015
222,739
(in thousands of US dollars)
Russian ports
VEOS
Finnish ports
Reconciliation adjustments
Total
operating
segments
Effect of
proportionate
consolidation
Other
adjustments
Group as per
proportionate
consolidation
Holdings
Property, plant and equipment (including
prepayments for PPE)
Investments in joint ventures
Intangible assets
Other non-current assets
Inventories
Trade and other receivables (including income
620,977
–
693,100
112,095
5,681
152,181
–
236
–
1,831
6,980
–
–
126,731
23
780,138
–
693,336
238,826
7,535
232
165,844
–
1,059,083
19
(86,921)
–
(2,101)
–
(165,844)
–
(33,662) (1,226,562)
–
(1,093)
693,449
–
691,235
37,685
6,461
tax prepayment)
Cash and cash equivalents
Total assets
Long-term borrowings
Other long-term liabilities
Trade and other payables
Short-term borrowings
Other short-term liabilities
Total liabilities
Non-controlling interest
54,553
124,956
24,577
4,103
1,707
2,923
80,837
131,982
23,598
2,984
(12,681)
(4,946)
(22,298)
–
69,456
130,020
1,611,362
182,928
138,364
1,932,654
1,251,760
(141,404) (1,414,704) 1,628,306
1,044,138
175,548
23,721
104,361
1,312
2,628
–
19,489
9,049
2,055
3,102
125
1,246
968
2
1,049,868
175,673
44,456
114,378
3,369
22,197
3
6,222
636
–
(4,277)
(1,190)
(9,951)
(6,682)
(1,036)
(22,942) 1,044,846
130,046
(44,440)
36,600
(4,127)
89,525
(18,807)
2,333
–
1,349,080
33,221
5,443
1,387,744
29,058
(23,136)
(90,316) 1,303,350
15,293
–
–
15,293
–
–
–
15,293
Included within ‘Russian ports’, ‘Finnish ports’ and ‘Holdings’ segments ‘Other non-current assets’ are investments in subsidiaries in the total
amount of US$ 7,924 thousand, US$ 126,614 thousand and US$ 1,057,676 thousand respectively (fully eliminated on consolidation).
ANNUAL REPORT 2017
43
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
5. Segmental information (continued)
The reconciliation of total segment assets and liabilities as at 31 December 2016 calculated with proportional consolidation to the results presented
in consolidated balance sheet above is as follows:
(in thousands of US dollars)
Property, plant and equipment (including prepayments for PPE)
Investments in joint ventures
Intangible assets
Other non-current assets
Inventories
Trade and other receivables (including income tax prepayment)
Cash and cash equivalents
Total assets
Long-term borrowings
Other long-term liabilities
Trade and other payables
Short-term borrowings
Other short-term liabilities
Total liabilities
Non-controlling interest
Group as per
proportionate
consolidation
Equity method and
other adjustments
Group as per
equity method
consolidation of
joint ventures
693,449
–
691,235
37,685
6,461
69,456
130,020
1,628,306
1,044,846
130,046
36,600
89,525
2,333
1,303,350
15,293
(108,583)
123,149
(25,012)
50,549
(1,448)
(13,213)
(10,741)
584,866
123,149
666,223
88,234
5,013
56,243
119,279
14,701
1,643,007
(3,971)
40,873
(10,280)
(10,844)
(1,037)
1,040,875
170,919
26,320
78,681
1,296
14,741
1,318,091
–
15,293
The revenue of the Group mainly comprises of stevedoring services, storage and ancillary port services for container and bulk cargoes (Russian
ports and Finnish ports segments) and oil products (VEOS segment). The subsidiaries and joint ventures of the Group also provide services which
are of support nature in relation to the core services mentioned above.
The consolidated revenue comprises only from the services related to containers and bulk cargo since the operations of VEOS are equity accounted
(Note 2, Basis of consolidation, (c)).
Revenue attributable to domestic and foreign customers for the year ended 31 December 2017 is disclosed below in accordance with their
registered address. Major clients of the Group are internationally operating companies and their Russian branches. Their registered addresses
are usually not relevant to the location of their operations.
(in thousands of US dollars)
Revenue from domestic customers – Cyprus
Revenue from foreign customers by countries:
Russia
Denmark
UK
France
Other
Revenue from foreign customers total
Total revenue
For the year ended 31 December
2017
17,971
199,317
46,700
19,609
13,074
33,834
312,534
330,505
2016
21,064
182,905
47,717
25,093
12,334
42,355
310,404
331,468
In both 2017 and 2016 there was one customer representing more than 10% of consolidated revenue. This customer originated from Russian ports
segment and was domiciled in Russia.
44
GLOBAL PORTS INVESTMENTS PLC
6. Expenses by nature
(in thousands of US dollars)
Staff costs (Note 8)
Depreciation of property, plant and equipment (Note 14)
Amortisation of intangible assets (Note 15)
Impairment of property, plant and equipment (Note 14)
Impairment of intangible assets (Note 15)
Transportation expenses
Fuel, electricity and gas
Repair and maintenance of property, plant and equipment
Taxes other than on income
Legal, consulting and other professional services
Auditors’ remuneration
Operating lease rentals
Purchased services
Insurance
Other expenses
For the year ended 31 December
2017
68,153
38,007
12,966
11,400
–
8,346
7,892
8,118
5,680
3,518
1,397
5,976
6,849
1,025
11,915
2016
56,564
34,843
13,225
–
67,532
6,642
5,994
6,924
5,356
3,579
1,544
4,944
5,311
894
9,387
Total cost of sales, administrative, selling and marketing expenses
191,242
222,739
The total fees charged by the Company’s statutory auditor for the statutory audit of the annual financial statements of the Company for the year
ended 31 December 2017 amounted to US$ 280 thousand (2016: US$ 305 thousand) The total fees charged by the Company’s statutory auditor for
the year ended 31 December 2017 for other assurance services amounted to US$ 60 thousand (2016: US$ 199 thousand), for tax advisory services
amounted to US$ 14 thousand (2016: US$ 77 thousand).
The above expenses are analysed by function as follows:
Cost of sales
(in thousands of US dollars)
Staff costs
Depreciation of property, plant and equipment
Amortisation of intangible assets
Impairment of property, plant and equipment (Note 14)
Impairment of intangible assets (Note 15)
Transportation expenses
Fuel, electricity and gas
Repair and maintenance of property, plant and equipment
Taxes other than on income
Operating lease rentals
Purchased services
Insurance
Other expenses
Total cost of sales
For the year ended 31 December
2017
41,893
37,037
12,938
11,400
–
8,346
7,573
7,085
5,183
2,958
6,849
642
6,607
2016
34,239
34,281
13,205
–
67,532
6,642
5,731
6,232
4,337
2,637
5,311
539
5,378
148,511
186,064
ANNUAL REPORT 2017
45
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
6. Expenses by nature (continued)
Administrative, selling and marketing expenses
(in thousands of US dollars)
Staff costs
Depreciation of property, plant and equipment
Amortisation of intangible assets
Fuel, electricity and gas
Repair and maintenance of property, plant and equipment
Taxes other than on income
Legal, consulting and other professional services
Auditors’ remuneration
Operating lease rentals
Insurance
Other expenses
Total administrative, selling and marketing expenses
7. Other gains/(losses) – net
(in thousands of US dollars)
Foreign exchange gains/(losses) on non-financing activities – net (Note 10)
Settlement of commercial claim
Recycling of derivative losses previously recognised through other comprehensive income (Note 23(ii))
Other gains/(losses) – net
Total
8. Employee benefit expense
(in thousands of US dollars)
Salaries
Social insurance costs
Other staff costs
Total
Average number of staff employed during the year
For the year ended 31 December
2017
26,260
970
28
319
1,033
497
3,518
1,397
3,018
383
5,308
42,731
2016
22,325
562
20
263
692
1,019
3,579
1,544
2,307
355
4,009
36,675
For the year ended 31 December
2017
2016
(1,176)
–
(69,566)
(587)
(71,329)
(2,354)
(3,413)
(63,149)
159
(68,757)
For the year ended 31 December
2017
52,877
12,242
3,034
68,153
2,726
2016
44,672
10,510
1,382
56,564
2,743
Included within ‘Social insurance costs’ for 2017 are contributions made to the state pension funds in the total amount of US$ 9,080 thousand
(2016: US$ 7,762 thousand).
46
GLOBAL PORTS INVESTMENTS PLC
9. Finance income/(costs) – net
(in thousands of US dollars)
Included in finance income:
Interest income on bank balances
Interest income on short-term bank deposits
Interest income on loans to related parties (Note 30(h))
Total finance income
Included in finance costs:
Interest expenses on bank borrowings
Interest expenses on bonds
Interest expenses on finance lease
Interest expenses on loans from third parties
Total finance costs
Included in the change in fair value of derivatives:
Interest component*
Foreign currency exchange component
Total change in fair value of derivatives (Note 23(i))
Net foreign exchange gains/(losses) on financing activities
Finance income/(costs) – net
For the year ended 31 December
2017
2016
612
644
792
2,048
(7,178)
(81,611)
(1,530)
(560)
(90,879)
20,214
21,875
42,089
27,944
(18,798)
482
447
438
1,367
(46,645)
(49,786)
(1,428)
(205)
(98,064)
14,411
50,021
64,432
142,572
110,307
*
Interest component represents the difference between interest expenses on RUR-denominated bonds and lower interest rates embodied in swap agreements (see Note 23).
10. Net foreign exchange gains/(losses)
The exchange differences (charged)/credited to the income statement are as follows:
(in thousands of US dollars)
Included in ‘finance income/(costs) – net’ (Note 9)
Included in ‘other gains/(losses) – net’ (Note 7)
Total
11. Income tax expense
(in thousands of US dollars)
Current tax
Deferred tax (Note 24)
Total
For the year ended 31 December
2017
2016
27,944
(1,176)
26,768
142,572
(2,354)
140,218
For the year ended 31 December
2017
32,932
(4,116)
28,816
2016
31,833
16,760
48,593
The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the applicable tax rate as follows:
(in thousands of US dollars)
Profit/(loss) before tax
Tax calculated at the applicable tax rates – 20%1
Tax effect of expenses not deductible for tax purposes
Tax effect of share of profit in jointly controlled entities
Withholding tax on undistributed profits
Tax charge
For the year ended 31 December
2017
2016
(24,131)
109,856
(4,826)
20,242
14,653
(1,253)
28,816
21,972
19,092
8,085
(556)
48,593
1. The applicable tax rate used for 2017 and 2016 is 20% as this is the income statutory tax rate applicable to the Russian ports segment, where a substantial part of the taxable
income arises.
ANNUAL REPORT 2017
47
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
11. Income tax expense (continued)
Deferred tax is provided on the undistributed profits of subsidiaries and joint ventures, except when it is probable that the Group will not distribute
dividends from the specific investment in the foreseeable future and the Group can control the payment of dividends.
The Company is subject to corporation tax on taxable profits at the rate of 12.5%. Under certain conditions, interest may be exempt from income
tax and only subject to defence contribution at the rate of 30%. In certain cases dividends received from abroad may be subject to defence
contribution at the rate of 17%. In certain cases dividends received from other Cyprus tax resident Companies may also be subject to special
contribution for defence.
12. Basic and diluted earnings per share
Basic and diluted earnings per share are calculated by dividing the profit attributable to equity holders of the Company by the weighted average
number in issue during the respective period.
Profit attributable to the owners of the parent of the Company – in thousands of US dollars
Weighted average of ordinary shares in issue (thousands)
Basic and diluted earnings per share for profit attributable to the owners of the parent
(expressed in US$ per share)
13. Dividend distribution
During 2017 and 2016 the Company did not declare or pay dividends to the equity holders of the Company.
For the year ended 31 December
2017
(52,973)
573,171
2016
61,038
573,171
(0.09)
0.11
14. Property, plant and equipment
(in thousands of US dollars)
At 1 January 2016
Cost
Accumulated depreciation and impairment
Buildings and
facilities
Assets under
construction
Land
Loading
equipment
and
machinery
Other
production
equipment
Office
equipment
Total
150,753
–
285,330
(74,513)
17,872
(1,243)
163,451
(61,405)
31,856
(13,186)
1,539
(1,309)
650,801
(151,656)
Net book amount
150,753
210,817
16,629
102,046
18,670
230
499,145
Additions
Transfers
Disposals
Depreciation charge (Note 6)
Translation reserve
Closing net book amount
At 31 December 2016
Cost
Accumulated depreciation and impairment
–
–
–
–
30,385
5,463
835
(18)
(17,346)
41,223
8,644
(835)
(260)
–
4,300
2,219
–
(155)
(14,683)
19,018
1,815
–
(375)
(2,630)
3,545
85
–
(1)
(184)
36
18,226
–
(809)
(34,843)
98,507
181,138
240,974
28,478
108,445
21,025
166
580,226
181,138
–
346,439
(105,465)
29,721
(1,243)
192,545
(84,100)
39,035
(18,010)
1,897
(1,731)
790,775
(210,549)
Net book amount
181,138
240,974
28,478
108,445
21,025
166
580,226
48
GLOBAL PORTS INVESTMENTS PLC
(in thousands of US dollars)
At 1 January 2017
Cost
Accumulated depreciation and impairment
Buildings
and facilities
Assets under
construction
Land
Loading
equipment
and
machinery
Other
production
equipment
Office
equipment
Total
181,138
–
346,439
(105,465)
29,721
(1,243)
192,545
(84,100)
39,035
(18,010)
1,897
790,775
(1,731) (210,549)
Net book amount
181,138
240,974
28,478
108,445
21,025
166
580,226
Additions
Transfers
Assets included in a disposal group classified as held for sale
–
–
14,373
2,871
–
(2,871)
7,809
–
3,027
(46)
1,059
46
26,268
–
and other disposals
Depreciation charge (Note 6)
Impairment charge (Note 26)
Translation reserve
Closing net book amount
At 31 December 2017
Cost
Accumulated depreciation and impairment
(16,727)
–
(11,400)
9,440
(13,327)
(20,863)
–
12,752
(386)
–
–
1,799
(2,663)
(14,288)
–
5,058
(788)
(2,699)
–
1,126
(77)
(157)
–
10
(33,968)
(38,007)
(11,400)
30,185
162,451
236,780
27,020
104,361
21,645
1,047
553,304
162,451
–
364,718
(127,938)
28,263
(1,243)
203,161
(98,800)
40,240
(18,595)
2,914
801,747
(1,867) (248,443)
Net book amount
162,451
236,780
27,020
104,361
21,645
1,047
553,304
In the cash flow statement proceeds from sale of property, plant and equipment comprise of:
(in thousands of US dollars)
Net book amount
Less: Non-cash items – write-offs of property, plant and equipment
Profit on sale of property, plant and equipment1
Proceeds from sale of property, plant and equipment
For the year ended 31 December
2017
209
(80)
129
162
291
2016
809
(440)
369
652
1,021
1. Profit on sale of property, plant and equipment is included in ‘Cost of sales’ in the income statement.
Net carrying amount of property, plant and equipment (included above) that are held under finance leases are as follows:
(in thousands of US dollars)
Buildings and constructions
Loading equipment
Total
As at 31 December
2017
7,951
9,279
17,230
2016
7,662
9,527
17,189
The total net book value of pledged property, plant and equipment (included above) which are held as collateral for borrowings and loans are
as follows:
(in thousands of US dollars)
Loading equipment and machinery
Total
As at 31 December
2017
–
–
2016
6,266
6,266
Depreciation expense amounting to US$ 37,037 thousand in 2017 (2016: US$ 34,281 thousand) has been charged to ‘cost of sales’ and US$ 970
thousand in 2017 (2016: US$ 562 thousand) has been charged to ‘administrative, selling and marketing’ expenses (Note 6).
There were no capitalised borrowing costs in 2017 and 2016.
Lease rentals relating to the lease of machinery and property amounting to US$ 2,958 thousand in 2017 (2016: US$ 2,637 thousand) have been
charged to ‘cost of sales’ and US$ 3,018 thousand in 2017 (2016: US$ 2,307 thousand) has been charged to ‘administrative, selling and
marketing expenses’.
As at 31 December 2017 the amounts prepaid for equipment not delivered and prepayments for construction works not yet carried out were US$
8,393 thousand (2016: US$ 4,640 thousand).
ANNUAL REPORT 2017
49
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
15. Intangible assets
(in thousands of US dollars)
Goodwill
Contractual rights
Client base
At 1 January 2016
Cost
Accumulated amortisation and impairment
Net book amount
Additions
Amortisation charge (Note 6)
Impairment charge (Note 6)
Translation reserve
Closing net book amount
At 31 December 2016
Cost
Accumulated amortisation and impairment
Net book amount
Additions
Amortisation charge (Note 6)
Translation reserve
Closing net book amount
At 31 December 2017
Cost
Accumulated amortisation and impairment
Net book amount
8,021
–
8,021
–
–
–
1,616
9,637
9,637
–
9,637
–
–
512
636,441
(23,191)
613,250
–
(11,830)
(67,532)
122,405
656,293
764,303
(108,010)
656,293
–
(12,303)
34,679
10,149
678,669
10,149
–
10,149
804,740
(126,071)
678,669
11,949
(10,811)
1,138
–
(1,241)
–
103
–
–
–
–
–
–
–
–
–
–
–
Computer
software
643
(366)
277
118
(154)
–
52
293
726
(433)
293
2,387
(663)
23
2,040
3,118
(1,078)
2,040
Total
657,054
(34,368)
622,686
118
(13,225)
(67,532)
124,176
666,223
774,666
(108,443)
666,223
2,387
(12,966)
35,214
690,858
818,007
(127,149)
690,858
As at 31 December 2017 the remaining useful lives for contractual rights were up to 55 years (2016: up to 56 years).
Goodwill is allocated to the Group’s cash generating units (CGUs) identified according to their operating segment. An operating segment-level
summary of the goodwill allocation is presented below:
(in thousands of US dollars)
PLP (Russian ports segment)
VSC (Russian ports segment)
Total
As at 31 December
2017
4,390
5,759
10,149
2016
4,168
5,469
9,637
The recoverable amount of CGU is determined based on value in use calculations. These calculations are based on post-tax cash flow projections
and all the assumptions in relation to growth rates are determined by reference to management’s past experience and industry forecasts. The
discount rates used reflect the specific risks of each segment. See Note 4(a)(i) for details of assumptions used.
50
GLOBAL PORTS INVESTMENTS PLC
16. Financial instruments by category
The accounting policies for financial instruments have been applied in the line items below:
(in thousands of US dollars)
Loans and receivables
Financial assets as per balance sheet:
Trade and other receivables1
Cash and cash equivalents
Total
Financial liabilities measured at amortised cost
Financial liabilities as per balance sheet:
Borrowings
Trade and other payables2
Total
As at 31 December
2017
2016
35,431
130,434
165,865
33,753
119,279
153,032
1,074,753
28,487
1,119,556
28,022
1,103,240
1,147,578
1. Trade and other receivables do not include taxes and prepayments.
2. Trade and other payables do not include taxes, advances and deferred gains.
17. Credit quality of financial assets
The credit quality of financial assets that are fully performing (i.e. neither past due or impaired) can be assessed by reference to external and
internal sources of information like business reputation, financial position and performance, prior working history records. Customers with longer
history of working with the Group are regarded by management as having lower risk of default.
The credit quality of financial assets that are neither past due nor impaired classified by reference to the working history of the counterparty with
the Group is as follows:
(in thousands of US dollars)
Trade and other receivables
Core customers – new (less than one year of working history with the Group)
Core customers – existing (more than one year of working history with the Group)
Related party loans
Trade and other receivables from other customers (third parties)
Trade and other receivables from related parties
Total
As at 31 December
2017
2016
–
9,134
14,559
857
7,834
32,384
41
9,042
8,472
1,467
11,978
31,000
Loans granted to the third parties, trade and other receivables are related to highly reputable counterparties with no external credit rating.
Cash at bank and short-term bank deposits (Note 20):
(in thousands of US dollars)
Agency
International rating agency Moody’s Investors Service
International rating agency Moody’s Investors Service
International rating agency Moody’s Investors Service
Fitch Ratings
Fitch Ratings
No rating*
Total
Rating
A1 – Aa3
B1 – Baa3
Caa1 – Caa2
AAA
BBB
No rating
As at 31 December
2017
3,855
105,381
208
–
20,912
78
130,434
2016
620
101,748
341
16,517
–
53
119,279
* Cash in hand and cash and cash equivalents with banks for which there is no rating. These banks are highly reputable local banks in the country of operation of the respective
Group entities.
ANNUAL REPORT 2017
51
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
18. Inventories
(in thousands of US dollars)
Spare parts and consumables
Total
All inventories are stated at cost.
19. Trade and other receivables
(in thousands of US dollars)
Trade receivables – third parties
Trade receivables – related parties (Note 30(e))
Total trade receivables
Other receivables
Other receivables – related parties (Note 30(e))
Prepayments for goods and services
Prepayments for goods and services – related parties (Note 30(e))
Loans to third parties
Loans to related parties (Note 30(h))
VAT and other taxes recoverable
Total trade and other receivables
Less non-current portion:
Loans to related parties
Total non-current portion
Current portion
As at 31 December
2017
5,769
5,769
2016
5,013
5,013
As at 31 December
2017
11,875
7,817
19,692
1,157
23
6,168
551
–
14,559
6,039
48,189
(14,559)
(14,559)
33,630
2016
12,663
7,997
20,660
358
4,094
6,262
525
169
8,472
5,736
46,276
(8,265)
(8,265)
38,011
According to management estimates the fair values of trade and other receivables do not materially differ from their carrying amounts, except
loans to related parties (fair value as at 31 December 2017: US$ 13,814 thousand).
The average effective interest rate on loans receivable from related parties were 6.4% (2016: 4.2%).
Trade and other receivables amounting to US$ 17,826 thousand (31 December 2016: US$ 22,527 thousand), were fully performing.
Trade and other receivables amounting to US$ 3,047 thousand (31 December 2016: US$ 2,584 thousand) were past due but not impaired. These
relate to a number of independent customers for whom there is no history of either non repayment in the past or renegotiation of the repayment
terms due to inability of the customer to repay the balance.
The analysis of past due trade and other receivables is as follows:
(in thousands of US dollars)
Less than 1 month overdue
From 1 to 3 months overdue
From 3 to 6 months overdue
Over 6 months overdue
Total
As at 31 December
2017
2,186
436
125
300
3,047
2016
1,892
518
114
60
2,584
During 2017 trade receivables amounting to US$ 27 thousand (2016: US$ 17 thousand) were impaired and written off in full. These are individually
impaired receivables mainly related to customers, which were in a difficult economic situation.
The other classes within trade and other receivables do not contain impaired assets except as disclosed in Note 3(b).
The creation and release of allowance and write off of impaired receivables have been included in ‘administrative, selling and marketing expenses’
in the income statement. Amounts charged to the allowance account are generally written off, when there is no expectation of recovering
additional cash.
52
GLOBAL PORTS INVESTMENTS PLC
The fair value of receivables approximates their carrying value as the impact of the discounting is insignificant and is within Level 2 of the fair value
hierarchy. The fair value is based on discounting of cash flows using 7% (2016: 7%) discount rate.
The carrying amounts of the Group’s trade and other receivables are denominated in the following currencies:
(in thousands of US dollars)
Currency:
US dollar
Russian rouble
Euro
Total
As at 31 December
2017
2016
24,932
22,952
305
48,189
18,949
21,611
5,716
46,276
The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivables mentioned above. The Group does not
hold any collateral as security for any receivables.
20. Cash and cash equivalents
(in thousands of US dollars)
Cash at bank and in hand
Short term bank deposits (less than 90 days)
Total
As at 31 December
2017
31,342
99,092
130,434
2016
30,073
89,206
119,279
The effective average interest rate on short-term deposits was 1% in 2017 (2016: 0.8%) and these deposits have an average maturity of 20 days
in 2017 (2016: 18 days).
Cash and cash equivalents include the following for the purposes of the cash flow statement:
(in thousands of US dollars)
Cash and cash equivalents
Total
As at 31 December
2017
130,434
130,434
2016
119,279
119,279
21. Share capital, share premium
Authorised share capital
The authorised share capital of the Company amounts to US$ 175,000,000.00 divided into 750,000,000 ordinary shares and 1,000,000,000
ordinary non-voting shares with a par value of US$ 0.10 each.
Issued share capital
The issued share capital of the Company amounts to US$ 57,317,073.10 divided into 422,713,415 ordinary shares and 150,457,316 ordinary
non-voting shares with a par value of US$ 0.10 each.
The ordinary shares and the ordinary non-voting shares rank pari passu in all respects save that, the ordinary non-voting shares do not have the
right to receive notice, attend or vote at any general meeting, nor to be taken into account for the purpose of determining the quorum of any
general meeting.
(in thousands of US dollars)
At 1 January/31 December 2016/ 31 December 2017
Number of
shares
‘000
573,171
Share capital
Share premium
Total
57,317
923,511
980,828
ANNUAL REPORT 2017
53
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
22. Borrowings
(in thousands of US dollars)
Non-current borrowings
Bank loans
Non-convertible unsecured bonds
Finance lease liabilities
Loans from third parties
Interest payable on loans from third parties
Total non-current borrowings
Current borrowings
Bank loans
Interest payable on bank loans
Finance lease liabilities
Interest payable on finance lease liabilities
Loans from third parties
Interest payable on loans from third parties
Non-convertible unsecured bonds – interest payable
Total current borrowings
Total borrowings
The maturity of non-current borrowings (excluding finance lease liabilities) is analysed as follows:
(in thousands of US dollars)
Between 1 and 2 years
Between 2 and 5 years
Over 5 years
Total
As at 31 December
2017
2016
43,000
953,308
9,356
–
–
91,625
938,373
9,937
755
185
1,005,664
1,040,875
43,000
156
840
371
795
246
23,681
69,089
51,908
252
2,523
505
–
–
23,493
78,681
1,074,753
1,119,556
As at 31 December
2017
2016
42,729
607,995
345,584
48,315
290,475
692,148
996,308
1,030,938
Bank borrowings mature until 2019 (31 December 2016: 2019), bonds mature until 2023 (31 December 2016: 2023) and loans from other third
parties mature until 2018 (31 December 2016: 2018).
Changes in liabilities and assets arising from financing activities:
(in thousands of US dollars)
At beginning of year
Interest charged
Borrowings and leases repaid during the year
Interest repaid during the year and swap cash settlements
Change in fair value of derivative financial instruments
Foreign exchange differences
At end of year
* Represents net position (liabilities less assets) of derivative financial instruments.
For the year ended 31 December 2017
Fair value of
derivative
financial
instruments*
Total changes in
assets and
liabilities from
financing
activities
Borrowings
1,119,556
(52,957)
1,066,599
90,879
(60,274)
(89,094)
–
13,686
–
–
20,254
(42,089)
(3,594)
90,879
(60,274)
(68,840)
(42,089)
10,092
1,074,753
(78,386)
996,367
9
23(i)
9
54
GLOBAL PORTS INVESTMENTS PLC
(in thousands of US dollars)
At beginning of year
Loans advanced during the year
Interest charged
Borrowings and leases repaid during the year
Interest repaid during the year and swap cash settlements
Change in fair value of derivative financial instruments
Foreign exchange differences
At end of year
* Represents net position (liabilities less assets) of derivative financial instruments.
For the year ended 31 December 2016
Borrowings and
leases
Fair value of
derivative financial
instruments*
Total changes in
assets and
liabilities from
financing activities
1,165,400
5,360
1,170,760
829,308
98,064
(945,544)
(70,259)
–
42,588
–
–
–
11,372
(64,432)
(5,258)
829,308
98,064
(945,544)
(58,887)
(64,432)
37,330
1,119,556
(52,957)
1,066,599
9
23(i)
9
In the 2015-2016 the Group partly restructured its debt portfolio with the aim of facilitating greater financial flexibility and diversification of the
debt portfolio of the Group. For this purpose the Group has repaid certain bank facilities before their maturity dates, terminated the exiting swap
arrangement, placed 3 issues RUR-denominated bonds of RUR 5 billion each in the total amount of RUR 15 billion and entered in swap agreements
(see Note 23). These bonds are guaranteed by the Company.
Proceeds from these bonds issuance were swapped using two cross currency swap instruments into US dollars with a lower interest rate (see Note
23(i)) and were used for the refinancing of the Group’s existing debt. In 2017 and 2016 the amounts received under the swap arrangements were
US$ 20,255 thousand and US$ 11,372 thousand respectively.
In April and September 2016 the GPI group has successfully finalised issue of two tranches of Eurobonds on the Irish Stock Exchange in the total
amount of US$ 700 million at a fixed coupon rate. Some companies within GPI group have unconditionally and irrevocably guaranteed these
Eurobonds on a joint and several basis.
The carrying amount of outstanding bonds as of 31 December 2017 totalled to US$ 976,989 thousand (as of 31 December 2016: US$ 961,866
thousand). Proceeds from above bond issues have been used for refinancing of the Group’s debt.
Fair value of bank loans and non-convertible unsecured bonds was as follows:
(in thousands of US dollars)
Fair value hierarchy
Non-convertible unsecured bonds
Bank loans
Level 1
Level 2
Total
Finance lease liabilities – minimum lease payments:
(in thousands of US dollars)
Under 1 year
Between 1 and 2 years
Between 2 and 5 years
Over 5 years
Total
Future finance charges of finance leases
Present value of finance lease liabilities
The present value of finance lease liabilities is analysed as follows:
(in thousands of US dollars)
Under 1 year
Between 1 and 2 years
Between 2 and 5 years
Over 5 years
Total
ANNUAL REPORT 2017
As at 31 December
2017
1,025,491
86,156
2016
980,911
139,883
1,111,647
1,120,794
As at 31 December
2017
2,276
1,441
4,406
63,793
71,916
(61,349)
10,567
As at 31 December
2017
1,208
7
13
9,339
2016
3,927
2,398
4,060
60,733
71,118
(58,153)
12,965
2016
3,019
1,062
11
8,873
10,567
12,965
55
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
22. Borrowings (continued)
The exposure of the Group’s borrowings to interest rate changes and the contractual repricing dates at the balance sheet dates are as follows
(the table excludes interest payable):
(in thousands of US dollars)
6 months or less
1-5 years
Over 5 years
Total
The carrying amounts of the Group’s borrowings are denominated in the following currencies:
(in thousands of US dollars)
Russian rouble
US dollar
Total
As at 31 December
2017
2016
1,629
693,724
354,946
3,966
143,880
947,275
1,050,299
1,095,121
As at 31 December
2017
2016
277,730
797,023
263,487
856,069
1,074,753
1,119,556
From the above amount of borrowings denominated in RUR, US$ 267,820 thousand (2016: US$ 253,168 thousand) are covered by a swap
arrangement effectively converting the RUR-denominated obligation into USD-denominated one (see Note 23).
The weighted average effective interest rate on borrowings is 8.4% (2016: 8.2%). The weighted average effective interest rate on borrowings which
includes the effect of the cross-currency swap would be 6.8% (2016: 6.7%).
The Group is leasing mainly container loading equipment, cars and terminal facilities.
Some bank loans given to a group entities in Russian ports segment are secured also by the pledge of shares of certain group entities.
The finance lease liabilities are effectively secured as the rights to the leased asset revert to the lessor in the event of default.
Agreements of the bank loans given to some of the subsidiaries of the Group include certain covenants which set forth certain financial ratios that
have to be complied with. There were no breaches of covenants as at 31 December 2017 and 2016.
23. Derivative financial instruments
As of 31 December 2017 the fair value of derivatives was positive – US$ 78,386 thousand. As of 31 December 2016 the fair value of derivatives was
positive – US$ 52,957 thousand.
The fair value of derivative is classified as a non-current asset or liability if the remaining maturity of the hedging relationship is more than 12
months and, as a current asset or liability, if the maturity of the hedging relationship is less than 12 months.
(i) Derivatives related to RUR-denominated bonds issues
During 2015 and 2016 the Group entered into three cross-currency swap arrangements to exchange its RUR-denominated liabilities related to the
newly issued bonds (3 issues of RUR 5,000 million each) with fixed interest rate of approximately 13% in the amount RUR 15,000 million (see Note
22) to USD-denominated debt with the lower fixed interest rate. The Group decided not to apply hedge accounting rules to new swaps. As a result
the change in fair value is presented in the income statement under “change in fair value of derivatives” as part of “finance income/(costs) – net”
(see Note 9).
Cash collected/paid in relation to the swap arrangements not used for hedging that relate to the swap of fixed RUR denominated interest to fixed
USD denominated interest is presented in the consolidated statement of cash flows as “proceeds from derivative financial instruments not used
for hedging”.
(ii) Derivatives used for hedging
Upon acquisition of NCC at the end of 2013 the Group has designated an acquired derivative as a cash flow hedge instrument where it was
hedging the variability of the interest rate on an external borrowing of a Group entity and the highly probable forecasted revenues of the same
Group entity which were expected to occur in USD (due to USD/RUR exchange rate).
At the end of 2015 the Group partly restructured its debt portfolio (see Note 22). This resulted in the termination of cross-currency interest rate
swap arrangement explained above.
The termination of the cross-currency interest rate swap arrangement together with the settlement of the related loan has led to the cancellation
of the related interest rate cash flow hedge.
56
GLOBAL PORTS INVESTMENTS PLC
During 2017 there was recycled US$ 57,426 thousand (2016: US$ 61,356 thousand) of derivative losses previously recognised through other
comprehensive income that related to the cash flow hedge on forecasted sales. This amount has been recycled as a loss of US$ 69,566 (2016:
US$ 63,149 thousand) through the income statement under ‘other gains/losses – net’ (Note 7) and as a credit charge in amount of US$ 12,140
thousand (2016: US$ 1,793 thousand), relating to the foreign exchange difference arising on the retranslation of the cash flow hedge reserve using
historic foreign exchange rate and average foreign exchange rate for the period, through currency translation differences in other comprehensive
income. The recycling was based on the original forecasted sales that were expected to occur during the period.
As at 31 December 2017 there remained no derivative losses in equity.
24. Deferred income tax liabilities
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities
and when the deferred taxes relate to the same fiscal authority. The offset amounts are as follows:
(in thousands of US dollars)
Deferred tax assets:
Deferred tax asset to be recovered after more than 12 months
Deferred tax liabilities:
Deferred tax liability to be recovered after more than 12 months
Deferred tax liabilities (net)
The gross movement on the deferred income tax account is as follows:
(in thousands of US dollars)
At the beginning of the year
Income statement charge:
Deferred tax credit (Note 11)
Other movements:
Reclassification to liabilities directly associated with assets classified as held for sale
Currency translation differences
At the end of the year
As at 31 December
2017
2016
45,529
44,440
(163,942)
(118,413)
(162,711)
(118,271)
For the year ended 31 December
2017
2016
(118,271)
(83,853)
4,116
(16,760)
1,868
(6,126)
–
(17,658)
(118,413)
(118,271)
The movement on the deferred tax assets (+) and liabilities (-) during the year, without taking into consideration the offsetting of balances within
the same tax jurisdiction, is as follows:
(in thousands of US dollars)
At 1 January 2016
Income statement (Note 11)
Translation differences
At 31 December 2016
Income statement (Note 11)
Reclassification to liabilities directly associated
with assets classified as held for sale
Translation differences
At 31 December 2017
Property,
plant and
equipment
Withholding
tax provision
Intangible
assets
Borrowings
Tax losses
Subtotal
Other assets
and liabilities
Grand total
(55,532)
(5,710)
(121,300)
(1,342)
97,461
(86,423)
2,570
(83,853)
4,296
(10,938)
1,327
(1,021)
15,928
(24,039)
(2,073)
(187)
(34,731)
18,012
(15,253)
(18,173)
(1,507)
515
(16,760)
(17,658)
(62,174)
(5,404)
(129,411)
(3,602)
80,742
(119,849)
1,578
(118,271)
3,314
3,749
2,411
3,403
(2,011)
10,866
(6,750)
4,116
1,916
(3,194)
–
(243)
–
(6,838)
–
(130)
–
4,260
1,916
(6,145)
(48)
19
1,868
(6,126)
(60,138)
(1,898) (133,838)
(329)
82,991
(113,212)
(5,201)
(118,413)
Deferred income tax assets are recognised for tax loss carry-forwards to the extent that the realisation of the related tax benefit through future
taxable profits is probable. The amount of unremitted earnings of certain subsidiaries and joint ventures on which no withholding tax provision was
recognised amounts to US$ 848,103 thousand (2016: US$ 700,321 thousand).
ANNUAL REPORT 2017
57
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
25. Trade and other payables
(in thousands of US dollars)
Trade payables – third parties
Trade payables – related parties (Note 30(f))
Payables for property, plant and equipment
Other payables – third parties
Other payables – related parties (Note 30(f))
Payroll payable
Accrued expenses and deferred gains
Advances received
Taxes payable (other than income tax)
Total trade and other payables
Less non-current portion
Current portion
As at 31 December
2017
3,690
304
957
1,338
682
1,875
18,298
5,007
3,535
35,686
(9,266)
26,420
2016
3,659
106
834
4,756
540
1,559
14,846
4,487
3,741
34,528
(8,208)
26,320
The fair value of trade and other payables approximates their carrying amount at the balance sheet date.
26. Assets held for sale
In August 2017 the Group signed an agreement to sell its 100% stake in JSC Logistika-Terminal (“LT”), one of the Group’s two inland terminals
for a consideration of RUR1.9 billion to be paid upon completion of the transaction. The transaction is subject to approval of relevant
regulatory authorities.
The transaction will allow the Group to optimise its inland terminal network focusing on the Yanino terminal, a modern multipurpose inland
terminal in the vicinity of St. Petersburg. The Group intends to use the proceeds of the sale for further deleveraging, a key strategic priority.
Prior to reclassification to assets held for sale, property, plant and equipment of LT was tested for impairment based on fair value less costs of
disposal using comparative market method taking into account the Sales Agreement signed in August 2017. As a result the impairment of US$
11,400 thousand was recognised (Note 14).
The result of the transaction will depend on the net assets of LT at the date of closing. In addition, at closing amounts recognised in other
comprehensive income and accumulated in equity relating to LT will be recycled from the other comprehensive income to the income statement.
As of 31 December 2017 this accumulated other comprehensive income relating to LT amounted to US$ (24,831) million (negative) and the
movement since reclassification to assets held for sale was US$ 1,560 thousand (positive). It is reflected within currency translation reserve in
the consolidated balance sheet.
The following assets and liabilities were classified as held for sale in relation to LT as at 31 December 2017:
(in thousands of US dollars)
Property, plant and equipment
Trade and other receivables and other current assets
Cash and cash equivalents
Assets classified as held for sale
Deferred tax liabilities
Trade and other payables
Liabilities directly associated with assets classified as held for sale
Net carrying amount classified as held for sale
As at
31 December 2017
33,713
865
835
35,413
1,867
560
2,427
32,986
58
GLOBAL PORTS INVESTMENTS PLC
27. Joint ventures
The Group has the following investments in joint ventures – VEOS, MLT group and CD Holding group. These entities are an integral part
of operations of the Group. See Note 1 and Note 5 for more details.
There are no contingent liabilities or commitments relating to the Group’s interest in the joint ventures.
The summarised investments in joint ventures accounted for using the equity method as at 31 December 2017 and 31 December 2016 are as follows:
(in thousands of US dollars)
VEOS
MLT
CD Holding
Total
At 1 January 2017
Recognised share of profit/(loss)
Dividends declared by joint venture
Other movement
Translation differences (through other comprehensive income/(loss))
At 31 December 2017
74,854
(77,462)
–
–
9,949
7,341
46,868
5,213
(6,863)
–
3,097
48,315
1,427
(1,018)
–
784
69
1,262
123,149
(73,267)
(6,863)
784
13,115
56,918
“Recognised share of profit/(loss)” includes US$ 71,578 thousand of effect of impairment related to VEOS (see Note 4(i)).
(in thousands of US dollars)
At 1 January 2016
Recognised share of profit/(loss)
Dividends declared by joint venture
Loans converted to share capital (Note 30(h))
Translation differences (through other comprehensive income/(loss))
At 31 December 2016
VEOS
125,564
(46,412)
–
–
(4,298)
74,854
MLT
CD Holding
Total
42,251
6,658
(5,048)
–
3,007
46,868
–
(669)
–
2,938
(842)
1,427
167,815
(40,423)
(5,048)
2,938
(2,133)
123,149
“Recognised share of profit/(loss)” includes US$ 46,122 thousand of effect of impairment related to VEOS being impairment loss on goodwill
amounting to US$ 39,218 thousand (see Note 4(i)) and share of impairment of intangible assets in VEOS of US$ 6,904 thousand (see Note 5).
Set out below are the selected summarised financial information for joint ventures that are accounted for using the equity method.
Selected income statement items
(in thousands of US dollars)
Revenue
Depreciation, amortisation and impairment
Interest income
Interest expense
Profit/(loss) before income tax
Income tax expense
Profit/(loss) after tax
Other comprehensive income/(loss)
Total comprehensive income/(loss)
Dividends declared by joint venture
For the year ended 31 December 2017
VEOS
MLT
CD Holding
51,348
(162,076)
18
(481)
(154,924)
–
(154,924)
19,897
(135,027)
–
31,083
(4,212)
123
(314)
9,560
(2,610)
6,950
2,788
9,738
9,151
9,845
(894)
–
(922)
(918)
(439)
(1,357)
92
(1,265)
–
ANNUAL REPORT 2017
59
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
27. Joint ventures (continued)
Selected balance sheet items
(in thousands of US dollars)
Total non-current assets
Cash and cash equivalents (including current deposits with maturity over 90 days)
Other current assets
Total current assets
Total assets
Non-current financial liabilities
Other non-current liabilities
Total non-current liabilities
Current financial liabilities excluding trade and other payables
Other current liabilities including trade and other payables
Total current liabilities
Total liabilities
Net assets
Selected income statement items
(in thousands of US dollars)
Revenue
Depreciation, amortisation and impairment
Interest income
Interest expense
Profit/(loss) before income tax
Income tax expense
Profit/(loss) after tax
Other comprehensive income/(loss)
Total comprehensive income/(loss)
Dividends declared by joint venture
Selected balance sheet items
(in thousands of US dollars)
Total non-current assets
Cash and cash equivalents (including current deposits with maturity over 90 days)
Other current assets
Total current assets
Total assets
Non-current financial liabilities
Other non-current liabilities
Total non-current liabilities
Current financial liabilities excluding trade and other payables
Other current liabilities including trade and other payables
Total current liabilities
Total liabilities
Net assets
As at 31 December 2017
VEOS
10,736
13,527
7,152
20,679
31,415
5,648
–
5,648
3,884
7,202
11,086
16,734
14,681
MLT
CD Holding
34,207
12,060
4,954
17,014
51,221
4,608
4,323
8,931
1,640
2,837
4,477
13,408
37,813
17,421
231
1,225
1,456
18,877
14,500
1,298
15,798
–
1,396
1,396
17,194
1,683
For the year ended 31 December 2016
VEOS
MLT
CD Holding
58,970
(34,089)
18
(709)
(16,345)
1,956
(14,389)
(4,643)
(19,032)
–
34,076
(4,422)
74
(388)
11,804
(2,927)
8,877
4,735
13,612
6,731
7,018
(866)
1
(1,162)
2,508
–
2,508
(1,125)
1,383
–
VEOS
152,417
23,603
4,969
28,572
180,989
2,628
–
2,628
9,049
19,604
28,653
31,281
149,708
As at 31 December 2016
MLT
CD Holding
34,510
10,875
4,913
15,788
50,298
4,537
3,944
8,481
968
3,623
4,591
13,072
37,226
16,860
717
1,219
1,936
18,796
7,318
812
8,130
7,728
1,035
8,763
16,893
1,903
The information above reflects the amounts presented in the financial statements of the joint ventures adjusted for differences in accounting
policies between the group and the joint ventures.
60
GLOBAL PORTS INVESTMENTS PLC
Set out below is the reconciliation of the summarised financial information presented to the carrying amount of the Group interest in joint ventures.
(in thousands of US dollars)
For the year ended 31 December 2017
VEOS
MLT
CD Holding
Total
Opening net assets at the beginning of the year
149,708
37,226
Profit/(loss) for the period
Dividends declared
Other comprehensive income/(loss)
Closing net assets at the end of the year
Ownership interest
Interest in joint venture
Other movement
Goodwill
Carrying value on 31 December 2017
(in thousands of USD)
Opening net assets at the beginning of the year
Profit/(loss) for the period
Conversion of loans to equity
Dividends declared
Other comprehensive income/(loss)
Closing net assets at the end of the year
Ownership interest
Interest in joint venture
Goodwill
Share of losses of joint ventures applied against other long-term interests
Carrying value on 31 December 2016
(154,924)
–
19,897
14,681
50%
7,341
–
–
7,341
6,950
(9,151)
2,788
37,813
75%
28,360
–
19,955
48,315
1,903
(1,357)
–
92
638
75%
478
784
–
1,262
188,837
(149,331)
(9,151)
22,777
53,132
36,179
784
19,955
56,918
For the year ended 31 December 2016
VEOS
MLT
CD Holding
Total
168,740
(14,389)
–
–
(4,643)
149,708
50%
74,854
39,218
(39,218)
74,854
30,345
(10,610)
188,475
8,877
–
(6,731)
4,735
37,226
75%
27,920
18,948
–
46,868
2,508
11,130
–
(1,125)
1,903
75%
1,427
–
–
1,427
(3,004)
11,130
(6,731)
(1,033)
188,837
104,201
58,166
(39,218)
123,149
28. Contingencies
Operating environment of the Group
The Russian Federation displays certain characteristics of an emerging market. Its economy is particularly sensitive to oil and gas prices. The legal,
tax and regulatory frameworks continue to develop and are subject to frequent changes and varying interpretations. The Russian economy was
growing in 2017, after overcoming the economic recession of 2015 and 2016. The economy is negatively impacted by low oil prices, ongoing political
tension in the region and international sanctions against certain Russian companies and individuals. The financial markets continue to be volatile.
This operating environment has a significant impact on the Group’s operations and financial position. Management is taking necessary measures
to ensure sustainability of the Group’s operations. However, the future effects of the current economic situation are difficult to predict and
management’s current expectations and estimates could differ from actual results.
Substantial part of Russian seaport operators of the Group, including PLP, VSC and FCT are classified as natural monopolies under Russian law.
As a matter of Russian law, tariffs for stevedoring services, including cargo handling and storage services, rendered by natural monopolies, are
subject to monitoring by the Federal Antimonopoly Service (the “FAS”). In 2016 FAS undertook certain actions, in particular FAS has commenced
investigation in respect of several Russian seaport operators, (including the following terminals of the Group: PLP, VSC and FCT), alleging potential
breach of antimonopoly laws in relation to the pricing of stevedoring services at Russia’s ports.
In March 2017 the FAS issued orders to the Group’s FCT, VSC and PLP terminals requiring them, inter alia to transfer to the federal budget RUR 7
billion (app. US$ 120 million), such amounts being the income, according to FAS, the relevant terminal derived from the activity in question.
Towards the end of 2017 FCT, VSC and PLP concluded the settlement agreement with FAS. The terms of the settlement did not have any material
impact on the Group’s financial position as of 31 December 2017 or results and cash flows for the year ended 31 December 2017 and did not
negatively affect operating activities of the Group in any significant way.
Estonia and Finland represent established market economies with more stable political systems and developed legislation based on EU directives
and regulations. However, the situation in Estonia remained challenging and is characterised by a structural deterioration of the business
environment in which the Group’s oil products terminal operates, which is heavily dependent on the flows of Russian oil products.
ANNUAL REPORT 2017
61
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
28. Contingencies (continued)
Tax legislation in Russia
Russian tax and customs legislation which was enacted or substantively enacted at the end of the reporting period, is subject to varying
interpretations when being applied to the transactions and activities of the Group. Consequently, tax positions taken by management and
the formal documentation supporting the tax positions may be challenged by the tax authorities. Russian tax administration is gradually
strengthening, including the fact that there is a higher risk of review of tax transactions without a clear business purpose or with tax incompliant
counterparties. Fiscal periods remain open to review by the authorities in respect of taxes for three calendar years preceding the year when a
decision about the review was made. Under certain circumstances reviews may cover longer periods.
The Russian transfer pricing legislation is to a large extent aligned with the international transfer pricing principles developed by the Organisation
for Economic Cooperation and Development. This legislation provides the possibility for tax authorities to make transfer pricing adjustments and
impose additional tax liabilities in respect of controlled transactions (transactions with related parties and some types of transactions with
unrelated parties), provided that the transaction price is not on an arm’s length basis.
Tax liabilities arising from transactions between companies are determined using actual transaction prices. It is possible, with the evolution of
the interpretation of the transfer pricing rules, that such transfer prices could be challenged. The impact of any such challenge cannot be reliably
estimated; however, it may be significant to the financial position and/or the overall operations of the Group.
The Group includes companies incorporated outside of Russia. The tax liabilities of the Group are determined on the assumption that these
companies are not subject to Russian profits tax, because they do not have a permanent establishment in Russia. This interpretation of relevant
legislation may be challenged and even though the impact of any such challenge cannot be reliably estimated, it may however, be significant
to the financial position and/or the overall operations of the Group. The Controlled Foreign Company (CFC) legislation introduced Russian taxation
on the profits of foreign companies and non-corporate structures (including trusts) controlled by Russian tax residents (controlling parties).
This interpretation of the relevant legislation may be challenged but the impact of any such challenge cannot be reliably estimated currently;
however, it may be significant to the financial position and/or the overall operations of the Group.
As Russian tax legislation does not provide definitive guidance in certain areas, the Group adopts, from time to time, interpretations of such
uncertain areas that could reduce the overall tax rate of the Group. While management currently estimates that the tax positions and
interpretations that it has taken can probably be sustained, there is a possible risk that outflow of resources will be required should such tax
positions and interpretations be challenged by the relevant authorities. The impact of any such challenge cannot be reliably estimated; however,
it may be significant to the financial position and/or the overall operations of the Group.
The Group’s management believes that its interpretation of the relevant legislation is appropriate and the Group’s tax, currency legislation and
customs positions will be sustained. Accordingly, as of 31 December 2017 and as of 31 December 2016 management believes that no additional tax
liability has to be accrued in the financial statements.
Legal proceedings and investigations
From time to time and in the normal course of business, claims against the Group may be received. On the basis of its own estimates and both
internal and external professional advice, management is of the opinion that no provisions should be recognised in these consolidated
financial statements.
Environmental matters
The Group is subject to laws, regulations and other legal requirements relating to the protection of the environment, including those governing
the discharge of waste water and the clean-up of contaminated sites.
Issues related to protection of water resources in Russia are regulated primarily by the Environmental Protection Law, the Water Code and
a number of other federal and regional normative acts.
Pursuant to the Water Code, discharging waste water into the sea is allowed, provided that the volume does not exceed the established standards
of admissible impact on water resources. At the same time, the Environmental Protection Law establishes a “pay-to-pollute” regime, which implies
that companies need to pay for discharging waste waters. However, the payments of such fees do not relieve a company from its responsibility
to comply with environmental protection measures.
If the operations of a company violate environmental requirements or cause harm to the environment or any individual or legal entity,
environmental authorities may suspend these operations or a court action may be brought to limit or ban these operations and require the
company to remedy the effects of the violation. The limitation period for lawsuits for the compensation of damage caused to the environment
is twenty years. Courts may also impose clean-up obligations on offenders in lieu of or in addition to imposing fines.
The enforcement of environmental regulation in the countries in which the Group operates is evolving and the enforcement posture of government
authorities is continuously being reconsidered. The Group periodically evaluates its obligations under environmental regulations. As obligations are
determined, they are recognised immediately. Potential liabilities, which might arise as a result of changes in existing regulations, civil litigation or
legislation, cannot be estimated but could be material. In the current enforcement climate under existing legislation, management believes that
there are no significant liabilities for environmental damage.
62
GLOBAL PORTS INVESTMENTS PLC
29. Commitments
Capital commitments
Capital expenditure contracted for at the balance sheet date but not yet incurred is as follows:
(in thousands of US dollars)
Property, plant and equipment
Total
As at 31 December
2017
26,515
26,515
2016
10,432
10,432
Operating lease commitments – Group as lessee
The future minimum lease payments payable under non-cancellable operating leases (mainly port infrastructure) are as follows:
(in thousands of US dollars)
Not later than 1 year
Later than 1 year and not later than 5 years
Later than 5 years
Total
As at 31 December
2017
3,022
11,807
54,954
69,783
2016
2,738
11,112
52,984
66,834
30. Related party transactions
The Group is jointly controlled by Transportation Investments Holding Limited (“TIHL”), and APM Terminals B.V. (“APM Terminals”).
For the purposes of these financial statements, parties are considered to be related if one party has the ability to control the other party or
exercise significant influence over the other party in making financial and operational decisions as defined by IAS 24 “Related Party Disclosures”.
In considering each possible related party relationship, attention is directed to the substance of the relationship, not merely the legal form.
Related parties may enter into transactions, which unrelated parties might not, and transactions between related parties may not be effected
on the same terms, conditions and amounts as transactions between unrelated parties.
The following transactions were carried out with related parties:
(a) Sale of services
(in thousands of US dollars)
Entities under control of owners of TIHL or APM Terminals
Joint ventures in which GPI is a venture
Other related parties
Total
(b) Sales of property, plant and equipment
Net book amount of sold property, plant and equipment
(in thousands of US dollars)
Joint ventures in which GPI is a venturer
Total
(c) Purchases of services and incurred expenses
(in thousands of US dollars)
Entities under control of owners of TIHL or APM Terminals
Other related parties
Total
For the year ended 31 December
2017
86,118
4
52
86,174
2016
94,065
23
48
94,136
For the year ended 31 December
2017
–
–
2016
116
116
For the year ended 31 December
2017
2,561
2,452
5,013
2016
2,415
2,004
4,419
ANNUAL REPORT 2017
63
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
30. Related party transactions (continued)
(d) Interest income
(in thousands of US dollars)
Joint ventures in which GPI is a venturer
Total
(e) Trade and other receivables and prepayments
(in thousands of US dollars)
Entities under control of owners of TIHL or APM Terminals
Joint ventures in which GPI is a venturer
Other related parties
Total
(f) Trade and other payables
(in thousands of US dollars)
Entities under control of owners of TIHL or APM Terminals
Other related parties
Total
(g) Key management compensation/directors’ remuneration
(in thousands of US dollars)
Key management compensation:
Salaries, payroll taxes and other short term employee benefits
Directors’ remuneration (included also above):
Fees
Emoluments in their executive capacity
Total
(h) Loans to related parties
The details of loans provided mainly to joint ventures in which GPI is a venturer are presented below (see also Note 19):
(in thousands of US dollars)
At the beginning of the year
Loans advanced during the year
Interest charged
Loan and interest repaid during the year
Fair value loss upon inception
Loans converted to share capital (Note 26)
Foreign exchange differences
At the end of the year (Note 19)
For the year ended 31 December
2017
792
792
As at 31 December
2017
8,368
–
23
8,391
As at 31 December
2017
796
190
986
2016
438
438
2016
8,522
3,981
113
12,616
2016
556
90
646
For the year ended 31 December
2017
2016
8,831
9,809
408
677
1,085
381
340
721
For the year ended 31 December
2017
8,472
7,500
792
(1,204)
(1,045)
–
44
14,559
2016
1,629
9,900
438
(482)
–
(2,938)
(75)
8,472
The loans are not secured, bear effective interest at 6.4% (2016: 4.3%) and are repayable in 2022.
31. Events after the balance sheet date
There were no material post balance sheet events which have a bearing on the understanding of these consolidated financial statements.
64
GLOBAL PORTS INVESTMENTS PLC
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF GLOBAL PORTS INVESTMENTS PLC
Report on the audit of the consolidated financial statements
Our opinion
In our opinion, the accompanying consolidated financial statements of Global Ports Investments Plc (the “Company”) and its subsidiaries and joint
ventures (hereafter collectively referred to as the “Group”) give a true and fair view of the consolidated financial position of the Group as at
31 December 2017, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with
International Financial Reporting Standards (IFRSs) as adopted by the European Union and the requirements of the Cyprus Companies Law, Cap. 113.
What we have audited
We have audited the consolidated financial statements which are presented in pages 17 to 64 and comprise:
–
–
–
–
–
–
The consolidated balance sheet as at 31 December 2017;
The consolidated income statement for the year then ended;
The consolidated statement of comprehensive income for the year then ended;
The consolidated statement of changes in equity for the year then ended;
The consolidated statement of cash flows for the year then ended; and
The notes to the consolidated financial statements, which include a summary of significant accounting policies.
The financial reporting framework that has been applied in the preparation of the consolidated financial statements is International Financial
Reporting Standards as adopted by the European Union and the requirements of the Cyprus Companies Law, Cap. 113.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further
described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the Group throughout the period of our appointment in accordance with the International Ethics Standards Board
for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to our audit
of the consolidated financial statements in Cyprus and we have fulfilled our other ethical responsibilities in accordance with these requirements
and the IESBA Code.
Our audit approach
Overview
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the consolidated financial
statements. In particular, we considered where the Board of Directors made subjective judgements; for example, in respect of significant
accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits,
we also addressed the risk of management override of internal controls, including among other matters, consideration of whether there was
evidence of bias that represented a risk of material misstatement due to fraud.
Materiality
Audit
Scope
Key audit
matters
Overall group materiality: USD 4.8 million, which represents 2,5% of Earnings Before Interest, Tax, Depreciation
and Amortisation (“EBITDA”).
We conducted full scope audit procedures for the parent entity; all the significant components; and the
consolidation process.
For the remaining non-significant components we performed a full scope audit; or analytical procedures; and/or
audit of specific account balances.
We have identified the impairment assessment of goodwill and other non-financial assets including individual
assets and cash generating units as the key audit matter.
ANNUAL REPORT 2017
65
FINANCIAL STATEMENTS INDEPENDENT AUDITOR’S REPORT
(CONTINUED)
Materiality
The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance whether the
consolidated financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered
material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the
consolidated financial statements.
Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall group materiality for
the consolidated financial statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to
determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both
individually and in aggregate on the consolidated financial statements as a whole.
Overall group materiality
USD 4.8 million
How we determined it
2,5% of EBITDA
Rationale for the materiality
benchmark applied
– We chose EBITDA as the benchmark, because, in our view:
–
It is the benchmark against which the performance of the Group is most commonly measured by
the users; and It is a generally accepted benchmark.
We chose 2,5% which is within the range of acceptable quantitative materiality thresholds in
auditing standards.
We agreed with the Audit and Risk Committee that we would report to them misstatements identified during our audit above US$ 0.48 million
as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
How we tailored our group audit scope
Global Ports Investments Plc controls or has joint control over a number of entities situated in a number of territories namely Russia, Estonia,
Finland and Cyprus. Considering our ultimate responsibility for the opinion on the Company’s consolidated financial statements we are responsible
for the direction, supervision and performance of the group audit.
The Group’s operations comprise 9 components. The financial information of these components is included in the consolidated financial
statements of the Group. We tailored the scope of our audit and determined the nature and extent of the audit procedures for the components
of the Group to ensure that we perform sufficient work to enable us to provide an opinion on the consolidated financial statements as a whole.
In this context, the determining factors were the structure of the Group, the significance of each component, the risk profile and relevant activities
of the components, the accounting processes and controls, and the industry in which the Group operates.
We conducted full scope audit procedures for the parent entity; all the significant components; and the consolidation process. For the remaining
non-significant components we performed a full scope audit; or analytical procedures; and/or audit of specific account balances.
The group consolidation was audited by the group engagement team. For components located in Russia and Estonia we used component auditors
from other PwC network firms who are familiar with the local laws and regulations to perform the audit work. Where the work was performed by
component auditors, we as group engagement team determined the level of involvement we needed to have in the audit work at those reporting
units to enable us to conclude whether sufficient appropriate audit evidence had been obtained as a basis for our opinion on the group financial
statements as a whole.
Our involvement in the work performed by other auditors of the significant components included, amongst others, regular calls with the
component auditors; discussion and agreement for the nature, timing and extent of the work; and review of the work performed by these
component auditors for significant risk areas.
Our involvement in the work performed by other auditors of the non-significant components included, amongst others, discussion and review
of the work performed by these component auditors for significant risk areas including impairment.
By performing the procedures above at components level, combined with the additional procedures at group level, we have obtained sufficient
and appropriate audit evidence regarding the consolidated financial information of the Group as a whole to provide a basis for our audit opinion
on the consolidated financial statements.
Key audit matters incorporating the most significant risks of material misstatements, including assessed risk
of material misstatements due to fraud
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial
statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole,
and informing our opinion thereon, and we do not provide a separate opinion on these matters.
66
GLOBAL PORTS INVESTMENTS PLC
Key audit matter
How our audit addressed the key audit matter
The Group performed an impairment test for all the cash generating
units (“CGUs”). We focused on this area due to:
–
–
The size of the goodwill and other non-financial assets; and
The assessment of the recoverable amount of the CGUs involves
complex and subjective judgements about the future results of
the business and the applicable discount rates to be used.
We evaluated the valuation inputs and assumptions, methodologies
and calculations adopted by the Company’s Board of Directors
in determining the CGUs’ recoverable amounts. In order to assist us
in our audit we involved PwC valuation experts that have the
knowledge and experience in the industry and country of operation to
assist us in evaluating methodology, models and assumptions used.
In particular, we focused our audit effort on the Board of Directors’
assessment of impairment of the following CGUs:
–
AS Vopak E.O.S. (VEOS) CGUs due to the fact that there was
material impairment during the period; and
First Container Terminal (FCT), Ust-Luga Container Terminal
(ULCT) and Petrolesport Terminal (PLP) CGUs as a reasonably
possible change in the key assumptions would cause the carrying
amounts of these CGUs to exceed their recoverable amounts.
–
The expected cash flows (budgets) for the year 2018 and the remaining
assumptions used for the CGUs’ value in use calculations have been
approved by the Company’s Board of Directors. Certain assumptions
made by the Board of Directors in the determination of the CGUs’
value in use calculations were considered to be key estimates.
Based on the results of the impairment tests no impairment losses were
recognised other that the impairment loss amounting to US$ 11,400
thousand for Logistika-Terminal (LT) CGU that was a result of its
classification as an asset held for sale and its measurement at the
lower of its carrying amount and fair value less cost to sell.
For the FCT and ULCT CGUs, it was determined that despite the fact
that the impairment test has shown a recoverable amount higher than
the carrying amount of the CGU no reversal of previously recognised
impairment was necessary because there is no observable external
or internal information to support reversal as required by IAS 36
“Impairment of Assets”; and the tests are still sensitive to the change
of certain key parameters.
For VEOS CGU, an impairment charge amounting to US$ 71,578
thousand was recognised through the share of profit/(loss) of the
joint venture, reducing the carrying amount of the investment in the
joint venture to US$ 7,341 thousand. Due to the significant judgement
and subjectivity in relation to the 2018 expectation, it is reasonably
possible on the basis of existing knowledge that outcomes within the
next financial year that are different from the assumption could require
a material adjustment to the carrying amount of the CGU and the
investment in joint venture.
Refer to Notes 4, 26 and 27 to the consolidated financial statements
for the related disclosures.
We evaluated and challenged the composition of the future cash flow
forecasts in the model including comparing them to the latest budgets
approved by the Board of Directors.
We challenged:
–
The Board of Directors’ key assumptions for the long term growth
rates of key inputs, such as volume and price and compared
them to historical results, economic and industry forecasts;
The discount rate applied to these cash flows, by assessing the
weighted average cost of capital, cost of debt and considering
territory specific factors; and
The macroeconomic assumptions used by the Board of Directors,
by comparing them to market benchmarks and publicly
available information.
–
–
For VEOS CGU, we have challenged the Board of Directors regarding
the outcomes within the next financial year that could lead to
a material adjustment to the carrying amount of the CGU.
For FCT and ULCT CGUs, we have challenged the Board of directors
on the no reversal of previously recognised impairment.
We further challenged the Board of Directors on the adequacy of their
sensitivity calculations over the CGUs’ recoverable amount and
determined the assumptions that created the most variability; being
assumptions for throughput volume, price per unit, growth rates,
and discount rates. For certain terminals, revenue from other cargoes
and container storage times are also relevant.
We lastly evaluated the adequacy of the disclosures made in
Notes 4, 26 and 27 of the consolidated financial statements, including
those regarding the key assumptions and sensitivities to changes in
such assumptions.
Based on the evidence obtained, we found that the methodologies,
assumptions, data used within the models and disclosures
are appropriate.
Reporting on other information
The Board of Directors is responsible for the other information. The other information comprises the information included in the Consolidated
Management Report (which includes the Corporate Governance Statement) which we obtained prior to the date of this auditor’s report and
the Annual Report, which is expected to be made available to us after that date. Other information does not include the consolidated financial
statements and our auditor’s report thereon.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance
conclusion thereon.
ANNUAL REPORT 2017
67
FINANCIAL STATEMENTS INDEPENDENT AUDITOR’S REPORT
(CONTINUED)
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above and,
in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge
obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information that
we obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required
to report that fact. We have nothing to report in this regard.
When we read the Company’s complete Annual Report, if we conclude that there is a material misstatement therein, we are required to
communicate the matter to those charged with governance and if not corrected, we will bring the matter to the attention of the members
of the Company at the Company’s Annual General Meeting and we will take such other action as may be required.
Responsibilities of the Board of Directors and those charged with governance for the consolidated
financial statements
The Board of Directors is responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance
with International Financial Reporting Standards as adopted by the European Union and the requirements of the Cyprus Companies Law, Cap. 113,
and for such internal control as the Board of Directors determines is necessary to enable the preparation of consolidated financial statements that
are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Board of Directors is responsible for assessing the Group’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors
either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of
assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of these consolidated financial statements.
–
–
–
As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and
–
perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our
opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made
by the Board of Directors.
Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to
continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report
to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may
cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether
the consolidated financial statements represent the underlying transactions and events in a manner that achieves a true and fair view.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to
express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the
group audit. We remain solely responsible for our audit opinion.
–
–
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged
with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with
them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit
of the consolidated financial statements of the current period and are therefore the key audit matters.
68
GLOBAL PORTS INVESTMENTS PLC
Report on other legal and regulatory requirements
Pursuant to the requirements of Article 10(2) of the EU Regulation 537/2014 we provide the following information in our Independent Auditor’s
Report, which is required in addition to the requirements of ISAs.
Appointment of the auditor and period of engagement
We were first appointed as auditors of the Company in 2008 by shareholder resolution for the audit of the financial statements for the period
ended 31 December 2008. Our appointment has been renewed annually, since then, by shareholder resolution. In 2011 the Company was listed
in the Main Market of the London Stock Exchange and accordingly the first financial year after the Company qualified as an EU PIE was the year
ended 31 December 2012. Since then, the total period of uninterrupted engagement appointment was 6 years.
Consistency of the additional report to the Audit Committee
We confirm that our audit opinion on the consolidated financial statements expressed in this report is consistent with the additional report to the
Audit and Risk Committee of the Company, which we issued on 12 March 2018 in accordance with Article 11 of the EU Regulation 537/2014.
Provision of non-audit services
We declare that no prohibited non-audit services referred to in Article 5 of the EU Regulation 537/2014 and Section 72 of the Auditors’ Law of 2017
were provided. In addition, there are no non audit services which were provided by us to the Group and which have not been disclosed in the
consolidated financial statements or the consolidated management report.
Other legal requirements
Pursuant to the additional requirements of the Auditors Law of 2017, we report the following:
–
In our opinion, based on the work undertaken in the course of our audit, the consolidated management report has been prepared in
accordance with the requirements of the Cyprus Companies Law, Cap. 113, and the information given is consistent with the consolidated
financial statements.
In light of the knowledge and understanding of the Group and its environment obtained in the course of the audit, we are required to report
if we have identified material misstatements in the consolidated management report. We have nothing to report in this respect.
In our opinion, based on the work undertaken in the course of our audit, the information included in the corporate governance statement
in accordance with the requirements of subparagraphs (iv) and (v) of paragraph 2(a) of Article 151 of the Cyprus Companies Law, Cap. 113,
and which is included as a specific section of the consolidated management report, have been prepared in accordance with the
requirements of the Cyprus Companies Law, Cap, 113, and is consistent with the consolidated financial statements.
In our opinion, based on the work undertaken in the course of our audit, the corporate governance statement includes all information
referred to in subparagraphs (i), (ii), (iii), (vi) and (vii) of paragraph 2(a) of Article 151 of the Cyprus Companies Law, Cap. 113.
In light of the knowledge and understanding of the Group and its environment obtained in the course of the audit, we are required to report
if we have identified material misstatements in the corporate governance statement in relation to the information disclosed for items (iv)
and (v) of subparagraph 2(a) of Article 151 of the Cyprus Companies Law, Cap. 113. We have nothing to report in this respect.
–
–
–
–
Other matter
This report, including the opinion, has been prepared for and only for the Company’s members as a body in accordance with Article 10(1) of the EU
Regulation 537/2014 and Section 69 of the Auditors Law of 2017 and for no other purpose. We do not, in giving this opinion, accept or assume
responsibility for any other purpose or to any other person to whose knowledge this report may come to.
The engagement partner on the audit resulting in this independent auditor’s report is Tasos Nolas.
Tasos Nolas
Certified Public Accountant and Registered Auditor
for and on behalf of
PricewaterhouseCoopers Limited
Certified Public Accountants and Registered Auditors
City House, 6 Karaiskakis Street,
CY-3032 Limassol, Cyprus
Limassol, 13 March 2018
ANNUAL REPORT 2017
69
FINANCIAL STATEMENTS PARENT COMPANY
FINANCIAL
STATEMENTS
GLOBAL PORTS INVESTMENTS PLC
GLOBAL PORTS INVESTMENTS PLC
PARENT COMPANY FINANCIAL STATEMENTS
ANNUAL REPORT 2017
ANNUAL REPORT 2017
FINANCIAL STATEMENTS DIRECTORS’ REPORT AND PARENT COMPANY FINANCIAL STATEMENTS
31 DECEMBER 2017
TABLE OF CONTENTS
Board of Directors and other officers
Management Report
Directors’ Responsibility Statement
Statement of comprehensive income for the year ended 31 December 2017
Balance sheet as at 31 December 2017
Statement of changes in equity for the year ended 31 December 2017
Statement of cash flows for the year ended 31 December 2017
Notes to the financial statements
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
General information
Summary of significant accounting policies
Financial risk management
Critical accounting estimates and judgments
Finance income – net
Administrative expenses
Other gains/(losses) – net
Staff costs
Finance costs
Income tax expense
Financial instruments by category
Credit quality of financial assets
Property, plant and equipment
Investments in subsidiaries
Investments in joint ventures
Loans receivable
Trade and other receivables
Cash and bank balances
Share capital, share premium and dividends
Trade and other payables
Contingencies and commitments
Related party transactions
Events after the balance sheet date
Independent Auditor’s Report
1
3
16
17
18
19
20
21
21
21
28
30
31
31
31
32
32
32
32
33
33
33
34
34
35
35
35
36
36
37
39
40
GLOBAL PORTS INVESTMENTS PLC
GLOBAL PORTS INVESTMENTS PLC
BOARD OF DIRECTORS AND OTHER OFFICERS
Board of Directors
Mr. Morten Henrick Engelstoft (appointed 31 October 2016)
(Mrs. Iana Boyd Penkova and Mrs. Olga Gorbarenko are the alternates to Mr. Morten Henrick Engelstoft)
Chairman of the Board of Directors
Non-Executive Director
Member of Remuneration and Nomination Committees
Mr. Nikita Mishin (appointed 15 December 2008)
(Mr. Mikhail Loganov is the alternate to Mr. Nikita Mishin)
Vice-Chairman of the Board of Directors
Non-Executive Director
Member of Remuneration and Nomination Committees
Capt. Bryan Smith (appointed 19 August 2008)
Senior Independent Non-Executive Director
Chairman of Remuneration and Nomination Committees
Mrs. Britta Dalunde (appointed 12 May 2017)
Independent Non-Executive Director
Chairman of Audit and Risk Committee
Mrs. Inna Kuznetsova (appointed 01 January 2018)
Independent Non-Executive Director
Member of Audit and Risk, Nomination and Remuneration Committees
Mr. Lambros Papadopoulos (appointed 01 January 2018)
Independent Non-Executive Director
Member of Audit and Risk Committee
Mr. Soren Jakobsen (appointed 02 March 2018)
(Mrs. Olga Gorbarenko is the alternate to Mr. Soren Jakobsen)
Non-Executive Director
Member of Audit and Risk, Nomination and Remuneration Committees
Mrs. Elia Nicolaou (appointed 12 May 2017)
Non-Executive Director
Member of Remuneration and Nomination Committees
Mr. Konstantin Shirokov (appointed 15 December 2008)
Non-Executive Director
Member of Audit and Risk Committee
Mr. Alexander Iodchin (appointed 15 August 2008)
Executive Director
Mr. Mikhail Loganov (appointed 15 December 2008)
Executive Director
Mrs. Laoura Michael (appointed 23 January 2013)
(Mr. Nicholas Charles Terry is the alternate to Mrs. Laoura Michael)
Non-Executive Director
Mr. Michalakis Christofides (appointed 30 July 2014)
Non-Executive Director
Mr. Vadim Kryukov (appointed 30 July 2014)
Non-Executive Director
Mr. Nicholas Charles Terry (appointed 31 October 2016)
(Mrs. Laoura Michael is the alternate to Mr. Nicholas Charles Terry)
Non-executive Director
Mrs. Iana Boyd (appointed 29 January 2018)
Non-executive Director
ANNUAL REPORT 2017
1
PARENT COMPANY FINANCIAL STATEMENTS BOARD OF DIRECTORS AND OTHER OFFICERS (CONTINUED)
Board of Directors (continued)
Mr. Tiemen Meester (resigned on 14 February 2017)
Mrs. Siobhan Walker (resigned on 12 May 2017)
Dr. Alexander Nazarchuk (resigned on 12 May 2017)
Mr. Gerard Jan van Spall (resigned on 29 January 2018)
Mr. Peder Sondergaard (resigned on 01 February 2018)
Board support
The Company Secretary is available to advise all Directors to ensure compliance with the Board procedures. Also a procedure is in place to enable
Directors, if they so wish, to seek independent professional advice at the Company’s expense.
Company Secretary
Team Nominees Limited
20 Omirou Street
Ayios Nicolaos
CY-3095 Limassol
Cyprus
Registered office
20 Omirou Street
Ayios Nicolaos
CY-3095 Limassol
Cyprus
2
GLOBAL PORTS INVESTMENTS PLC
MANAGEMENT REPORT
1.
The Board of Directors presents its report together with the audited financial statements of Global Ports Investments Plc (hereafter also
referred to as “GPI” or the “Company”) for the year ended 31 December 2017. The Company’s financial statements have been prepared in
accordance with International Financial Reporting Standards (hereafter also referred as “IFRS”) as adopted by the European Union (“EU”)
and the requirements of Cyprus Companies Law, Cap. 113.
Principal activities and nature of operations of the Company
2.
The principal activities of the Company, which are unchanged from the previous year, is the holding of investments including any interest
earning activities. The subsidiaries and joint-ventures of the Company (together with the Company the “Group”) are engaged in the
operation of container and oil products terminals in Russia and the Baltics. The Group offers its customers a wide range of services for their
import and export logistics operations.
Changes in group structure
3. During the year ended 31 December 2017 the management of the Group continued its efforts in optimisation of the Group structure. LLC
Rolis was sold by JSC Logistica-Terminal to NCC Pacific Investments Ltd. T.O. Services Ltd, LLC Kran-1, LLC Kran-2, LLC Kran-3 were liquidated.
LLC Shahovo-19 merged with LLC Shahovo-18. LLC ZASM was sold to LLC Farwater. The management launched the liquidation of LLC
Container-Depot East and LLC Cargo Connexion East which was finalised in February-March 2018.
4.
There were no other material changes in the group structure.
Review of developments, position and performance of the Group’s business
5.
The strong recovery in the Russian container market continued in the second half of 2017, posting 16%* growth in volumes for the full year. This
growth was principally driven by a revival in imports, due to improved consumer demand, along with increased containerisation of exports.
6. Against this backdrop, the Group continued to implement its strategy of harnessing the recovery of the container market, developing
additional revenue streams, improving operational efficiency, maximising free cash flow generation and deleveraging.
7.
The growth of Global Ports’ Consolidated Marine Container Throughput accelerated to 11.8%* in the second half of 2017, resulting in 6.8%*
growth for 2017 as a whole. This acceleration in growth has continued into 2018 with a 23%* increase in Consolidated Marine Container
Throughput in January-February 2018, significantly outpacing the Russian container market growth of 16%* for the same two-month period.
8.
The Group also delivered a record 21.9%* year-on-year increase in Consolidated Marine Bulk Throughput in 2017 which reached an all-time
high of 2.7 million tonnes*.
9. Based on these operational achievements, Global Ports generated Revenue of US$ 330.5 million, Adjusted EBITDA of US$ 201.6 million*, Gross
profit of US$ 182.0 million and strong Free Cash Flow of US$ 145.9 million*. The Group reduced Total Debt by a further US$ 70.2 million* over
the period.
10. The profit of the Company for the year ended 31 December 2017 was US$ 1,555 thousand (2016: net loss US$ (294,375) thousand). On
31 December 2017 the total assets of the Company were US$ 736,092 thousand (2016: US$ 736,727 thousand) and the net assets were US$
708,227 thousand (2016: US$ 706,672 thousand). The financial position, development and performance of the Group as presented in these
consolidated financial statements are considered satisfactory.
11.
In December 2017 Moscow Arbitrage Court has approved the terms of a settlement agreement between the Russian Federal Antimonopoly
Service (FAS) and the Group’s VSC, PLP and FCT terminals with respect to the findings of FAS in April 2017 that these terminals (as well as a
number of other Russian terminal operators) was in breach of antimonopoly laws in relation to the pricing of stevedoring services in Russian
ports. The Group challenged the FAS findings with respect to each of FCT, VSC and PLP and appealed against the orders in court. The terms
of the settlement will not have any material impact on the Group’s financial position or cash flow and will not negatively affect operating
activities in any significant way.
12. Certain non-IFRS financial measures and operational information above which is derived from the management accounts is marked in this
announcement with an asterisk {*}. Terms used above are defined as follows:
Adjusted EBITDA (a non-IFRS financial measure) for Global Ports Group is defined as profit for the period before income tax expense, finance
(income)/costs—net, depreciation of property, plant and equipment, amortisation of intangible assets, share of profit/(loss) of joint ventures
accounted for using the equity method, other gains/(losses)—net and impairment of goodwill and property, plant and equipment and
intangible assets.
Consolidated Marine Bulk Throughput is defined as combined marine bulk throughput by consolidated terminals: PLP, VSC, FCT and ULCT.
Consolidated Marine Container Throughput is defined as combined marine container throughput by consolidated marine terminals: PLP, VSC,
FCT and ULCT.
Free Cash Flow (a non-IFRS financial measure) is calculated as Net cash from operating activities less Purchase of property, plant and equipment.
Total Debt (a non-IFRS financial measure) is defined as a sum of current borrowings, non-current borrowings and derivative financial instruments.
ANNUAL REPORT 2017
3
PARENT COMPANY FINANCIAL STATEMENTS
MANAGEMENT REPORT (CONTINUED)
Risk management process, principal risks and uncertainties
13. GPI is exposed to a variety of risks that can have financial, operational and compliance impacts on its business performance, reputation
and licence to operate. The Board recognises that creating shareholder value involves the acceptance of risk. Effective management of risk
is therefore critical to achieving the corporate objective of delivering long-term growth and added value to our shareholders.
14. Global Ports has been developing and embedding Enterprise Risk Management system (the ERM) that is designed to identify, assess, respond
monitor and, where possible, mitigate or eliminate threats to the business caused by changes in the external and internal business, financial,
regulatory and operating environment.
15. Global Ports bases its risk management activities on a series of well-defined risk management principles, derived from experience, leading
practice, and corporate governance regimes. The Company updates and improves its risk management framework on a regular basis to
remain competitive in a changing and uncertain environment. Within 2017 a better overview and summary of major risks facing the Group
was developed and presented to the Board. It facilitates the analysis of risk ratings and their trends.
16. The GPI Board has overall oversight responsibility for the GPI’s risk management and it systematically monitors and assesses the risks
attributable to the Group’s performance and delivery of the GPI strategy. After identifying and assessing a risk, the Group selects and deploys
the appropriate risk response aimed at reducing the likelihood of its occurrence and/or potential adverse impact.
17. The GPI Board delegates to the Chief Executive Officer responsibility for effective and efficient implementation and maintenance of the risk
management system. Day-to-day responsibility for the risk management lies with the management team. The Audit and Risk Committee
is authorised by the Board to monitor, review and report on the organization, functionality and effectiveness of the Group’s ERM system.
18. Global Ports is exposed to a variety of risks which are listed below. The order in which the risks are presented is not intended to be an
indication of the probability of their occurrence or the magnitude of their potential effects.
19. Not all of these risks are within the Company’s control, and the list cannot be considered to be exhaustive, as other risks and uncertainties
may emerge in a changing external and internal environment that could have a material adverse effect on the Group’s ability to achieve its
business objectives and deliver its overall strategy.
20. Further information on our risk management system including a detailed description of identified risk factors is contained in the notes to the
Financial Statements attached to this report.
21. The Group’s financial risk management and critical accounting estimates and judgments are disclosed in Notes 3 and 4 to the
financial statements.
22. The Group’s contingencies are disclosed in Note 21 to the financial statements.
Risk factor
Strategic risks
Risk management approach
Market conditions:
Global Ports’ operations are dependent on the global macroeconomic
environment and resulting trade flows, including in particular
container volumes.
Container market throughput is closely correlated to the volume
of imported goods, which in turn is driven by domestic
consumer demand.
The Group remains exposed to the risk of contraction in the Russian
economy which if it were to occur could further dampen consumer
demand and lead to a deterioration in the container market which
could have a materially adverse impact on the Group.
The Group has reacted to the declining throughput in the container
market by:
–
–
–
–
Focusing on quality service;
Offering operational flexibility to the clients;
Effective management of costs; and
Adopting new revenue streams.
In addition, the Group aims to position itself to lead a future market
recovery through superior service and cost discipline.
4
GLOBAL PORTS INVESTMENTS PLC
Risk factor
Risk management approach
Competition:
Challenging market trading conditions mean that competition
pressures from other container terminals remains high. Further
consolidation between container terminal operators and container
shipping companies, introduction of new capacity and carrier
consolidation could result in greater price competition, lower
utilisation, and a potential deterioration in profitability.
In recent years, the Russian market has observed significant new
container handling capacity coming on-stream, for example the
new port terminal at Bronka, which competes with the Group’s ports
in the Baltic Sea Basin.
Additionally, strategic international investors may develop or acquire
stakes in existing competitor Russian container terminals, which could
bring new expertise into the market and divert clients and cargoes
away from the Group.
Given the historically high margins in the Russian container handling
industry, this trend may continue.
Political, economic and social stability:
Instability in the Russian economy as well as social and political
instability could create an uncertain operating environment and
affect the Group’s ability to sell its services due to significant
economic, political, legal and legislative risks.
Certain government policies or the selective and arbitrary enforcement
of such policies could make it more difficult for the Group to compete
effectively and/or impact its profitability.
The Group may also be adversely affected by US, EU and other
government sanctions against Russian business whose measures
have had and may continue to have an adverse effect on the Russian
economy and demand for commodities. Ongoing sanctions could also
adversely impact the Group’s ability to obtain financing on favourable
terms and to deal with certain persons and entities in Russia or in
other countries.
Operational risks
Leases of terminal land:
The Group leases a significant amount of the land and quays required
to operate its terminals from government agencies and any revision
or alteration of the terms of these leases or the termination of these
leases, or changes to the underlying property rights under these
leases, could adversely affect the Group’s business.
Customer Profile and Concentration:
The Group is dependent on a relatively limited number of major
customers (shipping lines etc.) for a significant portion of its business.
These customers are affected by conditions in their market sector
which can result in contract changes and renegotiations as well as
spending constraints, this is further exacerbated by carrier
consolidation process.
Reliance on third parties:
The Group is dependent on the performance of services by third
parties outside its control, including the performance by all other
participants in the logistics chain, such as customs inspectors,
supervisory authorities and others, and the performance of security
procedures carried out at other port facilities and by its shipping
line customers.
The Group actively monitors the competitive landscape and adjusts
its commercial strategy accordingly, i.e. the Group builds long-term
relationships with top customers based on a global approach to account
management and contractual agreements incentivising growth
of throughput.
The Group’s focus on service quality is a key differentiator to its
competition and the Group believes this is one of its key
competitive advantages.
The Group has made long-term investments in its terminals and modern
equipment to ensure competitive levels of service. It operates on a
long-term horizon and its terminals represent core infrastructure in
Russia that will continue to operate for the next 10-20 years or beyond.
Because the Group possesses modern, up-to-date facilities and available
capacity, it requires only minimal additional capital expenditure in the
short to medium term thus preserving its ability to offer capacity to the
market when necessary without sizeable additional investments.
The Group has adapted to the macroeconomic challenges posed since
the second half of 2014. Its approach of effective cost management,
focus on deleveraging and refinancing of its debt portfolio by switching
all borrowings to fixed rates and moving to longer maturities are
designed to make the Group more resilient to short term economic
challenges in Russia as well as the wider regional and global environment.
The Group has developed a system to monitor compliance with
restrictions posed by international sanctions.
The Group continues to maintain an international base of shareholders,
bondholders and business partners.
The Group is not aware of any specific sanctions risks related to its
ownership or operations.
The Group believes it has a stable situation at present regarding its land
leases and its terminals have been in operation for a number of years.
The Group owns the freehold on 66% of the total land of its terminals
and 70% of the land of its container and inland terminals in Russia. The
rest of the Group’s land is held under long-term leases (up-to 49 years).
The Group conducts extensive and regular dialogue with key customers
and actively monitors changes that might affect our customers’
demand for our services.
The Group has a clear strategy to reduce its dependence on its major
customers, targeting new potential customers and new cargo segments.
The Group is also growing its share of non-container revenues through
successfully building its presence in marine bulk cargo like coal (2017:
share of non-container revenue was 23% and 19% in 2016).
The Group strives to maintain a continuous dialog with third parties
across the supply chain. In addition, its geographic diversification
provides it with some flexibility in its logistics, should bottlenecks
develop in one area.
ANNUAL REPORT 2017
5
PARENT COMPANY FINANCIAL STATEMENTS MANAGEMENT REPORT (CONTINUED)
Risk management process, principal risks and uncertainties (continued)
Risk factor
Risk management approach
Oil products:
The Group’s oil products business could be affected by changes in
Russia’s exports of oil products and handling of such exports at its
oil products terminal in Estonia, a decline in global demand for oil
products or in Russian oil product export volumes or any change
in trade relationships with Estonia.
Tariff regulation:
Tariffs for certain services at certain of the Group’s terminals have
been in the past regulated by the Russian Federal Antimonopoly
Service and, as a result, the tariffs charged for such services were,
and may potentially in the future be, subject to a maximum tariff
rate and/or fixed in Russian roubles as PLP, VSC, and FCT, like many
other Russian seaport operators, are classified as natural monopolies
under Russian law.
Human resources management:
The Group’s competitive position and prospects depend on the
expertise and experience of its key management team and its ability
to continue to attract, retain and motivate qualified personnel.
Industrial action or adverse labour relations could disrupt the Group’s
operating activities and have an adverse effect on performance results.
Health, safety, security and environment:
Accidents involving the handling of hazardous materials and oil
products at the Group’s terminals could disrupt its business and
operations and/or subject the Group to environmental and
other liabilities.
The risk of safety incidents is inherent in the Group’s businesses.
The Group’s operations could be adversely affected by terrorist attacks,
natural disasters or other catastrophic events beyond its control.
Regulatory risks
Regulatory compliance:
The Group is subject to a wide variety of regulations, standards and
requirements and may face substantial liability if it fails to comply with
existing regulations applicable to its businesses. The Group’s terminal
operations are subject to extensive laws and regulations governing,
among other things, the loading, unloading and storage of hazardous
materials, environmental protection and health and safety.
The Group believes, like most international forecasters, that the global
demand for oil products remains cyclical and might grow again over
the medium term.
The Group continues to monitor for any legislative proposals and
regulatory actions that could lead to changes to the existing tariff
regulations. It seeks a proactive dialog with the relevant Russian federal
authorities. It believes it is as well placed as any market participant to
adapt to any – future changes in tariff regulation.
The Group is committed to recruiting and engaging Russian and
international managers and experts to meet its needs. The Group
offers competitive salaries and benefits to employees at all levels to
foster and retain top talent. In addition the Group pays special attention
to professional development as well as engagement in socially
responsible business practices and supporting local communities.
The Group strives to maintain a positive working relationship with labour
unions at its facilities. Moreover, it pursues overall labour policies
designed to provide a salary and benefit package in line with the
expectations of our employees.
The Group has implemented clear environmental and safety policies
designed around international best practices and benchmark using
such measures as GPI Global Minimum Requirements.
Safety is one of the Group’s top priorities. A safety strategy and annual
action plan have been developed, aiming to build a sustainable safety
culture covering the whole Group. The detailed roadmap is designed
to ensure sustainable implementation of safety culture over the
medium term.
Similarly, GPI works with all its stakeholders to maintain high levels of
security around port facilities and vessel operations to minimise the risk
of terrorist attack.
The Group strives to be in compliance at all times with all regulations
governing its activities and devotes considerable management and
financial resources to ensure compliance.
6
GLOBAL PORTS INVESTMENTS PLC
Risk factor
Risk management approach
Changes in regulations:
Changes to existing regulations or the introduction of new regulations,
procedures or licensing requirements are beyond the Group’s control
and may be influenced by political or commercial considerations not
aligned with the Group’s interests. Any expansion of the scope of the
regulations governing the Group’s environmental obligations, in
particular, would likely involve substantial additional costs, including
costs relating to maintenance and inspection, development and
implementation of emergency procedures and insurance coverage
or other financial assurance of its ability to address environmental
incidents or external threats.
Compliance and shareholder risk
Conflict of interests:
The Group’s controlling beneficial shareholders may have interests
that conflict with those of the holders of the GDRs or notes.
The major implications of this risk are that (i) co-controlling
shareholders pursue other businesses not related to GPI and hence
may not be deeply involved with developing GPI and (ii) one of the
major shareholders is also a major customer of the Group.
Legal and tax risks:
Adverse determination of pending and potential legal actions
involving the Group’s subsidiaries could have an adverse effect on
the Group’s business, revenues and cash flows and the price of the
GDRs. Weaknesses relating to the Russian legal and tax system
and appropriate Russian law create an uncertain environment for
investment and business activity and legislation may not adequately
protect against expropriation and nationalisation. The lack of
independence of certain members of the judiciary, the difficulty
of enforcing court decisions and governmental discretion claims
could prevent the Group from obtaining effective redress in
court proceedings.
Financial risks
FOREX risks:
The Group is subject to foreign-exchange risk arising from various
currency exposures, primarily the Russian rouble and the US dollar.
Foreign-exchange risk is the risk to profits and cash flows of the
Group arising from movement of foreign-exchange rates due to
inability to timely plan for and appropriately react to fluctuations
in foreign-exchange rates. Risk also arises from revaluation of assets
and liabilities denominated in foreign currency.
The Group maintains a constructive dialog with relevant federal,
regional and local authorities regarding existing and planned
regulations. The Group does not have the power to block any or all
regulations it may judge to be harmful, but this dialog should ensure
it has time to react to changes in the regulatory environment.
The Group’s corporate governance system is designed to maximise
the company’s value for all shareholders and ensure the interests of all
stakeholders are taken into account. The Group’s LSE listing ensures our
compliance with the highest international standards. In addition, the
Board has highly experienced members, including strong
independent directors.
The Group maintains a strong and professional legal function designed
to monitor legal risks, avoid legal actions where possible and carefully
oversee any legal actions that may occur.
The Group performs ongoing monitoring of changes in Russian and
international tax legislation and court practice and develops the
Group’s legal and tax position accordingly.
Currently, a significant part of the Group’s revenue, and a major part
of the Group’s debt is denominated in U.S. dollars, whereas most of
the Group’s operating expenses are and will continue to be
denominated and settled in Russian roubles. The Group uses several
different instruments and approaches to minimise future risks from
volatility in the value of the Russian rouble and US dollar. To date, this
strategy has proved effective. Should the Group have to switch the
currency of its tariffs to RUR, it will need to convert the existing debt
into the same currency to avoid significant foreign exchange risks
arising from such a mismatch.
Credit risk:
The Group may be subject to credit risk due to its dependence on
key customers and suppliers.
The Group closely tracks its accounts receivables overall and the
creditworthiness of key customers and suppliers.
ANNUAL REPORT 2017
7
PARENT COMPANY FINANCIAL STATEMENTS MANAGEMENT REPORT (CONTINUED)
Risk management process, principal risks and uncertainties (continued)
Risk factor
Risk management approach
Debt, leverage and liquidity:
The Group’s indebtedness or the enforcement of certain provisions
of its financing arrangements could affect its business or
growth prospects.
Failure to promptly monitor and forecast compliance with loan
covenants both at the Group and individual terminal levels may
result in covenant breaches and technical defaults.
The Group has been able to reduce its total debt level, as planned,
in 2017 and continued reduction of the debt above and beyond
minimum repayment requirements remains a management priority
in 2018.
Liquidity risk is carefully monitored, with regular forecasts prepared
for the Group and its operating entities.
If the Group is unable to access funds (liquidity) it may be unable
to meet financial obligations when they fall due, or on an ongoing
basis, to borrow funds in the market at an acceptable price to fund
its commitments.
Although the risk of liquidity shortfalls within the following 18-24
months has been significantly reduced via extensions of debt maturities
through public debt issuances in 2016, the liquidity position is carefully
monitored in case of further deterioration of financial performance.
The Group regularly stress tests scenarios when different negative
trends that could affect cash flows are identified.
Information technology and security:
The Group’s container terminals rely on IT and technology systems to
keep their operations running efficiently, prevent disruptions to logistic
supply chains, and monitor and control all aspects of their operations.
The Group has centralised its IT function in recent years and believes
this is an important step in ensuring both the efficiency and consistency
of the Group’s security protocols implementation.
Any IT glitches can create major disruptions for complex logistic
supply chains.
Any prolonged failure or disruption of these IT systems, whether the
result of human error, deliberate data breech or external cyber threat
could create major disruptions in terminal operations. This could
dramatically affect the Group’s ability to render its services to
customers, leading to reputational damage, disruption to business
operations and an inability to meet its contractual obligations.
The Group has further enhanced its IT security and security awareness
during the year. As part of its ongoing response to the threat of
cyber-attacks, the Group is currently rolling out additional
enhancements to its threat detection systems across all subsidiaries.
The Group continuously improves the cyber threats awareness and
training among its employees and develops the business continuity
plans in case of any disruptions.
Internal control and risk management systems in relation to the financial reporting process
23. The internal control and risk management systems relating to financial reporting are designed to provide reasonable assurance regarding
the reliability of financial reporting and to ensure compliance with applicable laws and regulations.
24. Financial reporting and supervision are based on approved budgets and on monthly performance reporting.
25. The Audit and Risk Committee of the Board of directors of the Company reviews certain high-risk areas at least once a year, including
the following:
– Significant accounting estimates; and
– Material changes to the accounting policies.
26. Reporting from various Group entities to the centralised unit is supervised on an ongoing basis and procedures have been established for
control and checking of such reporting. Procedures have also been set up to ensure that any errors are communicated to and corrected by
the reporting entities. The internal controls are subject to ongoing reviews, including in connection with the regular control inspections at
subsidiaries conducted by the central unit. The results from these reviews are submitted to the executive management, the Audit and Risk
Committee and Board of Directors. The internal financial reporting ensures an effective process to monitor the Company’s financial results,
making it possible to identify and correct any errors or omissions. The monthly financial reporting from the respective entities is analysed and
monitored by the centralised department in order to assess the financial and operating performance as well as to identify any weaknesses in
the internal reporting, failures to comply with procedures and the Group accounting policies. The Audit and Risk Committee follows up to
ensure that any internal control weaknesses are mitigated and that any errors or omissions in the financial statements identified and
reported by the auditors are corrected, including controls or procedures implemented to prevent such errors or omissions.
8
GLOBAL PORTS INVESTMENTS PLC
Use of financial instruments by the Group
27. The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, cash flow and fair value interest rate
risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and
seeks to minimise potential adverse effects on the Group’s financial results. Risk management is carried out by a centralised financial
department as well as financial departments in operating entities under policies approved by the Board of Directors. These departments
identify, evaluate and take actions to mitigate financial risks in close co-operation with the operating units. The Board provides principles
for overall risk management covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial
instruments and non-derivative financial instruments, and investment of excess liquidity.
(a) Market risk
(i) Foreign exchange risk
28. Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities are denominated in the currency different
from the functional currency of each of the entities of the Group.
29. The revenues of Russian operations are mainly priced in US dollars and Russian roubles, whereas most of expenses are denominated and
settled in Russian roubles.
30. The Group uses from time to time foreign currency swaps (derivatives) to manage its exposures to foreign exchange risk.
31. The Group will continue to review its borrowing policy in order to maintain a balance between term and interest rate of available financing
and its currency.
32. Currently the long-term debt of the Group is denominated in US dollars and Russian roubles. Most of rouble-denominated debt is effectively
swapped to USD-debt with a lower interest rate.
33. The US dollar and Euro interest rates are relatively more attractive compared to the Russian rouble interest rate.
(b) Cash flow and fair value interest rate risk
34. The Group is not significantly exposed to changes in market interest rates as substantially all of its borrowings portfolio consists of fixed
rate debt.
35. However, the Group is exposed to fair value interest rate risk through market value fluctuations of loans receivable, borrowings and lease
liabilities with fixed rates.
36. Management monitors changes in interest rates and takes steps to mitigate these risks as far as practicable and economically feasible.
(c) Credit risk
37. Financial assets, which potentially subject the Group to credit risk, consist principally of trade receivables and loans receivable (Note 16) and
cash and cash equivalents (Note 18). The Group has policies in place to ensure that sales of goods and services are made to customers with
an appropriate credit history. However, the Group’s business is heavily dependent on several large key customers accounting for substantial
part of the Group’s revenue. Cash and cash equivalents are placed in reliable banks with good history.
(d) Liquidity risk
38. Management controls current liquidity based on expected cash flows and expected revenue receipts.
39. Cash flow forecasting is performed at the level of operating entities of the group and at consolidated level by the centralised department.
The Group’s finance department monitors forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to meet operational
needs as well as scheduled debt service while maintaining sufficient headroom to ensure that the Group does not breach covenants (where
applicable) on any of its borrowing facilities. Such forecasting takes into consideration potential variations in operating cash flows due to
market conditions, the Group’s debt repayments and covenant compliance. Taking into account expected levels of operating cash flows,
availability of cash and cash equivalents and long-term nature of the debt portfolio, the Group has the ability to meet its liabilities as they
fall due and mitigate risks of adverse changes in the financial markets environment.
(e) Capital risk management
40. The Group’s main objective when managing capital is to maintain the ability to continue as a going concern in order to ensure the
profitability of the Group, maintain optimum equity structure and reduce its cost of capital.
41. Defining capital, the Group uses the amount of equity and the Group’s borrowings.
42. The Group manages the capital based on borrowings to total capitalisation ratio. Borrowings include lease liabilities, loan liabilities and public bonds.
43. Total capitalisation is calculated as the sum of the total Group borrowings and equity at the date of calculation. The management does not
currently have any specific target for the rate of borrowings to total capitalisation.
ANNUAL REPORT 2017
9
PARENT COMPANY FINANCIAL STATEMENTS MANAGEMENT REPORT (CONTINUED)
Future developments of the Company
44. The Board of Directors does not expect any significant changes in the activities of the Company in the foreseeable future.
Results
45. The Company’s results for the year are set out on page 17.
Dividends
46. Pursuant to the Articles of Association the Company may pay dividends out of its profits. To the extent that the Company declares and pays
dividends, owners of Global Depositary Receipts (hereafter also referred as “GDRs”) on the relevant record date will be entitled to receive
dividends payable in respect of Ordinary Shares underlying the GDRs, subject to the terms of the Deposit Agreement. The Company expects
to pay dividends in US dollars. If dividends are not paid in US dollars, they will be converted into US dollars by the Depositary and paid to
holders of GDRs net of currency conversion expenses.
47. The Company is a holding company and thus its ability to pay dividends depends on the ability of its subsidiaries and joint ventures to pay
dividends to the Company in accordance with the relevant legislation and contractual restrictions (shareholder agreements, bank borrowings
covenants, terms of the issuance of the public debt instruments). The payment of such dividends by its subsidiaries and joint-ventures is
contingent upon the sufficiency of their earnings, cash flows and distributable reserves. The maximum dividend payable by the Company’s
subsidiaries and joint-ventures is restricted to the total accumulated retained earnings of the relevant subsidiary or joint-venture, determined
according to the law applicable to each entity.
48. The Company has a Dividend Policy in place which provides for the payment of not less than 30% of any imputed consolidated net profit for
the relevant financial year of the Group. Imputed profit is calculated as the consolidated net profit for the period of the Group attributable to
the owners of the Company as shown in the Company’s consolidated financial statements for the relevant financial year prepared under EU
IFRS and in accordance with the requirements of the Cyprus Companies Law, Cap. 113, less certain non-monetary consolidation adjustments.
The Company’s dividend policy is subject to modification from time to time as the Board of Directors may deem appropriate.
49.
In the year 2015 following the revision of current market situation, market prospects and prioritising the deleveraging strategy over dividend
distribution, which should ensure the long-term robustness of the Group’s finances, the Board suspended the payment of the dividends in
the mid-term. The Board continues to monitor the container market for recovery as well as for levels of volatility in order to identify the
appropriate timing for a resumption of the payment of a dividend, always consistent with sustaining conservative leverage ratios.
50. During the years 2016 and 2017 the Company did not declare or pay any dividends.
51. The Board of Directors of the Company does not recommend the payment of a final dividend for the year 2017.
Share capital
Authorised share capital
52. The authorised share capital of the Company amounts to US$ 175,000,000.00 divided into 750,000,000 ordinary shares and 1,000,000,000
ordinary non-voting shares with a par value of US$ 0.10 each.
Issued share capital
53. The issued share capital of the Company amounts to US$ 57,317,073.10 divided into 422,713,415 ordinary shares and 150,457,316 ordinary
non-voting shares with a par value of US$ 0.10 each.
54. The ordinary shares and the ordinary non-voting shares rank pari passu in all respects save that, the ordinary non-voting shares do not have
the right to receive notice, attend or vote at any general meeting, nor to be taken into account for the purpose of determining the quorum
of any general meeting.
Rules for amending articles
55. The Articles of association of the Company may be amended from time to time by the special resolution of the General Meeting of
the shareholders.
The role of the Board of Directors
56. The Company is governed by its Board of Directors (hereafter also referred as “the Board”) which is collectively responsible to the
shareholders for the short – and long-term successful performance of the Group for the benefit of the shareholders as a whole.
57. The Board of Directors’ role is to provide entrepreneurial leadership to the Group through setting the corporate strategic objectives, ensuring
that the necessary financial and human resources are in place for the Group to meet its objectives and reviewing management performance.
The Board sets the Group’s values and standards and ensures all obligations to shareholders are understood and met. The Board ensures the
Group maintains a sound system of internal control and enterprise risk management to safeguard the Group’s assets and shareholders’
investments in the Group.
10
GLOBAL PORTS INVESTMENTS PLC
Members of the Board of Directors
58. The Board of Directors leads the process in making new Board member appointments and makes recommendations on appointments to
shareholders. In accordance with the Terms of Reference of the Board, all Directors are subject to election by shareholders at the first Annual
General Meeting after their appointment, and to re-election at intervals of no more than three years. Following the best practice guidance,
the members of the Board of Directors are being re-elected on an annual basis. Any term beyond six years for a Non-Executive Director is
subject to particularly rigorous review, and takes into account the need to refresh the Board on a regular basis.
59. The Board currently has 16 members and they were appointed as shown on pages 1 and 2.
60. On 14 February 2017 Mr. Tiemen Meester resigned from the Board and Mr. Peder Sondergaard replaced him. On 12 May 2017 Dr. Alexander
Nazarchuk and Mrs. Siobhan Walker resigned from the Board and Mrs. Britta Dalunde and Mrs. Elia Nicolaou replaced them.
61. All other Directors were members of the Board throughout the year ended 31 December 2017.
62. On 01 January 2018 Mrs. Inna Kuznetsova and Mr. Lambros Papadopoulos joined the Board of Directors.
63. On 29 January 2018 Mr. Gerard Jan Van Spall resigned from the Board and Mrs. Iana Boyd replaced him on the same day. On 01 February 2018
Mr. Peder Sondergaard resigned from the Board and Mr. Soren Jakobsen replaced him on 02 March 2018.
64. There is no provision in the Company’s Articles of Association for retirement of Directors by rotation. However in accordance with the Terms
of Reference of the Board of Directors and the resolutions adopted by the Shareholders at the Annual General Meetings held 29 April 2015 and
12 May 2017 and Extraordinary General Meetings held on 12 December 2017, 29 January 2018 and 02 March 2018 all present directors, except
for Capt. Bryan Smith, will be offered for re-election at the next Annual General Meeting of the Shareholders of the Company. Capt. Bryan
Smith will step down from the Board of Directors at the next AGM as his nine years term as Independent Non-Executive Director ended.
65. Team Nominees Limited has been acting as the Company Secretary since its incorporation in February 2008. Mr. Alexander Iodchin has been
acting as the Board Secretary since December 2008.
66. The changes in the composition of the committees of the Board of Directors are described below.
67. Mr. Tiemen Meester was the Chairman of the Board until 14 February 2017. Mr. Peder Sondergaard was the Chairman of the Board from
10 April 2017 until 01 February 2018. Mr. Morten Henrick Engelstoft was elected the Chairman of the Board of Directors on 26 February 2018.
There were no other significant changes in the responsibilities of the Directors during 2017.
Directors’ interests
68. The interests in the share capital of Global Ports Investments Plc, both direct and indirect, of those who were Directors as at 31 December
2017 and 31 December 2016 are shown below:
Name
Type of holding
Nikita Mishin
Through shareholding in Transportation Investments
Holding Limited and other related entities
Britta Dalunde
Through holding of the GDRs
Shares held at
31 December 2017
Shares held at
31 December 2016
42,267,114 ordinary shares
42,267,114 ordinary shares
16,477,011 ordinary
non-voting shares
7,000 GDRs representing
21,000 ordinary shares
16,477,011 ordinary
non-voting shares
NIL
Board performance
69. The Board meets at least four times a year. Fixed meetings are scheduled at the start of each year. Ad hoc meetings are called when there
are pressing matters requiring the Board’s consideration and decision in between the scheduled meetings.
70.
In 2017 the Board met formally 25 (2016: 21) times to review current performance and to discuss and approve important business decisions.
71.
In 2017 the Board met to discuss and approve important business decisions:
(a) FY2016 financial statements, 1H2017 interim financial statements and Annual Report;
(b) Changes in Group management and the Board of Directors;
(c) Remuneration guidelines;
(d) Review of segments financial and operational performance;
(e) Consideration of 2018 financial budget, major risks and uncertainties, commercial strategy, corporate social responsibility matters,
internal control framework;
(f) Consideration and approval of the intragroup financing and organisational restructurings;
(g) Consideration and approval of major capital expenditures and operating expenditures; and
(h) Consideration and approval of various resolutions related to the operations of the Company’s subsidiaries and joint-ventures.
ANNUAL REPORT 2017
11
PARENT COMPANY FINANCIAL STATEMENTS MANAGEMENT REPORT (CONTINUED)
Board performance (continued)
72. The number of Board and Board Committee meetings held in the year 2017 and the attendance of directors during these meetings was
as follows:
Alexander Iodchin
Bryan Smith
Nikita Mishin
Alexander Nazarchuk
Mikhail Loganov
Konstantin Shirokov
Siobhan Walker
Morten Henrick Engelstoft
Tiemen Meester
Laura Michael
Gerard Jan van Spall
Nicholas Charles Terry
Vadim Kryukov
Michalakis Christofides
Peder Sondergaard
Britta Dalunde
Elia Nicoalou
Board of Directors
Nomination Committee
Remuneration Committee
Audit and Risk Committee
A
25
25
17
7
13
25
4
25
–
25
25
25
25
25
25
18
17
B
25
25
25
7
25
25
7
25
–
25
25
25
25
25
25
18
18
A
–
7
4
3
–
–
–
7
–
–
–
–
–
–
7
–
3
B
–
7
7
3
–
–
–
7
–
–
–
–
–
–
7
–
4
A
–
10
6
3
–
–
–
10
1
–
–
–
–
–
9
–
6
B
–
10
10
3
–
–
–
10
1
–
–
–
–
–
9
–
7
A
–
–
–
–
–
10
3
10
–
–
–
–
–
–
–
7
–
B
–
–
–
–
–
10
3
10
–
–
–
–
–
–
–
7
–
A = Number of meetings attended.
B = Number of meetings eligible to attend during the year.
73. The operation of the Board, its Committees and individual Directors is subject to regular evaluation. The evaluation of the Board and
individual Directors’ performance can be conducted through self-assessment, cross-assessment or by an external third party. The Non-
Executive Directors, led by the Senior Independent Director, are responsible for the performance evaluation of the Chairman of the Board.
The Board did not engage any external advisors for evaluation of its performance in the years 2016 and 2017.
The Board diversity
74. The Company does not have a formal Board diversity policy to aspects such as age, gender or educational and professional backgrounds,
but following the best practice while making the new appointments and considering the current composition of the Board of Directors,
these aspects are taken into account.
75. As of the date of publication of these financial statements the Board has 5 females representing approximately 30% from the total number
of directors. The average age of directors is 49 years ranging from 32 to 72 years. The Board members have the following educational
backgrounds: port and transportation industry, accounting and financial, banking sector and legal. The Board has a necessary balance
of skills and expertise to run the Company and the Group. There are 7 nationalities present in the Board and the majority of the Board
members reside in Cyprus.
The Board committees
76. Since December 2008 the Board of Directors established the operation of three committees: an Audit and Risk Committee, a Nomination
Committee and a Remuneration Committee.
77. The Audit and Risk Committee comprises of five Non-Executive Directors, three of whom are independent, and meets at least four times
a year. The Audit and Risk Committee is chaired by Mrs. Britta Dalunde (an Independent Non-Executive Director) who replaced Mrs. Siobhan
Walker on 12 May 2017 and the other members are Mrs. Inna Kuznetsova (an Independent Non-Executive Director appointed as of 01 January
2018), Mr. Lambros Papadopoulos (an Independent Non-Executive Director appointed as of 01 January 2018), Mr. Konstantin Shirokov and
Mr. Soren Jakobsen (appointed as of 02 March 2018). Mr. Morten Henrick Engelstoft resigned from the Audit and Risk Committee on
26 February 2018 following his appointment as the Chairman of the Board of Directors.
12
GLOBAL PORTS INVESTMENTS PLC
78. The Committee is responsible for considering, among other matters: (i) the integrity of the Company’s financial information, including
its annual and interim condensed consolidated financial information, and the effectiveness of the Company’s internal controls, risk
management systems and the work of the Internal Auditor; (ii) external and internal auditors’ reports; and (iii) the terms of appointment
and remuneration of the external auditors. The Committee supervises and monitors the financial reporting process and the submission of
financial information by the Company and makes recommendations or proposals to ensure its integrity. The Committee informs the board
of the outcome of the external audit and explain how the audit contributed to the integrity of financial reporting and what the role of the
committee was in that process. The Committee recommends the Board on appointment, re-appointment and removal of the external
auditor, reviews and monitors its independence, objectivity and effectiveness of the audit process. The Committee implements the policy
on the engagement of the external auditors to perform non-audit services. In addition, the Committee supervises, monitors, and advises the
Board of Directors on effectiveness of risk management and internal control systems and the implementation of Code of Ethics and Conduct,
Authority Matrix and various other internal policies and regulations.
79.
In the year 2017 the Audit and Risk Committee met 10 times to review and discuss inter alia (on top of the topics listed above):
(a) Review of the press releases containing financial information;
(b) Consideration and approval of audit schedules and review of the impairment models and the impact of the new IFRS standards on
the Company’s financial statements;
(c) Review of the major risks, including but not limited to strategic, fraud and compliance, commercial, operational, financial, human
resources, environmental and other risks;
(d) Review of internal control framework and its deficiencies, consideration of management proposals on its further development
and improvement;
(e) Review of IT security setup, budgeting process, sanctions monitoring and compliance process, corporate social responsibility report,
whistle-blowing system;
(f) Making proposals to the Board of Directors to approve the amended and restated Terms of Reference of the Committee and on the
new composition of the Committee;
(g) Consideration of various reports from the management and external consultants;
(h) Consideration of various updated and restated Group Policies; and
(i) Consideration of the authority matrix framework.
80. The Nomination Committee as of the date of this report comprises six Directors, two of whom are independent. The Committee meets at
least once each year. Currently the Nomination Committee is chaired by Capt. Bryan Smith (an Independent Non-Executive Director) and
the other members are Mrs. Inna Kuznetsova (an Independent Non-Executive Director appointed as of 01 January 2018), Mr. Nikita Mishin,
Mrs. Elia Nicolaou (appointed on 12 May 2017), Mr. Morten Henrick Engelstoft and Mr. Soren Jakobsen (appointed on 02 March 2018).
Dr. Alexander Nazarchuk and Mr. Peder Sondergaard resigned from the position of the members of the Nomination Committee in May 2017
and February 2018 respectively.
81. The Committee’s role is to prepare selection criteria and appointment procedures for members of the Board of Directors as well as the Senior
Management of the companies of the Group and to review on a regular basis the structure, size, diversity and composition of the Board of
Directors of the Company. In undertaking this role, the Committee refers to the skills, knowledge and experience required of the Board and
Senior Management given the Company’s and Group’s stage of development and makes recommendations to directors as to any changes.
The Committee also considers future appointments in respect to the composition of the Board of Directors and Senior Management as well
as making recommendations regarding the membership of the Audit and Risk Committee and the Remuneration Committee. The
Committee relies on both independent search consultancy and internal sources in making the proposals for the Board and Senior
Management appointments.
82.
In 2017 the Nomination Committee met seven times to discuss and recommend to the Board the appointment of senior management of the
Group companies and also to recommend the Directors the candidates to the Board and discuss and recommend the composition of the
Board Committees. In the year 2018 one of the key focuses of the work of Nomination Committee will be the succession planning for the
Board and the Senior Management.
83. The Remuneration Committee as of the date of this report comprises six Directors, two of whom are independent. The Committee meets
at least once each year. Currently the Remuneration Committee is chaired by Capt. Bryan Smith (an Independent Non-Executive Director)
and the other members are Mrs. Inna Kuznetsova (an Independent Non-Executive Director appointed as of 01 January 2018), Mr. Nikita
Mishin, Mrs. Elia Nicolaou (appointed on 12 May 2017), Mr. Morten Henrick Engelstoft and Mr. Soren Jakobsen (appointed on 02 March 2018).
Dr. Alexander Nazarchuk and Mr. Peder Sondergaard resigned from the position of the members of the Remuneration Committee in May 2017
and February 2018 respectively.
84. The Committee is responsible for determining and reviewing the remuneration of the executive directors, Chairman and the Senior
Management and the Company’s remuneration policies. The remuneration of independent Directors is a matter for the chairman of the
Board of Directors and is subject to approval of the shareholders. Remuneration of the executive directors in their executive capacity is
subject to the Board approval. No director or manager may be involved in any decisions and discussions as to his or her own remuneration.
85.
In 2017 the Remuneration Committee met 10 times to discuss and recommend to the Board the Group management remuneration guidelines
and the remuneration of the new Board members and the Senior Management of the Group.
ANNUAL REPORT 2017
13
PARENT COMPANY FINANCIAL STATEMENTS MANAGEMENT REPORT (CONTINUED)
Corporate governance
86. The Company is not subject to the provisions of UK Corporate Governance Code, but follows internationally recognised best practices
customary to the public companies having GDRs having standard listing and admitted to trading at London Stock Exchange.
87.
Improving its corporate governance structure in accordance with the internationally recognised best practices the Company adopted in 2008,
2012, 2015 and 2016 important policies and procedures. The Group is regularly reviewing and updating its policies and procedures. The new
Code of Ethics was approved by the Board of Directors on 08 December 2016 and was introduced in the companies of the Group in the
course of the year 2017. On 03 October 2017 the Board of Directors approved the revised Terms of reference of the Audit and Risk Committee
and Charity and Sponsorship Policy.
88. The Company’s corporate governance policies and practices are designed to ensure that the Company is focused on upholding its
responsibilities to the shareholders. They include, inter alia:
– Appointment policy;
– Terms of reference of the Board of Directors;
– Terms of reference of the Audit and Risk Committee;
– Terms of reference of the Nomination Committee;
– Terms of reference of the Remuneration Committee;
– Code of Ethics and Conduct;
– Antifraud policy;
– Anti-Corruption Policy;
– Foreign Trade Controls Policy;
–
– Charity and Sponsorship Policy; and
– Group Securities Dealing Code.
Insurance Standard;
89.
In order to further strengthen the corporate governance and clearly set the management authority limits within the Group the Board of
Directors approved the Authority Matrix framework at the end of the year 2016. This framework is based on the Board of Directors reserved
matters, which are set in the Terms of reference of the Board of Directors and Shareholder’s reserved matters as set out in Company’s
Charter. All other matters are reserved for the management. The implementation of this framework within the Group started in the year 2017
and will continue in the year 2018.
90. In the course of the year ended 31 December 2017 in order to further strengthen the corporate governance procedures and streamline the
reporting of negligence, non-compliance or any other kind of wrongdoing the Group established a hotline mail-box and telephone line. It is
an important mechanism enabling staff and other members of the Group as well as third parties to voice concerns in a responsible and
effective manner.
Board and management remuneration
91. Non-Executive Directors serve on the Board pursuant to the letters of appointment. Such letters of appointment specify the terms of
appointment and the remuneration of Non-Executive Directors.
92. Levels of remuneration for the Non-Executive Directors reflect the time commitment, responsibilities of the role and membership of the
respective committees of the Board. Directors are also reimbursed for expenses associated with discharge of their duties.
93. The shareholders of the Company approved the remuneration of the members of the Board on 29 April 2013, 12 May 2017, 11 December 2017,
29 January 2018 and 02 March 2018.
94. The Directors did not waive or agreed to waive any emoluments from the company or any company of the Group during the period under
review or future emoluments.
95. The performance based part of the remuneration of the senior (key) management is based on the Key Rules of Awarding and Payment
of Performance Based Bonuses of GPI Group adopted by the Board on 15 June 2016 and regularly updated.
96. Neither the Board members, nor the management have long-term incentive schemes.
97. Refer to Note 22 to the financial statements for details of the remuneration paid to the members of the Board and key management.
Corporate social responsibility report
98. The Corporate Social Responsibility Report is drawn up as a separate report and will be made public at the Company’s website (the address
of which, at the date of publication of this report, is www.globalports.com) within six months from the balance sheet date.
14
GLOBAL PORTS INVESTMENTS PLC
Events after the balance sheet date
99. The events after the balance sheet date are disclosed in Note 23 to the financial statements.
Research and development activities
100. The Group is not engaged in research and development activities.
Branches
101. The Group did not have or operate through any branches during the year.
Treasury shares
102. The Company did not acquire either directly or through a person in his own name but on behalf of the Company any of its own shares.
Going concern
103. Directors have access to all information necessary to exercise their duties. The Directors continue to adopt the going concern basis in
preparing the parent company financial statements based on the fact that, after making enquiries and following a review of the Group’s
principle risks and uncertainties, budget for 2018 and the latest forecasts over a period of 5-7 years reflecting its business and investment
cycles, including cash flows and borrowing facilities, the Directors consider that the Group has adequate resources to meet its liabilities as
they fall due and to continue in operation for the foreseeable future.
Auditors
104. The Independent Auditors, PricewaterhouseCoopers Limited, have expressed their willingness to continue in office. A resolution approving their
reappointment and giving authority to the Board of Directors to fix their remuneration will be proposed at the Annual General Meeting.
By Order of the Board
Konstantin Shirokov
Director
13 March 2018
Alexander Iodchin
Director
ANNUAL REPORT 2017
15
PARENT COMPANY FINANCIAL STATEMENTS DIRECTORS’ RESPONSIBILITY STATEMENT
The Board of Directors of Global Ports Investments Plc (“Company”) is responsible for preparation and fair presentation of these parent company
financial statements in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union (“EU”) and the
requirements of the Cyprus Companies Law, Cap. 113.
This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial
statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and
making accounting estimates that are reasonable in the circumstances.
Each of the Directors confirms to the best of his or her knowledge that these parent company financial statements which are presented on pages
17 to 39 have been prepared in accordance with IFRS as adopted by the EU and the requirements of the Cyprus Companies Law, Cap. 113, and give
a true and fair view of the assets, liabilities, financial position and profit of the Company.
By Order of the Board
Konstantin Shirokov
Director
Limassol
13 March 2018
Alexander Iodchin
Director
16
GLOBAL PORTS INVESTMENTS PLC
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2017
(in thousands of US dollars)
Revenue
Dividend income
Finance income – net
Administrative expenses
Other gains/(losses) – net
Impairment of investments in subsidiaries and joint ventures
Operating profit/(loss)
Finance costs
Profit/(loss) before income tax
Income tax expense
Profit/(loss) for the year
Other comprehensive income
Total comprehensive profit/(loss) for the year
The notes on pages 21 to 39 are an integral part of these financial statements.
Note
22
22
5
6
7
4
9
10
For the year ended 31 December
2017
20
7,494
401
(5,427)
1,226
(961)
2,753
(1,197)
1,556
(1)
2016
–
5,281
2,432
(5,617)
758
(296,030)
(293,176)
(1,197)
(294,373)
(2)
1,555
(294,375)
–
–
1,555
(294,375)
ANNUAL REPORT 2017
17
PARENT COMPANY FINANCIAL STATEMENTS
(in thousands of US dollars)
ASSETS
Property, plant and equipment
Investments in subsidiaries
Investments in joint ventures
Loans receivable
Non-current assets
Loans receivable
Trade and other receivables
Cash and cash equivalents
Current assets
TOTAL ASSETS
EQUITY AND LIABILITIES
Share capital
Share premium
Capital contribution
Accumulated losses
Total equity
Borrowings
Non-current liabilities
Trade and other payables
Current liabilities
Total liabilities
TOTAL EQUITY AND LIABILITIES
BALANCE SHEET
AS AT 31 DECEMBER 2017
At 31 December
Note
2017
2016
13
14
15
16
16
17
18
19
19
22
20
66
638,899
94,978
–
733,943
251
259
1,639
2,149
–
630,499
94,969
946
726,414
5,258
4,179
876
10,313
736,092
736,727
57,317
923,511
101,300
(373,901)
57,317
923,511
101,300
(375,456)
708,227
706,672
21,000
21,000
6,865
6,865
27,865
736,092
22,197
22,197
7,858
7,858
30,055
736,727
On 13 March 2018 the Board of Directors of Global Ports Investments Plc authorised these financial statements for issue.
Konstantin Shirokov
Director
Alexander Iodchin
Director
The notes on pages 21 to 39 are an integral part of these financial statements.
18
GLOBAL PORTS INVESTMENTS PLC
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2017
(in thousands of US dollars)
Balance at 1 January 2016
Comprehensive loss
Loss for the year
Share capital
Share premium
Capital
contribution
Retained
earnings*
Total
57,317
923,511
101,300
(81,081)
1,001,047
–
–
–
(294,375)
(294,375)
Balance at 31 December 2016/1 January 2017
57,317
923,511
101,300
(375,456)
706,672
Comprehensive income
Profit for the year
Balance at 31 December 2017
–
–
–
1,555
1,555
57,317
923,511
101,300
(373,901)
708,227
* Retained earnings is the only reserve that is available for distribution.
The notes on pages 21 to 39 are an integral part of these financial statements.
ANNUAL REPORT 2017
19
PARENT COMPANY FINANCIAL STATEMENTS STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2017
(in thousands of US dollars)
Cash flows from operating activities
Profit/(loss) before tax
Adjustments for:
Depreciation of property, plant and equipment
Impairment of investments in subsidiaries and joint ventures
Dividend income
Finance income
Finance costs
Amortisation of financial guarantee
Foreign exchange (gains)/losses and other non-monetary items
Operating cash flows before working capital changes
Changes in working capital:
Trade and other receivables
Trade and other payables
Cash used in operating activities
Tax paid
Net cash used in operating activities
Cash flows from investing activities
Investments in subsidiaries
Repayment of original cost of subsidiaries
Purchase of investments in joint ventures
Purchase of property, plant and equipment
Loans advanced to related parties
Loan repayments received from related parties
Interest received
Dividends received
Net cash from investing activities
Cash flows from financing activities
Interest paid
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Exchange gains/(losses) on cash and cash equivalents
Cash and cash equivalents at end of the year
The notes on pages 21 to 39 are an integral part of these financial statements.
For the year ended 31 December
Note
2017
2016
1,556
(294,373)
13
14,15
22
5
9
7
14,18
14
15
22
22
18
1
961
(7,494)
(328)
1,197
(1,300)
(158)
(5,565)
57
306
(5,202)
–
(5,202)
(9,713)
352
(9)
(67)
(7,500)
13,433
415
11,445
8,356
(2,394)
(2,394)
760
876
3
1,639
20
296,030
(5,281)
(2,720)
1,197
(837)
413
(5,551)
(264)
29
(5,786)
(2)
(5,788)
(22,155)
30,330
–
–
(10,628)
3,012
254
5,281
6,094
–
–
306
573
(3)
876
20
GLOBAL PORTS INVESTMENTS PLC
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
1. General information
Country of incorporation
Global Ports Investments Plc (hereafter the “Company” or “GPI”) was incorporated on 29 February 2008 as a private limited liability company
and is domiciled in Cyprus in accordance with the provisions of the Cyprus Companies Law, Cap. 113. The address of the Company’s registered
office is 20 Omirou Street, Limassol, Cyprus.
On 18 August 2008, following a special resolution passed by the shareholders, the name of the Company was changed from “Global Ports
Investments Ltd” to “Global Ports Investments Plc” and the Company was converted into a public limited liability company in accordance with
the provisions of the Companies Law, Cap. 113.
During the first half of 2011 the Company has successfully completed an initial public offering (“IPO”) of its shares in the form of global depositary
receipts (“GDRs”). The Company’s GDRs (one GDR representing 3 ordinary shares) are listed on the Main Market of the London Stock Exchange
under the symbol “GLPR”.
Towards end of 2017 the Company was informed by its shareholder, Transportation Investments Holding Limited (“TIHL”) (see also Note 22),
that it has entered into an agreement to sell its 30.75% stake in Global Ports to Management Company “Delo” LLC, one of the largest private
transportation and logistics holding companies in Russia. The agreement remains subject to various conditions, including antitrust clearances
and other customary arrangements.
Approval of the parent company financial statements
These parent company financial statements were authorised for issue by the Board of Directors on 13 March 2018.
Principal activities
The principal activity of the Company, which is unchanged from last year, is the holding of investments, including any interest earning activities.
2. Summary of significant accounting policies
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently
applied to all years presented in these financial statements unless otherwise stated.
Basis of preparation
The financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (IFRS), as adopted
by the European Union (EU), and the requirements of the Cyprus Companies Law, Cap. 113.
The financial statements have been prepared under the historical cost convention.
The Company has prepared these separate financial statements of the parent company for compliance with the requirements of the Cyprus
Income Tax Law and the Disclosure Rules as issued by the Financial Services Authority of the United Kingdom.
As of the date of the authorisation of the financial statements, all International Financial Reporting Standards issued by the International
Accounting Standards Board (IASB) that are effective as of 1 January 2017 have been adopted by the EU through the endorsement procedure
established by the European Commission, with the exception of certain provisions of IAS 39 “Financial Instruments: Recognition and
Measurement” relating to portfolio hedge accounting and IFRS 14 “Regulatory Deferral Accounts”.
The preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting estimates and requires
management to exercise its judgment in the process of applying the Company’s accounting policies. The areas involving a higher degree
of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 4.
Consolidated financial statements
The Company has also prepared consolidated financial statements in accordance with International Financial Reporting Standards as adopted
by the EU for the Company and its subsidiaries (the “Group”). A copy of the consolidated financial statements is available at the Company’s
registered office and at the Company’s website at www.globalports.com.
Users of these separate financial statements of the parent company should read them together with the Group’s consolidated financial
statements as at and for the year ended 31 December 2017 in order to obtain a proper understanding of the financial position, the financial
performance and the cash flows of the Company and the Group.
ANNUAL REPORT 2017
21
PARENT COMPANY FINANCIAL STATEMENTS NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
(CONTINUED)
2. Summary of significant accounting policies (continued)
New Standards, interpretations and amendments adopted by the Company
During the current year the Company adopted all the new and revised International Financial Reporting Standards (IFRS) as adopted by the EU
that are relevant to its operations and are effective for accounting periods beginning 1 January 2017. This adoption did not have a material effect
on the accounting policies of the parent Company.
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Disclosure Initiative – Amendments to IAS 7 (issued on 29 January 2016 and effective for annual periods beginning on or after 1 January 2017).
As a result of this amendment, the Company has disclosed a reconciliation of movements in liabilities arising from financing activities.
Annual Improvements to IFRSs 2014-2016 cycle – amendments to IFRS 12 (issued on 8 December 2016 and effective for annual periods
beginning on or after 1 January 2017). The amendments clarify the scope of the disclosure requirements in IFRS 12 by specifying that the
disclosure requirements in IFRS 12, other than those relating to summarised financial information for subsidiaries, joint ventures and associates,
apply to an entity’s interests in other entities that are classified as held for sale or discontinued operations in accordance with IFRS 5.
New standards and interpretations not yet adopted by the Company
At the date of approval of these financial statements a number of new standards and amendments to standards and interpretations are effective
for annual periods beginning after 1 January 2017, and have not been applied in preparing these financial statements. None of these is expected
to have a significant effect on these financial statements, except the following set out below:
(a) Adopted by the European Union
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IFRS 9 “Financial Instruments: Classification and Measurement” (issued in July 2014 and effective for annual periods beginning on or after
1 January 2018). Key features of the new standard are:
– Financial assets are required to be classified into three measurement categories: those to be measured subsequently at amortised cost,
those to be measured subsequently at fair value through other comprehensive income (FVOCI) and those to be measured subsequently
at fair value through profit or loss (FVPL).
– Classification for debt instruments is driven by the entity’s business model for managing the financial assets and whether the contractual
cash flows represent solely payments of principal and interest (SPPI). If a debt instrument is held to collect, it may be carried at amortised
cost if it also meets the SPPI requirement. Debt instruments that meet the SPPI requirement that are held in a portfolio where an entity
both holds to collect assets’ cash flows and sells assets may be classified as FVOCI.
– Financial assets that do not contain cash flows that are SPPI must be measured at FVPL (for example, derivatives). Embedded derivatives
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are no longer separated from financial assets but will be included in assessing the SPPI condition.
Investments in equity instruments are always measured at fair value. However, management can make an irrevocable election to present
changes in fair value in other comprehensive income, provided the instrument is not held for trading. If the equity instrument is held for
trading, changes in fair value are presented in profit or loss.
– Most of the requirements in IAS 39 for classification and measurement of financial liabilities were carried forward unchanged to IFRS 9.
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The key change is that an entity will be required to present the effects of changes in own credit risk of financial liabilities designated at fair
value through profit or loss in other comprehensive income.
IFRS 9 introduces a new model for the recognition of impairment losses – the expected credit losses (ECL) model. There is a ‘three stage’
approach which is based on the change in credit quality of financial assets since initial recognition. In practice, the new rules mean that
entities will have to record an immediate loss equal to the 12-month ECL on initial recognition of financial assets that are not credit
impaired (or lifetime ECL for trade receivables). Where there has been a significant increase in credit risk, impairment is measured using
lifetime ECL rather than 12-month ECL. The model includes operational simplifications for lease and trade receivables.
– Hedge accounting requirements were amended to align accounting more closely with risk management. The standard provides entities
with an accounting policy choice between applying the hedge accounting requirements of IFRS 9 and continuing to apply IAS 39 to all
hedges because the standard currently does not address accounting for macro hedging.
While the Company has yet not finalised a detailed assessment of the classification and measurement of the financial instruments it holds
the Company does not expect the new guidance to have a material impact on the classification and measurement of its financial assets.
After taking into consideration the risk profile of its trade and loan receivables, financial guarantees, their repayment terms, the history
and probability of default (including assessment of their capability to meet their obligations to the group) and the expected loss in case
of default the company does not expect that there will be material impairment loss.
There will be no impact on the Company’s accounting for financial liabilities, as the new requirements only affect the accounting for
financial liabilities that are designated at fair value through profit or loss and the Company does not have any such liabilities.
The derecognition rules have been transferred from IAS 39 Financial Instruments: Recognition and Measurement and have not been changed.
The new standard also introduces expanded disclosure requirements and changes in presentation. These are expected to change the nature
and extent of the Company’s disclosures about its financial instruments particularly in the year of the adoption of the new standard.
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IFRS 15, Revenue from Contracts with Customers (issued on 28 May 2014 and effective for the periods beginning on or after 1 January 2018).
The new standard introduces the core principle that revenue must be recognised when the goods or services are transferred to the
customer, at the transaction price. Any bundled goods or services that are distinct must be separately recognised, and any discounts
or rebates on the contract price must generally be allocated to the separate elements. When the consideration varies for any reason,
minimum amounts must be recognised if they are not at significant risk of reversal. Costs incurred to secure contracts with customers
have to be capitalised and amortised over the period when the benefits of the contract are consumed.
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GLOBAL PORTS INVESTMENTS PLC
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The Company has not yet finalised a detailed assessment of the effect of the implementation of this standard. According to preliminary
estimates the implementation of the standard will not materially affect the financial position and the result of operations of the Company.
Amendments to IFRS 15, Revenue from Contracts with Customers (issued on 12 April 2016 and effective for annual periods beginning on or
after 1 January 2018). The amendments do not change the underlying principles of the Standard but clarify how those principles should be
applied. The amendments clarify how to identify a performance obligation (the promise to transfer a good or a service to a customer) in
a contract; how to determine whether a company is a principal (the provider of a good or service) or an agent (responsible for arranging for
the good or service to be provided); and how to determine whether the revenue from granting a licence should be recognised at a point in
time or over time. In addition to the clarifications, the amendments include two additional reliefs to reduce cost and complexity for a
company when it first applies the new Standard.
IFRS 16, Leases (issued on 13 January 2016 and effective for annual periods beginning on or after 1 January 2019). The new standard sets
out the principles for the recognition, measurement, presentation and disclosure of leases. All leases result in the lessee obtaining the right
to use an asset at the start of the lease and, if lease payments are made over time, also obtaining financing. Accordingly, IFRS 16 eliminates
the classification of leases as either operating leases or finance leases as is required by IAS 17 and, instead, introduces a single lessee
accounting model. Lessees will be required to recognise: (a) assets and liabilities for all leases with a term of more than 12 months, unless
the underlying asset is of low value; and (b) depreciation of lease assets separately from interest on lease liabilities in the income
statement. IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17. Accordingly, a lessor continues to classify
its leases as operating leases or finance leases, and to account for those two types of leases differently.
While the Company has not yet finalised a detailed assessment of the potential impact of this standard, the Company does not expect
any material effect on its financial statements.
Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts – Amendments to IFRS 4 (issued on 12 September 2016 and effective,
depending on the approach, for annual periods beginning on or after 1 January 2018 for entities that choose to apply temporary exemption
option, or when the entity first applies IFRS 9 for entities that choose to apply the overlay approach). The amendments address concerns
arising from implementing the new financial instruments Standard, IFRS 9, before implementing the replacement Standard that the IASB
is developing for IFRS 4. These concerns include temporary volatility in reported results. The amendments introduce two approaches: an
overlay approach and a deferral approach. The amended Standard will give all companies that issue insurance contracts the option to
recognise in other comprehensive income, rather than profit or loss, the volatility that could arise when IFRS 9 is applied before the new
insurance contracts Standard is issued. In addition, the amended Standard will give companies whose activities are predominantly
connected with insurance an optional temporary exemption from applying IFRS 9 until 2021. The entities that defer the application of IFRS 9
will continue to apply the existing financial instruments Standard—IAS 39. The amendments to IFRS 4 supplement existing options in the
Standard that can already be used to address the temporary volatility.
Annual Improvements to IFRSs 2014-2016 cycle (issued on 8 December 2016 and effective for annual periods beginning on or after 1 January
2018 for amendments to IFRS 1 and IAS 28). The amendments to IAS 28 clarify that an entity has an investment-by-investment choice for
measuring investees at fair value in accordance with IAS 28 by a venture capital organisation, or a mutual fund, unit trust or similar entities
including investment linked insurance funds. Additionally, an entity that is not an investment entity may have an associate or joint venture
that is an investment entity. IAS 28 permits such an entity to retain the fair value measurements used by that investment entity, associate
or joint venture when applying the equity method. The amendments clarify that this choice is also available on an investment-by-
investment basis.
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(b) Other accounting standards that have not been endorsed by EU or are not considered to be relevant to the Company
IFRS 14, Regulatory Deferral Accounts (issued in January 2014 and effective for annual periods beginning on or after 1 January 2016). The
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European Commission has decided not to launch the endorsement process of this interim standard and to wait for the final standard.
IFRS 14 permits first-time adopters to continue to recognise amounts related to rate regulation in accordance with their previous GAAP
requirements when they adopt IFRS. However, to enhance comparability with entities that already apply IFRS and do not recognise such
amounts, the standard requires that the effect of rate regulation must be presented separately from other items. An entity that already
presents IFRS financial statements is not eligible to apply the standard.
Amendments to IFRS 2, Share-based Payment (issued on 20 June 2016 and effective for annual periods beginning on or after 1 January
2018). The amendments mean that non-market performance vesting conditions will impact measurement of cash-settled share-based
payment transactions in the same manner as equity-settled awards. The amendments also clarify classification of a transaction with a
net settlement feature in which the entity withholds a specified portion of the equity instruments, that would otherwise be issued to the
counterparty upon exercise (or vesting), in return for settling the counterparty’s tax obligation that is associated with the share-based
payment. Such arrangements will be classified as equity-settled in their entirety. Finally, the amendments also clarify accounting for
cash-settled share based payments that are modified to become equity-settled, as follows (a) the share-based payment is measured
by reference to the modification-date fair value of the equity instruments granted as a result of the modification; (b) the liability is
derecognised upon the modification, (c) the equity-settled share-based payment is recognised to the extent that the services have been
rendered up to the modification date, and (d) the difference between the carrying amount of the liability as at the modification date and
the amount recognised in equity at the same date is recorded in profit or loss immediately.
ANNUAL REPORT 2017
23
PARENT COMPANY FINANCIAL STATEMENTS
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
(CONTINUED)
2. Summary of significant accounting policies (continued)
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IFRIC 22 – Foreign Currency Transactions and Advance Consideration (issued on 8 December 2016 and effective for annual periods
beginning on or after 1 January 2018). The interpretation addresses how to determine the date of the transaction for the purpose of
determining the exchange rate to use on initial recognition of the related asset, expense or income (or part thereof) on the derecognition
of a non-monetary asset or non-monetary liability arising from an advance consideration in a foreign currency. Under IAS 21, the date
of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income
(or part thereof) is the date on which an entity initially recognises the non-monetary asset or non-monetary liability arising from the
advance consideration. If there are multiple payments or receipts in advance, then the entity must determine the date of the transaction
for each payment or receipt of advance consideration. IFRIC 22 only applies in circumstances in which an entity recognises a non-monetary
asset or non-monetary liability arising from an advance consideration. IFRIC 22 does not provide application guidance on the definition of
monetary and non-monetary items. An advance payment or receipt of consideration generally gives rise to the recognition of a non-
monetary asset or non-monetary liability, however, it may also give rise to a monetary asset or liability. An entity may need to apply
judgment in determining whether an item is monetary or non-monetary.
Transfers of Investment Property – Amendments to IAS 40 (issued on 8 December 2016 and effective for annual periods beginning on or
after 1 January 2018). The amendments clarify the requirements on transfers to, or from, investment property in respect of properties under
construction. Prior to the amendments, there was no specific guidance on transfers into, or out of, investment properties under
construction in IAS 40. The amendment clarifies that there was no intention to prohibit transfers of a property under construction or
development, previously classified as inventory, to investment property when there is an evident change in use. IAS 40 was amended to
reinforce the principle of transfers into, or out of, investment property in IAS 40 to specify that a transfer into, or out of investment property
should only be made when there has been a change in use of the property; and such a change in use would involve an assessment of
whether the property qualifies as an investment property. Such a change in use should be supported by evidence.
Sale or Contribution of Assets between an Investor and its Associate or Joint Venture – Amendments to IFRS 10 and IAS 28 (issued on
11 September 2014 and effective for annual periods beginning on or after a date to be determined by the IASB). The EU endorsement is
postponed as IASB effective date is deferred indefinitely. These amendments address an inconsistency between the requirements in IFRS 10
and those in IAS 28 in dealing with the sale or contribution of assets between an investor and its associate or joint venture. The main
consequence of the amendments is that a full gain or loss is recognised when a transaction involves a business. A partial gain or loss is
recognised when a transaction involves assets that do not constitute a business, even if these assets are held by a subsidiary.
IFRIC 23 “Uncertainty over Income Tax Treatments” (issued on 7 June 2017 and effective for annual periods beginning on or after 1 January
2019). IAS 12 specifies how to account for current and deferred tax, but not how to reflect the effects of uncertainty. The interpretation
clarifies how to apply the recognition and measurement requirements in IAS 12 when there is uncertainty over income tax treatments.
An entity should determine whether to consider each uncertain tax treatment separately or together with one or more other uncertain
tax treatments based on which approach better predicts the resolution of the uncertainty. An entity should assume that a taxation
authority will examine amounts it has a right to examine and have full knowledge of all related information when making those
examinations. If an entity concludes it is not probable that the taxation authority will accept an uncertain tax treatment, the effect of
uncertainty will be reflected in determining the related taxable profit or loss, tax bases, unused tax losses, unused tax credits or tax rates,
by using either the most likely amount or the expected value, depending on which method the entity expects to better predict the
resolution of the uncertainty. An entity will reflect the effect of a change in facts and circumstances or of new information that affects
the judgments or estimates required by the interpretation as a change in accounting estimate. Examples of changes in facts and
circumstances or new information that can result in the reassessment of a judgment or estimate include, but are not limited to,
examinations or actions by a taxation authority, changes in rules established by a taxation authority or the expiry of a taxation authority’s
right to examine or re-examine a tax treatment. The absence of agreement or disagreement by a taxation authority with a tax treatment,
in isolation, is unlikely to constitute a change in facts and circumstances or new information that affects the judgments and estimates
required by the Interpretation.
IFRS 17 “Insurance Contracts”(issued on 18 May 2017 and effective for annual periods beginning on or after 1 January 2021).IFRS 17 replaces
IFRS 4, which has given companies dispensation to carry on accounting for insurance contracts using existing practices. As a consequence,
it was difficult for investors to compare and contrast the financial performance of otherwise similar insurance companies. IFRS 17 is a
single principle-based standard to account for all types of insurance contracts, including reinsurance contracts that an insurer holds.
The standard requires recognition and measurement of Company’s insurance contracts at: (i) a risk-adjusted present value of the future
cash flows (the fulfilment cash flows) that incorporates all of the available information about the fulfilment cash flows in a way that is
consistent with observable market information; plus (if this value is a liability) or minus (if this value is an asset) (ii) an amount representing
the unearned profit in the Company of contracts (the contractual service margin). Insurers will be recognising the profit from a Company
of insurance contracts over the period they provide insurance coverage, and as they are released from risk. If a Company of contracts is
or becomes loss-making, an entity will be recognising the loss immediately.
Amendments to IAS 28: Long-term Interests in Associates and Joint Ventures (issued on 12 October 2017 and effective for annual periods
beginning on or after 1 January 2019). The Amendments clarify that an entity applies IFRS 9 Financial Instruments to long-term interests
in an associate or joint venture that, in substance, form part of the net investment in the associate or joint venture but to which the equity
method is not applied. An entity applies IFRS 9 to such long-term interests before it applies IAS 28. In applying IFRS 9, the entity does not
take account of any adjustments to the carrying amount of long-term interests that arise from applying IAS 28. An entity applies the
Amendments retrospectively for annual reporting periods beginning on or after 1 January 2019. Earlier application is permitted.
Amendments to IFRS 9: Prepayment Features with Negative Compensation (issued on 12 October 2017 and effective for annual periods
beginning on or after 1 January 2019). For financial instruments which contain a prepayment amount that may result in negative
compensation, the Amendments propose that such a financial asset would be eligible to be measured at amortised cost or at fair value
through other comprehensive income, subject to the assessment of the business model in which it is held.
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GLOBAL PORTS INVESTMENTS PLC
The Board of Directors assesses the impact of new standards and interpretations at the point when these are endorsed by the European Union.
As a result the impact of the above new standards and interpretations that have not been endorsed by the European Union has not been assessed.
Revenue recognition
Revenues earned by the Company are recognised on the following bases:
(i) Interest income
Interest income is recognised when it is probable that benefits will flow to the Company and the amount of income can be measured reliably.
Interest income is recognized on a time-proportion basis using the effective interest method. When a loan receivable is impaired, the Company
reduces the carrying amount to its recoverable amount being the estimated future cash flows discounted at the original effective interest rate
of the instrument and continues unwinding the discount as interest income.
(ii) Dividend income
Dividend income is recognised when the right to receive payment is established.
Employee benefits
The Company and the employees contribute to the Cyprus Government Social Insurance Fund based on employees’ salaries. The Company’s
contributions are expensed as incurred and are included in staff costs.
Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of the Company are measured using the currency of the primary economic environment in which the
entity operates (‘the functional currency’). The financial statements are presented in United States dollars (US$), which is the Company’s
functional and presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions.
Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period end exchange rates
of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income.
Foreign exchange gains and losses that relate to borrowings are presented in the statement of comprehensive income within “finance cost”.
Foreign exchange gains and losses that relate to loans receivable and cash and cash equivalents are presented in profit or loss within “finance
income”. All other foreign exchange gains and losses are presented in the statement of comprehensive income within “other gains/(losses) – net”.
Current and deferred income tax
The tax expense for the period comprises current and deferred tax. Tax is recognized in profit or loss, except to the extent that it relates to items
recognized in other comprehensive income or directly in equity. In this case, the tax is also recognized in other comprehensive income or directly
in equity, respectively.
The current income tax is calculated in the basis of the tax laws enacted or substantively enacted at the balance sheet date in the country in
which the Company operates and generates taxable income. Management periodically evaluates positions taken in tax returns with respect to
situations in which applicable tax regulation is subject to interpretation. If applicable tax regulation is subject to interpretation, it establishes
provision where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is recognized using the liability method, on temporary differences arising between the tax bases of assets and liabilities and
their carrying amounts in the financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an
asset or liability in a transaction other than a business combination that at the time of transaction affects neither accounting nor taxable profit
or loss. Deferred income tax is determined using tax rates and laws that have been enacted or substantially enacted by the balance sheet date
and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognized to the extent that it is probable that future taxable profits will be available against which the
temporary differences can be utilised.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax
liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on the Company
where there is an intention to settle the balances on a net basis.
Property, plant and equipment
Property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to
the acquisition of property, plant and equipment.
ANNUAL REPORT 2017
25
PARENT COMPANY FINANCIAL STATEMENTS NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
(CONTINUED)
2. Summary of significant accounting policies (continued)
Depreciation on property, plant and equipment is calculated using the straight-line method to allocate their cost to their residual values, over their
estimated useful lives. The annual depreciation rates are as follows:
Motor vehicles
Office equipment
%
20
50
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated
recoverable amount.
Expenditure for repairs and maintenance of property, plant and equipment is charged to profit or loss of the year in which they were incurred.
The cost of major renovations and other subsequent expenditure are included in the carrying amount of the asset or recognised as a separate
asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost
of the item can be measured reliably.
Gains and losses on disposal of property, plant and equipment are determined by comparing proceeds with carrying amount and are recognised
in “other gains/(losses) – net” in profit or loss.
Investments in subsidiaries
Subsidiaries are all entities (including special purpose entities) over which the Company has control. The Company controls an entity whom the
Company is exposed to, or has the rights to variable returns from its involvement with the entity and has the ability to affect those returns
through its power over the entity. In its parent company financial statements, the Company carries the investments in subsidiaries at cost less
any impairment.
The Company recognizes dividend income from investments in subsidiaries to the extent that the Company receives distributions from subsidiaries
which constitute return on the cost of investment. Capital reductions and dividend distributions by subsidiaries which constitute return of cost of
investment as opposed to return on cost of investment are recognised as a reduction in the cost of investment in subsidiary.
Investments in joint arrangements
Investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations
each investor has rather than the legal structure of the joint arrangements. The Company has assessed the nature of its joint arrangements and
determined them to be joint ventures. In its parent company financial statements the Company carries its investments in joint ventures at cost
less any impairment.
Impairment of non-financial assets
Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to
depreciation or amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may
not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are
grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). Non-financial assets, other than
goodwill, that have suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.
Loans and receivables
The Company classifies its financial assets as loans and receivables.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and for
which there is no intention of trading the receivable. They are included in current assets, except for maturities greater than twelve months after
the balance sheet date. These are classified as non-current assets. The Company’s loans and receivables comprise cash and cash equivalents,
trade and other receivables and loans to related and third parties.
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less
provision for impairment.
Loans and receivables are initially recognised at fair value plus transaction costs. For loans provided to related parties other than its direct
subsidiaries, the difference between the fair value of the loans and their carrying amount on inception is recognized in profit or loss. For loans
provided to direct subsidiaries the difference is included in the cost of the investment. Loans and receivables are derecognised when the rights to
receive cash flows from the loans and receivables have expired or have been transferred and the Group has transferred substantially all risks and
rewards of ownership. Loans and receivables are carried at amortised cost using the effective interest method.
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GLOBAL PORTS INVESTMENTS PLC
Loans and receivables (continued)
The Company assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is
impaired. A provision for impairment of receivables is established when there is objective evidence that the Company will not be able to collect all
amounts due according to the original terms of receivables. Significant financial difficulties of the debtor/borrower, probability that the debtor/
borrower will enter bankruptcy or financial difficulty, and default or delinquency in payments are considered indicators that the receivable is
impaired. The amount of the provision is the difference between the carrying amount and the recoverable amount, being the present value of
estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the statement of
comprehensive income against “other gains/(losses) – net”.
Share capital, share premium and capital contribution
Ordinary shares are classified as equity.
Any excess of the fair value of consideration received over the par value of shares issued is recognized as share premium. Share premium is subject
to the provisions of the Cyprus Companies Law on reduction of share capital.
Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds.
Capital contribution represents contributions by the shareholders directly in the reserves of the Company. The Company does not have any
contractual obligation to repay these amounts.
Dividend distribution
Dividend distribution to the Company’s shareholders is recognised as a liability in the Company’s financial statements in the period in which the
dividends are appropriately authorised and are no longer at the discretion of the Company.
More specifically, interim dividends are recognised as liability in the period in which these are approved by the Board of Directors and in the case
of final dividends, they are recognised in the period in which these are approved by the Company’s shareholders.
Leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments
made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on a straight-line basis over the period
of the lease.
Provisions and contingent liabilities
Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events, it is more likely than not that
an outflow of resources will be required to settle the obligation, and the amount has been reliably estimated. Provisions are not recognised for
future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class
of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of
obligations may be small.
Provisions are measured at the present value of the expenditure expected to be required to settle the obligation using a pre-tax rate that reflects
current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of
time is recognised as interest expense.
Provisions are only used to cover those expenses which they had been set up for. Other possible or present obligations that arise from past events
but it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or the amount of the
obligation cannot be measured with sufficient reliability, are disclosed in the notes to the financial statements as contingent liabilities.
Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost.
Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the
borrowings, using the effective interest method, unless they are directly attributable to the acquisition, construction or production of a qualifying
asset, in which case they are capitalised as part of the cost of that asset.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all
of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extend there is no evidence that it is probable
that some or all of the facility will be drawn down, the fee is capitalised as a prepayment and amortised over the period of the facility to which
it relates.
ANNUAL REPORT 2017
27
PARENT COMPANY FINANCIAL STATEMENTS NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
(CONTINUED)
2. Summary of significant accounting policies (continued)
Borrowing costs are interest and other costs that the Company incurs in connection with the borrowing of funds, including interest on borrowings,
amortisation of discounts or premium relating to borrowings, amortisation of ancillary costs incurred in connection with the arrangement of
borrowings, finance lease charges and exchange differences arising from foreign currency borrowings to the extent that they are regarded as an
adjustment to interest costs.
Borrowings are classified as current liabilities, unless the Company has an unconditional right to defer settlement of the liability for at least twelve
months after the balance sheet date.
Financial guarantee contracts
Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs because
a specified debtor fails to make payments when due, in accordance with the terms of a debt instrument.
Financial guarantees are initially recognised in the financial statements at fair value on the date the guarantee was given. For financial guarantees
provided to related parties other than its direct subsidiaries the difference between the fair value of the financial guarantee and the fee received
is treated as an expense. For financial guarantees provided to direct and indirect subsidiaries the difference between the fair value of the financial
guarantee and the fee received is included in the cost of the investment. Subsequent to initial recognition, the Company’s liabilities under such
guarantees are measured at the higher of the initial measurement, less amortisation calculated to recognise in profit or loss the fee income
earned on a straight line basis over the life of the guarantee and the best estimate of the expenditure required to settle any financial obligation
arising at the balance sheet date. These estimates are determined based on experience of similar transactions and history of past losses,
supplemented by the judgment of management. Any increase in the liability relating to guarantees is taken to profit or loss in “other gains/
(losses) – net”.
Derivatives
Derivative financial instruments which comprise mainly options for shares are initially recognised in the balance sheet at fair value (excluding
transaction costs) and are subsequently remeasured at their fair value. They are classified as financial assets at fair value through profit or loss
and they are presented as current assets or liabilities if they are expected to be settled within 12 months after the end of the reporting period.
The resulting gain or loss is recorded in the income statement within “other gains/(losses) – net”. Transaction costs arising on entering into
derivatives are recognised in the income statement as incurred. All derivatives are carried as assets when fair value is positive and as liabilities
when fair value is negative.
Trade and other payables
Trade and other payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers.
Accounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities.
Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
Cash and cash equivalents
In the statement of cash flows, cash and cash equivalents include cash in bank, cash in hand and deposits held at call with banks, with original
maturities of three months or less.
3. Financial risk management
Financial risk factors
The Company’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, fair value interest rate risk and cash
flow interest rate risk), credit risk and liquidity risk.
The Company’s risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects
on the Company’s financial performance.
(a) Market risk
(i) Foreign exchange risk
Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities (mainly loans receivable, trade and other
receivables, cash and cash equivalents and borrowings) that are denominated in a currency that is not the Company’s functional currency.
Had Euro exchange rate strengthened/weakened by 15% (2016: 15%) against the US dollar and all other variables remained unchanged, the
post-tax profit of the Company for the year ended 31 December 2017, would have increased/(decreased) by US$ 23 thousand (2016: US$ 532
thousand). This is mainly due to foreign exchange gains and losses arising upon retranslation of dividends receivable, loans receivable, cash in
bank and payables denominated in Euros.
Management monitors the exchange rate fluctuations on a continuous basis and acts accordingly.
28
GLOBAL PORTS INVESTMENTS PLC
(ii) Cash flow and fair value interest rate risk
The Company is exposed to cash flow interest rate risk arising from changes in market interest rates of cash and cash equivalents. In addition,
the Company is exposed to fair value interest rate risk as all its loans receivable and borrowings are at fixed rates.
Had market interest rates on Euro and United States dollar denominated floating interest bearing cash and cash equivalents shift by 100 basic
points and all other variables remained unchanged, the post-tax profit of the Company would not significantly change for the years ended
31 December 2017 and 31 December 2016. In addition, as all of the Company’s fixed rate loans receivable are carried at amortised cost, any
reasonably possible change in the interest rates as of 31 December 2017 and 31 December 2016 would not have any significant impact on the
Company’s post tax profit. The Company’s management monitors the interest rate fluctuations on a continuous basis and acts accordingly.
(b) Credit risk
Financial assets, which potentially subject the Company to credit risk, consist principally of loans receivable, dividends receivable, other receivables
and cash and cash equivalents.
The majority of receivables are with related parties. Management believes that there is no significant risk of loss to the Company. Finally, see
Note 12 for credit quality of cash and cash equivalents.
(c) Liquidity risk
The table below analyses the Company’s financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet
to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months
equal their carrying balances as the impact of discounting is not significant.
(in thousands of US dollars)
As of 31 December 2017
Trade and other payables
Financial guarantee*
Borrowings
Total
As of 31 December 2016
Trade and other payables
Financial guarantee*
Borrowings
Total
Less than 1 year
1-2 years
2-5 years
Over 5 years
Total
1,827
1,018,804
–
1,020,631
1,521
1,061,421
–
1,062,942
–
–
–
–
–
–
22,197
22,197
–
–
21,000
21,000
–
–
–
–
–
–
–
–
–
–
–
–
1,827
1,018,804
21,000
1,041,631
1,521
1,061,421
22,197
1,085,139
* Full amount payable if the loans and bonds guaranteed are non-performing (Note 22 (l)).
Management controls current liquidity based on expected cash outflows and expected receipts from dividends and interest.
(d) Capital risk management
The Company’s main objective when managing capital is to maintain the ability to continue as a going concern in order to ensure the profitability
its operations, maintain optimum equity structure and reduce its cost of capital.
The Company monitors capital based on borrowings to total capitalization ratio. Total capitalization is calculated as the sum of the total
borrowings and equity at the date of calculation.
(e) Fair value estimation
Fair value is the amount at which a financial asset could be exchanged or a liability settled in a transaction between knowledgeable willing parties
in an arm’s length transaction, other than in a forced sale or liquidation, and is best evidenced by an active quoted market price.
The fair value of financial liabilities and assets for disclosure purposes is estimated by discounting the future contractual cash flows at the current
market interest rate that is available to for similar financial instruments.
The estimated fair values of financial instruments have been determined by the Company, using available market information, where it exists, and
appropriate valuation methodologies and assistance of experts. However, judgment is necessarily required to interpret market data to determine
the estimated fair value.
ANNUAL REPORT 2017
29
PARENT COMPANY FINANCIAL STATEMENTS NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
(CONTINUED)
3. Financial risk management (continued)
Financial risk factors (continued)
Fair value is the amount at which a financial asset could be exchanged or a liability settled in a transaction between knowledgeable willing parties
in an arm’s length transaction, other than in a forced sale or liquidation, and is best evidenced by an active quoted market price.
The estimated fair values of financial instruments have been determined by the Group, using available market information, where it exists, and
appropriate valuation methodologies and assistance of experts. However, judgment is necessarily required to interpret market data to determine
the estimated fair value. The Russian Federation continues to display some characteristics of an emerging market and economic conditions
continue to limit the volume of activity in the financial markets. Market quotations may be outdated or reflect distress sale transactions and
therefore do not always represent the fair values of financial instruments. The Group has used all available market information in estimating the
fair value of financial instruments.
The fair value of floating rate instruments is normally their carrying amount. The estimated fair value of fixed interest rate instruments is based
on estimated future cash flows expected to be received, discounted at current interest rates for instruments with similar credit risk and remaining
maturity. Discount rates used depend on credit risk of the counterparty. Carrying amounts of trade receivables approximate their fair values.
The estimated fair value of fixed interest rate instruments with stated maturity, for which a quoted market price is not available, was estimated
based on expected cash flows, discounted at current interest rates for new instruments with similar credit risk and remaining maturity. Carrying
amounts of trade and other payables which are due within twelve months approximate their fair values.
The disclosure of the fair value of financial instruments carried at amortised cost is determined by using the following valuation methods:
–
–
Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 – The fair value of financial instruments that are not traded in an active market is determined using valuation techniques.
These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on Group’s
specific estimates.
Level 3 – Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).
–
4. Critical accounting estimates and judgments
Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future
events that are believed to be reasonable under the circumstances.
Critical accounting estimates and assumptions
Estimated impairment of investments
The Company reviews investments, long-lived assets or groups of assets for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. If the estimated recoverable amount is less than the carrying amount of the asset or group
of assets, the asset is not recoverable and the Company recognises an impairment loss for the difference between the estimated recoverable
amount and the carrying value of the asset or group of assets. Events that can trigger assessments for possible impairments include, but are
not limited to (a) significant decreases in the market value of an asset, (b) significant changes in the extent or manner of use of an asset, and (c)
a physical change in the asset. Models are prepared based on the Company’s best estimates and latest budgets available as at the year end.
Estimating discounted future cash flows requires making judgments about long-term forecasts of future revenues and costs related to the assets
subject to review. These forecasts are uncertain as they require assumptions about volumes, prices for the products and services, future market
conditions and future technological developments. Significant and unanticipated changes in these assumptions could require a provision for
impairment in a future period.
The recoverable amounts of the Arytano Holdings Limited (FCT, PLP and ULCT CGUs), NCC Pacific Investments Limited (VSC CGU), Multi Link
Terminals Limited (MD CGU) and Intercross Investments B.V. (VEOS CGU) were determined based on value in use derived from discounted future
cash flows models(refer to notes 14 and 15 for the definition of the CGUs of the Company). Except for ULCT, cash flow projections cover a period
of five years based on the assumptions of the next 12 months. In case of ULCT cash flow projections cover an eight year period reflecting as
management considers that this terminal is still at a development stage. Cash flows beyond that five-year (eight-year period in case of ULCT)
period have been extrapolated using a steady terminal growth rate. The terminal growth rate used does not exceed the long-term average growth
rate for the market in which entities operate. For projections prepared for Russian CGUs a terminal growth rate of 3% has been applied (2016:
3%). For projections prepared for VEOS as at 31 December 2017 a terminal growth rate of 2% was applied (2015: 2%). The discount rate applied
for Russian CGUs in projections prepared as at 31 December 2017 is 10.4% (2016: 11.2%) and for VEOS the discount rate is 9.0% (2016: 8.6%).
Key assumptions for all CGUs are throughput volume, price per unit, growth rates, and discount rates. The projected volumes reflect past
experience adjusted by the management view on the prospective market developments. For VEOS CGU, given the high degree of volatility in the
performance of VEOS in recent years as well as the perceived risk profile of the terminal operations there is significant judgement and subjectivity
in relation to expectations for 2018. For Russian CGUs volume growth is estimated to be in line with the long-term market development, position
of each terminal on the market and its pricing power. As supported by historical market performance and in view of relatively low containerisation
level in Russia, the long-term average throughput growth rate for the Russian container market is higher than in developed markets. Based on the
results of the impairment testing above no impairment was recognised in 2017.
30
GLOBAL PORTS INVESTMENTS PLC
There was no impairment for all of the Company’s investments in subsidiaries and joint ventures except for its investment in NCC Group Limited
(ex-parent holding of NCC Group acquired by the Company in 2013) amounting to US$ 961 thousand. The recoverable amount of NCC Group
Limited was determined based on its net asset value which approximates its fair value less cost to sell.
For all investments, except Arytano Holdings Limited, management believes that any reasonable possible change in the key assumptions would
not cause the carrying amounts to exceed the recoverable amounts. Finally, the Board of Directors believes that there are no indications for
reversal of impairments recognised in previous periods.
In relation to the investment in Arytano Holdings Limited, the recoverable amount calculated based on value in use exceeded the carrying value
by US$ 187 million. A decrease of handling volumes by approximately 4% each year as opposed to volume projections used by the management
or a decrease in the average revenue per TEU by approximately 3% each year as opposed to the used in projections would remove the remaining
headroom. Reasonable changes in other key parameters do not result in the elimination of the existing remaining headroom.
Critical judgments in applying the Company’s accounting policies
There were no critical judgments in applying the Company’s accounting policies.
5. Finance income – net
(in thousands of US dollars)
Interest income on cash balances
Interest income on loans to related parties (Note 22(c))
Net foreign exchange gains/(losses) on cash and cash equivalents and loans receivable*
Total
For the year ended 31 December
2017
3
325
73
401
2016
–
2,720
(288)
2,432
* The total net foreign exchange loss recognised in the statement of comprehensive income amounted to US$ 1 thousand (2016: losses US$ 369 thousand). Refer also to Note 7.
6. Administrative expenses
(in thousands of US dollars)
Legal, consulting and other professional services
Staff costs (Note 8)
Travelling expenses
Taxes other than on income
Auditors' remuneration
Advertising and promotion
Insurance
Bank charges
Depreciation of property, plant and equipment (Note 13)
Operating lease rentals
Other expenses
Total
For the year ended 31 December
2017
2,185
1,325
630
443
477
38
88
19
1
19
202
5,427
2016
2,539
899
795
439
549
22
90
29
20
18
217
5,617
The auditors’ remuneration stated above include fees of US$ 249 thousand (2016: US$ 258 thousand) for statutory audit services and US$ 60
thousand (2016: US$ 99 thousand) for other assurance services charged by the Company’s statutory audit firm.
The legal and consulting fees stated above include fees of US$ 4 thousand (2016: US$ 72 thousand) for tax consultancy services charged by the
Company’s statutory audit firm.
7. Other gains/(losses) – net
(in thousands of US dollars)
Net foreign exchange transaction losses on non-financing activities
Amortisation of financial guarantee (Note 22(l))
Other gains/(losses) – net
Total
For the year ended 31 December
2017
(74)
1,300
–
1,226
2016
(81)
837
2
758
ANNUAL REPORT 2017
31
PARENT COMPANY FINANCIAL STATEMENTS NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
(CONTINUED)
8. Staff costs
(in thousands of US dollars)
Salaries
Social insurance costs
Other staff costs
Total
Average number of staff employed during the year
9. Finance costs
(in thousands of US dollars)
Interest expense on loans from related parties (Note 22)
Total
10. Income tax expense
(in thousands of US dollars)
Corporation tax
Defence contribution
Total income tax
For the year ended 31 December
2017
1,274
39
12
1,325
5
2016
864
30
5
899
4
For the year ended 31 December
2017
1,197
1,197
2016
1,197
1,197
For the year ended 31 December
2017
2016
–
1
1
2
–
2
The tax on the Company’s profit before tax differs from the theoretical amount that would arise using the applicable tax rate as follows:
(in thousands of US dollars)
Profit/(loss) before tax
Tax calculated at the applicable corporation tax rate of 12.5%
Tax effect of expenses not deductible for tax purposes
Tax effect of allowances and income not subject to tax
Group relief
Defence contribution
Tax charge
For the year ended 31 December
2017
1,556
194
931
(1,105)
(20)
1
1
2016
(294,373)
(36,797)
37,603
(660)
(144)
–
2
The Company is subject to corporation tax on taxable profits at the rate of 12.5%.
Under certain conditions, interest may be exempt from income tax and only subject to defence contribution at the rate of 30%.
In certain cases dividends received from abroad may be subject to defence contribution at the rate of 17%. In certain cases dividends received
from other Cyprus tax resident Companies may also be subject to special contribution for defence.
11. Financial instruments by category
(in thousands of US dollars)
Loans and receivables
Financial assets as per balance sheet
Non-current loan receivables
Current loan receivables
Trade and other receivables
Cash and bank balances
Total
Financial liabilities measured at amortised cost
Financial liabilities as per balance sheet
Trade and other payables
Borrowings (Note 22(j))
Total
32
As at 31 December
2017
2016
–
251
–
1,639
1,890
6,718
21,000
27,718
946
5,258
3,863
876
10,943
7,733
22,197
29,930
GLOBAL PORTS INVESTMENTS PLC
12. Credit quality of financial assets
The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings (if available)
or to historical information about counterparty default rates:
As at 31 December
(in thousands of US dollars)
Counterparties without external rating
Group 1
Group 2
Group 3
Total
Group 1 – Loans receivable from related parties with no defaults in the past.
Group 2 – Dividends receivable from related parties.
Group 3 – Other receivables with no defaults in the past.
(in thousands of US dollars)
Cash and bank
A1 (Moody’s)
A3 (Moody’s)
Aa3 (Moody’s)
Baa2 (Moody’s)
Caa1 (Moody’s)
Caa2 (Moody’s)
Total
13. Property, plant and equipment
(in thousands of US dollars)
At 1 January 2016
Cost
Accumulated depreciation
Net book amount
Depreciation charge for 2016
Closing net book amount at 31 December 2016
At 31 December 2016/1 January 2017
Cost
Accumulated depreciation
Net book amount
Additions
Depreciation charge for 2017
Closing net book amount at 31 December 2017
At 31 December 2017
Cost
Accumulated depreciation
Net book amount
14. Investments in subsidiaries
(in thousands of US dollars)
At beginning of year
Additions
Fair value of guarantees (Note 22(l))
Dividends set off against cost of investment *
Impairment charge (Note 4)
At end of year
2017
59
–
192
251
2016
6,035
3,863
169
10,067
As at 31 December
2017
–
1,612
19
–
8
–
1,639
2016
46
–
–
810
–
20
876
Motor vehicles and
other equipment
110
(90)
20
(20)
–
110
(110)
–
67
(1)
66
67
(1)
66
For the year ended 31 December
2017
630,499
9,713
–
(352)
(961)
2016
849,731
99,954
7,174
(30,330)
(296,030)
638,899
630,499
* Dividends received by a subsidiary of the Company have been recognized by the Company as a reduction of the cost of investment because the Company has asserted that
those amounts constitute a return of the original cost of the Company in this subsidiary.
ANNUAL REPORT 2017
33
PARENT COMPANY FINANCIAL STATEMENTS NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
(CONTINUED)
14. Investments in subsidiaries (continued)
The Company’s direct interests in subsidiaries, all of which are unlisted, were as follows:
Name
Principal activity
Country of
incorporation
2017
% holding
2016
% holding
Arytano Holdings Limited
Intercross Investments B.V.
NCC Pacific Investments Limited
NCC Group Limited
Global Ports Advisory Eesti OU
Global Ports Management OOO
National Container Holding Company Limited*
Holding company
Holding company
Holding company
Holding company
Consulting company
Management and consulting company
Holding company
Cyprus
Netherlands
Cyprus
Cyprus
Estonia
Russia
Cyprus
100
100
100
100
100
100
0.005
100
100
100
100
100
100
0.005
* National Container Holding Company Limited is accounted for as a subsidiary because the Company has indirect control, since its subsidiaries hold the remaining shareholding.
The principal activities of the indirect subsidiaries and joint ventures held by the direct subsidiaries listed above, which represent separate CGUs,
are the operation of four container terminals in Russia (Petrolesport (PLP), First Container Terminal (FCT), Ust-Luga Container Terminal (ULCT)
and Vostochnaya Stevedoring Company (VSC)); a Logistika-Terminal (LT) – inland terminal (classified as assets held for sale in the consolidated
financial statements of the Group); and an oil product terminal AS Vopak E.O.S (VEOS). All of the above terminals are 100% subsidiaries except
ULCT (a subsidiary which the Group controls 80%) and VEOS (a 50% joint venture).
15. Investments in joint ventures
(in thousands of US dollars)
At beginning of year
Additions
At end of year
For the year ended 31 December
2017
94,969
9
94,978
2016
94,969
–
94,969
The Company’s interests in joint ventures, all of which are unlisted, are as follows:
Name
CD Holding OY
Multi-Link Terminals Limited
M.L.T Container Logistics Ltd
Principal activity
Holding company
Holding company
Holding company
Country of
incorporation
2017
% holding
2016
% holding
Finland
Ireland
Cyprus
75
75
75
75
75
75
The principal activities of the joint ventures listed above are the operation of two container terminals in Finland, a container terminal in Russia
(Moby Dik) and an inland container terminal in Russia (Yanino Logistics Park (YLP)).
16. Loans receivable
(in thousands of US dollars)
Loans to related parties (Note 22(h))
Total non-current
Loans to related parties (Note 22(h))
Loans to third parties
Total current
Total loans receivable
All non-current loans receivable are due within five years from the balance sheet date.
The fair values of non-current receivables are as follows:
(in thousands of US dollars)
Loans to related parties
Total
As at 31 December
2017
–
–
59
192
251
251
2016
946
946
5,089
169
5,258
6,204
As at 31 December
2017
–
–
2016
946
946
The fair values of loans receivable as at 31 December 2017 were based on discounted cash flows using a discount rate based upon market interest
rates prevailing for similar instruments at the balance sheet date, amounting to 2.48% for Euro loans. The discount rate equals the weighted
average of external bank borrowings obtained by subsidiaries of the Group plus appropriate margin reflecting the credit rating of the borrower.
The fair values are within level 2 of the fair value hierarchy.
34
GLOBAL PORTS INVESTMENTS PLC
The weighted average effective interest rates on loans receivable at the balance sheet date were as follows:
Loans to related parties
The carrying amounts of the Company’s loans receivable are denominated in the following currencies:
(in thousands of US dollars)
Currency:
US dollar
Euro
Total
2017
%
3.8
As at 31 December
2017
–
251
251
2016
%
5.4
2016
4,882
1,322
6,204
The maximum exposure to credit risk at the balance sheet date is the carrying value of each class of receivable mentioned above. The Company
does not hold any collateral as security. None of the loans receivable is either past due or impaired.
17. Trade and other receivables
(in thousands of US dollars)
Dividends receivable from related parties (Note 22(i))
Prepayments
Total trade and other receivables
As at 31 December
2017
–
259
259
2016
3,863
316
4,179
The fair values of trade and other receivables approximate their carrying amounts. The carrying amount of the Company’s trade and other
receivables are denominated in Euros.
18. Cash and bank balances
(in thousands of US dollars)
Cash at bank
Total
Cash and cash equivalents are denominated in the following currencies:
(in thousands of US dollars)
Currency:
US dollar
Euro
Russian rouble
Total
Non-cash transaction
There were no principal non-cash transactions during 2017.
As at 31 December
2017
1,639
1,639
As at 31 December
2017
1,619
20
–
1,639
2016
876
876
2016
856
19
1
876
The principal non-cash transactions during 2016 year relate to the netting off of loans receivable from NCC Pacific Investments Limited
amounting to US$ 77,799 against payable towards NCC Pacific Investments Limited arose from the issue of shares at a premium during the year
(Note 22(h)).
19. Share capital, share premium and dividends
(in thousands of US dollars)
At 1 January 2016/31 December 2016/31 December 2017
Share capital
Share premium
Total
57,317
923,511
980,828
ANNUAL REPORT 2017
35
PARENT COMPANY FINANCIAL STATEMENTS NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
(CONTINUED)
19. Share capital, share premium and dividends (continued)
Authorised share capital
The authorised share capital of the Company amounts to US$ 175,000,000.00 divided into 750,000,000 ordinary shares and 1,000,000,000
ordinary non-voting shares with a par value of US$ 0.10 each.
Issued share capital
The issued share capital of the Company amounts to US$ 57,317,073.10 divided into 422,713,415 ordinary shares and 150,457,316 ordinary
non-voting shares with a par value of US$ 0.10 each.
The ordinary shares and the ordinary non-voting shares rank pari passu in all respects save that, the ordinary non-voting shares do not have the
right to receive notice, attend or vote at any general meeting, nor to be taken into account for the purpose of determining the quorum of any
general meeting.
Dividends
There were no dividends declared or paid in 2016 and 2017.
20. Trade and other payables
(in thousands of US dollars)
Financial guarantee (Note 22(l))
Other payables
Other payables to related parties (Note 22(k))
Accrued expenses
Payroll payable
Total trade and other payables
As at 31 December
2017
5,038
580
681
147
419
6,865
2016
6,337
862
534
125
–
7,858
The fair value of trade and other payables which are due within one year approximates their carrying amount at the balance sheet date.
The carrying amount of the Company’s trade and other payables are denominated in Euros.
21. Contingencies and commitments
Operating environment
Most of investments of the Company are related to the operations in Russia. The Russian Federation displays certain characteristics of an
emerging market. Its economy is particularly sensitive to oil and gas prices. The legal, tax and regulatory frameworks continue to develop and
are subject to frequent changes and varying interpretations. The Russian economy was growing in 2017, after overcoming the economic recession
of 2015 and 2016. The economy is negatively impacted by low oil prices, ongoing political tension in the region and international sanctions against
certain Russian companies and individuals. The financial markets continue to be volatile. This operating environment has a significant impact
on the Group’s operations and financial position. Management is taking necessary measures to ensure sustainability of the Group’s operations.
However, the future effects of the current economic situation are difficult to predict and management’s current expectations and estimates
could differ from actual results.
Management determined loan impairment provisions using the “incurred loss” model required by the applicable accounting standards (see Note
4). These standards require recognition of impairment losses that arose from past events and prohibit recognition of impairment losses that could
arise from future events, including future changes in the economic environment, no matter how likely those future events are. Thus final
impairment losses from financial assets could differ significantly from the current level of provisions.
Estonia and Finland represent established market economies with more stable political systems and developed legislation based on EU directives
and regulations. However, the situation with the operations in Estonia remained challenging and is characterised by a structural deterioration
of the business environment in which the Company’s joint venture operates, which is heavily dependent on the flows of Russian oil products.
Guarantees granted to subsidiaries
Refer to Note 22(l) for details of guarantees granted to direct and indirect subsidiaries.
Commitments
There were no material commitments as of 31 December 2017.
36
GLOBAL PORTS INVESTMENTS PLC
22. Related party transactions
The Company is jointly controlled by Transportation Investments Holding Limited (“TIHL”), one of Russia’s largest privately owned transportation
groups, and APM Terminals B.V. (“APM Terminals”), a global port, terminal and inland services operator.
For the purposes of these financial statements, parties are considered to be related if one party has the ability to control the other party or
exercise significant influence over the other party in making financial and operational decisions as defined by IAS 24 “Related Party Disclosures”.
In considering each possible related party relationship, attention is directed to the substance of the relationship, not merely the legal form. Related
parties may enter into transactions, which unrelated parties might not, and transactions between related parties may not be effected on the
same terms, conditions and amounts as transactions between unrelated parties.
The following transactions were carried out with related parties:
(a) Revenue
(in thousands of US dollars)
Subsidiaries
Total
(b) Dividend income
(in thousands of US dollars)
Subsidiaries
Joint ventures
Total
(c) Interest income and expenses
(in thousands of US dollars)
Subsidiaries
Joint ventures
Total interest income
Subsidiaries
Total interest expenses
(d) Other gains/(losses) – net
(in thousands of US dollars)
Subsidiaries (Note 22(l))
Total
(e) Purchases of services
(in thousands of US dollars)
Subsidiaries
Total
(f) Acquisitions/disposals of subsidiaries/joint ventures
(in thousands of US dollars)
Additions/contributions:
Subsidiaries
Joint ventures
Total
Disposals/distributions of equity:
Subsidiaries
Total
ANNUAL REPORT 2017
For the year ended 31 December
2017
20
20
2016
–
–
For the year ended 31 December
2017
630
6,864
7,494
2016
–
5,281
5,281
For the year ended 31 December
2017
260
65
325
1,197
1,197
2016
2,666
54
2,720
1,197
1,197
For the year ended 31 December
2017
1,300
1,300
2016
837
837
For the year ended 31 December
2017
218
218
2016
211
211
For the year ended 31 December
2017
2016
9,713
9
9,722
352
352
99,954
–
99,954
30,330
30,330
37
PARENT COMPANY FINANCIAL STATEMENTS NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
(CONTINUED)
22. Related party transactions (continued)
(g) Key management personnel compensation
The compensation of key management personnel and the total remuneration of the Directors (included in key management personnel
compensation above) were as follows:
(in thousands of US dollars)
Key management compensation:
Salaries, fees, payroll taxes and other short term employee benefits
Directors’ remuneration:
Fees
Emoluments in their executive capacity
Total
(h) Loans to related parties
Loans to subsidiaries:
(in thousands of US dollars)
At beginning of year
Loans advanced during the year
Interest charged
Loan and interest repaid during the year
Set off against payable arose from capital increase in a subsidiary (Note 18)
Foreign exchange differences
At end of year
Loans to joint ventures:
(in thousands of US dollars)
At beginning of year
Interest charged
Loan and interest repaid during the year
Foreign exchange differences
At end of year
The loan to related parties bear interest at the rate of 3.8%, is unsecured and is repayable by April 2018.
(i) Prepayments and other receivables
(in thousands of US dollars)
Dividends receivable from subsidiaries (Note 17)
Total
(j) Borrowings from related parties
Loans from subsidiaries:
(in thousands of US dollars)
At beginning of year
Loan and interest repaid during the year
Interest charged
At end of year
For the year ended 31 December
2017
1,085
408
677
1,085
2016
721
381
340
721
For the year ended 31 December
2017
4,882
7,500
260
(12,642)
–
–
–
2016
72,419
10,628
2,666
(2,784)
(77,799)
(248)
4,882
For the year ended 31 December
2017
1,154
65
(1,204)
44
59
2016
1,611
54
(482)
(29)
1,154
As at 31 December
2017
–
–
2016
3,863
3,863
For the year ended 31 December
2017
22,197
(2,394)
1,197
21,000
2016
21,000
–
1,197
22,197
The borrowings from related parties are USD-denominated, bear interest at the rate of 5.7%, are unsecured and repayable by January 2021.
The fair value of borrowings as at 31 December 2017 approximates to their carrying value.
38
GLOBAL PORTS INVESTMENTS PLC
(k) Other payables
(in thousands of US dollars)
Entities under control of owners of TIHL and APM Terminals (Note 20)
Total
As at 31 December
2017
681
681
2016
534
534
(l) Guarantees granted to subsidiaries
During 2015 and 2016 the Company granted an irrevocable public offer to purchase bonds issued by an indirect subsidiary of the Company,
in the event a default occurs in respect of those bonds. These bonds had a balance of US$ 267,820 thousand (including interest accrued) as at
31 December 2017. It also granted an irrevocable guarantee for the cross currency swap arrangement that the indirect subsidiary entered into,
relating to the issue of the bonds with a balance of US$ 208,695 thousand as at 31 December 2017. At inception the fair value of these guarantees
was US$ 2,575 thousand. As at 31 December 2017 the unamortised balance of these guarantees was US$ 1,614 thousand.
During 2016 the Company granted a corporate guarantee covering the non – performance by an indirect subsidiary of the Company in respect
of a bank loan, which had a balance of US$ 86,156 thousand (including interest accrued) as at 31 December 2017. The guarantee was provided
free of charge and is valid until December 2020. At inception the fair value of the guarantee was US$ 1,011 thousand. As at 31 December 2017 the
unamortised balance of these guarantees was US$ 673 thousand.
During 2016 the Company and its indirect subsidiaries granted guarantee to an indirect subsidiary of the Company, which issued the Eurobonds
in the event of default in respect of those bonds with a balance of US$ 716,549 thousand (including interest accrued) as at 31 December 2017.
At inception the fair value of the guarantee was US$ 3,588 thousand. As at 31 December 2017 the unamortised balance of this guarantee was
US$ 2,751 thousand.
The likelihood of realising any expenditure to settle any of the above guarantees was not considered probable.
23. Events after the balance sheet date
In January 2018 corporate guarantee covering the non – performance by an indirect subsidiary of the Company in respect of a bank loan with
a balance of US$ 86,156 thousand as at 31 December 2017 was terminated (Note 22(l)).
ANNUAL REPORT 2017
39
PARENT COMPANY FINANCIAL STATEMENTS INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF GLOBAL PORTS INVESTMENTS PLC
Report on the audit of the financial statements
Our opinion
In our opinion, the accompanying parent company financial statements (the “financial statements”)of Global Ports Investments Plc
(the “Company”) give a true and fair view of the financial position of the Company as at 31 December 2017, and of its financial performance
and its cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European
Union and the requirements of the Cyprus Companies Law, Cap. 113.
What we have audited
We have audited the financial statements which are presented in pages 17 to 39 and comprise:
–
–
–
–
–
The balance sheet as at 31 December 2017;
The statement of comprehensive income for the year then ended;
The statement of changes in equity for the year then ended;
The statement of cash flows for the year then ended; and
The notes to the financial statements, which include a summary of significant accounting policies.
The financial reporting framework that has been applied in the preparation of the financial statements is International Financial Reporting
Standards as adopted by the European Union and the requirements of the Cyprus Companies Law, Cap. 113.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further
described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the Company throughout the period of our appointment in accordance with the International Ethics Standards
Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to
our audit of the financial statements in Cyprus and we have fulfilled our other ethical responsibilities in accordance with these requirements
and the IESBA Code.
Our audit approach
Overview
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In
particular, we considered where the Board of Directors made subjective judgements; for example, in respect of significant accounting estimates
that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk
of management override of internal controls, including among other matters, consideration of whether there was evidence of bias that
represented a risk of material misstatement due to fraud.
Materiality
Audit
Scope
Key audit
matters
Overall materiality: USD 7.4 million, which represents 1% of total assets.
We audited the complete financial statements of the Company.
We have identified the impairment assessment of investment in subsidiaries and joint ventures
as the key audit matter.
Materiality
The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance whether the financial
statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or
in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall materiality for the
financial statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to determine the scope
of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in
aggregate on the financial statements as a whole.
40
GLOBAL PORTS INVESTMENTS PLC
Overall materiality
USD 7.4 million
How we determined it
1% of total assets
Rationale for the
materiality benchmark
applied
We chose total assets as the benchmark, because, in our view:
–
It is the benchmark against which the performance of the Company (the principal activity of the
Company is the holding of investments) is commonly measured by users; and
it is a generally accepted benchmark.
–
We chose 1% which is within the range of acceptable quantitative materiality thresholds in auditing standards.
We agreed with the Audit and Risk Committee that we would report to them misstatements identified during our audit above USD 0.48 million
as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
How we tailored our audit scope
Global Ports Investments Plc controls or has joint control over a number of entities situated in a number of territories namely Russia, Estonia,
Finland and Cyprus. In establishing the overall approach to the audit, we determined the scope of work that needed to be performed taking into
consideration the Company’s financial information, its activities and the industry in which the Company operates to ensure that we perform
sufficient work to enable us to provide an opinion on the financial statements as a whole.
Key audit matters incorporating the most significant risks of material misstatements, including assessed risk
of material misstatements due to fraud
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of
the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
Key audit matter
How our audit addressed the key audit matter
The Company performed an impairment test for all the cash
generating units (“CGUs”). We focused on this area due to:
–
–
The size of investments in subsidiaries and joint ventures; and
The assessment of the recoverable amount of the CGUs involves
complex and subjective judgements about the future results of
the business and the applicable discount rates to be used.
We evaluated the valuation inputs and assumptions, methodologies and
calculations adopted by the Board of Directors in determining the CGUs’
recoverable amounts. In order to assist us in our audit we involved PwC
valuation experts that have the knowledge and experience in the industry
and country of operation to assist us in evaluating methodology, models
and assumptions used.
In particular, we focused our audit effort on the Board of Directors’
assessment of impairment of the investments in Arytano Holdings
Limited as a reasonably possible change in the key assumptions would
cause its carrying amount to exceed its recoverable amount.
We evaluated and challenged the composition of the future cash flow
forecasts in the model including comparing them to the latest budgets
approved by the Board of Directors.
The expected cash flows (budgets) for the year 2018 and the
remaining assumptions used for the value in use calculation for the
investments in subsidiaries and joint ventures have been approved
by the Company’s Board of Directors. Certain assumptions made by
the Board of Directors in the determination of the CGUs’ value in use
calculation were considered to be key estimates.
Based on the results of the impairment tests the Company has
recognised an impairment charge amounting to US$ 961 thousand
in relation to the investment in NCC Group Limited.
For the investment in Arytano Holdings Limited, it was determined
that despite the fact that the test has shown a recoverable amount
higher than the carrying amount of the CGU no reversal of previously
recognised impairment was necessary because there is no observable
external or internal information to support reversal as required by
IAS 36 “Impairment of Assets”; and the tests are still sensitive to the
change of certain key parameters.
Refer to Notes 4 and 14 to the financial statements for the
related disclosures.
We challenged:
–
The Board of Directors’ key assumptions for the long term growth
rates of key inputs, such as volume and price and compared them
to historical results, economic and industry forecasts;
The discount rate applied to these cash flows, by assessing the
weighted average cost of capital, cost of debt and considering
territory specific factors; and
The macroeconomic assumptions used by the Board of Directors,
by comparing them to market benchmarks and publicly
available information.
–
–
For the investment in Arytano Holdings Limited, we have also
challenged the Board of Directors on the no reversal of previously
recognised impairment.
We further challenged the Board of Directors on the adequacy
of their sensitivity calculations over the CGUs’ recoverable amount
and determined the assumptions that created the most variability;
being assumptions for throughput volume, price per unit, growth
rates, and discount rates.
We lastly evaluated the adequacy of the disclosures made in Note 4
and 14 of the financial statements, including those regarding the key
assumptions and sensitivities to changes in such assumptions
as required.
Based on the evidence obtained, we found that the methodologies,
assumptions, data used within the models and disclosures are appropriate.
ANNUAL REPORT 2017
41
PARENT COMPANY FINANCIAL STATEMENTS INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF GLOBAL PORTS INVESTMENTS PLC
(CONTINUED)
Reporting on other information
The Board of Directors is responsible for the other information. The other information comprises the information included in the Management
Report (which includes the Corporate Governance Statement) which we obtained prior to the date of this auditor’s report and the Annual Report,
which is expected to be made available to us after that date. Other information does not include the financial statements and our auditor’s
report thereon.
Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated. If, based on the work we have performed on the other information that we obtained prior to the
date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
When we read the Company’s complete Annual Report, if we conclude that there is a material misstatement therein, we are required to
communicate the matter to those charged with governance and if not corrected, we will bring the matter to the attention of the members
of the Company at the Company’s Annual General Meeting and we will take such other action as may be required.
Responsibilities of the Board of Directors and those charged with governance for the financial statements
The Board of Directors is responsible for the preparation of the financial statements that give a true and fair view in accordance with International
Financial Reporting Standards as adopted by the European Union and the requirements of the Cyprus Companies Law, Cap. 113, and for such
internal control as the Board of Directors determines is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the Board of Directors is responsible for assessing the Company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either
intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit.
We also:
–
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit
procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk
of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion,
forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made
by the Board of Directors.
Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to
continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to
the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based
on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to
cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial
statements represent the underlying transactions and events in a manner that achieves a true and fair view.
–
–
–
–
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence,
and where applicable, related safeguards.
42
GLOBAL PORTS INVESTMENTS PLC
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit
of the financial statements of the current period and are therefore the key audit matters.
Report on other legal and regulatory requirements
Pursuant to the requirements of Article 10(2) of the EU Regulation 537/2014 we provide the following information in our Independent Auditor’s
Report, which is required in addition to the requirements of ISAs.
Appointment of the auditor and period of engagement
We were first appointed as auditors of the Company in 2008 by the members of the Company for the audit of the financial statements for the
year ended 31 December 2008. Our appointment has been renewed annually, since then, by shareholder resolution. In 2011 the Company was listed
in the Main Market of the London Stock Exchange and accordingly the first financial year after the Company qualified as an EU PIE was the year
ended 31 December 2012. Since then, the total period of uninterrupted engagement appointment was 6 years.
Consistency of the additional report to the Audit Committee
We confirm that our audit opinion on the financial statements expressed in this report is consistent with the additional report to the Audit and
Risk Committee of the Company, which we issued on 12 March 2018 in accordance with Article 11 of the EU Regulation 537/2014.
Provision of non-audit services
We declare that no prohibited non-audit services referred to in Article 5 of the EU Regulation 537/2014 and Section 72 of the Auditors’ Law of 2017
were provided. In addition, there are no non audit services which were provided by us to the Company and which have not been disclosed in the
financial statements or the management report.
Other legal requirements
Pursuant to the additional requirements of the Auditors Law of 2017, we report the following:
–
–
–
–
–
In our opinion, based on the work undertaken in the course of our audit, the management report has been prepared in accordance with
the requirements of the Cyprus Companies Law, Cap. 113, and the information given is consistent with the financial statements.
In light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we are required
to report if we have identified material misstatements in the management report. We have nothing to report in this respect.
In our opinion, based on the work undertaken in the course of our audit, the information included in the corporate governance statement
in accordance with the requirements of subparagraphs (iv) and (v) of paragraph 2(a) of Article 151 of the Cyprus Companies Law, Cap. 113,
and which is included as a specific section of the management report, have been prepared in accordance with the requirements of the
Cyprus Companies Law, Cap, 113, and is consistent with the financial statements.
In our opinion, based on the work undertaken in the course of our audit, the corporate governance statement includes all information
referred to in subparagraphs (i), (ii), (iii), (vi) and (vii) of paragraph 2(a) of Article 151 of the Cyprus Companies Law, Cap. 113.
In light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we are required
to report if we have identified material misstatements in the corporate governance statement in relation to the information disclosed for
items (iv) and (v) of subparagraph 2(a) of article 151 of the Cyprus Companies Law, Cap. 113. We have nothing to report in this respect.
Other matter
This report, including the opinion, has been prepared for and only for the Company’s members as a body in accordance with Article 10(1) of the
EU regulations 537/2014 section 69 of the Auditors Law of 2017 and for no other purpose. We do not, in giving this opinion, accept or assume
responsibility for any other purpose or to any other person to whose knowledge this report may come to.
The engagement partner on the audit resulting in this independent auditor’s report is Tasos Nolas.
Tasos Nolas
Certified Public Accountant and Registered Auditor
for and on behalf of
PricewaterhouseCoopers Limited
Certified Public Accountant and Registered Auditor
City House, 6 Karaiskakis Street,
CY-3032 Limassol, Cyprus
Limassol, 13 March 2018
ANNUAL REPORT 2017
43
PARENT COMPANY FINANCIAL STATEMENTS ADDITIONAL
INFORMATION
GLOBAL PORTS INVESTMENTS PLC
GLOBAL PORTS INVESTMENTS PLC
ANNUAL REPORT 2017
ANNUAL REPORT 2017
ADDITIONAL INFORMATION DIRECTORS’ RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
This Annual Report includes a fair review of the development and performance of the business and the position of the Company and the
undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.
Board of Directors of Global Ports Investments Plc
1
GLOBAL PORTS INVESTMENTS PLC
DEFINITIONS
Terms that require definitions are marked with capital letters and the definitions of which are provided below in alphabetical order.
Adjusted EBITDA (a non-IFRS financial measure) for Global Ports Group is defined as profit for the period before income tax expense, finance
(income)/costs—net, depreciation of property, plant and equipment, amortisation of intangible assets, share of profit/(loss) of joint ventures
accounted for using the equity method, other gains/(losses)—net and impairment of goodwill and property, plant and equipment and
intangible assets.
Adjusted EBITDA Margin (a non-IFRS financial measure) is calculated as Adjusted EBITDA divided by revenue, expressed as a percentage.
Average Storage Capacity is a storage capacity available at Vopak E.O.S. oil products terminals, averaged for the beginning and end of the year.
Baltic Sea Basin is the geographic region of northwest Russia, Estonia and Finland surrounding the Gulf of Finland on the eastern Baltic Sea,
including St. Petersburg, Ust-Luga, Tallinn, Helsinki and Kotka.
Cash Costs of Sales (a non-IFRS financial measure) are defined as cost of sales, adjusted for depreciation and impairment of property, plant
and equipment, amortisation and impairment of intangible assets.
Cash Administrative, Selling and Marketing expenses (a non-IFRS financial measure) are defined as administrative, selling and marketing
expenses, adjusted for depreciation and impairment of property, plant and equipment, amortisation and impairment of intangible assets.
CD Holding group consists of Yanino Logistics Park (an inland terminal in the vicinity of St. Petersburg), CD Holding and some other entities.
The results of CD Holding group are accounted in the Global Ports’ financial information using equity method of accounting (proportionate share
of net profit shown below Adjusted EBITDA).
Consolidated Marine Container Throughput is defined as combined marine container throughput by consolidated marine terminals: PLP, VSC,
FCT and ULCT.
Consolidated Marine Bulk Throughput is defined as combined marine bulk by consolidated terminals: PLP, VSC, FCT and ULCT.
Consolidated Inland Container Throughput is defined as combined container throughput by consolidated inland terminals: LT.
Consolidated Inland Bulk Throughput is defined as combined bulk throughput by consolidated inland terminals: LT.
Container Throughput in the Russian Federation Ports is defined as total container throughput of the ports located in the Russian Federation,
excluding half of cabotage cargo volumes. Respective information is sourced from ASOP (“Association of Sea Commercial Ports”,
www.morport.com).
Far East Basin is the geographic region of southeast Russia, surrounding the Peter the Great Gulf, including Vladivostok and the Nakhodka Gulf,
including Nakhodka on the Sea of Japan.
First Container Terminal (FCT) is located in the St. Petersburg harbour, Russia’s primary gateway for container cargo and is one of the first
specialised container terminals to be established in the USSR. The Global Ports Group owns a 100% effective ownership interest in FCT. The results
of FCT are fully consolidated.
Finnish Ports segment consists of two terminals in Finland, MLT Kotka and MLT Helsinki (in the port of Vuosaari), in each of which Container
Finance currently has a 25% effective ownership interest. The results of the Finnish Ports segment are accounted in the Global Ports’ financial
information using equity method of accounting (proportionate share of net profit shown below EBITDA).
Free Cash Flow (a non-IFRS financial measure) is calculated as Net cash from operating activities less Purchase of PPE.
Functional Currency is defined as the currency of the primary economic environment in which the entity operates. The functional currency
of the Company and certain other entities in the Global Ports Group is US dollars. The functional currency of the Global Ports Group’s operating
companies for the years under review was (a) for the Russian Ports segment, the Russian rouble, (b) for Oil Products Terminal segment, and for
the Finnish Ports segment, the Euro.
Gross Container Throughput represents total container throughput of a Group’s terminal or a Group’s operating segment shown on a 100%
basis. For the Russian Ports segment it excludes the container throughput of the Group’s inland container terminals – Yanino and Logistika
Terminal.
Logistika Terminal (LT) is an inland container terminal providing a comprehensive range of container freight station and dry port services at
one location. The terminal is located to the side of the St. Petersburg – Moscow road, approximately 17 kilometres from FCT and operates in the
Shushary industrial cluster. The Global Ports Group owns a 100% effective ownership interest in LT. The results of LT are fully consolidated.
MLT Group consists of Moby Dik (a terminal in the vicinity of St. Petersburg) and Multi-Link Terminals Oy (terminal operator in Vuosaari (near
Helsinki, Finland) and Kotka, Finland). The results of MLT group are accounted in the Global Ports’ financial information using equity method
of accounting (proportionate share of net profit shown below EBITDA).
ANNUAL REPORT 2017
2
ADDITIONAL INFORMATION DEFINITIONS (CONTINUED)
Moby Dik (MD) is located on the St. Petersburg ring road, approximately 30 kilometers from St. Petersburg, at the entry point of the St. Petersburg
channel. It is the only container terminal in Kronstadt. The Global Ports Group owns a 75% effective ownership interest in MD, Container Finance
LTD currently has a 25% effective ownership interest. The results of MD are accounted in the Global Ports’ financial information using equity
method of accounting (proportionate share of net profit shown below EBITDA).
Net Debt (a non-IFRS financial measure) is defined as a sum of current borrowings and non-current borrowings, derivative financial instruments
less cash and cash equivalents and bank deposits with maturity over 90 days.
Oil Products Terminal segment consists of the Group’s 50% ownership interest in Vopak E.O.S. (in which Royal Vopak currently has a 50%
effective ownership interest). The results of the Oil Products Terminal segment are consolidated in the Global Ports’ financial information using
equity method of accounting (proportionate share of net profit shown below EBITDA).
Petrolesport (PLP) is located in the St. Petersburg harbour, Russia’s primary gateway for container cargo. The Group owns a 100% effective
ownership interest in PLP. The results of PLP are fully consolidated.
Revenue per TEU is defined as the Global Ports Group’s Consolidated container revenue divided by total container marine throughput.
Ro-Ro, roll on-roll off is cargo that can be driven into the belly of a ship rather than lifted aboard. Includes cars, buses, trucks and other vehicles.
Russian Ports segment consists of the Global Ports Group’s interests in PLP (100%), VSC (100%), FCT (100%), ULCT (80%) (in which Eurogate
currently has a 20% effective ownership interest), Moby Dik (75%), Yanino (75%) (in each of Moby Dik and Yanino Container Finance currently
has a 25% effective ownership interest), and Logistika Terminal (100%). The results of Moby Dik and Yanino are accounted in the Global Ports’
consolidated financial information using equity method of accounting (proportionate share of net profit shown below EBITDA).
TEU is defined as twenty-foot equivalent unit, which is the standard container used worldwide as the uniform measure of container capacity;
a TEU is 20 feet (6.06 metres) long and eight feet (2.44 metres) wide and tall.
Total Debt (a non-IFRS financial measure) is defined as a sum of current borrowings, non-current borrowings and derivative financial instruments.
Total Operating Cash Costs (a non-IFRS financial measure) is defined as Global Ports Group’s cost of sales, administrative, selling and marketing
expenses, less depreciation and impairment of property, plant and equipment, less amortisation and impairment of intangible assets.
Ust Luga Container Terminal (ULCT) is located in the large multi-purpose Ust-Luga port cluster on the Baltic Sea, approximately 100 kilometres
westwards from St. Petersburg city ring road. ULCT began operations in December 2011. The Global Ports Group owns an 80% effective ownership
interest in ULCT, Eurogate, the international container terminal operator, currently has a 20% effective ownership interest. The results of ULCT are
fully consolidated.
Vopak E.O.S. includes AS V.E.O.S. and various other entities (including an intermediate holding) that own and manage an oil products terminal
in Muuga port near Tallinn, Estonia. The Group owns a 50% effective ownership interest in Vopak E.O.S.. The remaining 50% ownership interest
is held by Royal Vopak. The results of Vopak E.O.S. are accounted in the Global Ports’ financial information using equity method of accounting
(proportionate share of net profit shown below EBITDA).
Vostochnaya Stevedoring Company (VSC) is located in the deep-water port of Vostochny near Nakhodka on the Russian Pacific coast,
approximately eight kilometers from the Nakhodka-Vostochnaya railway station, which is connected to the Trans-Siberian Railway. The Group
owns a 100% effective ownership interest in VSC. The results of VSC are fully consolidated.
Weighted average effective interest rate is the average of interest rates weighted by the share of each loan in the total debt portfolio.
Yanino Logistics Park (YLP) is the first terminal in the Group’s inland terminal business and is one of only a few multi-purpose container logistics
complexes in Russia providing a comprehensive range of container and logistics services at one location. It is located approximately 70 kilometres
from the Moby Dik terminal in Kronstadt and approximately 50 kilometres from PLP. The Global Ports Group owns a 75% effective ownership
interest in YLP, Container Finance LTD currently has a 25% effective ownership interest. The results of YLP are accounted in the Global Ports’
financial information using equity method of accounting (proportionate share of net profit shown below EBITDA).
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GLOBAL PORTS INVESTMENTS PLC
SHAREHOLDER INFORMATION AND KEY CONTACTS
Global Ports Investments PLC
Legal Address
Omirou 20
Agios Nikolaos
CY-3095
Limassol, Cyprus
Postal Address
Kanika International Business Center,
Office 201, Profiti Ilia Street, 4,
Germasogeia
Limassol P.C. 4046, Cyprus
Investor Relations
Mikhail Grigoriev
Head of Investor Relations
Phone +7 812 677 15 57
GSM: +7 916 991 7396
Tatiana Khansuvarova
Investor Relations Analyst
Email: ir@globalports.com
Media Relations
Russian Media
Anna Vostrukhova
Head of Media Relations
Phone: +357 25 313 475
E-mail: media@globalports.com
International Media
Teneo Blue Rubicon
Zoë Watt
Doug Campbell
+44 20 7240 2486
E-mail: globalports@teneobluerubicon.com
Depositary
J.P. Morgan
1 Chase Manhattan Plaza, Floor 58
New York, NY 10005
+1 (866) JPM-ADRS
adr@jpmorgan.com
Stock Exchange
London Stock Exchange PLC
10 Paternoster Square,
London EC4M 7LS, UK
Phone: +44 20 7797 1000
Website: www.londonstockexchange.com
Independent Auditors
PricewaterhouseCoopers Limited
City House, 6 Karaiskakis Street
CY-3032, Limassol, Cyprus
Phone: +357 25 555 000
Fax: +357 25 555 001
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