GMS Annual Report 2014 | Quarterlytics

FY2014 Annual Report · GMS

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WELL-POSITIONED
FOR GROWTH

GULF MARINE SERVICES PLC
Annual Report 2014

LEADING THE WAY IN
OFFSHORE SUPPORT
SOLUTIONS FOR THE OIL,
GAS AND RENEWABLE
ENERGY INDUSTRIES

Gulf Marine Services (GMS) is one of the largest operators
of self-propelled, self-elevating support vessels (SESVs)
in the world. The Group builds and maintains its vessels
in Abu Dhabi and operates these from its offices in Abu Dhabi,
Saudi Arabia and the United Kingdom.

GOVERNANCE
38-65

Chairman’s Introduction

Board of Directors

Corporate Governance

Report of the Audit and Risk Committee

Report of the Remuneration Committee

Report of the Nomination Committee

Directors’ Report

Statement of Directors’ Responsibilities

FINANCIAL STATEMENTS
66-113

Independent Auditor’s Report

Group Consolidated Financial Statements

Company Financial Statements

ADDITIONAL INFORMATION
114-124

Notice of AGM

Glossary

Corporate Information

106

116

122

124

INTRODUCTION
01-05

2014 – Highlights

GMS at a Glance

Chairman’s Statement

STRATEGIC REPORT
06-23

CEO’s Review

Business Model

Our Strategy

Key Performance Indicators

Risk Management

PERFORMANCE
24-37

Operating Review

Financial Review

Corporate Social Responsibility

GULF MARINE SERVICES PLC Annual Report 2014Introduction2014 – HIGHLIGHTS

Operational Highlights

Financial Highlights

– The Group’s focus on providing

– Revenue increased by 7% to US$ 196.6

cost-effective and flexible solutions
to its clients is reflected in a continued
high SESV fleet utilisation of 97% for
the year.

million (2013: US$ 184.3 million).

– Robust cash flows generated from

operations, adjusted EBITDA of US$
124.8 million (2013: US$ 124.7 million).

– Six new contract wins (with charter day
rates in line with previous guidance) and
three significant contract extensions
during 2014, comprising:

– Two new contracts for the existing
SESV fleet: a Large Class vessel
four-year charter in the North Sea
(two years firm with two 12-month
options) and a Small Class vessel
12-month charter in MENA (six
months with up to six months option).

– Four new contracts for the new build
SESV fleet: one Large Class vessel
initially contracted for four months
directly followed by a long-term
contract of four years (three years
plus a one-year option, signed in
January 2015), the first Mid-Size Class
vessel contracted for five years (two
years firm with three one-year
options) and an enhanced Small Class
vessel contracted for five years (three
years firm plus a two-year option).

– Three significant contract extensions
from existing clients for SESV fleet:
one Large Class vessel in the North
Sea and two Small Class vessels
in MENA.

– The new build programme, which will

expand the SESV fleet from nine to 15
vessels during the period 2014 to 2016,
is going well with, to date, two SESVs
delivered as planned and on charter and
the remaining four SESVs at various
stages of construction as scheduled.

– Adjusted EBITDA margin 64%

(2013: 68%).

– Adjusted net profit (excluding IPO

costs) up by 13% to US$ 81.3 million
for 2014 (2013: US$ 71.9 million).

– Adjusted diluted earnings per share
increased in the year to 23.71 cents
(2013: 23.56 cents).

– Final dividend for the year proposed of

1.06 pence (1.64 cents) per share taking
total 2014 dividend payments to
1.47 pence (2.33 cents).

– Successful IPO in March 2014 raised

primary gross proceeds of approximately
US$ 111.0 million.

Outlook

– Demand for the Group’s cost-effective
support solutions in the Opex cycle
remains strong with a healthy secured
backlog of US$ 707 million as at 1 March
2015 comprising US$ 380 million firm
and US$ 327 million extension options.

– Well-placed to continue progress with
robust operating cash flows and net
debt (including obligations under finance
leases) of US$ 273.6 million (2013: US$
307.2 million) and committed undrawn
bank facilities of US$ 130.0 million at
31 December 2014.

– The 2014 to 2016 fleet expansion

programme, which is fully-financed,
will help drive significant growth in 2015
and 2016.

The above highlights are based on the Group’s adjusted results. A full reconciliation between the adjusted and
statutory results is contained in note 6 to the consolidated financial statements.

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GULF MARINE SERVICES PLC Annual Report 2014INTRODUCTIONSTRATEGIC REPORT PERFORMANCEGOVERNANCEADDITIONAL INFORMATION
GMS AT A GLANCE

OUR OFFERING

A WORLD
LEADER IN
SESVs

Gulf Marine Services was founded in Abu Dhabi in 1977
and is the operator of one of the world’s largest fleets of
advanced self-propelled Self-Elevating Support Vessels
(SESVs). The Group listed on the London Stock Exchange
in March 2014.

GMS’ assets provide the stable platform for the
delivery of a wide range of services performed
by the Group’s clients throughout the total
lifecycle of offshore oil, gas and renewable
energy activities. The vessels are capable of
operations in the Middle East, South East Asia,
West Africa and Europe.

The Group constructs and maintains its vessels
at its yard in Abu Dhabi; its extensive new build
programme makes the GMS fleet the most
sophisticated in the industry. The current
fleet of SESVs comprises 11 vessels; GMS
will increase this to 15 vessels by 2016.

The Group’s SESV fleet is technically
advanced and amongst the youngest in the
industry, with an average age of eight years.
The SESVs are four-legged vessels that
move independently, with no requirement
for anchor handling or tug support. They
have a large deck space, crane capacity
and accommodation facilities that can
be adapted to the requirements of the
Group’s clients. These vessels support
GMS’ clients in a broad range of offshore
oil and gas platform refurbishment and
maintenance activities, well intervention
work and offshore wind turbine maintenance
work (which are Opex-led activities) and
offshore oil and gas platform installation
and offshore wind turbine installation
(which are Capex-led activities).

GmS Supports:
– Well intervention services and

enhanced oil recovery

– Drilling support, completions

and testing

– Platform construction, hookup

and commissioning

– Platform restoration and

maintenance

– Coil tubing, wireline, snubbing
– Well abandonment and

decommissioning

– Wind turbine installation

and maintenance

Further details on our Business Model and vessel
flexibility can be found on pages 12 to 13.

GULF MARINE SERVICES PLC Annual Report 2014IntroductionOUR OFFERING

Three classes of vessels serve a range of client needs

Small Class

Mid-Size Class

Large Class

• 8 units
• Average age: 11 yrs
(7 yrs excl Naashi)
• Water depth: 45m
• Accommodation for up

to 300 people

• 3 units under construction
• Average age: N/A
• Water depth: 55m
• Accommodation for up

to 300 people

• Harsh weather capable

• 3 units + 1 to be constructed
• Average age: 2 yrs
• Water depth: 65–80m
• Accommodation for up

to 300 people

• Harsh weather capable

WHERE WE CURRENTLY OPERATE

HISTORY

MENA

Market dominance in the MENA region.

NORTH WEST EUROPE

Continued successful operations
in North West Europe.

GMS was established in Abu Dhabi, UAE in 1977.
In 2007 the Group was acquired by a consortium
of investors, led by private equity firm Gulf
Capital, and a new senior management team was
appointed, headed by the current CEO Duncan
Anderson. At this time, the Group was operating
three self-propelled SESVs (with a fourth
undergoing refurbishment) and had another
under construction. Within just seven years,
GMS has successfully expanded its fleet and
geographical coverage, from a local operation
in Abu Dhabi to become the number one player
in the Middle East, and now one of the largest
operators of self-propelled SESVs in the world.

The Group’s current SESV fleet stands at
11 vessels (as at March 2015); it also has an
accommodation barge and two anchor-
handling tug support (AHTS) vessels.

The Group’s first Large Class vessel, which
opened up a market sector where vessels can
operate in harsh weather and deeper water
environments, was constructed in 2010,
with a second delivered in 2011. In 2010 when
GMS Endurance was completed it was initially
deployed in Saudi Arabia, whilst the second,
GMS Endeavour, was mobilised to the North
Sea; both markets were a first for GMS and
allowed the Group to continue its growth
strategy and to expand its geographic and
client footprint beyond the UAE where it had
predominantly been working up to that time.

GMS operated entirely in the oil and gas
sector until 2011 when it entered the offshore
wind power installation market in North West
Europe with one of its Large Class vessels,
GMS Endeavour.

In 2014 GMS embarked on a three-year new
build programme to expand its fleet by a further
six SESVs. The first of these, GMS Enterprise,
was completed in 2014 and in the same year
construction commenced on the first of
three newly-designed Mid-Size Class vessels,
with these due for delivery in 2015 and 2016.

GmS Fleet of SeSVs

Small class Vessels
Naashi
Kamikaze
Kikuyu
Kawawa
Kudeta
Keloa
Kinoa

Pepper

large class Vessels
GMS Endurance
GMS Endeavour

GMS Enterprise

Year of Build

1982
1999
2005
2006
2008
2009
2012

2015

Year of Build

2010
2011

2014

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GULF MARINE SERVICES PLC Annual Report 2014INTRODUCTIONSTRATEGIC REPORT PERFORMANCEGOVERNANCEADDITIONAL INFORMATION
Introduction

CHAIRMAN’S STATEMENT

2014: A YEAR
OF DELIVERY

It gives me great pleasure to introduce Gulf Marine
Services’ inaugural Annual Report. The Group’s
IPO in March and admission onto the main market
of the London Stock Exchange, which raised primary
gross proceeds of approximately US$ 111 million, was
a major highlight of 2014. GMS has since gone from
strength to strength. We are implementing our
business strategy to expand our fleet and operations
as planned, we have maintained a strong balance
sheet and achieved good revenue visibility.

During the year, we secured five new contract
awards, totaling an aggregate contracted period
of approximately 15.5 years (including options),
which equates to around US$ 272.6 million of
additional backlog. Our order book continues to
be very healthy, and as the year drew to a close
we negotiated a new four-year contract, signed
in January, for one of our Large Class vessels
in the MENA region, culminating in a secured
backlog of over US$ 700 million as at 1 March
2015. We delivered a strong set of results for
2014. Total revenue and adjusted EBITDA for
the year were US$ 196.6 million and US$ 124.8
million respectively, with adjusted diluted
earnings per share of 23.71 cents.

Central to our growth has been both the
continued high utilisation of our existing fleet
and the commencement of the delivery of
additional SESVs under our fleet expansion
programme. The Group’s continued positive
development is testament to its long track
record of successful operations, its excellent
reputation and robust financial performance
under the leadership of its CEO Duncan
Anderson and his executive team.

As GMS prepared for the IPO it appointed a new
Board, which I am delighted to lead as Chairman.
The Board is highly experienced and provides
sound stewardship; it has also ensured that the
appropriate Corporate Governance standards
are in place.

GULF MARINE SERVICES PLC Annual Report 2014IntroductionLooking to the future, the Group has a strong
financial base from which to deliver the organic
growth strategy we set out at IPO and this will
be driven through the support services we
provide to our core clients’ Opex-related oil
and gas operations.

We will continue to capitalise on strong demand
for our assets in the MENA region, and will seek
to increase our operations in Europe. Expansion
into new geographies will be a longer-term goal
aligned to the availability of our new tonnage.

With a clear strategy and a proven management
team, we are well-positioned to deliver
shareholder value. The Board views the coming
years with confidence and enthusiasm and
I look forward to reporting on our progress.

Simon Heale
Chairman
23 March 2015

The Group’s dividend policy looks to maximise
shareholder value and reflect GMS’ strong
earnings and cash flow characteristics, whilst
allowing the retention of sufficient capital to
invest in long-term growth for the Group.
For 2014, we were pleased to declare a maiden
interim dividend of 0.41 pence per share, which
was paid in October. The final dividend for the
year will be 1.06 pence per share subject to
shareholders’ approval at the AGM on 6 May
2015 and this will be paid on 12 May 2015.

GMS has maintained its excellent health and
safety record and we remain committed to
upholding the highest standards across all areas
of our business. Focus on our employees has
been important, as it is every year. We have
supplemented our workforce at all levels and
across all departments to support our expansion
requirements. I would like to thank all employees,
both onshore and offshore, for their energy and
dedication to GMS during a very busy first year
as a listed company.

We are, of course, keeping a watchful eye on
current challenging macroeconomic conditions.
While we are not immune to low oil prices, we are
more cushioned from the effects than others in
the energy sector due to the Opex nature of our
business and to the fact that the majority of our
fleet is working in the MENA region, which gives
us a greater resilience to ride out the current
industry fluctuations.

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GULF MARINE SERVICES PLC Annual Report 2014INTRODUCTIONSTRATEGIC REPORT PERFORMANCEGOVERNANCEADDITIONAL INFORMATION
STRATEGIC
REPORT

CEO’s Review
Business Model
Our Strategy
Key Performance Indicators
Risk Management

08
12
14
18
20

GULF MARINE SERVICES PLC Annual Report 2014i

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GULF MARINE SERVICES PLC Annual Report 2014INTRODUCTIONSTRATEGIC REPORT PERFORMANCEGOVERNANCEADDITIONAL INFORMATION
Strategic Report

CEO’S REVIEW

2014: WELL-
POSITIONED
FOR GROWTH

The Group delivered a strong performance in 2014.
GMS carried out the business strategy we set out at IPO,
maintaining high utilisation levels of 97% for the SESV
fleet and achieving charter rates in line with expectations.
The new build programme, which will expand the fleet by
two-thirds during the period 2014 to 2016, progressed
as scheduled with a Large Class vessel delivered to its
first contract in Q4 2014, and two further new vessels
contracted well ahead of their Q2 2015 scheduled build
completion. As our fleet continues to grow we believe
2015 will be a year of progress.

GMS delivered a solid performance in the year,
successfully implementing the business
strategy we set out at IPO as we expanded both
our fleet and operations.

Group Financial Performance
Revenue improved by 7% compared to 2013
to US$ 196.6 million and adjusted net profit
increased by 13% to US$ 81.3 million (net profit
was US$ 75.6 million). EBITDA (adjusted for IPO
costs) has remained stable year on year at a
robust US$ 124.8 million, with a healthy EBITDA
margin of 64%. The Group’s IPO raised primary
gross proceeds of approximately US$ 111.0
million. For 2014, we declared a maiden interim
dividend of 0.41 pence per share, which was
paid on 27 October. The final dividend for the
year will be 1.06 pence (1.64 cents) per share
subject to shareholders’ approval at the AGM on
6 May 2015 and this will be paid on 12 May 2015.

High Fleet Utilisation
GMS has continued to focus on providing
cost-effective offshore support solutions
to its clients and this, combined with the
Group’s extensive operational expertise,
is reflected in a high SESV utilisation rate
of 97%.

Strong Order Book
Demand for our assets continues to be excellent
in the MENA region and solid in Europe. The Group
has entered 2015 with a very healthy secured
backlog, comprising firm and extension
options, of US$ 707 million as at 1 March 2015.

GMS had an encouraging total of six new
contract wins since the beginning of 2014
to date. Two of these were for SESVs in our
existing fleet, with a four-year charter for
a Large Class vessel in the North Sea, and
a 12-month charter for a Small Class vessel
in MENA. A newly-built Large Class SESV
was initially contracted for four months and
directly followed by a long-term contract
of four years in MENA. The remaining two new
long-term contracts, each being five-year

GULF MARINE SERVICES PLC Annual Report 2014Strategic Report
charters, were secured for our new build SESVs
well ahead of the vessels’ scheduled delivery
dates, for operations in the MENA region.

The recruitment and training of highly
specialised crew to operate our vessels
is always important.

Operations
The Group’s current SESV fleet is one of the
youngest in the industry, with an average age
of eight years. This is based on 11 years for
the Small Class SESV fleet and two years for
the Large Class SESV fleet. At the time of our
IPO we set out our new build programme for
the years 2014 to 2016. On its completion,
which will see an increase in our SESV fleet to
15 vessels, the average age of the SESV fleet
will reduce still further. The GMS fleet offers
clients not only the cost-efficient deployment
of our vessels, but also the prospect of
substantial operational efficiencies in their
own maintenance activities that would not
be available from less modern vessels.

Utilisation of the SESV fleet for the year was
97%, with day rates in line with those previously
indicated at IPO. The Group has built its
reputation on the reliability of its fleet. Across
our entire fleet, we only had 12 days of unpaid
technical downtime (for repairs/maintenance)
in 2014 and we would seek to maintain this level
of performance in 2015.

Health, safety and environment (HSE) is a top
priority for GMS, with the lives of our personnel,
our contractors and others who are impacted
by our activities dependent upon us upholding
our high standards. The Group’s strong HSE
track record has been maintained throughout
a period of considerable expansion, with zero
lost time injuries both onshore and offshore
throughout our global business and operations.
I would like to commend all our personnel for
their diligence and vigilance.

With a relatively small pool of SESV-qualified
senior officers worldwide, it is essential to
ensure we have enough appropriately-skilled
crew to meet not only the needs of our current
fleet, but also that of our expanding fleet.
During the year we substantially enhanced the
training opportunities for our crew, forming
a partnership with Abu Dhabi Ports Company
to develop the world’s first self-propelled
SESV manoeuvring and jacking simulator
course. This excellent facility allows us to
repeat difficult and complex operations
until the trainee is well-practised in any given
scenario. A number of new training initiatives
were introduced during the year for both land
and sea-going personnel. The Group also
continues to build a good pipeline of ‘home-
grown’ qualified staff to ensure the continuity
of efficient operations as we grow the business.

markets
middle east
2014 has been characterised by excellent
demand and high levels of utilisation across
the SESV fleet. We completed two charters
on Small Class vessels in 2014 which were
immediately re-chartered on new contracts.
Two further Small Class units that had
outstanding options with existing long-term
contracts had these options exercised by their
respective clients during the year. Our entire
Small Class fleet and one Large Class vessel
are operational in the Middle East. They will be
joined by the Group’s first new build Mid-Size
Class SESV and a new enhanced Small Class
vessel, which will commence contracts during
the first half of 2015.

GMS has long-term confidence in the Saudi
Arabian market and, as announced previously,
subject to the normal regulatory approvals
by the relevant government authorities,
plans to increase its ownership in its KSA joint
venture to 75% by purchasing a 15% interest
from its existing partner, which will at the
same time sell its remaining 25% stake
to a well-regarded KSA conglomerate.

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GULF MARINE SERVICES PLC Annual Report 2014INTRODUCTIONSTRATEGIC REPORT PERFORMANCEGOVERNANCEADDITIONAL INFORMATION
CEO’S REVIEW
Continued

europe
Two Large Class SESV units have been operating
in the Southern North Sea throughout 2014.
One is chartered under a long-term oil and gas
contract, and the second vessel that undertook
a mixture of shorter-term contracts in both the
oil and gas and renewables sectors during the
year, will be directly chartered in Q2 2015 under
a long-term contract for up to four years' work
in the Dutch sector of the Southern North Sea.
A number of other opportunities remain within
the oil and gas sector in this region despite the
current low oil price. While the renewables sector
continues to provide short-term opportunities,
demand in the wind farm segment is unpredictable.
The flexibility of our SESVs will allow us to
maximise opportunities should this sector
pick up, subject to vessel availability.

Rest of World
During the year, the Group entered into
cooperation agreements with local partners
in Malaysia and Brunei, and these are providing
greater levels of access and support within
these new markets. While we believe the NOC
client base in the South East Asian region is
receptive to the SESV concept, development
of this market has been restricted by a lack of
available vessels within our current fleet. Going
forward, we expect demand in South East Asia
to be more sensitive to lower oil prices due
to the higher production costs in that region
compared to the Gulf. It is difficult to gauge
what the impact is likely to be on demand over
the next three to five years, but we believe that
there will continue to be opportunities for GMS.

The level of tendering activity for new business
in West Africa during 2014 has been significantly
lower than in previous years, in part due to the
uncertainty associated with elections in some
countries, but we are continuing to track
opportunities in this market.

enhancing our Offering
During the year, we continued to build up our
in-house expertise in well services in order to
engage more effectively with our clients and
their sub-contractors, with a view to providing
SESVs with increased capabilities specifically
suited to their needs. As a result, we are seeing
significant new opportunities developing across
all of our current markets for enhanced well
intervention services that can be performed
from our vessels where clients may previously
have used more expensive drilling rigs. Our
ability to provide innovative and cost-effective
new options to clients will continue to drive
demand for our services and contribute towards
maintaining high levels of utilisation in future.

new Build Programme
The Group’s new build programme, which will
expand the fleet of SESVs from nine to 15 vessels
during the period 2014 to 2016, progressed as
planned throughout the year. GMS continues
to benefit from the competitive advantage our
well-established in-house quayside construction
facility in Abu Dhabi provides, which allows us to
build our vessels approximately 30% cheaper
than our peers who rely on third party shipyards.

This also allows us to control the quality of the
entire construction process and manage the
timely delivery of the completed vessel.

The first of the six new SESVs, GMS Enterprise,
was completed ahead of schedule and under
budget. The hull of the next new build, the
Mid-Size Class vessel GMS Shamal, arrived
at the yard in Q4 2014 and is scheduled for
completion in Q2 2015. An Enhanced Small
Class vessel, Pepper, will be completed in Q1
2015, and a second Mid-Size Class vessel, GMS
Scirocco, will be completed in Q3 2015. A third
Mid-Size Class vessel, GMS Sharqi, is scheduled
for Q1 2016 and a further Large Class vessel,
GMS Evolution, is planned for Q4 2016. Various
enhancements are being incorporated into
the design of GMS Evolution in order to expand
the well service offering on board to clients.
These include higher deck loads and increased
free deck space, and a cantilever crane that will
not only further enhance the efficiency and
cost-effectiveness of existing interventions,
but will also extend the range of possible
well interventions to include ESP (electric
submersible pump) systems replacement
or Plug and Abandonment for example.

The estimated cost to complete the remainder
of the new build programme for the period 2015
to 2016 is approximately US$ 175 million.

Our People
Our people are at the very core of our business
and are the strength behind the Group.
GMS employs personnel from more than 50
countries and this rich diversity ensures we look
at ourselves, and the way we work, from many
different viewpoints. I would like to take this
opportunity to thank all our staff for their great
dedication and support as we prepared for
our IPO and throughout our first year as a
listed company.

I would also like to extend my gratitude to the
management team for its hard work in ensuring
the Group has the correct strategy in place for
our future growth, and to my colleagues on
the Board of Directors, who provide us with
the benefit of their extensive knowledge
and experience.

GULF MARINE SERVICES PLC Annual Report 2014Strategic Report
THE 2014 TO 2016 FLEET EXPANSION PROGRAMME
IS FULLY-FINANCED AND WILL HELP DRIVE GROWTH
IN 2015 AND 2016.

Outlook
The Group is continuing to increase its SESV
fleet throughout 2015 with the delivery of three
new vessels; a further two vessels are scheduled
for 2016. This 2014 to 2016 fleet expansion
programme is fully-financed and will help drive
earnings growth in 2015 and 2016. It is our
intention to continue to expand the fleet
beyond this at an appropriate rate to capitalise
on the continuing strong demand we see for our
vessels. Future growth will be paced responsibly,
based on the Group’s view of market demand
and investment returns. Whilst we will always
have regard to our earnings progress and the
capital required for investment in our new build
programme, we expect the increasing strength
in our cash flows to be reflected in a step up in
our dividend payments ratio.

The recent rapid decline in the oil price is
clearly already having significant effects
across the oil and gas sector. Whilst we cannot
say with certainty how GMS will be affected by
this, any effects to date have been limited and
we believe that we are well-placed to continue
to grow our business. The Group has a strong
backlog (over $700m) of firm and option-based
contracts, and all of the activity in the backlog is
in Opex rather than Capex-based work meaning

that none of our contracts are vulnerable
to the major cutbacks to capital expenditure
that are already taking place. In addition,
over 70% of the Group’s backlog will be derived
from our work mainly for NOCs in the low cost
production areas in the Middle East. The low
oil price could well also lead to the acceleration
of abandonment and decommissioning work
by our clients which would provide further
business opportunities for GMS.

We will monitor carefully any emerging effects
of the low oil price environment and, if necessary,
adjust our strategy accordingly. However,
the outlook, based on our current pipeline of
contracts under negotiation and other tender
opportunities, is for continued strong demand
driven primarily by our core Opex-related
brownfield oil and gas client base, and in
particular in the Middle East.

We are well-positioned for continued growth
and I look forward to 2015 and beyond
with confidence.

Duncan Anderson
Chief Executive Officer
23 March 2015

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GULF MARINE SERVICES PLC Annual Report 2014INTRODUCTIONSTRATEGIC REPORT PERFORMANCEGOVERNANCEADDITIONAL INFORMATION
BUSINESS MODEL

CREATING VALUE FOR
OUR SHAREHOLDERS

Our business model is centred on the provision of highly cost-effective sophisticated
self-propelled jackup vessels to clients operating in the offshore energy sector.
This service enables our clients primarily to carry out maintenance, modification and
well services work on their offshore facilities, by providing a stable platform immediately
adjacent to the facility. This allows the storage and application of materials and equipment
necessary for the client's work, and for the accommodation of the workforce. We have
developed an integrated approach focused around six key areas in order to deliver this
business model.

The diagram represents the
Group’s business. The outer
circle represents the environment
in which GMS works. Within the
image, our core values, which
are central to everything we
do, are captured along with
the business model we apply
to create shareholder value.

GULF MARINE SERVICES PLC Annual Report 2014Strategic Report CREATE SHAREHOLDER VALUEOUR CORE VALUESExcellenceOﬀshore Support VesselsDesign and Build SophisticatedClientsBusiness PartnersInvestorsStaﬀCommunities and wider societyGovernmentsRecurring Contracts Focus on Long-Term and Deliver OperationalExcellenceMaintain the Highest Levels of Health, Safety and Enhance our Oﬀering Innovate and our PeopleContinuously Develop RelationshipsResponsibilityOUR BUSINESS MODELOUR KEY STAKEHOLDERSEnvironmental (HSE) Performance > Design and Build Sophisticated

Offshore Support Vessels

back-to-back contracts with the same clients,
carrying out the same service.

GMS has in excess of 30 years’ experience in the
design and construction of SESVs solely for our
own use. Our quayside construction facility in
Abu Dhabi provides us with the in-house resource
to speedily adapt or repair our vessels without
relying on third parties; any client-requested
changes can be made to the vessels at minimum
cost and time to our clients.

This ability to build SESVs for ourselves is
essential to our low-cost integrated build model
that allows management to better control the
quality, componentry and timelines of delivery
whilst also enabling construction of the vessels
at around 30% cheaper than at a traditional
shipyard. We can also respond rapidly to clients’
requests for bespoke specifications that can be
efficiently incorporated at the build stage; this
flexibility enables us to bid on a wide variety
of tenders.

The construction of an SESV takes around
18 months with the four main processes
being procurement of vessel components,
hull construction that is outsourced to
competitive yards, assembly at our yard in
Abu Dhabi and commissioning. Since GMS
is both builder and operator, we can closely
manage our construction programme and
are therefore well-placed to gear our fleet
expansion programme according to our
view of market demand.

> Focus on long-term and

Recurring contracts

The Group’s revenue is principally generated by
the charter day rates we charge for each vessel.
We target long-term contracts in order to
maintain industry-leading levels of vessel
utilisation and more predictable cash flows.

GMS is active in the Opex phase of the oil and
gas cycle, predominantly supporting long term
oil production, traditionally in maintenance,
refurbishment and repair, and more recently in
well services. This means GMS is far less prone
to the cyclical nature of the oil industry than
many oil service companies exposed to the
Capex-led exploration and development
phases. A typical contract length for a Small
Class vessel is three to five years, while for
the Large Class vessels it ranges from six
months to four years. Contracts normally
include both a firm and extension period;
the extension/option period is at the client’s
discretion and historically 90% of these periods
have been exercised.

Nearly all of the Group’s revenue is sourced
from the Opex-led activities of our clients,
who generally will have an ongoing requirement
for a SESV once all available options have been
exercised. As the incumbent operator, GMS
is always well-placed to win recurring work
when the renewal contract is tendered and we
have been very successful in securing renewal
contracts. This is demonstrated by three of
our oldest Small Class vessels, which between
them have amassed more than 45 years of

> Deliver Operational excellence
We continually strive for excellence in all
aspects of our operations. Within our market
we have the largest pool of skilled employees
that provide clients with safe and high quality
services from a fleet of sophisticated SESVs.
In addition, we are continually looking for ways
to improve our offering through significant
market knowledge and experience, technical
expertise, client collaboration and by forming
strategic business partnerships.

GMS offers a range of benefits to its clients,
resulting in greater operational efficiency and
significant time and cost savings for them, along
with high utilisation and premium day rates
for GMS. All of our SESVs have rapid jacking
capability and have a four-leg design with better
stability and jacking speed relative to three-
leg SESVs. In addition, all of our SESVs are
self-propelled (with full propulsive redundancy)
and the Large Class and Mid-Size Class vessel
designs include DP2, a dynamic positioning
system that enhances the ability of SESVs to
safely manoeuvre close to our clients’ offshore
installations. These features also allow the
vessels to move faster in-field than conventional
non-propelled vessels. We are focused on
ensuring the efficient management of our fleet,
with our in-house maintenance programme
ensuring timely repairs and routine maintenance
have minimal effect on operations.

> maintain the Highest levels of

Health, Safety and environmental
(HSe) Performance

We place a high priority on managing the risks
inherent to our operations and comply with
national and international HSE standards.

We employ an integrated management
system covering the quality, health, safety and
environmental principles and objectives of our
business, which is implemented throughout all
offshore and onshore operations. This aims to
provide innovative and sustainable solutions to
monitor our HSE performance and continuously
improve the necessary safeguards to protect
our employees and minimise the impact on the
environment. This system is fully ISO 9001,
ISO 14001 and OHSAS 18001 compliant,
is externally audited and accredited, and is
continually reviewed to capture best practice
changes issued by the International Association
of Oil and Gas Producers. We have also
developed successfully UK North Sea Safety
Cases for the operation of our Large SESVs
in that region.

Health and safety are considered by our clients
when assessing bids for tenders and we regard
our performance in this area as an advantage.
We have consistently maintained low levels
of lost time injuries (LTIs, meaning an injury
that requires one or more days off work).
In 2014 we had zero LTIs in our fleet and in
our onshore operations. Further detail on our
HSE performance can be found on page 19.

> continuously Develop our People
GMS operates in an industry where staff mobility
rates are relatively high and as such, we seek to
attract and retain high-calibre staff and ensure
they are empowered to carry out their duties
safely and effectively. We value the diversity
of our employees and provide an environment
where everyone can perform to their full potential
and be rewarded for delivering excellence.

Due to the niche nature of our sector, skilled and
capable offshore crew members are in limited
supply and we therefore pay attention to growing
talent from within our organisation. We have
a Competence Management System (CMS)
in place based on recognised industry best
practice. Its purpose is the integrated control
of those activities within the company that will
assure competency of personnel, particularly
in safety critical activities. Annual assessments
are carried out for offshore personnel to ensure
appropriate certification and competence to
undertake operational roles.

Competency gaps are closed via training
supported by the GMS Academy. Much of the
GMS Academy training is knowledge-based
and delivered via computer-based training
which employees are able to access at any
time, irrespective of their location. However,
all Academy training is supplemented with
the coaching and mentoring of crew by their
officers and complimented by the Group’s
Offshore Performance Coaches who are
responsible for embedding the knowledge
delivered via the GMS Academy through
effective real-time coaching. We also have
a wide range of development initiatives,
such as an externally accredited management
development programme, our newly developed
simulator programme for our Masters, and
Fleet Management programmes. Further
detail can be found in our Performance
section on page 32.

> innovate and enhance our Offering
We have a long history of satisfying the needs
of our national and international clients. Our
experience, technical expertise and ability to
modify and enhance our vessels means that we
are ideally-placed to assess where best to place
our existing fleet, and to ensure the design and
construction of our new vessels meets clients’
expectations in terms of operational efficiency,
safety and cost. Through close collaboration
with clients on a project-by-project basis, GMS
offers a cost-effective model that provides
optimum efficiency and minimum non-
productive time during clients’ mobilisations
or operations, whilst maintaining the flexible
multi-role design as part of the Group’s core
strategy for high utilisation. Examples of how
the vessels can be modified may be found in
the case studies on page 16.

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GULF MARINE SERVICES PLC Annual Report 2014INTRODUCTIONSTRATEGIC REPORT PERFORMANCEGOVERNANCEADDITIONAL INFORMATION
OUR STRATEGY

STRATEGIC FOCUS

The Group’s core business consists of well support services supplemented by pure
accommodation oil and gas work, as well as wind farm installation, commissioning
and maintenance. We continue to see the more stable demand going forward for
our vessels in brownfield oil and gas Opex-related work and further growth potential
in well intervention activities and enhanced oil recovery work. Going forward,
we also see opportunities for decommissioning and plug and abandonment activities.

Our strategic focus is based on five elements:

Fleet Expansion

We believe that the demand
for our SESVs remains
strong, particularly in our
core market of brownfield
Opex work, and will continue

to seek to both consolidate and grow
our market share. That growth is best
and most cost-effectively achieved
through expanding our fleet mainly by
constructing vessels in our own yard.

The fleet expansion programme will increase the
fleet of SESVs from 9 to 15 vessels during the
period 2014 to 2016. We are continuing to focus
on our new build programme in response to high
client demand. This includes the introduction of
a new design, the Mid-Size Class, to the GMS
fleet in 2015.

Vessel Flexibility
Designing, building and
maintaining a technologically
advanced flexible fleet of
modern SESVs operated
by our skilled employees

delivers economies and efficiencies to
our clients that will be reflected in high
utilisation and good charter rates.

The Group’s assets provide the stable platform
from which a diverse range of services are carried
out by our clients throughout the total lifecycle of
offshore oil, gas and renewable energy activities.
Our flexibility and ability to adapt and tailor our
assets to suit the requirements of our clients’
operations, in short timescales, means we can
often offer more cost-effective and time-
efficient offshore solutions than a third party.

The fact that we can modify our vessels to
suit different operational needs has proved
advantageous when winning and executing
contracts in different sectors of our market.

For example, when GMS Endeavour began
operating in the North Sea in 2011 it was initially
adapted for wind turbine installation work, with
modifications including replacing the helideck
with a blade rack and the large deck space filled
with parts used to construct a windmill. On
completion of that contract, the vessel then
proceeded to another wind farm-related contract
whereby it was supporting the commissioning of
a substation; here the key demands of the client
were for accommodation for its personnel and
a large deck space to use as a working platform.
The vessel will shortly be commencing a new
contract in the oil and gas market where the large
deck space will be filled with temporary living
quarters, increasing the number of personnel
it can accommodate from 142 to 300.

Growth in Existing
and New Markets
The Group believes it is
well-positioned in the MENA
and North West Europe
markets and continues to
seek to grow in these regions.

We expect that a larger fleet will allow
GMS to take on additional contracts
in existing areas of operation and will
provide the opportunity to potentially
enter new regions where we believe
the demand for our vessels exists.

The primary demand for our SESVs in the
MENA and North West Europe regions is
in the brownfield market within the oil and
gas sector. The brownfield market covers
a broad range of repair and maintenance
support services, including well and subsea
maintenance services, for existing oil and gas
fields. GMS is very well-placed to capitalise on
the inherent maintenance and modification
support requirement of ageing offshore
structures, with our vessels providing the
stable platform from which clients can carry
out diverse operations.

The offshore renewable energy market is
less mature than the oil and gas market and
there is currently less demand for maintenance
services as the infrastructure is, on the whole,
relatively new. However, as a critical mass of
installed capacity is reached, it is expected that
the demand for maintenance work on these
assets will increase and GMS will be well-placed,
due to our experience working in this sector
and the flexibility of our assets, to maximise
opportunities in this maturing market as
it develops.

Operational
Expertise

Having a team of highly
experienced and skilled
employees enables us to
provide safe and effective
solutions to our clients’

needs whilst developing and maintaining
a reputation as a quality provider of an
advanced adaptable fleet with superior
jacking systems.

Our technical expertise and experience in the
construction of the SESVs we operate enables
us to adapt our vessels efficiently in order to
meet client-specific requirements, which in
turn results in greater operational efficiency.

The provision of highly sophisticated SESVs with
comprehensive maintenance programmes,
excellent client services and our in-depth
knowledge of the markets in which we operate
are the primary drivers for operational excellence.
The Group also has a strong reputation born of
our commitment to safety, quality and delivery.
While we believe we offer the best offshore
solution, we are also continually looking to
innovate in terms of design and aim to exceed
regulatory requirements and best practice.

We have recently partnered with Abu Dhabi Ports
Company to introduce a SESV simulator to better
assess and train our senior offshore personnel.

GULF MARINE SERVICES PLC Annual Report 2014Strategic Report Financial
Management

We are careful to manage
the finances of the business
in a prudent manner whilst
allowing the responsible
investment of capital to

generate shareholder returns.

We are significantly growing our business
through fleet expansion. We take a disciplined
approach to making new investments and
financing them. We target (and are currently
exceeding) a minimum return on capital of
over 20% on the construction of our SESVs.
We seek to maximise returns through a prudent
approach to borrowing by not exceeding a
target net debt to EBITDA ratio of 3 times at the
peak periods of our new build programmes.

Our integrated build model substantially
reduces the cost of vessel construction and
fleet maintenance compared to outsourcing
it to third parties. It also provides us with far
more flexibility to manage the new build
timetable than would be possible by placing
an order with a third party shipyard.

GMS targets blue chip companies as clients
and the strong secured backlog with long-term
contracts provide good revenue visibility on
future earnings. We believe that the high degree
of contracted future revenues and strong cash
flow from operations combine to support the
prudent capital structure within the Group.

The Group’s dividend policy will look to maximise
shareholder value and reflect GMS’ strong
earnings potential and cash flow characteristics,
while allowing the retention of sufficient capital
to fund ongoing operating requirements and to
invest in the Group’s long-term growth.

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GULF MARINE SERVICES PLC Annual Report 2014INTRODUCTIONSTRATEGIC REPORT PERFORMANCEGOVERNANCEADDITIONAL INFORMATION
CASE STUDY
GMS ENTERPRISE
We believe we successfully delivered
on all five elements of our strategy,
as detailed on pages 14 to 15, during
the year with GMS Enterprise.

In September 2014, GMS announced the
completion of its latest new build vessel GMS
Enterprise, a Large Class vessel that was
constructed ahead of schedule and under
budget and which, following successful sea
trials, proceeded directly to its first charter.
It is the first of six new SESVs to be added to
the Group’s fleet during the period 2014 to
2016. The vessel is currently working for a
national oil company in the MENA region.

The Group has two other Large Class vessels
that it built in 2010 and 2011 which operate in
water depths of up to 65 metres; GMS enhanced
the design of GMS Enterprise to allow it to work
in depths up to 80 metres. Other improvements
made to the new vessel include a larger crane,
bigger helideck, longer legs, improved HVAC,
enhanced cabin layout with all having ensuite
toilet/shower cubicles, blast-proof windows and
an improved fire rating for the accommodation.
The timeframe for the vessel was one year from
steel cutting to delivery; this is approximately
six months faster than traditional shipyards.

CASE STUDY
GMS SHAMAL
In December 2014, GMS announced
its first contract award for its new
Mid-Size Class vessel, GMS Shamal.

The vessel, which is the first of its kind in the
world, is currently being built and is scheduled
to be completed in Q2 2015 when it will proceed
directly to its first charter for a national oil

company in the MENA region. This SESV is not
only a new design, it has also been adapted to suit
the client’s specific needs as a specialised well
intervention unit. The bespoke modifications
include the supply and installation of pumping
equipment and gas lines, the enlargement of the
onboard brine capacity and the optimisation of
the crane configuration.

A key factor in the client’s decision to charter
GMS Shamal was GMS’ ability, through its
integrated engineering and construction
process, to make modifications during the
build process without these affecting the
delivery schedule. Through collaboration
with the client, GMS developed an SESV
that will ensure optimum efficiency and
minimum non-productive time during
the client’s operations.

GULF MARINE SERVICES PLC Annual Report 2014Strategic Report
FLEXIBILITY OF GMS VESSELS
ENSURES HIGH UTILISATION

The Group’s SESVs are chartered to a high-quality worldwide client base
and are used as customised work platforms for offshore oil, gas and
renewable energy sectors.

These vessels are operated by skilled
employees and support our clients in a
broad range of offshore oil and gas platform
refurbishment and maintenance activities,
well intervention work and offshore wind
turbine maintenance work (which are Opex-
led activities) and offshore oil and gas platform
installation and offshore wind turbine
installation (which are Capex-led activities).

Our fleet of young and technically advanced
SESVs has a niche and non-commoditised
nature that allows competition against a diverse
range of marine assets, including drilling rigs,
accommodation service barges (non-propelled)
and floating construction vessels. The SESVs are
four-legged vessels that move independently
and have a large deck space, crane capacity
and accommodation facilities that can be
readily adapted to the requirements of the
Group’s clients.

The four-legged design represents a significant
competitive advantage over the more traditional
non-propelled, three-legged barges available in
the market in terms of both speed in jacking and
safety. The SESVs are all self-propelled (with full
propulsive redundancy). The Large Class and
Mid-Size Class vessel designs include DP2,
a dynamic positioning system that enhances
the ability of the SESVs to safely manoeuvre
close to clients’ offshore installations. These
features all enable an increase in the speed of
movement around a client’s field of assets and
remove the need for costly support vessels.
Some of the specific benefits of our fleet are:

GMS PROVIDES THE
STABLE PLATFORM TO
SUPPORT A VARIETY
OF CLIENTS’ NEEDS.

– Well intervention activities which require
frequent changes in location are ideally
suited to our self-propelled units.

– The ability to relocate quickly within small
weather windows allows our clients to
work more efficiently. This in turn provides
them with an immediate benefit through
increased production as a result of the
intervention performed.

– High-capacity accommodation can be

installed, for 150 to 300 persons, along with
multiple access routes to the client facility.
This allows clients to simultaneously open
up multiple work fronts and achieve high
levels of productivity.

– The high-capacity cranes are able to support
construction and commissioning activities
offshore where specialist crane barges
would have previously been required, in
addition to the accommodation barge.

GMS provides the stable platform to support
a variety of clients’ needs. This flexibility and
our technological capabilities are reflected in
our high utilisation and premium charter rates.

TOPSIDE MAINTENANCE

WELL INTERVENTION

COMMISSIONING AND
ACCOMMODATION

WIND TURBINE INSTALLATION
AND MAINTENANCE

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GULF MARINE SERVICES PLC Annual Report 2014INTRODUCTIONSTRATEGIC REPORT PERFORMANCEGOVERNANCEADDITIONAL INFORMATION
KEY PERFORMANCE INDICATORS

The Group uses a number of Key Performance Indicators (KPIs) to measure its performance
and review the impact of its business strategy. The financial and operational KPIs adopted
are kept under review to ensure that we focus on achieving our strategic objectives and are
aligned to address the principal risks facing the Group.

KPi
Revenue and Utilisation

$200

$150

$100

$50

94%

$184m

97%

$197m

97%

$143m

2012

2013

2014

% = SESV utilisation Bars = Revenue

Adjusted EBITDA and EBITDA margin

$150

$120

$90

$60

$30

68%

$125m

64%

$125m

66%

$95m

2012

2013

2014

Description

Progress in 2014

Revenue reflects the value of operating activity
and is derived primarily from the day rates and
utilisation levels achieved.

The 7% growth in revenue reflects the
increase in fleet size combined with improved
utilisation rates of SESVs.

SESV utilisation is the percentage of days
SESVs are chartered on a day rate out of
total available days.

Adjusted EBITDA is a key profit measure
and means earnings before interest, tax,
depreciation and amortisation, excluding
exceptional items.

Adjusted EBITDA margin demonstrates
our ability to convert revenue into profit.

Strong level of adjusted EBITDA continued.

The Group’s adjusted EBITDA margin
decreased from 68% in 2013 to 64% in 2014,
primarily as general and administrative costs
rose as we invested in and expanded our
workforce to better position the business
for a period of major organic growth.

% = Adjusted EBITDA Margin Bars = Adjusted EBITDA

Adjusted Net Income and DEPS

$100

$80

$60

$40

$20

DEPS
$0.24

$81m

DEPS
$0.24

$72m

DEPS
$0.17

$51m

2012

2013

2014

Adjusted net income measures the net
profitability of the business excluding
exceptional items.

Adjusted net income rose by 13% in 2014
contributing to a small increase in adjusted
DEPS for the year.

Adjusted DEPS means fully diluted earnings per
share, which measures the level of net profit
excluding exceptional items per ordinary share
outstanding.

The increase in adjusted net income primarily
occurs from a reduction in finance costs
following a restructuring of Group financing
arrangements in 2014.

DEPS = Adjusted DEPS Bars = Adjusted Net Income

Net Debt to Adjusted EBITDA

2.61

2.46

2.19

2012

2013

2014

Net debt to adjusted EBITDA is the ratio of net
debt (including finance lease obligations) at year
end to earnings before interest, tax, depreciation
and amortisation, excluding exceptional items.

Net debt to adjusted EBITDA ratio has
declined during a period of significant capex,
reflecting the use of IPO proceeds to help
fund the capex programme.

This KPI demonstrates the Group’s level
of borrowing against operating cash flows.

The level of debt has steadily declined as
scheduled debt repayments were made
during the year.

The details of the adjustment derived in the above are contained in note 6 to the consolidated financial statements.

GULF MARINE SERVICES PLC Annual Report 2014Strategic Report KPi
Backlog

$800

$600

$400

$200

Description

Progress in 2014

Backlog shows the total order book of contracts
(comprising firm and option periods at year end).

Strong growth in backlog provides good
visibility on future revenues and utilisation
of vessels.

$739m*

The Group uses this KPI as an indication of
future revenue and utilisation levels.

Increase in backlog reflects the increase in
the Group’s fleet capacity and the continued
strong demand for our vessels.

$434m

$253m

2012

2013

2014

New Build Programme Delivery

*This backlog figure includes backlog for the Large Class vessel contract award announced on 28 January 2015.

New build programme delivery KPIs measure
how successful the Group has been in managing
vessel construction projects in terms of cost
control and delivery schedule.

Delivery of our Large Class vessel on schedule
and on budget in 2014 demonstrates
effective project delivery and cost control.

Year

2014

2013

2012

Employees

600

400

200

new vessels completed

On Schedule

On Budget

Enterprise

None

–

90%
573

Offshore staff retention shows percentage of
senior officers (masters and chief engineers)
who continued to be employees in the period.

The increase in offshore staff retention is a
result of increased investment in retention
policies for key personnel.

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74%

394

77%

352

Average FTE employees means the average
number of full time equivalent employees
throughout the year which provides an
indication of the Group’s service capacity
and scale of operations.

Average FTE employees increased by 45%
due to the increase in construction staff
headcount for the new build programme
along with other recruitments to position the
business for anticipated growth.

2012

2013

2014

DEPS = Offshore staff retention Bars = Average FTE Employees

TRIR & LTIR

2.0

1.0

2012

0.4

0.13

2013

0.25

2014

= TRIR

= LTIR

TRIR is the total recordable Injury rate per
200,000 man hours, which provides a measure
of the frequency of recordable injuries requiring
first aid treatment in the year.

The combined strong KPI delivery illustrates
the Group’s commitment to delivering high
standards of health and safety.

LTIR is the lost time injury rate per 200,000 man
hours which is a measure of the frequency of
injuries requiring employee absence from work
in the year for a period of one or more days.

GULF MARINE SERVICES PLC Annual Report 2014INTRODUCTIONSTRATEGIC REPORT PERFORMANCEGOVERNANCEADDITIONAL INFORMATION
RISK MANAGEMENT

The effective identification and management of business risks and opportunities across
the Group are a key priority of the business and integral to the delivery of the Group’s
strategic objectives. The Group has a robust risk management system in place to support
risk identification, analysis, evaluation, treatment and ongoing monitoring of risks across
the Group as shown in the risk management framework below.

Board of
Directors
The Board has overall
responsibility for ensuring
eﬀective management
of risks.

Senior
Management
The Senior Managment
team implement the risk
management process from
risk identification through
to mitigation.

e n t i ﬁcation

I d

n
o
i
t
a
g

Risk
Management
Process

n
a
y
s
is

Evalua t i o n

Audit and Risk
Committee

Internal
Audit
There are clear reporting
lines from the Internal
Audit function to the Audit
and Risk Committee
and the Senior
Management Team.

Business risks across the Group are addressed in
a systematic and consistent way through the risk
management framework, which has clear lines of
reporting and communication to deal with risk
management and internal control issues.

The Board has overall responsibility for ensuring
that risks are effectively managed. However, the
Audit and Risk Committee has been delegated
responsibility for reviewing the effectiveness
of the Group’s system of internal control and
procedures for the identification, assessment,
management, mitigation and reporting of risk.

The internal control process starts with
identifying risks, compliance matters and other
issues through routine reviews carried out by
process owners and facilitated by regular
Group-wide risk assessments. The Group’s
system for identifying and managing risks is
embedded in its organisational structure,

operations and management systems and
accords with the risk management guidelines
and principles. The risks associated with the
delivery of the strategy, business plan, annual
work programme and the associated mitigation
measures and action plans are maintained
in a series of departmental risk registers which
are consolidated and reviewed by the senior
management team to formulate the Group
risk management process.

For risks that are recorded in the Group
risk register, the Group then assesses the
implications and consequences and determines
the likelihood of occurrence. The outcomes of
risk identification and control assessments are
formally reported to the senior management
team and escalated to the Audit and Risk
Committee and Board, as appropriate. The Board
regularly reviews all key risks facing the Group
as part of the Group risk management process.

The Group’s Internal Audit function has been
largely outsourced to a specialised team
provided by a third party. All internal audit activity
conducted by the Internal Audit team is done
under the leadership of the Finance Director,
who reports to the Chief Financial Officer, but
also has an independent reporting line to the
Chairman of the Audit and Risk Committee.
In view of Internal Audit’s recommendations,
management agrees and implements corrective
action plans, which are tracked to completion
by Internal Audit, with the results reported to
executive management, the Audit and Risk
Committee and the Board.

GULF MARINE SERVICES PLC Annual Report 2014Strategic Report Principal Risks and Uncertainties
The principal risks and uncertainties facing the Group in the short to medium term are set out below, together with the principal mitigation measures.
These risks are not intended to be an exhaustive analysis of all risks that may arise in the ordinary course of business or otherwise.

Key:

Risk has increased since 2013

No change in risk since 2013

Risk has reduced since 2013

assessment
of change
in Risk

Risk

Strategic

Risk Profile

The macroeconomic environment
influences the demand for our services.
A sustained period of low oil prices could
affect the demand for the Group’s oil
extraction support services. This could
lead to lower utilisation or lower charter
day rates causing profit margins to fall.

Significant changes in the market-
place as a result of the actions of our
competitors or the entrance of new
competitors may jeopardise our market
share or adversely affect utilisation levels
or charter day rate levels achieved.

Over-exposure to any one geographic
market or loss of a significant business
partner could impact our performance.

People

The Group’s success depends on our
ability to attract and retain sufficiently
qualified and experienced personnel,
particularly at senior management levels.

The staffing requirements have been
increasing for the Group as we continue
to deliver and operate new build vessels
as part of our fleet expansion programme.
The Group therefore needs to recruit
more suitably qualified personnel to
operate the expanding fleet.

Failure to attract, develop and retain
sufficient competent crew to support
our clients’ needs could result in vessels
being off hire.

mitigation, monitoring and assurance

Opex v Capex
The Group provides cost-effective services almost entirely in the Opex phase of oil
companies’ budgets, supporting long-term oil production which tends to be much less
cyclical than Capex phase work. This helps to insulate the Group from falls in demand for
our services due to low oil prices. Additionally, our clients are mainly NOCs who tend to be
less sensitive to varying outputs of oil as they generally act to address macroeconomic
concerns in their country.

Focus on low cost of production areas such as MENA
A larger share of the Group’s client base and revenues are generated in the MENA region,
where the cost of oil production is significantly lower than in other parts of the world such
that the effects of a sustained low oil price have less impact than in other regions.

The well services we provide from our SESVs are more cost-effective than those provided
by other solutions such as drilling rigs. This helps ensure our offering remains attractive
even during times when our clients may be suffering from lower margins when energy
prices are lower.

Backlog visibility
We focus on long-term and recurring client contracts with a stable cost base such that
operating margins can generally be forecast with reasonable accuracy, providing visibility
of future earnings.

Market and operational familiarity
We believe that the Group continues to have a competitive edge over most other market
participants through operational experience and remains a leading operator of SESVs in
the MENA region and one of the largest operators in the world.

Construction and modification flexibility tailored to client needs
Our vessels are built to be as flexible as possible thus allowing us to compete for a wider
share of the market than some of our competitors. This helps to maintain high utilisation
levels and charter day rates across the fleet.

The Group maintains detailed management succession plans for shore-based personnel
which are monitored by the Group HR team. Resource gaps are filled via internal
development programmes and/or external recruitment. Succession planning for general
promotion within the fleet is carried out for key positions.

We offer appropriate training and development programmes which include GMS bespoke
training for our safety critical roles.

Through regular monitoring and reviewing of our staffing needs, we strive to identify and
nurture the best talent. The Group has a competitive remuneration structure that aims
to attract, motivate and retain suitably qualified personnel through performance-based
reward practices.

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GULF MARINE SERVICES PLC Annual Report 2014INTRODUCTIONSTRATEGIC REPORT PERFORMANCEGOVERNANCEADDITIONAL INFORMATION
RISK MANAGEMENT
Continued

Risk

Risk Profile

assessment
of change
in Risk

Safety and
Assurance

Financial

The Group may suffer commercial
and reputational damage as a result
of an environmental or safety incident
involving our employees, visitors
or contractors.

Our operations have an inherent safety
risk due to operating off shore. We have
a fundamental obligation to protect our
people and recognise the implications
of poor safety procedures.

Macro and micro economic events,
such as a low oil price, may impact our
ability to raise finance, achieve forecast,
effectively manage our working capital,
or may hamper management’s ability to
make effective decisions or report on
our financial position.

The Group utilises external funding in
financing major projects, and inability to
obtain the required funding may hamper
the successful undertaking of capital-
intensive projects.

Failure of the Group to service the debts
and comply with debt covenants could
result in negative repercussions for
the Group.

mitigation, monitoring and assurance

Safety and assurance continues to be a top priority and is underpinned by our HSSEQ
management system and strong safety-focused culture within the Group.

Our employees undergo continuous training and sensitisation on operational
best practice. As such we are an ISO 9001, ISO 14001 and OHSAS 18001 certified
company. The Group undergoes regular independent audits confirming our adherence
to these standards.

Management reviews safety practices and procedures, disaster recovery plans and the
insurance coverage of all commercial contracts prior to acceptance.

The Group follows regular maintenance schedules on its vessels and the condition of the
vessels is consistently monitored.

We adhere to Group-wide financial and accounting policies which underpin our approach
to risk management. This includes regular preparation of budgets and forecasts allowing
constant monitoring of changes in the macro and micro economic environment and the
impact these changes may have on the Group.

An extensive review and approval process is carried out for significant capital
commitments, acquisitions and disposals.

The Management and the Board regularly monitor the Group’s debt obligations and
funding requirements and seek to ensure that sufficient funding is always in place to
meet the needs of the business as well as maintaining significant headroom over debt
covenants thus minimising the risk of breach.

Commercial

There is a risk that the Group may not
be able to win new or retain existing
contracts, resulting in lower vessel
utilisation.

The Group has a clear record of established relationships in the MENA region, some going
back over thirty years, which has resulted in an excellent understanding of our clients’
requirements and standards. Our vessels are then designed to maximise as many of
these requirements as the limits of the design will permit.

Customers may opt not to exercise the
contractual option periods resulting in
gaps between long-term contracts.

The Group provides services to a limited
number of clients including IOCs and
NOCs. The reliance of the Group on a
limited number of blue chip customers
may expose us to losses in the event of
disruptions in client relationships.

In order to offer a degree of protection from clients not exercising options the Company
will compete in tenders for all vessels nearing the end of their firm contracts, ensuring that,
if a client chooses not to exercise their option, no other opportunities would be missed.

We seek to continually improve our offering through innovation including new vessel
designs and specification improvements by responding directly to client feedback and
modifying designs as appropriate. The Group’s vessels will be contracted for the greater
part of the forthcoming financial year as evidenced by the Group’s strong order book of
contracts and options.

The Group views expanding its geographical footprint as one of its strategic aims and
seeks to diversify into other markets. We recently entered into a strategic business
partnership in South East Asia.

GULF MARINE SERVICES PLC Annual Report 2014Strategic Report Risk

Risk Profile

Fleet
Expansion

The Group may fail to appropriately
identify laws and regulations and other
regulatory statute in new jurisdictions
where it intends to expand its business.

assessment
of change
in Risk

Compliance

Non-compliance with anti-bribery and
corruption regulations could damage
stakeholder relations and lead to
reputational and financial loss.

The Group may fail to appropriately
identify laws and regulations and other
regulatory statute in new jurisdictions
where it intends to expand its business.

Non-compliance with anti-bribery-and-
corruption regulations could damage
stakeholder relations and lead to
reputational and financial loss.

Operational

There is a risk that the Group’s assets
may not be fit for purpose or may fail
to operate in the manner intended by
the management. Failure to deliver the
expected operational performance
could result in reputational damage,
litigation or loss of clients.

Changes in the political regimes, civil
and political unrest or sanctions in the
jurisdictions in which we operate could
adversely affect our operations.

mitigation, monitoring and assurance

The Group closely monitors all capital projects which are undertaken by a team of
experienced marine industry engineers and project managers. We execute regular
budgeting, forecasting and monitoring processes over capital projects.

In order to mitigate the risk of project delays and price fluctuations the Group procures
significant components well in advance of lead times or locks option prices with suppliers
for future orders.

The Group has significant experience in the construction of SESVs and, as a result of
building them in our own yard facility, have the flexibility to modify the specification to
ensure the vessels meet client needs in a cost effective and time efficient manner.

Prior to venturing into new markets, the Group performs substantial due diligence work
and obtains an understanding of the governing laws and regulations. The Group engages
third parties to help assist in performing the respective due diligence work.

The Group has a Code of Conduct which employees are required to comply with when
conducting business on behalf of the Group; this includes anti-bribery and corruption
policies. Assessment of anti-bribery and corruption risks form an integral part of the
decision-making process when entering new countries or negotiating with potential
partners and major suppliers. If significant concerns arise, further research and
assessment will be performed and may involve appropriate third parties, to establish
whether potential issues are such that GMS must decline the opportunity under UK law.

The Group operates an anonymous whistleblowing hotline which offers a confidential
platform for reporting suspected ethical breaches or concerns. All suspected breaches
are investigated and the Board is informed of any significant issues.

The Group constantly monitors the condition of the vessels and other equipment which
undergo mandatory dry docking within the specified timeframes. The Group has policies
and procedures in place such as the Planned Maintenance System to ensure that the
vessels undergo regular maintenance. The vessels are subject to periodic audits from
third parties and the structural integrity of the vessels is certified.

For all our major assets, the Group maintains emergency preparedness plans. We
regularly review the insurance coverage over the Group’s assets, ensuring these are
comprehensively covered.

The Board constantly monitors the ever-changing political landscape in the regions that
are considered volatile or unpredictable.

The Group remains vigilant to potential changes and risks and as such the Group considers
it a priority to engage with governments and continued legal counsel to ensure
a comprehensive view of our stakeholders is presented.

Information contained within the Introduction on pages 1 to 5 and the Performance section on pages 26 to 37 of this document forms part of the
Strategic Report by reference.

Duncan Anderson
Chief Executive Officer
On behalf of the Board of Directors
23 March 2015

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GULF MARINE SERVICES PLC Annual Report 2014INTRODUCTIONSTRATEGIC REPORT PERFORMANCEGOVERNANCEADDITIONAL INFORMATION
PERFORMANCE

Operating Review
Financial Review
Corporate Social Responsibility

26
30
32

GULF MARINE SERVICES PLC Annual Report 2014i

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GULF MARINE SERVICES PLC Annual Report 2014INTRODUCTIONSTRATEGIC REPORT PERFORMANCEGOVERNANCEADDITIONAL INFORMATION
OPERATING REVIEW

Operations
Our fleet currently comprises 12 vessels.
Of these, eight SESVs are operational in the
Middle East (seven Small Class and one Large
Class) along with two AHTS vessels, and two
SESVs (both Large Class) are working in North
West Europe. The SESVs have been primarily
engaged in well services and accommodation
support, with equal utilisation between
the two segments. The two AHTS vessels
have primarily been engaged in platform
supply activities.

a Young Sophisticated Fleet
The Group’s current SESV fleet is one of the
youngest in the industry, with an average age
of eight years. This is based on 11 years for the
Small Class SESV fleet and two years for the
Large Class SESV fleet. At the time of our IPO
we set out our new build programme for the
years 2014 to 2016. On its completion, which
will see an increase in our SESV fleet to 15
vessels, the average age of the SESV fleet
will reduce still further. The GMS fleet offers
clients not only the cost-efficient deployment
of our vessels, but also the prospect of
substantial operational efficiencies in their
own maintenance activities that would
not be available from less modern vessels.

SeSVs’ charter Rates, Utilisation
and Operating costs
The fleet performed very well during the year,
with continued high utilisation levels for the
SESVs of 97% in 2014. Operating costs have
remained stable and charter rates achieved
in 2014 are in line with expectations.

The table below provides a summary of our key
performance metrics.

We continually seek to improve all areas of
operations. The Group has built its reputation
on the reliability of its fleet. Across an entire
fleet, we had only 12 days of unpaid technical
downtime (for repairs/maintenance) in 2014
and we would seek to maintain this level of
performance in 2015.

2014 revenue by type of work
GMS' business is heavily weighted towards clients'
Opex-based activities as shown below.

10%

77%

13%

Oil and Gas Opex led Activities

Oﬀshore Renewable Energy Capex led Activities

Oil and Gas Capex led Activities

crewing
The fleet is manned with 343 crew members
(as at 31 December 2014). This figure comprises
57 senior ratings, 81 officers and 205 ratings,
whom are all marine-qualified. We also have 94
sub-contracted catering staff across the fleet.

The average crew on board our vessels
(excluding AHTS vessels) at any time varies
between 15 and 21 persons, of which
approximately 17% are senior officers.

Average daily charter rate excluding
hotel services (US$'000s)
Utilisation

Average daily vessel operating costs
(US$'000s)

Small class
2014

2013

large class
2014

2013

total SeSVs
2014

2013

38
99%

38
95%

100
88%

112
88%

97%

94%

With a relatively small pool of SESV-qualified
senior officers worldwide, it is important we focus
our efforts on ensuring we have the appropriate
crew to meet not only the needs of our current
fleet, but also that of our expanding fleet. We
place Captains under training annually and during
the year developed the world’s first onshore SESV
simulator, discussed on page 37, to increase the
training opportunities and our ability to fast-track
our senior officers.

Retaining our senior officers is also crucial to
the successful continuity of our operations.
Our retention rate for senior officers has been
just under 90% during the period. Seeking to build
on this success rate, we have incorporated our
senior crew into our retention schemes.

2014 also saw a number of new training
initiatives to further develop our people and
their operational expertise as we move forward.
Examples include the introduction of the GMS
Academy and a Fleet Management programme.
Information on these is included in our
performance section on page 32.

The fleet operations department had a very
busy year, with our Operational Readiness
Teams (ORTs) ensuring all necessary work,
such as modifications and refurbishments,
were carried out on our current fleet so the
vessels could move as quickly as possible from
one contract to the next. Since we both build
and operate the SESVs, we are ideally placed
to efficiently carry out these adaptations to
the fleet as described on page 16.

Our extensive SESV new build programme has
also kept the ORTs occupied as they clear the
way both administratively and technically, for
the efficient delivery of our new SESVs to our
clients for the commencement of operations
worldwide. Large Class vessel GMS Enterprise
was delivered in Q4 2014; Enhanced Small
Class vessel Pepper and Mid-Size Class vessel
GMS Shamal are the latest new builds to be
prepared for their first contracts in Q1 and Q2
2015 respectively.

GULF MARINE SERVICES PLC Annual Report 2014PerformanceThe way these, and other new vessels, are
prepared for operations is absolutely key to
the success of GMS and the ORT ensures that the
experience and knowledge gained in delivering
one vessel is transferred to the next; this good
practice will help enable continuous improvement
throughout the fleet expansion programme.

The Group’s strong HSE track record has been
maintained throughout a period of considerable
expansion, with zero lost time injuries both
onshore and offshore throughout our global
business and operations in 2014. Further
information on our HSE performance may
be seen on page 19.

markets
Demand for our assets continues to be
excellent in the MENA region and strong in
Europe. Our secured backlog is very healthy,
being US$ 707 million as at 1 March 2015,
comprising US$ 380 million firm and US$ 327
million options, and provides a good indication
of future revenue and utilisation. The contract
duration by vessel is shown in the chart below.

The Group’s fleet is capable of supporting
worldwide operations in the shallow water
oil and gas and renewable energy industries
and we tender for business across the globe.

middle east
2014 has been characterised by excellent
demand and high levels of utilisation across the
operational fleet. We completed two charters
on Small Class vessels in 2014, which were
immediately re-chartered on new contracts.
Two further Small Class units that had
outstanding options with existing long-term
contracts had these options exercised by their
respective clients during the year. One new
Large Class unit that was delivered during
the year was immediately committed to a
short-term EPC-related (Capex) requirement;
the vessel has since been chartered under
a further contract for the long-term support
of maintenance-related (Opex) activities with
a Middle East NOC and this new charter has
followed on in direct continuation of the first
contract and will be for a period of up to four
years. During 2014 an enhanced Small Class
unit was chartered by a local NOC to support
its well intervention programme for a period
of up to five years. The first Mid-Size Class unit,
which is due to be delivered in Q2 2015, has
been contracted in advance by a local NOC
for up to five years in support of its well
intervention activities.

GMS has long-term confidence in the Saudi
Arabian market and, as announced previously,
subject to the normal regulatory approvals by
the relevant government authorities, plans to
increase its ownership in its KSA joint venture
to 75% by purchasing a 15% interest from its
existing partner, which will at the same time
sell its remaining 25% stake to a well-regarded
KSA conglomerate.

europe
Two Large Class SESV units have been
operating in the Southern North Sea
throughout 2014. One is chartered under a
long-term oil and gas contract and during the
period the client exercised its option under this
contract to extend the charter for a further
12 months. The second vessel undertook a
mixture of shorter-term contracts in both the
oil and gas and renewables sectors. Sustained
levels of enquiry for GMS assets have meant
that utilisation levels on this vessel have
remained high. Despite the delay in start up by
one client and subsequent cancellation of an oil
and gas contract in Q2, alternative work was
successfully secured at short notice in order
to maintain utilisation levels. Demand for our
sophisticated assets in 2014 resulted in GMS
securing a long-term contract for up to four
years' work in the Dutch Sector of the Southern
North Sea, commencing in Q2 2015. A number
of other opportunities remain within the oil and
gas sector in this region despite the current low
oil price and we continue to evaluate these
with the potential to bring additional vessels
into the region in future. The renewables sector
continues to provide short-term opportunities
however, the demand for our assets in the wind
farm segment remains unpredictable due to
the industry’s project execution track record
on the construction (Capex) side and a lack
of fully-developed long-term maintenance
(Opex) strategies.

SeSVs order book of contracts as at 1 march 2015

2015
Q1
Large Vessels

2017
Q2
Q1 Q2

2016
2018
Q1 Q2
Q1 Q2

2017
2019
Q1 Q2
Q1

2018
2020
Q1 Q2
Q1

Q3
Q2

Q4
Q3

2019
Q1
Q4

2020
Q1

Mid-Size Vessel

Small Vessels

Secured Backlog($ millions)
Options

Firm

Firm
Total

Options
380

Total
Under Construction
707

327

Firm

Options

Under Construction

2015

Large Vessels

2016
Q1 Q2

Mid-Size Vessel

Small Vessels

Secured Backlog($ millions)

Firm

380

Options

327

Total

707

Total

GULF MARINE SERVICES PLC Annual Report 2014INTRODUCTIONSTRATEGIC REPORT PERFORMANCEGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION

OPERATING REVIEW
Continued

Rest of World
GMS has entered into cooperation agreements
with local partners in two of the three key
markets which it has previously identified in
South East Asia. These partners in Malaysia
and Brunei will provide greater levels of access
and support within the respective markets than
had previously been achieved. The third market
in that region, Indonesia, continues to be
developed with local partners on a project-by-
project basis. During 2014 there was a noticeable
shift amongst the NOC client base in the South
East Asian region, which has traditionally used
less efficient floating assets, to being receptive
to the SESV concept and the benefits that
it brings. However, while we see South East
Asia as a market opportunity, development
has been restricted by lack of available SESV
units within our current fleet. Going forward,
we expect demand in South East Asia to be
more sensitive to lower oil prices due to the
higher production costs in that region compared
to the Gulf. It is difficult to gauge what the
impact is likely to be over the next three to five
years, but we believe that there will continue
to be opportunities for our flexible and
innovative SESVs.

The level of tendering activity for new business
in West Africa during 2014 has been significantly
lower than in previous years in part due to the
uncertainty associated with elections in some
countries. We continue to track opportunities
in this market particularly in Nigeria, Gabon and
Northern Angola. In addition to the established
regional targets, GMS has also participated in
tenders for opportunities in Mexico, Venezuela,
New Zealand and Australia during 2014.

During the year, we continued to build up our
in-house expertise in well services. The primary
reason for doing so is to be able to engage
more effectively with our clients and their
sub-contractors to further develop the
capabilities of our SESV assets. As a result,
we are seeing significant new opportunities
developing across all of our current markets
for enhanced intervention services that can
be performed from our vessels where clients
may previously have used drilling rigs. Providing
innovative and cost-effective new options to
clients will continue to drive demand for our
services and contribute towards maintaining
high levels of utilisation in future.

Outlook
The outlook, based on our current pipeline of
contracts under negotiation and other tender
opportunities, is for overall stronger demand
driven primarily by our core Opex-related
brownfield oil and gas client base, and in
particular in the Middle East.

new Build Programme
2014 has been an exceptionally busy year and
full credit goes to everyone involved in ensuring
the successful progression of our SESV new
build programme, which will expand the fleet
of SESVs from nine to 15 vessels during the
period 2014 to 2016.

We continue to benefit from the competitive
advantage that our well-established in-house
facility provides, which allows us to build our
vessels, in the case of our Large Class vessels,
for approximately 30% cheaper than our peers
who rely on third party shipyards. This also
enables us to manage the pace of our new build
programme to ensure it is aligned to future
demand and allows us to control the quality of
the entire construction process and manage
the timely delivery of the completed vessel.

The Group has a philosophy of ensuring a
high degree of commonality of components
between SESV classes ensuring lower training
and spares costs. (Jacking systems, leg steel,
HVAC, accommodation and switchboard
components are common between Mid-Size
and Large Class vessels.)

The first of the six new SESVs in the 2014
to 2016 new build programme that was
communicated at the time of our IPO, GMS
Enterprise, was completed ahead of schedule
and under budget. The vessel progressed
directly to its first charter in September 2014,
a four-month contract for an EPC contractor
working for a MENA-based NOC. GMS
Enterprise has continued to its next contract
for another NOC in MENA, with this charter
period for up to four years.

The estimated cost to complete the remainder
of the new build programme for the period 2015
to 2016 is approximately US$ 175 million.

construction of large class GmS enterprise
GMS Enterprise from steel cutting through to first charter in Q3 2014. Information on the design
enhancements made to the vessel is contained on page 16.

GULF MARINE SERVICES PLC Annual Report 2014PerformanceDelivery of Fleet expansion Schedule
Set out below is the new build delivery schedule for the fleet expansion programme from 2014 to 2016.

New SESVs

2014

2015

2016

Enterprise (Large Class)

Pepper (Enhanced Small Class)

Shamal (Mid-Size Class)

Scirocco (Mid-Size Class)

Sharqi (Mid-Size Class)

Evolution (Large Class)

Scheduled delivery date of vessel

GULF MARINE SERVICES PLC Annual Report 2014INTRODUCTIONSTRATEGIC REPORT PERFORMANCEGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION

FINANCIAL REVIEW

US$ million
Revenue
Gross profit
Adjusted EBITDA1
Net profit
Adjusted net profit2
Adjusted diluted earnings per share (US cents)2

Proposed final dividend per share (pence)

2014

196.6
126.5
124.8
75.6
81.3
23.71

1.06

2013

184.3
118.8
124.7
69.4
71.9
23.56

–

1. Adjusted EBITDA represents operating profit after adding back depreciation, amortisation and IPO Costs.

Refer to note 6 to the consolidated financial statements.

2. Adjusted Net Profit represents net profit after adding back exceptional IPO related costs.

introduction
The Group delivered a solid set of results
in 2014 and produced a record year in terms
of both revenue and profit.

Our operations during the year have resulted
in adjusted EBITDA of US$ 124.8 million
(2013: US$ 124.7 million). Adjusted net profit
for 2014 improved by 13% to US$ 81.3 million
(2013: US$ 71.9 million), while adjusted
diluted EPS for year increased to 23.71 cents
(2013: 23.56 cents).

GMS continues to have a healthy financial
position with robust operating cash flows and
a strong balance sheet. Capital expenditure
for 2014 of US$ 140.7 million (2013: US$ 53.5
million) was primarily invested on construction
of new vessels as part of the ongoing new build
programme. The Group’s net debt level (being
borrowings and finance lease obligations less
cash) reduced by 11% to US$ 273.6 million at
the year end compared to US$ 307.2 million
as at 31 December 2013. The Group’s net debt
(including obligations under finance leases)
was 2.19 times adjusted EBITDA at year end
(2013: 2.46 times), well below the maximum
net leverage ratio permitted under the bank
facility agreement of 4 times adjusted EBITDA.
At the year end, the Group had undrawn
committed bank facilities of US$ 130.0 million
(2013: US$ 80.0 million).

Each of the following sections discusses
the Group's adjusted results as the Directors
consider that they provide a useful indication
of performance. The adjusting items
are discussed below in this review and
reconciliation between the adjusted and
statutory results is contained in note 6
to the consolidated financial statements.

Revenue and Segment Results
Revenue increased by 7% to US$ 196.6 million
in 2014 (2013: US$ 184.3 million) due to the
97% utilisation rate of our SESVs (2013: 94%)
combined with the maintenance of strong
average charter day rates. There was
growth in all three segments of the business;
Large Class, Small Class, and Other vessels.
The Small Class segment made the largest
contribution to Group revenue with US$ 104.4
million (2013: US$ 94.4 million).

Revenue from Large Class and Others
segments was US$ 79.4 million (2013: US$ 77.7
million) and US$ 12.8 million (2013: US$ 12.1
million), respectively. The segment profit, being
gross profit excluding depreciation, was US$
75.6 million (2013: US$ 65.5 million) for Small
Class vessels, US$ 60.5 million (2013: US$ 63.5
million) for Large Class vessels, and US$ 7.6
million (2013: US$ 7.0 million) for Other vessels

The increase in Small Class revenue primarily
reflects the increase in average utilisation of
Small SESVs from 95% in 2013 to 99% in 2014.
The increase in Large Class revenue was mainly
due to the successful deployment of our latest
Large Class vessel GMS Enterprise in September
2014 following which it subsequently continued
on hire for the remainder of the year. The
increase in revenue attributable to our Other,
non-SESV, vessels is largely due to the increased
utilisation of an accommodation barge in 2014.

cost of Sales and General
and administrative expenses
The Group has a relatively predictable operating
cost base, which is kept under constant review
to ensure that tight control is maintained as
the Group grows. Cost of sales as proportion
of revenue remained relatively stable year on
year constituting 35.7% of revenue in 2014
(2013: 35.5% of revenue). The increase in cost
of sales to US$ 70.1 million (2013: US$ 65.5
million) has been commensurate with the
increase in operations required for a larger fleet.

General and administrative expenses, excluding
non-recurring IPO costs of US$ 5.7 million,
increased to US$ 19.7 million (2013: US$ 12.6
million including management fee of US$ 0.3
million) mainly due to increased staff costs as we
enhanced our management team and expanded
our workforce to meet effectively the expected
increase in requirements of our growing business.

eBitDa
Adjusted EBITDA for the year was US$ 124.8
million (2013: US$ 124.7 million). The Group’s
adjusted EBITDA margin remained strong overall,
having decreased from 68% in 2013 to 64% in
2014, mainly as general and administrative costs
increased as we continued to invest in positioning
the business for an anticipated period of major
organic growth.

Finance costs
Net finance costs in 2014 were lower at US$ 20.5
million (2013: US$ 28.8 million), mainly as a result
of more favourable loan terms following the
bank refinancing.

taxation
The tax charge for the year was US$ 4.7 million
(2013: US$ 3.9 million), representing 6% (2013:
5%) of profit for the year before taxation. The
small increase in tax charge is primarily due to a
higher level of profits being generated in taxable
jurisdictions during 2014.

adjusted net Profit
and earnings Per Share
The Group recorded an increase in adjusted net
profit of 13% in 2014 to US$ 81.3 million (2013:
US$ 71.9 million). The improvement in results is
largely attributable to lower finance costs and
increased fleet size in the final quarter of the
year. The fully diluted adjusted earnings per
share (DEPS) for the year increased to 23.71
cents (2013: 23.56 cents). Adjusted DEPS is
calculated based on adjusted profit after tax
and a reconciliation between the adjusted and
statutory profit, is provided in note 6.

Dividends
The Group paid an interim dividend of 0.41
pence (0.69 cents) per ordinary share on
27 October 2014 to shareholders on the
register on 26 September 2014.

The Board has reviewed the results for the year
and is pleased to recommend a final dividend
of 1.06 pence (1.64 cents) per share to be paid
in cash for the year ended 31 December 2014.
Subject to shareholder approval, this will be
paid on 12 May 2015 to all ordinary shareholders
who were on the register of members at the
close of business on 17 April 2015. This final
dividend brings the 2014 dividends to the
targeted payout ratio, communicated at the
time of IPO, of 10% of the Group’s consolidated
post-tax profit from its ongoing business.

capital expenditure
The Group’s capital expenditure during the
year ended 31 December 2014 was US$ 140.7
million (31 December 2013: US$ 53.5 million).
The main area of investment was additions
to assets under the course of construction
of US$ 136.6 million (US$ 53.0 million), of which
US$ 96.0 million was transferred to vessels
upon completion of a new large class vessel
and improvements to certain existing vessels.

GULF MARINE SERVICES PLC Annual Report 2014Performance
Total current liabilities at 31 December 2014
were US$ 99.8 million (31 December 2013:
US$ 43.2 million). The principal movement was
a reclassification of obligations under finance
leases from non-current liabilities to current
liabilities of US$ 41.5 million (December 2013:
US$ 5.7 million), mainly as the period remaining
for the option to purchase a leased Small Class
vessel became exercisable within one year. The
option to purchase the vessel was exercised in
March 2015. There was an increase in trade and
other payables to US$ 30.1 million (December
2013: US$ 22.0 million) and an increase in bank
borrowings classified as current liabilities
to US$ 23.4 million (December 2013:
US$ 11.0 million).

The combined result of the above was a
decrease in the Group’s combined working
capital and cash to US$ 9.7 million at
31 December 2014 (December 2013:
US$ 47.9 million).

Total non-current assets at 31 December
2014 were US$ 620.2 million (December 2013:
US$ 495.1 million). This increase is primarily
attributable to the US$ 124.2 million increase
in the net book value of property, plant and
equipment, from the ongoing new build
programme to expand the fleet.

Total non-current liabilities at 31 December
2014 were US$ 270.7 million (December 2013:
US$ 358.8 million). This reduction is primarily
due to repayment of shareholder loans of US$
19.5 million, repayment of bank borrowings of
US$ 13.0 million and obligations under finance
leases of US$ 41.5 million being reclassified to
current liabilities.

Shareholders’ equity increased from US$ 182.9
million at 31 December 2013 to US$ 358.6
million at 31 December 2014. The movement
is mainly as a result of the new equity issued as
part of the IPO which increased share capital to
US$ 57.9 million (31 December 2013: US$ 0.3
million) and share premium to US$ 93.2 million
(December 2013: US$ nil), as well as the
retained profit for the year of US$ 75.1 million
(2013: US$ 68.2 million). Furthermore, a share
based payment reserve of US$ 0.5 million and
capital contribution reserve of US$ 1.4 million
was created during the year in respect of share
based payments. These increases in equity
were partially offset by the Group restructuring
reserve of US$ 49.4 million, created in the year
as outlined in note 15 to the consolidated
financial statements, and certain other items
such as interim dividend of US$ 2.4 million
which was paid in October 2014.

cash Flow and liquidity
The Group’s net cash flow from operating
activities continued to be robust for 2014, as
reflected in a net inflow of US$ 120.3 million
(2013: net inflow of US$ 113.3 million).

The net cash outflow from investing activities
for 2014 was US$ 139.6 million (2013: US$ 52.5
million). The increase in outflow was mainly due
to investment on capital expenditure.

The Group’s net cash relating to financing
activities during the year was an inflow of US$
31.9 million (2013: cash outflow of US$ 15.9
million). This net positive balance was mainly
attributable to receipt of net IPO proceeds
during the year which were mainly invested
in our ongoing new build programme.

The year end net debt position was US$ 273.6
million as at 31 December 2014 as compared
to US$ 307.2 million as at 31 December 2013.
The year end outstanding debt was US$ 333.1
million (December 2013: US$ 354.1 million)
constituting bank borrowings of US$ 249.2
million (December 2013: US$ 265.3 million) and
finance lease obligations of US$ 84.0 million
(31 December 2013: US$ 88.8 million). Undrawn
committed bank facilities were US$ 130.0
million at year end (2013: US$ 80.0 million).
The Group completed a drawdown of US$ 37.5
million in March 2015 to fund the exercise of a
purchase option on a leased vessel as discussed
below. The Group remained in full compliance
with its debt covenants, with significant
headroom, during the year and expects
to continue to do so.

In February 2014, the Group’s main bank facility
was restructured, resulting in improvements
to some of the key terms of the loan, such
as available facility, margins and tenure. The
Group’s net leverage ratio, being the ratio of
net debt (including finance lease obligations) to
adjusted EBITDA, reduced to 2.19 times at year
end (2013: 2.46 times). While the Group targets
its net debt net leverage ratio not to exceed
3 times adjusted EBITDA, the maximum net
leverage ratio permitted under the bank facility
agreement is 4 times adjusted EBITDA.

Secured undrawn debt facilities and strong
operating cashflows, makes the Group fully
financed to complete its capital expenditure
program for the years 2015 and 2016.

Balance Sheet
The Group has a robust and well financed balance
sheet. A review of the major components of the
balance sheet follows.

Total current assets at 31 December 2014 were
US$ 109.5 million (December 2013: US$ 91.1
million). This movement is attributable to an
increase in cash and cash equivalents to US$
59.5 million (December 2013: US$ 46.9 million)
and an increase in trade and other receivables
to US$ 50.0 million (31 December 2013: US$
43.2 million).

adjusting items
The Group presents adjusted results, in
addition to the statutory results, as the
Directors consider that they provide a useful
indication of performance. The pre-tax item
that is excluded from adjusted results in 2014 is
IPO costs of US$ 5.7 million (2013: IPO costs of
US$ 2.1 million and management fee of US$ 0.3
million). A reconciliation between the adjusted
and statutory results is given in note 6 to the
consolidated financial statements.

Outlook
The Group is well placed to continue the
progress it demonstrated in 2014. The 2014
to 2016 fleet expansion programme is fully
financed and funding allocation for future
growth beyond that will be paced responsibly,
based on the Group’s view of market demand
and achieving its investment returns.

Our intention is that financial and business
performance will be supported by a capital
structure which is both sustainable and
seeks in time to deliver significant total
shareholder returns.

John Brown
Chief Financial Officer
23 March 2015

GULF MARINE SERVICES PLC Annual Report 2014INTRODUCTIONSTRATEGIC REPORT PERFORMANCEGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONCORPORATE SOCIAL RESPONSIBILITY

OPERATING
WITH INTEGRITY

We believe that our day-to-day business, both onshore and offshore,
should be carried out with the utmost integrity. Our core values
of Responsibility, Excellence and Relationships define who we are,
what we believe and strive for and how we act and behave.

We proactively manage our financial risk and
understand the importance of communicating
this and our financial performance in a clear and
concise manner and of maintaining relationships
with the financial community, including investors,
analysts and the financial media. Our investor
relations strategy during the year included a
series of investor roadshows and one-to-one
sessions with our CEO and CFO and included
results presentations, investor meetings and
investment bank conferences in both the UAE
and the UK. Senior management also responded
to ad hoc requests from the investor community.
We have developed our website to include
investor relations information and plan to
augment this during 2015.

We understand the importance of giving back
to the communities where we work. We actively
encourage participation in sports activities
and sponsor a range of local and national
organisations. We also regularly support
a variety of charity events.

By living our values we can achieve our mission to
create shareholder value through the provision
of modern, innovative and sustainable solutions
to our partners in the offshore energy sector.

living our Values
Responsibility
We have a responsibility to our clients to provide
cost-effective and flexible offshore support
vessels that meet their business needs, while
maintaining the highest standards in safety
and operational efficiency and minimising
downtime. In doing this, we generate value for
our shareholders by delivering our existing and
new contracts with high utilisation rates, our
new build programme on schedule and our
future growth strategy at a managed pace to
maintain and expand a profitable business.

We also have a responsibility to our employees
and are committed to providing them with a
safe working environment and to investing in
their personal and professional development
so they can reach their full potential within GMS.
We strive to provide a high standard of training
and develop our own training initiatives where
we feel these will be of benefit to GMS and
the employees. In 2014 these included an
in-house leadership development programme
for management whereby they can attain
an Institute of Leadership and Management
accreditation; the recruitment of Offshore
Performance Coaches to embed the training
we deliver and to provide more ‘on-the-job’
support to our crew as needed; and the
introduction of the GMS Academy, which is
a computer-based initiative that ensures the
efficient induction and ongoing competency
of our globally dispersed staff.

We recognise the importance of building a
pipeline of ‘home-grown’ qualified staff to
ensure we have the right skills in place for
our business and achieve this through a

combination of internships and graduate
development programmes. In order to retain
the best talent, we offer career progression and
a variety of opportunities within our business.
Staff are encouraged through our Fleet
Development Programme to develop their
skill set in order to become more effective
members of our operations function and have
the further opportunity of secondment to
other areas of the business to give them the
breadth of knowledge and ability required for
progression to senior positions within GMS.
There are opportunities for offshore staff to
work onshore, which is considered useful in
spreading specialist knowledge and practical
experience throughout the Group. We also hold
in-house Business Awareness sessions which
all levels of staff can attend; these are hosted
by senior managers and managers who share
their expertise with staff and this in turn helps
employees to understand the wider business,
where they fit in and how they might develop.

As we carry out our business, we believe that
living by our values also means living by our
Code of Conduct, which sets out the basic rules
of the Group and its purpose is to ensure we
work safely, ethically, efficiently and within the
laws of the countries in which we operate. Our
reputation and our success is dependent on all
staff taking responsibility for putting the Code
of Conduct into practice and maintaining a high
ethical standard in our work and in our dealings
with host and foreign governments, joint
venture partners and associates, contractors,
employees, consultants, agents, and generally
everyone with whom we have business dealings
throughout the world. Our Code includes our
standards and practices related to anti-bribery
and corruption policies and anti-money
laundering and competition laws, provides
details on how to raise concerns and has
information on our whistleblowing policy.
All our staff receive Code of Conduct training.

GULF MARINE SERVICES PLC Annual Report 2014PerformanceRelationships
GMS values the relationships we have with
our clients, which are built on trust and a
proven track record of delivering successful
operations. Many of these relationships are
with long-term clients, in the case of ADNOC
subsidiaries spanning more than 35 years.
We are also working closely with our business
partners to maximise opportunities in existing
and new geographies and in 2014 we formed a
marketing partnership with Dialog in Malaysia to
focus on possible opportunities there, subject
to future fleet availability.

We also maintain very good relationships with
our high-quality core suppliers through the
sourcing of components and often through
ongoing maintenance agreements once the
SESV is operational. Our key suppliers include
Rolls Royce, Hydralift, BLM, Kongsberg, Gusto
MSC and Wartsila. The length and depth of our
relationships with our key suppliers are critical
as they allow us to benefit from substantial
economies of scale in the procurement of
goods and services, which strengthens the
viability of our low-cost model. When tendering
for major vessel components, the main factors
we consider in awarding contracts are quality,
price and delivery schedule.

The Group continues to work with industry
bodies such as BROA and IJUBOA and is
represented on the ABS Worldwide Technical
Committee. We also participate in major
industry exhibitions; in 2014 these included
OTC Asia (the Offshore Technology
Conference Asia, in Malaysia) and ADIPEC,
(the international petroleum exhibition and
conference, in Abu Dhabi).

Our employee relationships are of great
importance to us. We encourage in everyone,
both onshore and offshore, a sense of pride
in GMS. We welcome an honest and open
dialogue and continually look for ways to
engage with our employees. Our regular
company magazine, Jack Flash, communicates
a wide range of information on the Group’s
activities and regularly features members of
staff. In addition, our whistleblowing policy
and careline offers staff a way to express
grievances without fear of repercussions.

GMS also recognises the contribution made by
individuals. In 2014 we introduced a Long Term
Incentive Plan for managers and senior officers,
rewarding their loyalty and allowing them to
share in the future success of GMS. We also
have an annual employee awards ceremony, the
Oscars, which recognises outstanding service.

Excellence
The Group prides itself on operational excellence
and we continually look for ways to improve how
we work and to ensure our client offering is the
best it can be.

For GMS, Health, Safety, Security, Environment
and Quality (HSSEQ) are of paramount
importance, with the lives of our personnel, our
contractors and others who are impacted by
our activities dependent upon us upholding the
highest standards. We are always conscious of
the environment in which we work and we are
fully committed to ensuring its protection.

We constantly seek improvement and we do this
by enhancing our employees’ competencies
through training and knowledge transference
and providing the robust safety tools required to
prevent incidents. GMS expanded significantly in
2014 and it was important to ensure our systems
and HSSEQ toolkit evolved appropriately to
support our growth. A new HSSEQ Director was
appointed, reinforcing the Group’s commitment
to outstanding performance in this key area.

During the period we introduced a new initiative
called GMS Advance to Zero (GMS’ A to Z), which
includes improving the safety leadership skills
of staff, simplifying our support systems, and
setting and rewarding successful performance.
We have adopted 12 mandatory Life-Saving
Rules that supplement and support the existing
company management systems, programmes
and policies and which reinforce what employees
and contractors must know and do to prevent
serious injury or even fatality. The aim is to
achieve zero lost time injuries (LTIs).

We are pleased to report that there were no
LTIs in 2014, which is an improvement on 2013
when one LTI was sustained. We also recorded
further improvement in 2014 in our proactive
HSE observation programme, demonstrating
increased engagement with our staff.

GULF MARINE SERVICES PLC Annual Report 2014INTRODUCTIONSTRATEGIC REPORT PERFORMANCEGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONCORPORATE SOCIAL RESPONSIBILITY
Continued

Diversity
We are very proud of our diverse workforce,
which ensures we look at ourselves, and the
way we work, from many different viewpoints.
We employ personnel from more than 50
countries. The majority of our employees
are aged between 30 and 55. GMS is a global
recruiter and in 2013 staff travelled to the
Balanagar Technical Institute Association
(BTIA) in Mookkannur, India as part of our
recruitment drive for the construction of
GMS Enterprise (during 2014) and subsequent
vessels. The BTIA’s Manpower Recruitment
Division has been instrumental in finding
suitable placement for thousands of skilled,
semi-skilled, and unskilled youngsters, not just
from Mookkannur and the surrounding areas,
but from all over the state, and was the ideal
place for GMS to find a skilled labour force.

The recruitment team also travelled to the
Philippines in 2014 to further supplement
our new build workforce.

Our core values of Responsibility, Excellence
and Relationships define who we are, what
we believe and strive for and how we act and
behave. Information on our core values can
be found on our website at www.gmsuae.com.

environment
Our aim in GMS is to minimise the impact we
have on the environment. In 2014 we achieved
our objective of not causing any accidental
pollution across all our operations and new
build programme. Going further than that we
made sure that any potential incidents were
investigated fully thus enabling us to address
internal controls effectively. We are also
establishing an environmental monitoring
programme with the aim of introducing key
initiatives across our business that will further
reduce our environmental impact and footprint.

Diversity Brings a Wealth
of Talent to GMS

land-Based management

Total of 39 employees (36 male, 3 female).

Asia

Europe

MENA

Africa

Other
(Americas,
Australia)

Land-Based Staff

Total of 243 (200 male, 43 female)

215

Asia

Europe

MENA

Africa

Other
(Americas,
Australia)

Offshore Employees (343, all male)

1 5
14

229

Asia

Europe

Eastern Europe
(Includes Azerbaijan)

Middle East
(includes Turkey)
Africa

N & S Americas

For cultural and legal reasons the extent to which
we can increase the number of female personnel
is limited. For example, we cannot employ women
offshore in the Middle East.

WE ARE VERY PROUD
OF OUR DIVERSE
WORKFORCE, WHICH
ENSURES WE LOOK AT
OURSELVES, AND THE WAY
WE WORK, FROM MANY
DIFFERENT VIEWPOINTS.

GULF MARINE SERVICES PLC Annual Report 2014Performance
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GULF MARINE SERVICES PLC Annual Report 2014INTRODUCTIONSTRATEGIC REPORT PERFORMANCEGOVERNANCEADDITIONAL INFORMATION
CORPORATE SOCIAL RESPONSIBILITY
Continued

Greenhouse Gas
emissions Statement
In accordance with the UK Government
regulatory requirements, GMS is reporting
its Greenhouse Gas (GHG) emissions for the
first time. Accordingly, we are not reporting
comparative data for previous financial years.
The sources for which we are reporting GHG
emissions are those which we include within
our consolidated financial statements.

We do not have responsibility for emission
sources in entities that are not included in our
consolidated financial statements. The
consumption of fuel during the operation of our
vessels is the largest contributor to our GHG
emissions. Although our vessels are leased on
a long-term basis to our clients, who both pay
for fuel and determine where each vessel sails,
we have chosen to account for their GHG
emissions within our footprint, in accordance
with the ‘operational control’ approach to
developing our GHG footprint.

The intensity ratio of tonnes CO2e per US$ 1000
of Group revenue earned during the reporting
period has been chosen because, as a service
company, the amount of revenue earned best
reflects our operational output and therefore
the contribution to our GHG emissions.

In calculating our GHG emissions, we have used
the GHG Protocol Corporate Accounting and
Reporting Standard (revised edition), the 2014
UK Government Conversion Factors for
Company Reporting, the Climate Registry
2014 and the IEA CO2 Emissions from Fuel
Combustion (2012 edition).

For the 12-month period from 1 January 2014 to 31 December 2014, our GHG emissions were
as below:

Scope:
Scope 1
Scope 2

Total

emissions from:
Combustion of fuel and operation of facilities
Electricity purchased *

Revenue recognised during the reporting period

Intensity Ratio (Tonnes CO2e per US$ 1000)

tonnes cO2e
39,515
1,038

40,553

US$'000
196,554

0.2

* Note GMS did not purchase heat, steam or cooling for its own use in the reporting period.

GULF MARINE SERVICES PLC Annual Report 2014PerformanceCASE STUDY
LEADING THE FIELD. A WORLD-FIRST
IN SESV SIMULATOR TRAINING

A highlight in 2014 was the development
by GMS, in partnership with Abu Dhabi
Ports Company, of the world’s first
bespoke onshore SESV simulator that
has expanded the ‘offshore’ training
opportunities for our Masters.

As the demand for self-propelled
SESVs grows, due to ageing oil and gas
infrastructure and the increased need
for well intervention work, so the world
SESV fleet will increase in size and this
will increase international demand for
SESV-specialist senior crews. It was
important for us to find a way to provide
operational training onshore, at a central
location, for our Masters to ensure their
readiness to safely carry out manoeuvres
at sea and to make sure our expanding
fleet will have sufficient senior crewing
in the years ahead.

Abu Dhabi Ports Company already had
a simulator for ship and port operations;
we were able to modify the simulator
and software to include our SESVs in
offshore operations. We developed
a training programme that is the first
to have fully incorporated simulations
for the manoeuvring and jacking of
self-elevating, self-propelled vessels
in a variety of operational scenarios as
they move from one platform to the
next. The Group has been successful
in accelerating the clients’ Masters
approval process. In addition, it allows
the Group to create simulated disaster
scenarios thus allowing its Masters to
be better able to respond should such
an incident actually occur.

We are now able to more closely control
the training of our current and future
senior crew and to ensure our vessels
have the right people in place when our
clients need them, which is essential
for our operational delivery. Our clients
in the UAE consider the simulator a
partnering opportunity whereby they
can work with us to potentially develop
their own staff. We have also been
working closely with the IJUBOA to
ensure all owners of these highly
specialised units worldwide have the
same possibility to enhance the safety
assurance of their operations.

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GULF MARINE SERVICES PLC Annual Report 2014INTRODUCTIONSTRATEGIC REPORT PERFORMANCEGOVERNANCEADDITIONAL INFORMATION
GOVERNANCE

Chairman’s Introduction
Board of Directors
Corporate Governance
Report of the Audit and Risk Committee
Report of the Remuneration Committee
Report of the Nomination Committee
Directors’ Report
Statement of Directors’ Responsibilities

40
42
44
47
50
61
62
65

GULF MARINE SERVICES PLC Annual Report 2014i

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GULF MARINE SERVICES PLC Annual Report 2014INTRODUCTIONSTRATEGIC REPORT PERFORMANCEGOVERNANCEADDITIONAL INFORMATION
CHAIRMAN'S INTRODUCTION

Simon Heale
Chairman

Dear Shareholders,
I am pleased to introduce our Corporate Governance Report. Our evolution
from being a predominantly private equity owned company to a premium
listed company on the London Stock Exchange represented a significant
milestone in the development of the business.

The Board is committed to the highest standards of corporate
governance. Prior to the Company’s listing, a robust governance
structure and a high quality framework was implemented to ensure
full compliance with the UK Corporate Governance Code (“the Code”).
We believe this is integral to sustain our reputation and the continuing
trust and support of our shareholders, employees, clients and
other stakeholders.

In February 2014, a new holding company of the Group was incorporated
as Gulf Marine Services PLC and a new Board was then selected and
appointed in March 2014. The Company undertook this selection process,
which specified the skills and qualities we were seeking in the Directors,
with the assistance of Spencer Stuart, an external search company.
All of the Directors were provided with training by the Company’s legal
advisers to ensure they were fully aware of their corporate governance
and Director duties. The Board, as part of their induction programme,
also met with the wider executive management team.

The Board, which consists of seven Directors, comprises an independent
Chairman (who, for the purposes of the Code was independent on
appointment), one executive Director, three independent non-executive
Directors and two non-executive Directors who are considered by the
Board to not be independent because of their relationship with Gulf
Capital, a substantial shareholder in the Company. The Company has
established three Committees: the Audit and Risk Committee, the
Nomination Committee and the Remuneration Committee, all of which
are compliant with the Code.

The Board views effective governance as an essential foundation for
the Group’s success in delivering shareholder value in a controlled
sustainable environment.

Since listing, the Company has complied in all respects with the provisions
of the Code. This Corporate Governance Report, including the individual
reports of the Board and its Committees, summarises the work undertaken
in this area since listing. This report explains key features of the Company’s
governance structure to provide a greater understanding of how the main
principles of the Code have been applied and to highlight areas of focus
during the year.

The focus for the Board in 2015 is to further strengthen the existing
corporate governance policies to support the growth strategy of the
Company. Your Board is well-placed to challenge robustly the proposals
placed before it and to provide independent oversight.

Simon Heale
Chairman
23 March 2015

GULF MARINE SERVICES PLC Annual Report 2014GovernanceGovernance calendar for 2014

The overall calendar of meetings of the Board and its Committees for 2014 is shown below.

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Board (Main Meetings)

Audit and Risk Committee

Remuneration Committee

A Nomination Committee meeting was held after the year end on 22 March 2015.
For more detail on the responsibilities of the Board Committees, their terms of reference are included on the Group’s website at
www.gmsuae.com.

meeting attendance by Directors in 2014

The attendance of the Directors at the meetings of the Board and its Committees is shown below.

Attended

Attended all or part of meeting as an invitee

Board

Audit & Risk

Remuneration

Simon Heale

Duncan Anderson

Simon Batey

H. Richard Dallas

Dr. Karim El Solh

Mike Straughen

W. Richard Anderson

Christopher Foll, a Chartered Accountant and Chief Financial Officer at Gulf Capital, has been appointed as an alternate Director for H. Richard
Dallas and Dr Karim El Solh; further details can be found in the Directors’ Report on page 62.

Note: Given the recent appointment of the Directors of the Company and the rigorous selection process undertaken by the Company and assisted by Spencer Stuart
there was no meeting of the Nomination Committee in 2014.

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GULF MARINE SERVICES PLC Annual Report 2014INTRODUCTIONSTRATEGIC REPORT PERFORMANCEGOVERNANCEADDITIONAL INFORMATION
BOARD OF DIRECTORS

Name

Designation

Simon Heale
independent
non-executive chairman

Duncan Anderson
chief executive Officer

Simon Batey
Senior independent
non-executive Director

Appointment Date

February 2014

January 2014
(with Group since October 2007)

February 2014

Experience

A non-executive director at Coats
plc from 2010 to 2014. Served
on the boards of PZ Cussons
from 2007 to 2013 and Morgan
Advanced Materials from 2005
to 2014. Non-executive director
and chairman at Panmure Gordon
& Co plc from 2007 to 2011. Has
extensive experience in senior
executive roles, including as chief
executive at the London Metal
Exchange from 2001 to 2006,
chief operating officer and chief
financial officer at Jardine Fleming
Ltd from 1997 to 2001 and deputy
managing director at Cathay Pacific
Airways from 1994 to 1997.

A Chartered Accountant with a
degree in Philosophy, Politics and
Economics from Oxford University.

Brings a wealth of experience,
spanning more than 33 years, to the
executive team gained from prior
role as chief operating officer at the
UAE-based Lamnalco Group, which
included the management of a fleet
of 90 vessels, as well as increasing
the client base in West Africa and
the Middle East. Also operated the
largest offshore service vessel fleet
in the region as chief operating
officer at Gulf Offshore North
Sea. Responsible for leading
the management of the GMS
Group and the implementation
of its strategy.

A UK Chartered Engineer with
a post-graduate BSc (Hons)
degree in Marine Machinery
Monitoring Control.

A non-executive director at Arriva
plc from 2003 to 2010, THUS Group
plc in 2006 and BlackRock New
Energy Investment Trust plc from
2010 to 2014. A member of the
Postal Services Commission,
responsible for the regulation
of the UK postal services sector,
from 2010 to 2011. As a Chartered
Accountant, spent 12 years in
professional practice with Armitage
& Norton (now part of KPMG),
latterly as a partner. Has more than
20 years’ experience in a number
of senior finance roles in industry.
Group finance director of United
Utilities plc between 2000 and
2006. Chief financial officer at
Thames Water Utilities Ltd from
2006 to 2007. Between 1987 and
2000, worked at AMEC Foster
Wheeler plc, initially as deputy
group finance director and then,
from 1992, as group finance
director.

A Chartered Accountant with
an MA in Geography from
Oxford University.

External Appointments

Non-executive chairman at Kaz
Minerals plc, previously known as
Kazakhmys plc, since 2013 and a
non-executive director since 2007.
Non-executive director at Marex
Spectron since 2007. A trustee of
Macmillan Cancer Support.

Member of ABS Worldwide
Technical Committee.

Independent non-executive
director and chairman of the
Audit Committee at Telecity
Group since 2007.

Committees

Chairman of the Nomination
Committee.

Chairman of the Audit
and Risk Committee.
Member of the Nomination and
Remuneration Committees.

GULF MARINE SERVICES PLC Annual Report 2014GovernanceW. Richard Anderson
independent
non-executive Director

Mike Straughen
independent
non-executive Director

H. Richard Dallas
non-executive Director

Dr Karim El Solh
non-executive Director

February 2014

Has 36 years’ experience in the
oil and gas industry and related
finance and management.
Previously president and chief
executive officer at Prime Natural
Resources Inc. from 1999 to 2007.
Partner from 1989 to 1995 and then
managing partner from 1995 to
1998 at Hein & Associates LLP.
Served on the boards of Calibre
Energy Inc from 2005 to 2007,
Transocean Ltd from 2007 to
2011 and Boots & Coots Inc
from 1999 to 2010.

A Certified Public Accountant, with
a BSc in Business from University
of Colorado, magna cum laude,
and a Masters in Taxation from
the University of Denver.

Board member of the John Wood
Group PLC and chief executive
officer of the Engineering Division
from 2007 to 2014. With AMEC
for 25 years, latterly as group
managing director responsible for
UK activities across all sectors
including global oil & gas. A member
of PILOT, the UK Government Oil &
Gas Advisory Board, from 2000 to
2007 and chairman of the Energy
Industry Council from 2002 to 2007.
Recently a member of the UK
Government’s Offshore Wind Cost
Reduction Task Force. A member of
the Scottish Government’s Energy
Advisory Board from January 2013
to September 2014.

A Chartered Engineer with a BSc
(Hons) degree in Mechanical
Engineering from Newcastle
University.

Previously served as managing
director of Oryx Capital
International, an investment group
composed of families from GCC
that specialised in small to mid-cap
investments in the United States,
from 1998 to 2007. A partner of
Gibson, Dunn & Crutcher from
1985 to 1998 and established and
managed offices in London and
Saudi Arabia.

Holds an A.B. degree in Economics,
with honours, from Stanford
University and a J.D. degree
from the University of Southern
California.

Chief financial officer at Eurasia
Drilling Company since 2008 and
member of the board since 2011.
Chairman of the board at Vanguard
Natural Resources LLC since 2008.
Non-executive director at Soma Oil
& Gas Holdings since 2013.

A non-executive director of Glacier
Energy Services Holdings Ltd since
January 2014. A member of the
Energy Institute since 2001.

Managing director at Gulf Capital
since 2007.

Chairman of the
Remuneration Committee.
Member of the Audit and Risk,
and Nomination Committees.

Member of the Audit and Risk,
Nomination and Remuneration
Committees.

Co-founder of Gulf Capital, one
of the largest alternative asset
management firms in the Middle
East, since its formation in 2006.
Under his leadership, Gulf Capital
has been associated with some
of the region’s most prominent
transactions, with the firm
managing $3 billion in assets.

Chairman of Maritime Industrial
Services from 2007 to 2011 and
Chairman of Metito from 2006 to
2014. Chief executive officer of the
Abu Dhabi-based Investment Bank,
The National Investor, from 2001
to 2005. Senior banker in the
European High Yield Capital
Markets at Donaldson, Lufkin and
Jenrette (DLJ), now part of Credit
Suisse, from 1997 to 1999. Senior
banker at Citigroup from 1995
to 1997.

Holds a B.S. degree in Civil
Engineering from Cornell
University, an MBA from
Georgetown University and a
Doctorate in Economics from
the Institute D’Etudes Politiques
de Paris (Science Po).

Chief executive officer
of Gulf Capital since 2006.
Co-managing partner of
Gulf Related since 2010.
Chairman of Reach Group
since 2014. Board member,
Destination of the World
since 2014.

Member of the Nomination
Committee.

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GULF MARINE SERVICES PLC Annual Report 2014INTRODUCTIONSTRATEGIC REPORT PERFORMANCEGOVERNANCEADDITIONAL INFORMATION
CORPORATE GOVERNANCE

corporate Governance Report
compliance with UK corporate Governance code
Since listing the Company has complied with all the relevant provisions
set out in the Code.

Governance Overview
membership of the Board
The UK Code provides that independent non-executive Directors
should comprise at least half of the Board, excluding the Chairman.

Chairman
Simon Heale

Executive Director
Duncan Anderson

Independent non-executive Directors
W. Richard Anderson, Mike Straughen

Senior independent Directors
Simon Batey

Non-executive Directors
Karim El Sohl, H. Richard Dallas

Board composition, Qualification and independence
It is intended that the composition, qualifications, experience and
balance of skills on the Board will be regularly reviewed by the Board to
ensure that there is the right mix on the Board and its committees and
that they are working effectively. There are currently seven Directors
on the Board, which comprises an independent Chairman (who, for the
purposes of the Code was independent on appointment), one executive
Director, three independent non-executive Directors and two non-
executive Directors who are considered by the Board to not be
independent due to their relationship with the major shareholder Gulf
Capital. The current members of the Board have a wide range of skills
and experience and their biographies can be found on pages 42 to 43.

non-executive Director independence
The Board considers and reviews the independence of each non-executive
Director on an annual basis as part of the Directors’ performance evaluation.
In carrying out the review, consideration is given to factors such as their
character, judgment, commitment and performance on the Board and
relevant committees and their ability to provide objective challenge to
management. Following the annual review for 2014, the Board concluded
that each of the independent non-executive Directors reviewed continue
to demonstrate those behaviours and continued to be considered by the
Board as independent.

Division of Board Responsibilities

chairman

Chief Executive Officer

– Provided strategic insight from his wide-ranging business

– Brought matters of particular significance or risk to the Chairman,

experience and contacts built up over many years.

for discussion and consideration if appropriate.

– Met major shareholders on governance matters and was an

– Represented the Group to its shareholders, customers, suppliers

alternate point of contact instead of the Chief Executive Officer
for shareholders on other matters as well.

– Provided a sounding board for the Chief Executive Officer on key
business decisions, challenging proposals where appropriate.
– Agreed executive Directors’ subjects for particular consideration
by the Board during the year at Board meetings, ensuring that
adequate time is available to discuss all agenda items.

and the general industry.

– Led the business and the rest of the management team.
– Led the development of the Group’s strategy with input from

the rest of the Board and our advisers.

– Worked with the Chairman in agreeing subjects for particular

consideration by the Board during the year.

Effective Division of Responsibilities and Board Operation

Senior independent Director

company Secretary

– Made himself available to shareholders if they had concerns

– Secretary to the Board and each of its Committees, reporting

that could not be addressed through normal channels.
– Acted as an internal sounding board for the Chairman.
– Served as an intermediary for the other Directors with the

Chairman when necessary.

directly to their Chairman.

– Assisted the Chairman to ensure that Board papers are clear,
accurate, timely, succinct and of sufficient quality to enable
the Board to discharge its duties effectively.

– Ensured balanced understanding of major shareholders' issues

– Provided advice to the Board and each of its Committees on

and concerns.

Board and governance matters.

GULF MARINE SERVICES PLC Annual Report 2014Governance
Board calendar for 2014

may

IPO debrief

Q1 Interim management
statement

Remuneration
Committee Report

Contract updates

Trading

Review of
operational matters

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June

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October

December

City expectations for first
year as a plc

Current trading activity

Competitive landscape

Business Update, including:
– update on charters
– new build programme

Approval of 2014
interim results

Competitive landscape

Approval of Group strategic
plan 2015 to 2019

Group strategic plan
2015 to 2019

Review of indicative
2015 budget

Share price

Review and approval
of 2015 budget

Review of Group
financing strategy

Discussion on
macroeconomic conditions

Approval of 2015 Group KPIs

Review of remuneration policy

Consideration of new
build programme

Discussion on
macroeconomic conditions

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Review and discussion of:
– investor relations
– new build programme
– market update
– contractual update
– minutes of previous meetings
– reports on implementation of

actions from previous meetings

– Operational matters

Review of reports on:
– finance and accounting matters
– health, safety and environment
– personnel and support services
– risk management
– trading and forecast update

– the Group strategy is reviewed by the Board throughout the year,
with particular strategic matters being reviewed and updated as
appropriate at each main meeting.

– good working relationships exist between non-executive Directors

and non-Board members of the senior management team.

– members of the senior management team draw on the collective
experience of the Board, including its non-executive Directors.

– comprehensive reporting packs are provided to the Board, which are
designed to be clear, accurate and analytical, whilst avoiding excess
and unnecessary information.

– reporting packs are normally distributed six days in advance of Board

meetings, enabling them to be as up-to-date as possible whilst
allowing sufficient time for their review and consideration in advance
of the meeting.

– clarification or amplification of reports is sought in advance of,

or at the meeting as appropriate.

– once goals have been set and actions agreed, the Board receives

regular reports on their implementation.

– comprehensive management accounts with commentary and

analysis are distributed to the Board on a monthly basis.

– the Board reviews the Group’s risk register at each of its main

meetings and challenges this where appropriate.

– the Board visits the Group’s business locations both to review its

operations and new build vessels and to meet with local management.

– all Directors have open access to the Group’s key advisers as well

as to Management and the Company Secretary.

– Directors are also entitled to seek independent professional advice

at the Group’s expense should they consider this appropriate.

How the Board Operates
The Board is responsible for providing entrepreneurial leadership and
effective oversight of the Company. It also agrees the strategic direction
and governance structure that will help achieve the long-term success of
the Company and deliver shareholder value. The Board takes the lead in
areas such as strategy, financial policy, risk management and the overall
system of internal control. The Board’s full responsibilities are set out
in the matters reserved for the Board. The ultimate responsibility for the
Company rests with the Board and its legal powers and responsibilities
are stated in the Articles of Association, which are available for inspection
at the Company’s registered office in the UK.

The Board delegates authority to its committees to carry out certain
tasks on its behalf, so that it can operate efficiently and give the right
level of attention and consideration to relevant matters. The composition
and role of each committee is summarised on pages 47 to 61 and their
full terms of reference are available on our website at www.gmsuae.com.

The composition, experience and balance of skills on the Board are
regularly reviewed to ensure that there is the right mix on the Board and its
committees and they are working effectively. The current members of the
Board have a wide range of skills and experience and their biographies can
be found on pages 42 to 43.

The Chairman, along with the Chief Executive Officer and the Company
Secretary, has established Board processes designed to maximise
its performance. Key aspects of these are shown below:

– the Chairman, Chief Executive Officer and Company Secretary meet

towards the beginning of each year to agree an overall calendar
of subjects to be discussed by the Board during the year.
– Board meetings are timetabled to ensure adequate time for
discussion of each agenda item for that particular meeting.

– discussions at Board meetings are held in a collaborative atmosphere

of mutual respect and open discussion allowing for questions,
scrutiny and constructive challenge where appropriate.

– full debates on key matters allow decisions to be taken by consensus

(although any dissenting views would be minuted accordingly).
– the development of strategy is led by the Chief Executive Officer,
with input, challenge, examination and ongoing testing from the
non-executive Directors.

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GULF MARINE SERVICES PLC Annual Report 2014INTRODUCTIONSTRATEGIC REPORT PERFORMANCEGOVERNANCEADDITIONAL INFORMATION

CORPORATE GOVERNANCE
Continued

appointment and tenure
All non-executive Directors serve on the basis of letters of appointment
which are available for inspection at the Company’s registered office.
The letters of appointment set out the expected time commitment of
non-executive Directors, who, on appointment, undertake that they will
have sufficient time to meet what is expected of them.

The non-executive Directors are appointed for a term of three years,
subject to earlier termination, including provision for early termination
by either the Company or the non-executive Director on three months’
notice. In accordance with the Company’s Articles of Association all
Directors must retire by rotation and seek re-election by shareholders
every three years; however, it is intended that the Directors will each
retire and submit themselves for re-election by shareholders annually.

Director induction and training
The training needs of the Directors are periodically discussed at Board
meetings and briefings are arranged on issues relating to corporate
governance and other areas of importance. Arrangements were put
in place for newly appointed Directors to undertake an induction
programme designed to develop their knowledge and understanding
of the Company. This included briefing sessions during regular Board
meetings, visits to the Company’s fabrication yard, meetings with
members of the wider management team and discussions on relevant
business issues. Upon appointment Directors are advised of their legal
and other duties and their obligations as Directors of a listed company
and under the Companies Act 2006 and they receive training from the
Company’s lawyers.

Director election
Following recommendations from the Nomination Committee, the
Board considers that all Directors continue to be effective, committed
to their roles and have sufficient time available to perform their duties.
Accordingly, all Directors will seek election at the Company’s first Annual
General Meeting (“AGM”) as set out in the Notice of the Annual General
Meeting (see page 116 for resolutions relating to election of Directors).

Directors’ conflicts of interest
Directors have a statutory duty to avoid situations in which they have
or may have interests that conflict with those of the Company, unless
that conflict is first authorised by the Directors. This includes potential
conflicts that may arise when a Director takes up a position with another
company. The Company’s Articles of Association allow the other
Directors to authorise such potential conflicts, and there is in place
a procedure to deal with any actual or potential conflict of interest.
The Board deals with each actual or potential conflict of interest on
its individual merit and takes into consideration all the circumstances.

All potential conflicts approved by the Board are recorded in an Interests
Register, which is reviewed by the Board at least quarterly to ensure that
the procedure is operating at maximum effectiveness.

Board evaluation and effectiveness
The Board and its Committees were formed when the Company listed
in March 2014 and in January 2015 an internal evaluation was conducted
by the Chairman. The Chairman distributed a high-level questionnaire
for completion by the Directors. The questionnaire was structured to
provide Directors with an opportunity to express their views about:

– strategy and implementation;
– succession planning and talent development;
– Board dynamics and operation;
– Chairman effectiveness;
– performance of the Board and each of its Committees; and
– Director self-assessment and training needs.

Following the internal evaluation process conducted in 2014, the Board
and the Board Committees are satisfied that they are operating
effectively and that each Director has performed well in respect of their
individual roles on the Board.

Dialogue with shareholders

Shareholder engagement

annual General meeting

The Company’s first AGM will take place at 11.30am (UK time) on Wednesday
6 May 2015 at Linklaters LLP, One Silk Street, London, EC2Y 8HQ. All
shareholders have the opportunity to attend and vote, in person or by proxy, at
the AGM. The notice of the AGM can be found on page 116 and on our website
at www.gmsuae.com. The Notice of AGM sets out the business of the Meeting
and an explanatory note on all resolutions. Separate resolutions are proposed
in respect of each substantive issue.

The AGM is the Company’s principal forum for communication with private
shareholders. In addition to the formal business, there will be a presentation
by the Chief Executive Officer on the performance of the Group and its future
development. The Chairman of the Board and the Chairman of each Board
Committee, together with senior management, will be available to answer
shareholders’ questions at the AGM.

Responsibility for shareholder relations rest with the Chairman, Chief Executive
Officer and Chief Financial Officer. They ensure that there is effective
communication with shareholders on matters such as governance and strategy,
and are responsible for ensuring that the Board understands the views of
major shareholders.

As part of our investor relations programme a combination of presentations,
Group calls and one-to-one meetings are arranged to discuss the Company’s
interim and final results with stock market participants. In the intervening periods
meetings are held with existing and prospective shareholders to update them
on our latest performance or to introduce them to the Company. Periodically
we arrange visits to the business to give analysts, brokers and major
shareholders a better understanding of how we manage our business and
to ensure we understand the views of our shareholders. These visits and
meetings are principally undertaken by the Chief Executive Officer and the
Chief Financial Officer.

The Board receives regular updates on the views of its shareholders from its
brokers at its Board meetings. In addition, the Senior Independent Director is
available to meet if they wish to raise issues separately from the arrangements
as described above.

The presentations to analysts are posted on the Company’s website at
www.gmsuae.com.

GULF MARINE SERVICES PLC Annual Report 2014GovernanceREPORT OF THE AUDIT AND RISK COMMITTEE

Simon Batey
Audit and Risk Committee Chairman

I am pleased to present the Audit and Risk Committee report for 2014.
The Audit and Risk Committee was established in its current form as part
of the governance framework adopted by the Company on its admission
to the London Stock Exchange. The Committee is satisfied that the
combined knowledge and experience of its members is such that the
Committee discharges its responsibilities in an effective, informed and
challenging manner. During the period under review I served as Chairman
of the Audit and Risk Committee alongside two of my fellow non-executive
Directors, both of whom are considered by the Board to be independent.
The members of the Committee have been chosen to provide the wide
range of financial and commercial experience needed to fulfil these duties.
The members of the Committee during the year were as follows:

Chairman and Senior independent
Director, Simon Batey

Independent non-executive Directors
W. Richard Anderson
Mike Straughen

The Audit and Risk Committee discharges its responsibilities through
a series of scheduled meetings during the year, the agenda of which is
linked to events in the financial calendar of the Company. We met three
times during the financial year and attendance at those meetings is set
out on page 41. The Committee receives reports from external advisers
and from the senior management team, as required, to enable it to
discharge its duties. The Chief Financial Officer and senior members
of the finance team attend each of these meetings at our request.
In addition, the external Auditor attended two of these meetings and
had the opportunity to meet privately with the Committee, in the
absence of senior management.

The external Auditor receives copies of all relevant Committee papers
(including papers that were considered at the meeting when they were
not in attendance) and minutes of all Committee meetings.

the Responsibilities and Role
of the audit and Risk committee
The Committee’s responsibilities as detailed in its terms of reference include:
– monitoring the integrity of the financial statements of the Group and
formal announcements relating to the Group’s financial performance
and reviewing any significant financial reporting judgments contained
in them;

– reviewing accounting policies, accounting treatments and

disclosures in financial reports;

– reviewing the Group’s internal financial controls and internal control

and risk management systems;

– monitoring and reviewing the effectiveness of the Group’s internal

audit function;

– overseeing the Group’s relationship with the external Auditor, including

making recommendations to the Board as to the appointment
or reappointment of the external Auditor, reviewing its terms of
engagement and engagement for non-audit services, and monitoring
the external Auditor’s independence, objectivity and effectiveness; and

– reviewing the Group’s whistleblowing procedures and ensuring that
arrangements are in place for the proportionate and independent
investigation of possible improprieties in respect of financial and
other matters for appropriate follow-up action.

The ultimate responsibility for reviewing and approving the Annual
Report and financial statements and the half-yearly reports remains
with the Board. The Committee gives due consideration to laws and
regulations, the provisions of the Code and the requirements of the
Listing Rules, and makes its recommendations on these reports
to the Board.

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GULF MARINE SERVICES PLC Annual Report 2014INTRODUCTIONSTRATEGIC REPORT PERFORMANCEGOVERNANCEADDITIONAL INFORMATION

REPORT OF THE AUDIT AND RISK COMMITTEE
Continued

Objectives Set for 2014
At our first meeting we decided that our primary objectives for
2014 were:

– review of financial reporting and related internal control risk;
– monitoring accounting judgments and estimates prepared

for any accounting changes;

– considering the financial statements and disclosures

to ensure they are fair, balanced and understandable and
“tell the Company’s story”;

– reviewing the Group’s risk management systems; and
– monitoring and reviewing the internal audit effectiveness.

audit and Risk committee calendar for 2014

Developments During the Year
We reviewed and discussed:

– the system of risk management in the Group and enhanced the

measurement of risk levels by management, increasing uniformity
across the Group;

– the new reporting, regulatory and governance requirements for
listed companies and where necessary updated or implemented
new policies; and

– the effectiveness of the Group’s internal audit function.

august

October

December

Review of 2014 External Audit Plan.

Update on 2014 Annual Report process.

2014 Annual Report Process.

External Auditor, including:
policy on appointment of external Auditor.

Management papers to support areas of
judgment in the Annual Report.

Review of external Auditor’s
Engagement Letter.

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Review and recommendation of approval of
2014 Interim Results.

Report from external Auditor on 2014
Interim Results.

Private meeting between non-executive
Directors and external Auditor.

External Auditor’s fee proposal and policy
on non-audit services.

Proposed specific objectives of the
Audit and Risk Committee for 2014.

Approved 2014/15 Internal Audit Programme.

Reviews of financial reporting, including:

Review and discussion of:

Consideration of Internal Audit:

Any proposed changes to accounting policies. Whistleblowing and related policies.

Status of 2014/15 Internal Audit Programme.

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Risk management systems and internal
controls, including a discussion of the
risk management process.

Minutes of previous meetings.

Reports on implementation of actions
from previous meetings.

Significant issues
The Audit and Risk Committee pays specific attention to matters it considers important based on their potential impact on the Group's results,
or based on the level of complexity, judgement or estimation involved in their application. The Committee considered the following matters as
significant issues in 2014:

Significant issue

How addressed

Impairment of property, plant and equipment

IAS 36 requires that a review for impairment be carried out if events or
changes in circumstance indicate that the carrying amount of an asset
may not be recoverable.

The volatility of the oil prices in recent periods may significantly impact the
value in use of the vessels.

Impairment assessments are judgmental and careful consideration of the
assumptions used in the determination of the value in use is required.

Capitalisation of new build programme costs

The Committee considered the assumptions used in the computation of the
value in use of the vessels. Consideration was given to both the feasibility of the
long-term business plan and the appropriateness of the discount rate applicable
to the Group, used in the valuation process.

The Group has invested substantial capital in its vessel fleet, which is the key
component of its business offering and its major asset.

The Committee reviewed the basis of Management's assumptions over the
eligibility of the new build costs for capitalisation.

As a part of its new build programme, the Group completed the build of a
Large Class vessel during the period. Careful consideration had to be given
as to which costs met the criteria for capitalisation.

The Committee reviewed the costs that were capitalised to be satisfied that they
complied with the definition of costs directly attributable to the construction of
the asset as required by IFRS.

Incremental costs as a result of the project were considered for capitalisation.

GULF MARINE SERVICES PLC Annual Report 2014Governance

external audit
appointment and independence
Deloitte LLP was appointed on 14 March 2014 as external Auditor of the
Company. The Committee is aware of the changes and potential changes
to the requirements for external auditor selection, given recent reviews
by the Competition and Markets Authority and the European Union. Whilst
we do not currently consider it necessary to have a policy for rotation of
the external Auditor in this our first year as a listed company, we plan to give
consideration to placing future audits out to tender over the coming years.

internal controls and Risk management
The Group’s systems of internal control and in particular our risk
management process have been designed to support our strategic and
business objectives as well as our internal control over financial reporting.
The Board has established an ongoing process for identifying and evaluating
and managing the significant risks faced by the Group that has been in place
for the period under review and up to the date of the Annual Report. The
process is regularly reviewed by the Board and is in accordance with the
Turnbull Review guidance on internal controls and requirements of the Code.

Provision of non-audit Services
The Committee believes that it may be appropriate for the Company
to engage its external Auditor to provide non-audit services in limited
circumstances. Given the knowledge of a company’s market, systems
and operations which an external auditing firm gains through the audit
process, together with effective working relationships developed with
senior management, the Committee believes that appointing the
Company’s external Auditor to provide non-audit services can represent
an effective and cost-efficient process which is in the best interests
of shareholders. However, to ensure the continued objectivity and
independence of the external Auditor are not compromised, the
Committee has established a non-audit services policy.

The Committee requires specific approval for the provision of any
non-audit services above the value of US$ 50,000 and, in the unlikely event
that the non-audit services have resulted in a cumulative total of 70% of the
overall audit fee in any financial year, then any further non-audit services
carried out by the external Auditor would be regarded as exceptional and will
require the Committee’s prior approval. The Committee receives quarterly
reports of any non-audit services undertaken. The Committee must be
satisfied that the external Auditor’s objectivity and independence would
not be compromised in any way as a result of being instructed to carry out
those services.

During the year the total fees paid to Deloitte LLP were unusually high
due to the level of work undertaken as reporting accountants as part of
the Group re-organisation and listing, services which it is normal practice
for the auditors to perform. However the Committee is satisfied that this
exceptional level of fee will not continue. The total non-audit services
provided by Deloitte LLP for the year ended 31 December 2014 were
US$ 921,000 (2013: US$ 962,000) which comprised 79% (2013: 91%)
of total audit and non audit fees.

The Committee is satisfied that the quantum and nature of the non-audit
services provided by Deloitte LLP during the year are such that the objectivity
and independence of the external Auditor have not been compromised.

As part of the Committee’s assessment of the objectivity and independence
of the external Auditor, the Committee held a private meeting with the
external Auditor without management being present. In addition, I met
privately with the external audit Engagement Partner on several occasions.

The effectiveness of the external Auditor was evaluated by feedback from
the senior management team and the Committee by way of questionnaire.
We examined a range of performance criteria including, but not limited to,
robustness of the audit process, independence and objectivity, quality of
delivery, quality of people and service, and value-added advice. We also had
regard to the 2014 Audit Quality Inspections Report on Deloitte LLP audits
carried out by the Financial Reporting Council. As a result of this work, the
Committee has recommended to the Board that the reappointment of
Deloitte LLP as the Company’s external Auditor be proposed to
shareholders at the 2015 AGM.

internal audit
The Committee receives at each meeting a report on internal controls
from the Internal Auditors. These reports provide an update on progress
against the internal audit plan, including the status of actions and
management responses and highlighting key improvement themes
and recommend areas of business focus.

Any system of internal control is designed to manage rather than
eliminate the risk of failure to achieve business objectives and can
only provide reasonable and not absolute assurance against material
misstatement or loss.

The Group has a clear framework for identifying and managing risk, both
at an operational and strategic level. Our risk identification and mitigation
processes have been designed to be responsive to the constantly changing
environment. The internal control process starts with identifying risks,
compliance matters and other issues through routine reviews carried out by
process owners and facilitated by regular Group wide risk assessments. For
risks that are recorded in the Group risk register, the Group then assesses the
implications and consequences and determines the likelihood of occurrence.

Reviewing the effectiveness of internal controls
At least annually the Board, supported by this Committee’s activities,
reviews the effectiveness of our internal control process, including
financial reporting, to make sure it remains robust. The latest review
covered the financial year to 31 December 2014 and the period to the
approval of this Annual Report and financial statements. It included:
– clearly defined responsibilities and delegated limits of authority,

including definition of matters that require Board approval;

– operation of an effective system of internal control at Group and

subsidiary levels;

– production of accurate, relevant and timely financial information

by each subsidiary;

– a comprehensive Group-wide system of financial reporting,

budgeting and cash forecasting and control through which financial
statements are prepared and submitted to the Board monthly;
– safeguarding of the Group’s assets through physical controls and

segregation of duties;

– the close involvement of the executive Directors, including regular
meetings with the senior management team to review operational
aspects of the business.

ethical conduct
Our Code of Conduct encourages all employees to report any potential
improprieties in financial reporting or other matters. The Group operates
a confidential whistleblowing hotline and all reports received are
communicated to this Committee. Where appropriate, our Internal
Audit team may be asked to investigate issues and report to us on the
outcome. Code of Conduct training was included as part of the Company
induction process when the policy was launched earlier this year.

The Company has also implemented an Anti-Bribery and Corruption
Policy and is satisfied that appropriate policies and training is in place to
deal with any instances of whistleblowing and to ensure that appropriate
follow up action is taken.

Simon Batey
Audit and Risk Committee Chairman
23 March 2015

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GULF MARINE SERVICES PLC Annual Report 2014INTRODUCTIONSTRATEGIC REPORT PERFORMANCEGOVERNANCEADDITIONAL INFORMATION
REPORT OF THE REMUNERATION COMMITTEE

W. Richard Anderson
Remuneration Committee Chairman

Remuneration committee composition

Chairman
W. Richard Anderson

Independent non-executive Director
Mike Straughen

Senior Independent Director
Simon Batey

On behalf of the Remuneration Committee I am pleased to present the Directors’ Remuneration Report for the year ended 31 December 2014.

In advance of the IPO earlier this year, a review of the structure of remuneration for senior executives was carried out to ensure the policy was
appropriate for the Company following listing. Our remuneration arrangements have been designed in accordance with the principles set out in
the UK Corporate Governance Code and current market and best practices for UK listed companies. They also take into account market practice
and labour laws in the local UAE market . As part of this exercise, the Committee, with external assistance, developed a Long-Term Incentive Plan
to be introduced following listing. The first award under this Plan was granted in May 2014 and will vest in May 2017, subject to the achievement
of challenging performance conditions relating to EPS growth and the Company’s relative total shareholder return.

Our aim is to ensure that pay arrangements appropriately and responsibly incentivise executive directors and senior management to achieve the
Group’s strategic objectives, which should in turn create value for the Company’s shareholders. To this end, the overall remuneration structure
for executives therefore comprises:

– Base salary, benefits and allowances – set at a level appropriate to the sector and geographic markets in which we operate;
– An annual bonus – based on measures of annual financial and strategic performance; and
– A share-based Long Term Incentive Plan – based on growth in EPS and total shareholder return.

Further details of this structure are set out on the following pages.

The Company is subject to legislation applying to the governance and reporting of remuneration for UK-listed companies, which provides
shareholders with a say on Company remuneration policy. This report will therefore be subject to two shareholder votes at the forthcoming AGM:
– A binding vote on the Directors’ Remuneration Policy Report; this report (contained on pages 51 to 55) sets out the forward looking Directors’

Remuneration Policy that it is proposed will operate from the date of the AGM;

– An advisory vote on the Annual Report on Remuneration; this report (contained on pages 55 to 60) provides details of the remuneration earned

by Directors in the year ended 31 December 2014 and how we propose to operate our policy in 2015.

We welcome questions and feedback regarding our remuneration structures and commend both the Remuneration Policy and the Annual Report
on Remuneration to shareholders for their support at the forthcoming AGM.

W. Richard Anderson
Remuneration Committee Chairman

GULF MARINE SERVICES PLC Annual Report 2014GovernanceDirectors’ Remuneration Policy Report
This part of the report, which is not subject to audit, sets out the remuneration policy for the Company and has been prepared in accordance with
The Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013. The policy has been developed taking
into account the principles of the UK Corporate Governance Code 2014 and the views of our major shareholders and describes the policy to be
applied from 2014 onwards. The Policy Report will be put to a binding shareholder vote at the 2015 AGM and assuming the vote is passed, will take
formal effect from that date.

Policy overview
The Committee assists the Board in its responsibilities in relation to remuneration, including making recommendations to the Board on the
Company’s policy on executive remuneration.

The Company’s policy is to provide remuneration to executives to reflect their contribution to the business, the performance of the Group, the
complexity and geography of the Group’s operations and the need to attract, retain, and incentivise executives. The Committee seeks to provide
remuneration packages that are simple, transparent and aligned with UK best and local UAE market practice, whilst providing an appropriate balance
between fixed and variable pay that supports the delivery of the Group’s strategy.

Summary of the Directors' Remuneration Policy
The following table sets out the Directors’ remuneration policy.

element of pay
Base salary

Purpose and link to strategy

Operation

maximum opportunity

Performance criteria

– To attract, retain and

motivate individuals of
the necessary calibre
to execute the Group’s
strategy

– Normally reviewed annually by the Committee
or, if appropriate, in the event of a change in an
individual’s position or responsibilities
– The level of base salary reflects the

experience and capabilities of the individual
as well as the scope and scale of the role

– Any increases to base pay will take into

account individual performance as well as
the pay and conditions in the workforce

– There is no prescribed maximum

N/A

annual increase

– When determining the level of

any change in compensation, the
Committee takes into account:

– Remuneration levels in

comparable organisations
in the UAE and the GCC
– Remuneration levels in the

international market

– Increases for the workforce

generally

– Changes to an individual’s

role, including any additional
responsibilities

– Normal maximum opportunity
of 100% of salary (exceptional
limit 150% of salary)

– The majority of the annual

bonus will be based on Group
financial performance

– The Committee has discretion

to vary bonus payments
downwards or upwards if it
considers the outcome would
not otherwise be a fair and
complete reflection of the
performance achieved by the
Group and/or the Executive
Director. Performance below
threshold results in zero
payment. Payments increase
from 0% to 100% of the
maximum opportunity for
levels of performance between
threshold and maximum
performance targets

– Performance is assessed
against metrics which will
normally include a financial
measure, such as EPS, and
/ or a measure linked to the
Company’s total shareholder
return against an appropriate
group of peers. Measures are
captured independently
– 30% of an award will vest
for achieving threshold
performance, increasing
pro-rata to full vesting for
achievement of maximum
performance targets

– Normal maximum opportunity
of 200% of base compensation
(exceptional limit of 300%
of salary)

– The maximum payout to an
employee is limited by UAE
Labour Law to two years'
base salary

N/A

– Actual value of benefits provided N/A

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Annual bonus
plan

– To encourage and reward
delivery of the Group’s
annual financial and
operational objectives

– Performance measures and targets are

reviewed annually by the Committee and
are linked to the Group’s key strategic and
financial objectives

– The bonus will normally be paid wholly in
cash; however the Committee has the
discretion to defer a proportion of the
bonus in GMS shares or cash

– Clawback (or malus in the event of any

deferral) provisions apply in the event of
a material misstatement of the Group’s
financial results or an error in the calculation
of performance targets. Clawback and/or
malus can be applied for three years from
the end of the financial year to which a
payment relates

– Annual awards of nil-cost options or

conditional shares with the level of vesting
subject to the achievement of stretching
performance conditions measured over
a three-year period

– Performance targets are reviewed annually
by the Committee and are set at such a level
to motivate management and incentivise
outperformance

– Dividends that accrue during the vesting

period may be paid in cash or shares at the
time of vesting, to the extent that shares vest
– Clawback provisions apply in the event of a
material misstatement of the Company’s
financial results or an error in the calculation
of performance targets. Clawback can be
applied for three years from the end of the
financial year in which an award vests

– End of service gratuity contributions are

accrued by the Company

Long Term
Incentive Plan
(LTIP)

– To incentivise and reward the
achievement of key financial
performance objectives and
the creation of long-term
shareholder value
– To encourage share

ownership and provide
further alignment
with shareholders

End of service
gratuity

– To provide an end of service
gratuity, as required under
the UAE Labour Law

Benefits

– To provide competitive and
cost-effective benefits to
attract and retain high-
calibre individuals

– Private medical insurance for the executive
and close family, death in service insurance,
disability insurance, accommodation and
payment of children’s school fees

GULF MARINE SERVICES PLC Annual Report 2014INTRODUCTIONSTRATEGIC REPORT PERFORMANCEGOVERNANCEADDITIONAL INFORMATION
REPORT OF THE REMUNERATION COMMITTEE
Continued

element of pay
Allowances

Share ownership
guidelines

Purpose and link to strategy

Operation

maximum opportunity

Performance criteria

– Allowances set to cover

essential living costs where
this is in line with local
market practice

– Any increases to allowances will take into
account local market conditions as well as
the allowances provided to the workforce
– Allowances relate to air travel and transport

N/A

– To encourage alignment

– Executive Directors are required to build

N/A

with shareholders

and maintain a shareholding equivalent to
at least 100% of base salary through the
retention of vested share awards or through
open market purchases

– A new appointment will be expected to

reach this guideline in three to five years
post-appointment

– Executive Directors are required to retain

50% of the shares (net of tax) vesting under
the incentive schemes until the guideline
has been achieved

notes to table
annual bonus performance measures
The annual bonus reflects key financial performance indicators linked to the Group’s strategic goals. Financial targets are set at the start of the
financial year with reference to internal budgets and taking account of market expectations. The balance is based on how well the individual
performed against a range of stretching objectives relating to key strategic and operational objectives.

ltiP performance measures
The LTIP performance measures (which are currently EPS growth and TSR relative to companies in the FTSE 250 Index excluding financial services
companies) reward long-term financial growth and significant long-term returns to shareholders. Targets are set on sliding scales that take account
of internal strategic planning and external market expectations for the Group. Only modest rewards are available for achieving threshold performance
with maximum rewards requiring substantial out-performance of challenging strategic plans approved at the start of each year.

Discretion
The Committee operates annual bonus and long-term incentive arrangements for the Executive Director(s) in accordance with their respective rules,
the Listing Rules and the HMRC rules where relevant. The Committee, consistent with market practice, retains discretion over a number of areas
relating to the operation and administration of the plans. These include the following:

– Who participates;
– The timing of the grant of award and/or payment;
– The size of an award (up to plan limits) and/or a payment;
– The annual review of performance measures, targets and weightings for the annual bonus plan and LTIP from year to year;
– Discretion relating to the measurement of performance in the event of a change of control or restructuring;
– Determination of a good leaver (in addition to any specified categories) for incentive plan purposes;
– Adjustments required in certain circumstances (e.g. rights issues, corporate restructuring and special dividends); and
– The ability to adjust existing performance conditions for exceptional events so that they can still fulfil their original purpose.

awards granted prior to approval of policy
For the avoidance of doubt, in approving this Directors’ Remuneration Policy, authority is given to the Company to honour any commitments entered
into with current or former Directors (such as the vesting or exercise of past share awards granted pre- or post-IPO but before the AGM at which this
policy is approved by shareholders).

Remuneration scenarios for the ceO
The chart below shows an estimate of the potential future remuneration payable for the CEO in 2015 at different levels of performance. The chart
highlights that the performance-related elements of the package comprise a significant portion of the CEO’s total remuneration at on-target and
maximum performance.

Chief Executive
US$’000

$2,000

$1,500

$1,000

$500

$675
100%

$1,159

23%

19%

58%

$1,995

44%

22%

34%

Minimum

On-Target

Maximum

Fixed Pay

Annual Bonus

LTIP

GULF MARINE SERVICES PLC Annual Report 2014Governance1. Duncan Anderson’s remuneration is paid in UAE Dirhams and shown above in US$ using an exchange rate of US$1/AED3.67.
2. Minimum remuneration represents base salary and allowance levels applying as at 1 January 2015. It also includes benefits and end of service gratuity.
3. The value of benefits is based on the cost of supplying those benefits (as disclosed in the Annual Report on Remuneration on page 57) for the year ended

31 December 2014.

4. The end of service gratuity is based on the provision accrued (as disclosed in the Annual Report on Remuneration on page 57) for the year ended 31 December 2014

in line with the UAE Labour Law limit.

5. Minimum performance assumes no award is earned under the annual bonus plan and no vesting is achieved under the LTIP; at on-target, half of the annual bonus

is earned (i.e. 50% of salary) and 30% of maximum is achieved under the LTIP (i.e. 60% of salary); and at maximum full vesting under both plans.

6. Share price movement and dividend accrual have been excluded from the above analysis.

How remuneration of executive Directors differs from employees generally,
and how their views are taken into account in setting remuneration policy
When considering the structure and levels of Executive Director remuneration, the Committee reviews base compensation and annual bonus
arrangements for the management team, to ensure that there is a coherent approach across the Group. The annual bonus plan operates on a similar
basis across the senior management team. The key difference in the Executive Director policy is that remuneration is more heavily weighted towards
variable pay than that of other employees. This ensures that there is a clear link between the value created for shareholders and the remuneration
received by the executive directors.

The Committee does not formally consult with employees in respect of the design of the Executive Director remuneration policy, however the
Human Resources Director is available to discuss issues relating to the wider employee population.

consideration of shareholder views
The Company is committed to maintaining good communications with investors. The Committee considers the AGM to be an opportunity to meet
and communicate with investors, giving shareholders the opportunity to raise any issues or concerns they may have. In addition, the Committee will
seek to engage directly with major shareholders and their representative bodies should any changes be planned to the Directors’ Remuneration
Policy or if the Committee wishes to make material changes to how Policy will be implemented.

Following the Company’s first AGM in 2015, details of votes cast for and against the resolutions to approve the Directors' Remuneration Policy
and Annual Report on Remuneration will be included in the next Annual Report on Remuneration published following the AGM.

The Company is required to prepare, and seek shareholder approval for an updated Directors' Remuneration Policy at least once every three years.

Directors’ recruitment and promotions
The policy on the recruitment or promotion of an Executive Director takes into account the need to attract, retain and motivate the best person for
each position, while at the same time ensuring a close alignment between the interests of shareholders and management, as follows.

Base salary

The base salary for a new appointment will be set taking into account the skills and experience of the individual, internal relativities and the
market rate for the role as identified by any relevant benchmarking of companies of a comparable size and complexity.

If it is considered appropriate to set the salary for a new Executive Director at a level which is below market (for example, to allow them to gain
experience in the role) their salary may be increased to achieve the desired market positioning by way of a series of phased above inflation
increases. Any increases will be subject to the individual’s continued development in the role.

End of service
gratuity, benefits
and allowances

End of service gratuity, benefits and allowances will be set in line with the policy above, reflective of typical market practice and the Labour
Law for the UAE region. The Committee may also approve the payment of one-off relocation-related expenses and legal fees incurred by
the individual.

In the event of an Executive Director being recruited to work outside the UAE region, additional benefits, pension provision and/or allowances
may be provided in line with local market practice.

Annual bonus and
LTIP

The Company’s incentive plans will be operated, as set out in the policy table above, albeit with any payment pro-rata for the period of
employment and with the flexibility to use different performance measures and targets, depending on the timing and nature of the appointment.

Remuneration
foregone

The Committee may offer cash and/or share-based elements to compensate an individual for remuneration and benefits that would be
forfeited on leaving a former employer, when it considers these to be in the best interests of the Group (and therefore shareholders).

Such payments would take account of remuneration relinquished and would mirror (as far as possible) the delivery mechanism, time horizons
and performance requirement attached to that remuneration.

Where possible this will be facilitated through existing share plans as set out in the policy table above, but if not the Committee may use the
provisions of 9.4.2 of the Listing Rules.

Internal
appointments

In the case of an internal appointment, any variable pay element awarded in respect of the prior role will be allowed to pay out according to its
original terms stipulated on grant or adjusted as considered desirable to reflect the new role.

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GULF MARINE SERVICES PLC Annual Report 2014INTRODUCTIONSTRATEGIC REPORT PERFORMANCEGOVERNANCEADDITIONAL INFORMATION
REPORT OF THE REMUNERATION COMMITTEE
Continued

Directors’ service agreements and payments for loss of office
The Committee seeks to ensure that contractual terms of the executive Director’s service agreement reflect best practice.

Notice period

The CEO’s service agreement is terminable by either the Company or the executive on twelve months’ notice. In circumstances of termination
on notice the Committee will determine an equitable compensation package, having regard to the particular circumstances of the case.
The Committee has discretion to require notice to be worked, to make payment in lieu of notice or to place the Director on gardening leave.

Payment in lieu
of notice

Annual bonus

LTIP

The Company may terminate the appointment summarily with immediate effect if the Director is guilty of gross misconduct in accordance
with relevant provisions of the UAE labour law.

In case of payment in lieu, base salary, allowances, benefits and end of service gratuity will be paid for the period of notice served or paid in lieu.

If the Committee believes it would be in shareholders’ interests, payments would be made either as one lump sum or in equal monthly
instalments and in the case of payment in lieu will be subject to be offset against earnings elsewhere.

An annual bonus may be payable in respect of the period of the bonus plan year worked by the director; there is no provision for an amount
in lieu of bonus to be payable for any part of the notice period not worked.

Outstanding share awards under the LTIP are subject to the rules which contain discretionary provisions setting out the treatment of awards
where a participant leaves for designated reasons (i.e. participants who leave early on account of injury, disability or ill health, death, a sale of their
employer or business in which they were employed, statutory redundancy, retirement or any other reason at the discretion of the Committee).

In these circumstances a participant’s awards will not be forfeited on cessation of employment and instead will continue to vest on the normal
vesting date or earlier at the discretion of the Committee, subject to the performance conditions attached to the relevant awards. The awards
will, other than in exceptional circumstances, be scaled back pro-rata for the period of the incentive term worked by the director.

Other payments

Change of control

In addition to the above payments, the Committee may make any other payments determined by a court of law in respect of the termination
of a director’s contract.

In the event of a change of a control all unvested awards under the LTIP would vest, to the extent that any performance conditions attached
to the relevant awards have been achieved.

The date of the CEO’s Executive Service Agreement is 12 March 2014.

The service contract is available for inspection during normal business hours at the Company’s registered office, and available for inspection
at the AGM.

external appointments
The Committee recognises that Executive Directors may be invited to become non-executive Directors in other companies and that these
appointments can enhance their knowledge and experience to the benefit of the Group. It is policy that Board approval is required before any external
appointment may be accepted by an Executive Director. The Executive Director is permitted to retain any fees paid for such services. The current
Executive Director does not hold any such external appointment.

non-executive Directors’ remuneration policy and terms of engagement
The following table sets out the components of the non-executive Directors' remuneration package.

element of pay
Non-executive
Directors’ fee

Purpose and link to strategy

Operation

maximum opportunity

Performance criteria

– Set to attract, retain and motivate
talented individuals through the
provision of market competitive fees

– Reviewed periodically by the Board
or, if appropriate, in the event of a
change in an individual’s position
or responsibilities

– Fee levels set by reference to

market rates, taking into account
the individual’s experience,
responsibility, time commitments

– There is no prescribed maximum

N/A

annual increase

– The Board takes into account
external market practice, pay
increases within the Group,
wider economic factors and any
changes in responsibilities when
determining fee increases

Non-executive
Directors’ benefits

– Travel to the Company’s

– Costs of travel, grossed-up

N/A

registered office

registered office may in some
jurisdictions be recognised
as a taxable benefit

where taxable

GULF MARINE SERVICES PLC Annual Report 2014GovernanceNon-executive Directors are appointed by letter of appointment for an initial period of three years, which are terminable by three months’ notice on
either side. However, it is the Company’s intention to comply with provision B.7.1 of the UK Corporate Governance Code and accordingly all Directors
will stand for annual re-election by shareholders at future AGMs until the Board determines otherwise. The dates of the letters of appointment of the
Chairman and non-executive Directors are:

Simon Heale

H. Richard Dallas

Dr Karim El Solh

Simon Batey

Mike Straughen

W. Richard Anderson

Chairman

Non-executive Director

Independent non-executive Director

27 February 2014

The letters of appointment are available for inspection during normal business hours at the Company’s registered office. For the appointment
of a new Chairman or non-executive Director, the fee arrangement would be set in accordance with the approved remuneration policy in force
at that time.

annual Report on Remuneration
This part of the report has been prepared in accordance with Part 4 of The Large and Medium-sized Companies and Groups (Accounts and Reports)
(Amendment) Regulations 2013 and 9.8.6R of the Listing Rules. The Annual Report on Remuneration will be put to an advisory shareholder vote at the
2015 AGM. Sections of this report that are subject to audit, on pages 57 to 59 have been indicated.

Responsibilities of the committee
The Remuneration Committee will assist the Board in fulfilling its responsibilities regarding all matters related to remuneration, including making
recommendations to the Board on the Company’s policy on executive remuneration, including setting the over-arching principles, parameters and
governance framework of the Group’s remuneration policy and determining the individual remuneration and benefits package of the Executive
Director(s) and the Company Secretary. In addition, the Committee monitors the structure and level of remuneration for the senior management team
and is aware of pay and conditions in the workforce generally. The Committee also ensures full compliance with the UK Corporate Governance Code
in relation to remuneration.

members and activities of the committee
The members of the Committee during 2014 were W. Richard Anderson (chair), Simon Batey and Mike Straughen. All members were Independent
non-executive Directors. The Chief Executive Officer, Chief Financial Officer and Human Resources Director are normally invited to attend for at
least part of each meeting to allow the Committee to benefit from their contextual advice. The Group Chairman also normally attends meetings by
invitation. The Company Secretary acts as Secretary to the Committee. These individuals are not present when their own remuneration is discussed.

The number of formal meetings held and the attendance by each member is shown in the table below. The Committee also held informal discussions
as required.

W. Richard Anderson

Simon Batey

Mike Straughen

number of meetings attended out of a potential maximum
3 out of 3

3 out of 3

external advice received
During the year, the Committee received independent advice on remuneration matters from Mercer Limited (“Mercer”).

Mercer is a member of the Remuneration Consultants Group and adheres to the Voluntary Code of Conduct in relation to executive remuneration
consulting in the UK. The fees paid to Mercer for advice from the date of listing total US$ 63,056. Mercer also provided support to the Company and
the Committee prior to and in preparation for listing. Mercer is a division of Marsh & McLennan Companies, Inc. (“MMC”). Another division of MMC
provides broker services with regard to the Group medical insurance. However, notwithstanding this relationship, the Committee is satisfied that
Mercer’s advice to the Committee is objective and independent, as they are two distinct autonomous business divisions within MMC.

Shareholder voting at aGm
The 2014 Annual Report on Renumeration will be the first such report published by the Company.

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GULF MARINE SERVICES PLC Annual Report 2014INTRODUCTIONSTRATEGIC REPORT PERFORMANCEGOVERNANCEADDITIONAL INFORMATION
REPORT OF THE REMUNERATION COMMITTEE
Continued

implementation of the Remuneration Policy for 2015
Base salary
The CEO's base compensation was reviewed on listing and also at the end of 2014 to determine the appropriate salary for the coming year. As a point
of comparison, increases to salary levels for the workforce generally during 2014 averaged 5%. Accordingly, base salary for 2015 will be as follows:

Duncan Anderson1

Base salary
from 1 January
2015
US$ ’000

Base
salary from
1 January 2014
US$ ’000

% increase

440

415

1. Duncan Anderson’s remuneration is paid in UAE Dirhams and reported in US$ using an exchange rate of US$ 1/AED 3.67.

allowances and benefits for 2015
The cash allowances for 2015 comprise payments to cover costs of air travel and transport and for 2015 will be as follows:

Duncan Anderson1

allowances
from 1 January
2015
US$’000

allowances
from 1 January
2014
US$’000

% increase

1. Duncan Anderson’s remuneration is paid in UAE Dirhams and reported in US$ using an exchange rate of US$1/AED3.67.

Other benefits to be provided directly include accommodation, private medical insurance for the executive and close family, death in service
insurance, disability insurance and payment of children’s school fees.

annual bonus for 2015
For 2015 the annual bonus opportunity will be 100% of base salary. The annual bonus will be assessed against financial and personal objectives
to provide a rounded assessment of the Group and individual’s performance, weighted as follows:

measure
Profit after tax
EBITDA margin
Total Reportable Incident Rate (TRIR)
Strategic and operational objectives

Total

Weighting

25%
25%
10%
40%

100%

The Committee considers the targets to be commercially sensitive, but will provide details of performance against the financial targets
retrospectively in next year’s Annual Report on Remuneration.

The bonus will be paid wholly in cash. Clawback provisions apply in the event of a material misstatement of the Group’s financial results or an error
in the calculation of performance targets. Clawback can be applied for three years from the end of the financial year to which a payment relates.

long-term incentive to be granted in 2015
The Committee intends to grant an LTIP award to the CEO in 2015 over shares with a value of 150% of base salary. The award will vest three years
after grant, subject to performance measured over three financial years commencing with the year of grant. Vesting of 75% of the award will be
based on the compound annual growth rate (CAGR) of EPS and the remaining 25% will be determined by TSR relative to the FTSE 250 Index excluding
financial services companies.

EPS and relative TSR are considered to be the most appropriate measures of long-term performance, as they incentivise and reward for improvement
in the long-term financial performance of the Group, together with the creation of value for shareholders.

Clawback provisions apply in the event of a material misstatement of the Group’s financial results or an error in the calculation of performance
targets. Clawback can be applied for three years from the end of the financial year in which an award vests.

Performance condition

EPS CAGR

Relative TSR

threshold target
(30% vesting)

20% per annum

Median of index

Stretch target
(100% vesting)

26.5% per annum

Upper quartile of index

end of service gratuity
As required under the UAE Labour Law, the Company accrues for the end of service gratuity entitlement in respect of the CEO, whereby the gratuity
is 21 days’ base salary (excluding fixed cash allowances) for each year of the first five years of employment and 30 days’ wages for each additional year
of employment thereafter, to a limit of two years’ total wages.

GULF MARINE SERVICES PLC Annual Report 2014Governance
Fees for the chairman and non-executive Directors
The Chairman and non-executive Directors' remuneration is determined by the Board, based on the responsibility and time committed to the Group's
affairs and appropriate market comparisons. Individual non-executive Directors do not take part in discussions regarding their own fees. The Chairman
and non-executive Directors receive no other benefits and do not participate in short-term or long-term reward schemes. A summary of the current
fees and those for 2015 are set out below; no increase in fee levels is proposed in 2015. Please note that fees are determined in Pound Sterling.

Chairman
Non-executive Director base fee
Additional fees:
Senior Independent Director
Audit and Risk Committee Chair

Remuneration Committee Chair

annual Fee
2015
£000

annual Fee
2014
£000 % increase

175
50

5
5

175
50

5
5

0%
0%

Directors’ remuneration earned in 2014 (audited)
The table below summarises Directors’ remuneration received in 2014.

Fixed element of pay

Pay for performance

Base salary
US$’000

allowances and
benefits1
US$’000

end of service
gratuity2
US$’000

annual
Bonus
US$’000

long term
incentives
US$’000

Other3
US$’000

total
Remuneration
US$’000

Executive Director
Duncan Anderson4,5

2014

2013

415

366

182

175

353

238

–

1,003

826

Chairman6
Simon Heale7,9

Non-executive Directors6
H. Richard Dallas8

Dr Karim El Solh8

Simon Batey8,10

Mike Straughen8,10

W. Richard Anderson8,10

Non-executive Director total

Fees
US$’000

292
–

76
–

92
–

76
–

84
–

696

–

2014
2013

2014

2013

total
Remuneration
US$’000

292
–

76
–

92
–

696

–

1. Allowances include fixed cash allowances for air travel and transport. Other benefits include accommodation (US$ 82,947), private medical insurance for the

executive and close family, death in service insurance, disability insurance and payment of children’s school fees.

2. End of service gratuity is the provision accrued for the year.
3. During the year, Duncan Anderson received a cash and equity award of US$ 11.8 million as settlement of a previous share appreciation rights scheme. This was funded

by the shareholders in place prior to the IPO at no cost to the company.

4. Duncan Anderson’s remuneration is paid in UAE Dirhams and reported in US$ using an exchange rate of US$1/AED 3.67.
5. Duncan Anderson was appointed as a Director of the Company on 24 January 2014.
6. The Chairman and non-executive Directors’ remuneration is paid in Pound Sterling and reported in US$ using an exchange rate of US$ 1.67/£1.
7. Simon Heale was appointed as Chairman on 27 February 2014.
8. H. Richard Dallas, Dr Karim El Solh, Simon Batey, Mike Straughen and W. Richard Anderson were appointed as non-executive Directors on 27 February 2014.
9. Simon Heale received a pro-rata annual fee of £175,000 (per annum) from 1 January 2014 to the date of his appointment (27 February 2014) in consideration of

advisory work performed prior to his formal appointment as Chairman.

10. The Independent non-executive Directors received a pro-rata equivalent of their basic annual fee of £50,000 per annum for the period from 1 February 2014 to the date
of their appointment (27 February 2014) in consideration of advisory work performed prior to their formal appointments as Independent Non-Executive Directors.

Christopher Foll was appointed as an Alternate Director on 27 February 2014; he receives no remuneration for this appointment.

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GULF MARINE SERVICES PLC Annual Report 2014INTRODUCTIONSTRATEGIC REPORT PERFORMANCEGOVERNANCEADDITIONAL INFORMATION

REPORT OF THE REMUNERATION COMMITTEE
Continued

annual bonus for 2014 (audited)
For 2014 the annual bonus opportunity was set at 100% of base salary. The annual bonus will be assessed against financial and personal objectives to
provide a rounded assessment of the Group and individual’s performance.

measure
Profit after tax
EBITDA margin
Lost Time Injuries (LTI)
Strategic and operational objectives

Total

Performance range
(from zero to maximum
pay-out)

Weighting

25% US$ 76m – US$ 81m
64% – 69%
25%
2 – 1
10%
**
40%

100%

Result

US$ 81m
64%
0
**

% of salary paid
in cash

25
10
10
40

** Objectives set related to key operational and strategic objectives, with targets for each aligned with delivery of the Company’s annual corporate objectives and

long-term financial plan. Details of these measures are considered commercially sensitive and it is not intended that they will be disclosed.

The bonus will be paid wholly in cash. Clawback provisions apply in the event of a material misstatement of the Company’s financial results or an error
in the calculation of performance targets. Clawback can be applied for three years from the end of the financial year to which a payment relates.

Share appreciation rights settlement (audited)
During the year 2014, the CEO’s vested share appreciation rights, from a previous share appreciation rights scheme, were settled as follows:

Cash payout

Number of shares issued

Settlement of vested SaRs

US$ 5,857,657

2,614,622 shares (Market Value as on the grant date US$ 5,894,665)1

1. Calculated as 2,614,622 shares at the IPO price of £1.35, converted at an exchange rate of £1:US$ 1.67.

long-term incentive awards granted during the year and Directors’ interests in share plan awards (audited)
The Committee granted an LTIP award to the CEO in May 2014 over shares with a value of 120% of base salary. Awards will vest, subject to the
achievement of specific performance conditions and continued employment, in May 2017.

Date of grant

number of
shares

Face value1

Face value as a
percentage of
salary

end of
performance
period

Performance
conditions

Duncan Anderson

8 May 2014

184,327 US$ 497,863

120%

31 December
2016

See table
below

1. Award face value (and value as a percentage of salary) is calculated using the closing share price on 8 May 2014, being 161.75p per share and assumes all performance

conditions are met in full. The number of shares has been calculated using an exchange rate of £1: US$ 1.67. The minimum award available is nil.

Performance
condition
EPS CAGR

Relative TSR

Weighting
50%

50%

1. FTSE 250 excluding financial services companies.

threshold target
(30% vesting)
15% per annum

Median of index1

Stretch target
(100% vesting)
21.5% per annum

Upper quartile of index1

Awards outstanding under the Company’s LTIP comprise:

Grant date
8 May 2014

no. of shares
at listing
(14/03/14)

–

Granted
during the year

Vested during
the year

exercised
during the year

lapsed during
the year

no. of shares
31/12/14

184,327

–

184,327

end of
performance
period

Vesting date

31/12/16

8/5/17

GULF MARINE SERVICES PLC Annual Report 2014Governance
Directors’ interests in ordinary shares (audited)
Through participation in performance-linked share-based plans, there is strong encouragement for executive Directors to build and maintain
a significant shareholding in the business.

As set out in the Directors' Remuneration Policy, the Committee requires any executive Director to build and maintain a shareholding in the Company
equivalent to 100% of base salary. Until this threshold is achieved they are required to retain no less than 50% of the net of tax value of any share
award that vests. The Chairman and non-executive Directors are encouraged to hold shares in the Company but are not subject to a formal
shareholding guideline. A new appointment will be expected to reach this guideline in three to five years post-appointment.

The beneficial interests of the Directors and connected persons in the share capital of the Company at 31 December 2014 was as follows:

Duncan Anderson
Simon Heale
H. Richard Dallas
Dr Karim El Solh
Simon Batey
Mike Straughen

W. Richard Anderson

Beneficially
owned at
31 Dec 2014

Beneficially
owned at
19 march 2014

Shareholding
requirement
met?

Outstanding
ltiP awards

2,614,622
74,074
18,518
296,296
37,037
37,037

153,453

Yes
N/A
N/A
N/A
N/A
N/A

N/A

184,327
–
–
–
–
–

–

1. There were no changes to the interests of the Directors in the ordinary shares of the Company in the period from 1 January 2015 to 13 March 2015.
2. Full details of the Directors’ shareholdings and share allocations are given in the Company’s Register of Directors’ Interests, which is open to inspection at the

Company’s registered office during business hours.

3. There are no other share, share option schemes or outstanding share awards other than LTIP awards.
4. 2,614,622 restricted shares awarded at IPO in settlement of outstanding share appreciation rights. These shares are fully vested and are subject to a lock-in until

the second anniversary of the IPO.

5. 19 March 2014 – Admission to trading on London Stock Exchange.

Directors’ pension entitlement (audited)
The Company does not operate a pension scheme and accordingly no element of remuneration is pensionable.

Payments to former directors (audited)
No payments were made to past executive Directors during the year ended 31 December 2014.

Payments for loss of office (audited)
No payments were made in respect of loss of office during the year ended 31 December 2014.

Percentage change in remuneration levels
The table below shows base salary, allowances and benefits, and annual bonus for the CEO in the 2014 financial year, compared to that for the
average employees:

Chief Executive Officer
Base salary
Allowances and benefits
Bonus

All employees
Base salary
Allowances and benefits

Bonus

% change

13%
4%
48%

5%
5%

48%

Relative importance of the spend on pay
The table below shows overall expenditure on pay in the whole Group in 2013 and 2014 financial years, compared to returns to shareholders
through dividends:

Overall expenditure on pay

Dividends proposed

2014
US$’000

32,879

8,131

2013
US$’000

22,795

N/A1

% change

44 %

N/A

1. The Company was admitted to trading on the London Stock Exchange on 19 March 2014 and returns to shareholders prior to admission have been excluded.

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GULF MARINE SERVICES PLC Annual Report 2014INTRODUCTIONSTRATEGIC REPORT PERFORMANCEGOVERNANCEADDITIONAL INFORMATION
REPORT OF THE REMUNERATION COMMITTEE
Continued

total Shareholder Return
This graph below shows the value, by 31 December 2014, of £100 invested in Gulf Marine Services PLC on 14 March 2014 (being the date that shares were first admitted
to conditional trading) compared with the value of £100 invested in the FTSE 250 Index excluding investment trusts over the same period.

)
d
e
s
a
b
e
R
(
n
r
u
t
e
R
r
e
d
o
h
e
r
a
h
S

a
t
o
T

140

120

100

Friday, 14 March 14

Wednesday, 31 December 14

Gulf Marine Services PLC
FTSE 250 Index excluding investment trusts

Source: Datastream (Thomson Reuters)

The total remuneration figures for the CEO during the 2014 financial year are shown in the table below. Consistent with the calculation methodology
for the single figure for total remuneration, the total remuneration figure includes the total annual bonus award based on that year’s performance
and the LTIP award based on the three-year performance period ending in the relevant year. The annual bonus payout and LTIP award vesting level
as a percentage of the maximum opportunity are also shown for this year.

Chief Executive Officer
Total Remuneration (US$'000)
Annual bonus %

LTIP vesting %

Year ending 31 December

2014

2013

2012

Duncan
Anderson
1,003
35%

Duncan
Anderson
826
29%

Duncan
Anderson
437
46%

–

approval of the Directors’ Remuneration Report
The Directors’ Remuneration Report, including both the Directors’ Remuneration Policy and the Annual Report on Remuneration, was approved by
the Board on 23 March 2015 for presentation to shareholders at the AGM.

W. Richard Anderson
Remuneration Committee Chairman
23 March 2015

GULF MARINE SERVICES PLC Annual Report 2014Governance

REPORT OF THE NOMINATION COMMITTEE

Simon Heale
Nomination Committee Chairman

I am pleased to present the Nomination Committee report for 2014.
The Nomination Committee was established in its current form as part
of the governance framework adopted by the Company on its admission
to the London Stock Exchange. The Code provides that independent
non-executive Directors should comprise the majority of the Committee.
The Committee members during the year were as follows:

All of the Company’s Directors will stand for election at the 2015
Annual General Meeting (“AGM”) as it is the first AGM since their
appointments. The biographical details of the current Directors can
be found on pages 42 to 43. In accordance with the recommendation
for FTSE 350 companies set out in the Code, all of the Directors of
the Company will be subject to annual re-election at future AGMs.

Chairman
Simon Heale

The terms and conditions of appointment of non-executive Directors,
which includes their expected time commitment, are available for
inspection at the Company’s registered office.

Senior independent Director
Simon Batey

Independent non-executive Directors
W. Richard Anderson, Mike Straughen

All members of the Board are male. The Group has one female member
of the senior management team and two female managers. The Operating
with Integrity section on pages 32 to 36 of the report explains the
Group’s approach to diversity.

Simon Heale
Nomination Committee Chairman
23 March 2015

Non-executive Director
Karim El Solh

the responsibilities and role of the
nomination committee
The Nomination Committee’s responsibilities include:

– regularly reviewing the structure, size and composition of the Board
taking into consideration the skills, knowledge and diversity required
of the Board compared to its current position;

– reviewing and recommending succession plans for Directors and

other senior executives;

– identifying and nominating for the approval of the Board, candidates

to fill Board vacancies as and when they arise;

– establishing, monitoring and reviewing the Directors’ induction and

ongoing development programme; and

– reviewing annually the composition of the Board.

Objectives for 2014 and developments
Given the recent appointment of the Directors of the Company and the
rigorous selection process undertaken by the Company and assisted by
Spencer Stuart, we did not consider it necessary to meet between listing
and the year end.

Since the year end, the Committee has met to assess the results of the
Board evaluation process. In light of the findings, we have concluded
that the performance of each of the Directors standing for re-election
continues to be effective and demonstrates commitment to their roles,
including commitment of time for Board and Committee meetings and
any other duties.

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GULF MARINE SERVICES PLC Annual Report 2014INTRODUCTIONSTRATEGIC REPORT PERFORMANCEGOVERNANCEADDITIONAL INFORMATION
compensation for loss of office
The Company does not have agreements with any Director that would
provide compensation for loss of office or employment resulting from a
takeover, except that provisions of the Company’s share plans may cause
options and awards granted under such plans to vest on a takeover.

Share capital and control
Details of the Company’s issued share capital as at 31 December 2014
can be found in note 14 to the consolidated financial statements,
on page 91. The Company’s share capital comprises ordinary shares,
which are listed on the London Stock Exchange.

Ordinary shares
Holders of ordinary shares are entitled to receive dividends (when declared
by the Board or approved by members), receive copies of the Company’s
Annual Report, attend and speak at general meetings of the Company,
appoint proxies and exercise voting rights.

There are no restrictions on the transfer, or limitations on the holding,
of ordinary shares and no requirements to obtain approval prior to
any transfers. No ordinary shares carry any special rights with regard
to control of the company and there are no restrictions on voting
rights. Major shareholders have the same voting rights per share as
all other shareholders.

There are no known arrangements under which financial rights are held
by a person other than the holder of the shares and no known agreements
on restrictions on share transfers or on voting rights.

Shares acquired through our share schemes and plans rank equally with
the other shares in issue and have no special rights.

authority to purchase the company’s own shares
The Company did not acquire any of its own shares in the financial year
to 31 December 2014 or in the period between the year end and the date
of this report.

The Company is due to have its first AGM on 6 May 2015 and the
Directors will be seeking approval from shareholders, to authorise the
Company to purchase up to 10% of its existing ordinary share capital.
This authority would expire at the Company’s 2016 AGM; however, it is
intended that this authority be renewed each year. For more information
on this resolution refer to the Notice of AGM and explanatory notes on
pages 116 to 121.

DIRECTORS’ REPORT

The Directors of Gulf Marine Services PLC present their Annual Report
and audited financial statements of the Company and the Group for the
year ended 31 December 2014.

This Directors’ Report, prepared in accordance with the requirements
of the Companies Act 2006, the UK Listing Authority’s Listing Rules, and
Disclosure and Transparency Rules, contains certain statutory, regulatory
and other information.

Strategic Report
Details of the Group’s strategy and business model during the year and the
information that fulfils the requirements of the Strategic Report required
by sections 414A to D of the UK Companies Act 2006 can be found in the
Strategic Report section on pages 8 to 23 of this document, which forms
part of this report by reference.

corporate Governance
The Company’s Corporate Governance Statement is set out on pages 40
to 61 and forms part of this report by reference.

Directors
A list of the Directors who served during the period and their biographies
can be found in the Corporate Governance Report on pages 42 to 43.

In addition, Andrew Robertson, a member of the senior management
team, was appointed as Director as part of the pre-IPO process on
21 January 2014 and resigned on 27 February 2014. Christopher Foll was
appointed as an alternate Director for H. Richard Dallas and Dr. Karim El
Solh on 27 February 2014. The Articles of Association of the Company
permits any Director to appoint any person to be their alternate and each
Director may at their discretion remove an alternate Director so appointed.

Powers of Directors
Our Directors’ powers are determined by UK legislation and our Articles
of Association (the ‘Articles’), which are available on our website at
www.gmsuae.com. The Articles may be amended by a special resolution
of the members. The Directors may exercise all of the Company’s powers
provided that the Articles or applicable legislation do not stipulate that
any such powers must be exercised by the members (shareholders).

appointment and replacement of Directors
The rules about the appointment and replacement of Directors are
contained in our Articles. They provide that Directors may be appointed
by ordinary resolution of the members or by a resolution of the Directors.
Directors must retire and put themselves forward for election at their
first Annual General Meeting ("AGM") following their appointment. Since
the Company is holding its first AGM on 6 May 2015, every Director will
be retiring and seeking election at this meeting.

Directors wishing to continue to serve will seek re-election annually in
accordance with provision B.7.1 of the UK Corporate Governance Code.
Members may remove a Director by passing an ordinary resolution of
which special notice has been given, in accordance with the Companies
Act 2006.

amendments to the articles of association
The Company may alter its Articles of Association by special resolution
passed at a General Meeting of shareholders.

indemnification of Directors
The Company has provided indemnification for Directors in accordance
with the Company’s Articles and the Companies Act 2006. As far as is
permitted by legislation, all Officers of the Company are indemnified out
of the Company’s own funds against any liabilities and associated costs
which they could incur in the course of their duties for the Company,
other than any liability to the Company or an associated company.

GULF MARINE SERVICES PLC Annual Report 2014GovernanceSubstantial shareholders
The Directors are aware of the following substantial interests in the
shares of the Company:

Significant direct/indirect
interest
Green Investment
Commercial Investments
Horizon Energy
Al Ain Capital
Schroder Investment
Management
Abu Dhabi Islamic Bank
Aberforth Partners

as at 31 December 2014
number of shares

as at 31 December 2014
% Voting Rights

as at 13 march 2015
number of shares

as at 13 march 2015
% Voting Rights

174,945,676
21,136,703
21,136,703

16,054,272
10,654,958
8,544,000

50.05
6.05
6.05

4.59
3.05
2.44

174,945,676
21,136,703
21,136,703

15,929,877
10,401,958
11,564,892

50.05
6.05
6.05

4.56
2.98
3.31

Director and Senior manager lock-Up arrangements
As noted on pages 197 and 198 of the Company’s prospectus dated
14 March 2014, the Directors and senior management of the Company
entered into broad lock up undertakings that, subject to certain
exceptions, prevented those individuals from selling, transferring or
otherwise disposing of their shareholdings in the Company for a period
of 360 days from admission of the Company to listing. One of the
main exceptions to these lock-up arrangements is the acceptance of
a general offer made to all shareholders of the Company under the
United Kingdom City Code on Takeovers and Mergers. Related to this,
the lock-up arrangements also do not apply to the execution and delivery
by a relevant Director or senior manager of an irrevocable undertaking
or commitment to accept such an offer.

Share incentive Schemes
All of the Company’s share-based employee incentive plans detailed
in the Report of the Remuneration Committee on pages 50 to 60 contain
provisions relating to a change of control of the Company. Vesting of
outstanding awards and options on a change of control would normally
be at the discretion of the Remuneration Committee, who would take
into account the satisfaction of any applicable performance conditions at
that time and the expired duration of the relevant performance period.

executive Service contracts
The service contracts for the Company’s executive Directors and senior
management include provisions applicable to a change of control in the
Company. Further details of these service contracts are described in the
Directors’ Remuneration Report.

Operational contracts
The Group is party to a limited number of operational arrangements that
have the potential to be terminated or altered on a change of control of
the Company, but these are not considered to be individually significant
to the business of the Group as a whole.

Significant agreements
As at 31 December 2014 the Company was party to the following
significant agreements that take effect, alter or terminate, or have
the potential to do so, on a change of control of the Company:

Relationship agreement
The Relationship Agreement dated 14 March 2014 amongst Green
Investment Commercial Investments LLC (GICI), Ocean Investments
Trading LLC (Ocean), Horizon Energy LLC (Horizon), Al Ain Capital LLC
(Al Ain) and the Company provides that it shall terminate on there ceasing
to be a “Principal Shareholder” holding at least 10% of the issued share
capital of the Company or shares carrying at least 10% of the aggregate
voting rights in the Company from time to time. In this context a “Principal
Shareholder” is any of (a) GICI and Ocean together, (b) Horizon and (c)
Al Ain.

The relevant Principal Shareholder shall be entitled to appoint one
Director to the Board, and for so long as a Principal Shareholder Group
holds 15% or more of the issued ordinary share capital of the Company,
the relevant Principal Shareholder shall be entitled to appoint two
Directors to the Board. The appointees are H. Richard Dallas and
Dr. Karim El Solh. The Company has further agreed that, subject to the
Gulf Capital Shareholders (comprising Green Investment Commercial
Investments LLC, and Ocean Investments Trading LLC, both beneficially
owned by GC Equity Partners Fund II, L.P.), having the requisite aggregate
shareholding to appoint a Director as described above, (i) Christopher Foll
shall be given notice of, be invited to, and have the right to attend
meetings of the Board as an observer, but shall not be entitled to vote,
and (ii) H. Richard Dallas shall be given notice of, be invited to, and have
the right to attend meetings of the Remuneration Committee as an
observer, but shall not be entitled to vote.

The Relationship Agreement has not been amended since adoption and
is in compliance with the recently amended Listing Rules.

initial Supplemental Purchase Undertaking
The initial supplemental purchase undertaking made on 5 June 2013 by
Gulf Marine Middle East FZE (GMME), a member of the Group, to and for
the benefit of Abu Dhabi Islamic Bank PJSC (ADIB) provides that, in the
event of a person or persons acting in concert acquiring control of the
Company, ADIB shall be entitled to serve a notice on GMME exercising
its option to sell to GMME assets currently leased by GMME from ADIB
under related finance lease arrangements described in more detail on
pages 139 and 140 of the Company’s prospectus dated 14 March 2014.
If ADIB serves such a notice following a change of control of the
Company, GMME is obliged to purchase the leased assets in their then
current condition on an “as is where is” basis at a price determined by
a detailed formula set out in the undertaking.

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GULF MARINE SERVICES PLC Annual Report 2014INTRODUCTIONSTRATEGIC REPORT PERFORMANCEGOVERNANCEADDITIONAL INFORMATION
Dividends
The Board has adopted a dividend policy which will look to maximise
shareholder value and reflect its strong earnings potential and cash
flow characteristics, while allowing it to retain sufficient capital to
fund ongoing operating requirements and to invest in the Company’s
long-term growth plans. The Company intends, subject to available
distributable profits and shareholder approval, to pay annual dividends
based on a targeted payout ratio of 10% of the Company’s consolidated
post-tax profit from its ongoing business. The Board may decide to
revise this policy if deemed appropriate.

The Board recommends a final dividend of 1.06 pence (1.64 cents) per
share in respect of the 2014 financial year. Shareholders will be asked to
approve the dividend at the Annual General Meeting on 6 May 2015, for
payment on 12 May 2015 to ordinary shareholders whose names are on
the register on 17 April 2015.

Going concern
The Group is expected to continue to generate positive operating cash
flows on its own account for the foreseeable future and has in place a
committed term loan facility of US$ 110.0 million, of which US$ 72.5 million
remained undrawn as at 23 March 2015. The Group also has access to
a committed working capital facility of US$ 40.0 million, of which only
US$ 20.0 million has been drawn to date.

On the basis of their assessment of the Group’s financial position,
and after reviewing its cash flow forecasts for a period of not less than
12 months from the date of approval of the Annual Report, the Group’s
Directors have a reasonable expectation that, taking into account
reasonably possible changes in trading performance, the Group will
be able to continue in operational existence for the foreseeable future.
Thus they have adopted the going concern basis of accounting in
preparing the consolidated financial statements.

More information on the going concern status of the Group can be
found in the going concern section of note 3 to the consolidated financial
statements on page 78 along with details of the Group's objectives and
policies for managing its capital, its financial risk management objectives,
details of its financial instruments and its exposure to credit and liquidity
risk in note 35 to the consolidated financial statements on pages 101 to 103.
The principal risks and uncertainties facing the Group are set out on
pages 21 to 23.

Statement on disclosure to the external auditor
So far as each Director is aware, there is no relevant information, which
would be needed by the Company’s external Auditor in connection with
preparing its audit report (which appears on pages 68 to 71) of which
the external Auditor is not aware; and each Director, in accordance with
section 418(2) of the Companies Act 2006, has taken all reasonable steps
that he ought to have taken as a Director to make himself aware of any
such information and to ensure that the external Auditor is aware of
such information.

John Brown
Company Secretary
on behalf of the Board of Directors
23 March 2015

DIRECTORS’ REPORT
Continued

Risk regarding the use of financial instruments
The Group’s financial risk management objectives and policies including
the use of financial instruments are set out in note 35 to the consolidated
financial statements on pages 101 to 103.

Post balance sheet events
The following events occurred after the balance sheet date:

(i) On 16 March 2015 the option to purchase the leased vessel Keloa
was exercised for US$ 37.5 million. The transaction was funded
by a US$ 37.5 million drawdown from the committed loan facility.
(ii) In January 2014, the Group entered into an arrangement to lease
a vessel (Pepper) commencing in 2015 for a five-year term with
an option to purchase the vessel at the end of the lease term.
This vessel commenced its inaugural client charter in March 2015
and is now on lease.

likely future developments
Information in respect of likely future developments in the business
of the Company can be found in the Strategic Report on pages 8 to 23
and forms part of this report by reference.

Research and development
The Group does not undertake any research and development activities.

Political donations
No political donations were made in 2014.

the existence of branches outside the UK
The Group has a branch in Qatar.

employees and policies
The Group operates an equal opportunities policy that aims to treat
individuals fairly and not to discriminate on the basis of sex, race, ethnic
origin or disability or on any other basis. Applications for employment are
fully considered on their merits, and employees are given appropriate
training and equal opportunities for career development and promotion.

The Group gives full consideration to applications for employment from
disabled persons where the requirements of the job can be adequately
fulfilled by a handicapped or disabled person. Where existing employees
become disabled, it is the Group’s policy wherever practicable to provide
continuing employment under normal terms and conditions and to
provide training and career development and promotion to disabled
employees wherever appropriate.

During the year, the policy of providing employees with information about
the Group and keeping them up to date on financial, economic and other
factors which affect the Group has been continued through internal
media methods. Employees have also been encouraged to present their
suggestions and views on the Group’s performance. Regular meetings
are held between local management and employees to allow a free flow
of information and ideas.

Health and safety
Information on health and safety is provided on pages 13, 19 and 33 and
forms part of this report by reference.

Greenhouse gas emissions
Information on the Group’s greenhouse gas emissions is set out in the
Operating with Integrity Report on pages 32 to 36 and forms part of this
report by reference.

GULF MARINE SERVICES PLC Annual Report 2014GovernanceSTATEMENT OF DIRECTORS’ RESPONSIBILITIES

The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company’s website.
Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.

The Directors consider that to the best of their knowledge:

– the financial statements, prepared in accordance with the relevant

financial reporting framework, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the company and the
undertakings included in the consolidation taken as a whole;

– the strategic report includes a fair review of the development and

performance of the business and the position of the Company and the
Group, together with a description of the principal risks and
uncertainties that they face; and

– the Annual Report and financial statements, taken as a whole, are fair,
balanced and understandable and provide the information necessary
for shareholders to assess the company’s performance, business
model and strategy.

Deloitte LLP have expressed their willingness to continue in office
as auditor and a resolution to reappoint them will be proposed at the
forthcoming Annual General Meeting.

This statement, together with the accompanying reports and financial
statements, was approved by the Board on 23 March 2015 and is signed
on its behalf by:

Duncan Anderson
Chief Executive Officer
23 March 2015

John Brown
Chief Financial Officer
23 March 2015

The Directors have prepared the Annual Report and the financial
statements in accordance with their responsibilities under applicable
law and regulations.

Company law requires the Directors to prepare financial statements for
each financial year. Under that law the Directors are required to prepare
the consolidated financial statements in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the European Union
and Article 4 of the IAS Regulation and have elected to prepare the
parent company financial statements in accordance with United
Kingdom Generally Accepted Accounting Practice (United Kingdom
Accounting Standards and applicable law). The financial statements have
been prepared, as required by law, to give a true and fair view of the state
of affairs of the Group and the Company and of the profit of the Group
for that period.

In preparing the parent company financial statements, the Directors
confirm that to the best of their knowledge they have:

– recorded and reflected all transactions in the financial statements;
– selected suitable accounting policies and then applied them consistently;
– made judgments and accounting estimates that are reasonable

and prudent;

– stated whether applicable UK Accounting Standards have been

followed, subject to any material departures disclosed and explained
in the financial statements; and

– prepared the financial statements on the going concern basis as they
consider that it is inappropriate to presume that the company will not
continue in business.

In preparing the consolidated financial statements, the Directors
confirm that to the best of their knowledge they have:

– recorded and reflected all transactions in the financial statements;
– properly selected and applied accounting policies;
– presented information, including accounting policies, in a manner that

provides relevant, reliable, comparable and understandable information;
provided additional disclosures when compliance with the specific
requirements in IFRSs is insufficient to enable users to understand
the impact of particular transactions, other events and conditions
on the entity’s financial position and financial performance; and

– made an assessment of the Group and Company’s ability to continue

as a going concern.

In accordance with the Directors’ responsibilities, the Group maintains
adequate accounting records that are sufficient to show and explain the
Company’s transactions and disclose with reasonable accuracy at any
time the financial position of the Company and the Group and enable
them to ensure that the financial statements comply with the Companies
Act 2006. The Directors are also responsible for safeguarding the assets
of the Company and the Group and have taken reasonable steps for the
prevention and detection of fraud and other irregularities.

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GULF MARINE SERVICES PLC Annual Report 2014INTRODUCTIONSTRATEGIC REPORT PERFORMANCEGOVERNANCEADDITIONAL INFORMATION
FINANCIAL
STATEMENTS

Independent Auditor’s Report
Group Consolidated Financial Statements
Company Financial Statements

68
72
106

GULF MARINE SERVICES PLC Annual Report 2014i

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INTRODUCTIONPERFORMANCEGOVERNANCEADDITIONAL INFORMATIONGULF MARINE SERVICES PLC Annual Report 2014

INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF GULF MARINE SERVICES PLC

Opinion on financial
statements of Gulf Marine
Services plc

In our opinion:
– the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s

affairs as at 31 December 2014 and of the Group’s profit for the year then ended;

– the Group financial statements have been properly prepared in accordance with International Financial

Reporting Standards (IFRSs) as adopted by the European Union;

– the Parent Company financial statements have been properly prepared in accordance with United Kingdom

Generally Accepted Accounting Practice; and

– the financial statements have been prepared in accordance with the requirements of the Companies Act 2006

and, as regards the Group financial statements, Article 4 of the IAS Regulation.

The financial statements comprise the consolidated statement of comprehensive income, the consolidated
statement of financial position, the Parent Company balance sheet, the consolidated statement of changes
of equity, the consolidated statement of cash flows, the Parent Company cash flow statement, the related
consolidated notes 1 to 39 and related Parent Company notes 1 to 15. The financial reporting framework that
has been applied in the preparation of the Group financial statements is applicable law and IFRSs as adopted by
the European Union. The financial reporting framework that has been applied in the preparation of the Parent
Company financial statements is applicable law and United Kingdom Accounting Standards (United Kingdom
Generally Accepted Accounting Practice).

As required by the Listing Rules we have reviewed the directors’ statement contained within the Directors’ report
on page 62 that the Group is a going concern. We confirm that:
– we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the

financial statements is appropriate; and

– we have not identified any material uncertainties that may cast significant doubt on the Group’s ability to

continue as a going concern.

However, because not all future events or conditions can be predicted, this statement is not a guarantee as to
the Group’s ability to continue as a going concern.

Going concern

Our assessment of risks of
material misstatement

The assessed risks of material misstatement described below are those that had the greatest effect on our audit
strategy, the allocation of resources in the audit and directing the efforts of the engagement team:

Risk

How the scope of our audit responded to the risk

Management has assessed recoverable amount based on the estimated value in use of each vessel, which in
all cases was higher than fair value less costs to sell, and concluded that no impairments have arisen. We have
obtained management’s value in use calculations and compared the carrying value of each vessel to its value in
use. The key assumptions utilised in these calculations include, on a vessel by vessel basis:
– forecast utilisation;
– forecast day rates;
– inflation; and
– discount rate.

We have assessed these assumptions by reference to publicly available information, our knowledge of the Group
and industry and the Group’s most recent budget. This included:
– understanding the process by which management has derived its value in use estimates;
– comparing forecast utilisation and day rates to those achieved in prior periods;
– comparing forecast day rates to signed contracts for contracted periods, and challenging the basis adopted

for day rates elsewhere in the calculations;

– using our internal valuation specialists to perform an independent recalculation of the discount rate;
– performing sensitivity tests, using more conservative assumptions for future day rates and discount rate to

take into consideration the current market conditions described opposite;

– testing the design and implementation of management’s controls to address the risk of impairment of the

Group’s vessels; and

– testing the clerical accuracy of the calculations.

We have concluded that management’s estimates of value in use were reasonable and are therefore satisfied
that no impairments have arisen.

Impairment of the
Group’s vessels
The Group’s vessels are its sole
revenue generating assets, with
a carrying value of $516.7 million
at 31 December 2014 which
represents 70% of the Group’s
total assets at that date. Their
recoverable amount is based on
an assessment of the higher of
fair value (less cost to sell) and
value in use. Estimates of fair
value less costs to sell take into
consideration vessel valuations
from an independent ship broker,
whilst value in use is calculated
as the net present value of
estimated future cash flows, in
each case on a vessel by vessel
basis. In the current year, there is
a risk that recoverable amounts
could be adversely impacted by
the recent significant decline
in global oil & gas prices, due
to the resultant impact on the
Group’s customer base in the
oil & gas industry.

Further detail of the Group’s
vessels is provided in note 9.

Financial StatementsGULF MARINE SERVICES PLC Annual Report 2014We have tested expenditure incurred during the year on the new-build programme on a sample basis to assess
whether the related costs qualify for capitalisation under the relevant standards. This has included:
– tracing direct third party costs to supporting documentation;
– testing the appropriate allocation of costs such as overheads and finance charges between amounts

capitalised and amounts expensed, through understanding the basis and rationale for the split and verifying
this through review of supporting evidence; and

– testing the design and implementation of management controls to address the risk of inappropriate

capitalisation of costs.

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Our testing did not identify any material misstatements.

We have obtained a detailed schedule analysing the revenue earned by month and by vessel, which specifies
both the number of days on hire/on standby and the relevant contractual rate, and agreed this to the general
ledger. On a sample basis we have :
– agreed the days on hire/standby to a report from the Group’s operations department, to confirmation of days

worked signed by the customer, as well as to invoice (which state the number of days to which it relates);

– performed an analysis on the number of days on hire/standby, obtaining supporting explanation for any gaps

and reconciling this to our knowledge of each vessel’s operational performance during the year;

– agreed the day rate to the underlying contract; and
– recalculated the revenue figure and agreed this to both invoice and either subsequent cash received or the year

end debtors schedule.

We have also tested the design and implementation of management controls to address the risk of inappropriate
revenue recognition.

Our testing did not identify any material misstatements.

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Capitalisation of vessel costs
The Group has a significant
new-build programme underway
comprising the construction
of the Enterprise and the three
new S-class vessels, in respect
of which costs of $136.6 million
have been capitalised in the
year. There is a risk that costs
are not appropriately capitalised
in accordance with the relevant
accounting standards, including
the requirement to only capitalise
overheads and finance charges
which are directly attributable
to the construction activities.

Revenue recognition
Each of the Group’s vessels
earns revenues on the basis
of a specific contract with the
relevant counterparty. Each
contract will typically specify
a day rate, which can vary
significantly by vessel and
by counterparty, as well as
a standby rate for when the
vessel is available for use but
not operational.

Accordingly, in order for revenue
to be recorded appropriately,
for each vessel the company
needs to:

– accurately record the number
of days both on hire and on
standby; and

– apply the correct contractual
rates to the number of days
in each of these categories.

Due to the significant variability
in contract terms by vessel
and by counterparty, we have
identified the complete and
accurate recording of revenue
as a key audit risk.

Further details of revenue arising
in the year are provided in note 25.

The description of risks above should be read in conjunction with the significant issues considered by the Audit and Risk Committee discussed on
page 48.

Our audit procedures relating to these matters were designed in the context of our audit of the financial statements as a whole, and not to express
an opinion on individual accounts or disclosures. Our opinion on the financial statements is not modified with respect to any of the risks described
above, and we do not express an opinion on these individual matters.

INTRODUCTIONPERFORMANCEGOVERNANCEADDITIONAL INFORMATIONGULF MARINE SERVICES PLC Annual Report 2014

INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF GULF MARINE SERVICES PLC Continued

Our application of materiality We define materiality as the magnitude of misstatement in the financial statements that makes it probable

that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use
materiality both in planning the scope of our audit work and in evaluating the results of our work.

An overview of the scope
of our audit

We considered the appropriate level of materiality for the Group as a listed entity to be US$4.0 million, which
was 5% of pre-tax profit, and 1% of equity.

We agreed with the Audit Committee that we would report to the Committee all audit differences in excess
of US$80,000, as well as differences below that threshold that, in our view, warranted reporting on qualitative
grounds. We also report to the Audit Committee on disclosure matters that we identified when assessing the
overall presentation of the financial statements.

This is our first year as auditors of the Group following the listing of the Group on the London Stock Exchange.
Our audit planning identified the Group’s business to be a single component, and therefore all of the operations
of the Group were subject to a full scope audit. During the course of the audit, senior members of the UK audit
team, including the Senior Statutory Auditor, supervised the members of the audit team who are based in the
United Arab Emirates, and visited the United Arab Emirates operations during the interim and completion stages
of the audit.

Opinion on other matters
prescribed by the Companies
Act 2006

In our opinion:
– the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with

the Companies Act 2006; and

– the information given in the Strategic Report and the Directors’ Report for the financial year for which the

financial statements are prepared is consistent with the financial statements.

Matters on which we are required to report by exception

Adequacy of explanations
received and accounting
records

Under the Companies Act 2006 we are required to report to you if, in our opinion:
– we have not received all the information and explanations we require for our audit; or
– adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit

have not been received from branches not visited by us; or

– the parent company financial statements are not in agreement with the accounting records and returns.

We have nothing to report in respect of these matters.

Directors’ remuneration

Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of directors’
remuneration have not been made or the part of the Directors’ Remuneration Report to be audited is not in
agreement with the accounting records and returns. We have nothing to report arising from these matters.

Corporate Governance
Statement

Our duty to read other
information in the
Annual Report

Under the Listing Rules we are also required to review the part of the Corporate Governance Statement relating
to the company’s compliance with ten provisions of the UK Corporate Governance Code. We have nothing to
report arising from our review.

Under International Standards on Auditing (UK and Ireland), we are required to report to you if, in our opinion,
information in the annual report is:
– materially inconsistent with the information in the audited financial statements; or
– apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Group acquired

in the course of performing our audit; or

– otherwise misleading.

In particular, we are required to consider whether we have identified any inconsistencies between our knowledge
acquired during the audit and the directors’ statement that they consider the annual report is fair, balanced and
understandable and whether the annual report appropriately discloses those matters that we communicated to
the audit committee which we consider should have been disclosed. We confirm that we have not identified any
such inconsistencies or misleading statements.

Financial StatementsGULF MARINE SERVICES PLC Annual Report 2014Respective responsibilities
of directors and auditor

Scope of the audit of the
financial statements

As explained more fully in the Directors’ Responsibilities Statement, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility
is to audit and express an opinion on the financial statements in accordance with applicable law and International
Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s
Ethical Standards for Auditors. We also comply with International Standard on Quality Control 1 (UK and Ireland).
Our audit methodology and tools aim to ensure that our quality control procedures are effective, understood
and applied. Our quality controls and systems include our dedicated professional standards review team and
independent partner reviews.

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members
those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the
company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to
give reasonable assurance that the financial statements are free from material misstatement, whether caused
by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group’s
and the Parent Company’s circumstances and have been consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates made by the directors; and the overall presentation of the
financial statements. In addition, we read all the financial and non-financial information in the annual report to
identify material inconsistencies with the audited financial statements and to identify any information that is
apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the
course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies
we consider the implications for our report.

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David Paterson (Senior Statutory Auditor)
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditor
London
23 March 2015

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INTRODUCTIONPERFORMANCEGOVERNANCEADDITIONAL INFORMATIONGULF MARINE SERVICES PLC Annual Report 2014

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2014

Revenue
Cost of sales
Gross profit
General and administrative expenses
Finance income
Finance expense
Other income/(loss)
Foreign exchange loss, net

Profit for the year before taxation
Taxation charge for the year

Profit for the year

Other comprehensive income – Items that will be reclassified to profit and loss
Exchange differences on translating foreign operations

Total comprehensive income for the year

Profit attributable to:
Owners of the Company
Non-controlling interests

Total comprehensive income attributable to:
Owners of the Company
Non-controlling interests

Earnings per share
Basic (cents per share)

Diluted (cents per share)

All results are derived from continuing operations in each year.

notes

2014
US$’000

2013
US$’000

196,554
(70,094)
126,460
(25,417)
843
(21,354)
245
(408)
80,369
(4,744)

184,264
(65,506)
118,758
(14,778)
693
(29,495)
(1,247)
(637)
73,294
(3,861)

75,625

69,433

(430)

568

75,195

70,001

75,065
560

75,625

74,635
560

75,195

68,201
1,232

69,433

68,769
1,232

70,001

22.14

22.04

22.73

Financial StatementsGULF MARINE SERVICES PLC Annual Report 2014

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 December 2014

ASSETS
Non-current assets
Property, plant and equipment
Intangibles
Dry docking expenditure
Fixed asset prepayments

Total non-current assets

Current assets

Loans to related parties
Derivative financial instrument
Trade and other receivables
Cash and cash equivalents

Total current assets

Total assets

EQUITY AND LIABILITIES
Capital and reserves
Share capital
Share premium
Statutory reserve
Restricted reserve
Group restructuring reserve
Share option reserve
Capital contribution
Translation reserve
Retained earnings
Attributable to the Owners of the Company
Non-controlling interests

Total equity

Non-current liabilities
Bank borrowings
Obligations under finance leases
Loans from related parties
Provision for employees’ end of service benefits
Deferred tax liability

Total non-current liabilities

Current liabilities
Trade and other payables
Current tax liability
Bank borrowings
Obligations under finance leases
Due to related parties

Total current liabilities
Total liabilities

Total equity and liabilities

notes

2014
US$’000

2013
US$’000

614,524
750
4,177
750
620,201

490,354
1,125
778
2,827
495,084

–
–
49,948
59,532
109,480

445
541
43,249
46,897
91,132

729,681

586,216

57,929
93,247
–
272
(49,437)
563
9,177
180
246,631
358,562
610

273
–
136
136
–
–
78,527
610
103,228
182,910
1,328

359,172

184,238

225,741
42,473
–
2,468
5
270,687

30,120
4,809
23,415
41,478
–
99,822
370,509

254,269
83,086
19,504
1,910
5
358,774

22,033
3,682
11,010
5,697
782
43,204
401,978

729,681

586,216

The financial statements were approved by the Board of Directors and authorised for issue on 23 March 2015. They were signed on its behalf by:

Duncan Anderson
Chief Executive Officer
23 March 2015

John Brown
Chief Financial Officer
23 March 2015

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INTRODUCTIONPERFORMANCEGOVERNANCEADDITIONAL INFORMATIONGULF MARINE SERVICES PLC Annual Report 2014

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2014

Share
capital
US$’000

Share
premium
US$’000

Statutory
reserve
US$’000

Restricted
reserve
US$’000

Group
restructuring
reserve
US$’000

Share
option
reserve
US$’000

Capital
contribution
US$’000

Translation
reserve
US$’000

Retained
earnings
US$’000

Attributable
to the owners
of the
Company
US$’000

Non-
controlling
interests
US$’000

Total
equity
US$’000

273

–

136

–

70,750

42 115,027

186,364

598 186,962

Balance at
1 January 2013
Transfer
of share
appreciation
rights payable
(note 36)
Total
comprehensive
income for
the year
Dividends paid
during the year
(note 38)

Balance at
1 January 2014

Total
comprehensive
income
Share
appreciation
rights charge
(note 36)
Share options
rights charge
(note 37)
Transfer
of capital
contribution
to retained
earnings
Transfer to
restricted
reserve
Group
restructuring
reserve
Issue of
share capital
Capital
reduction
Issue of share
capital – IPO
Share
issue cost
Dividends
paid during the
year (note 38)

Balance at
31 December
2014

–

273

–

(273)

497,100

(447,390)

–

8,219 102,702

–

(9,455)

–

57,929

93,247

–

136

–

(136)

136

–

273

(497,100)

447,390

–

Please refer to note 19 for a description of each reserve.

7,777

–

7,777

–

7,777

–

568

68,201

68,769

1,232

70,001

–

(80,000)

(502)

(80,502)

78,527

610 103,228

182,910

1,328 184,238

–

(430)

75,065

74,635

560

75,195

1,400

563

–

1,400

563

–

1,400

563

–

(70,750)

–

70,750

–

110,921

– 110,921

(9,455)

–

(9,455)

(2,412)

(1,278)

(3,690)

–

272

(49,437)

563

9,177

180 246,631

358,562

610 359,172

Financial StatementsGULF MARINE SERVICES PLC Annual Report 2014
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2014

Net cash generated from operating activities (note 30)

Investing activities
Payments for property, plant and equipment
Proceeds from disposal of property, plant and equipment
Payment for capital advances
Dry docking expenditure incurred
Movement in pledged deposits
Movement in guarantee deposits
Interest received

Net cash used in investing activities

Financing activities
Bank borrowings received
Proceeds from share issue – IPO
Share issue cost paid
Repayment of bank borrowings
Repayment of loans from related parties
Repayment of short term loans to shareholders
Interest paid
Payment on obligations under finance lease
Dividends paid
Decrease in loans to related parties
Payment of issue cost on borrowings

Net cash provided by/(used in) financing activities

Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year

Cash and cash equivalents at the end of the year (note 13)

Non-cash transactions
Transfer of capital contribution to retained earnings (note 14)
Group restructuring reserve recognised (note 15)

Transfer of share appreciation rights obligation to shareholders (note 36)

2014
US$’000

2013
US$’000

120,353

113,343

(136,563)
25
(750)
(4,656)
1,679
(164)
843

(48,502)
847
(2,827)
(855)
(1,602)
309
135

(139,586)

(52,495)

–
110,921
(9,455)
(13,000)
(19,504)
(782)
(22,814)
(4,832)
(3,455)
445
(5,656)

280,000
–
(9,391)
(164,844)
(10,410)
–
(26,552)
(4,352)
(80,502)
133
–

31,868

(15,918)

12,635
46,897

59,532

44,930
1,967

46,897

70,750
(49,437)

–
–

–

7,777

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INTRODUCTIONPERFORMANCEGOVERNANCEADDITIONAL INFORMATIONGULF MARINE SERVICES PLC Annual Report 2014

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for year ended 31 December 2014

1. general information
Gulf Marine Services PLC (“GMS” or “the Company”) is a Company which was registered in England and Wales on 24 January 2014. The Company is
a public limited company with operations mainly in the Middle East and North Africa, and Europe. The address of the registered office of the Company
is 1st Floor, 40 Dukes Place, London EC3A 7NH. The registered number of the Company is 08860816.

The principal activities of GMS and its subsidiaries (together referred to as the “Group”) are investing in, establishing and managing commercial, and
industrial projects as well as chartering and operating a fleet of specially designed and built vessels.

The Company completed its Premium Listing on the London Stock Exchange on 19 March 2014. The Company and its subsidiaries are engaged in providing
self-propelled, self-elevating accommodation vessels which provide the stable platform for delivery of a wide range of services throughout the total lifecycle
of offshore oil, gas and renewable energy activities and which are capable of operations in the Middle East, South East Asia, West Africa and Europe.

2. adoption of new and revised international Financial reporting Standards (iFrSs)
The accounting policies and methods of computation adopted in the preparation of these consolidated financial statements are consistent with
those followed in the preparation of the Group’s annual financial statements for the year ended 31 December 2013, except for the adoption of new
standards and interpretations effective as of 1 January 2014 and the principles of merger accounting including the pooling of interests method for
business combinations under common control which has been used in accounting for the Group restructuring (note 3).

New and revised IFRSs applied with no material effect on the consolidated financial statements
The following new and revised IFRSs have been adopted in these consolidated financial statements. The application of these new and revised IFRSs has not
had any material impact on the amounts reported for the current and prior years but may affect the accounting for future transactions or arrangements.

new and revised iFrSs

Summary of requirements

Amendments to IAS 32 Financial
Instruments: Presentation

Amendments to IAS 36 Impairment of
Assets relating to recoverable amount
disclosures for non-financial assets

Amendments to IAS 39 Financial
Instruments: Recognition and Measurement,
Novation of Derivatives and Continuation of
Hedge Accounting

The amendments provide guidance on the offsetting of financial assets and financial liabilities.

The amendments restrict the requirements to disclose the recoverable amount of an asset or CGU
to the period in which an impairment loss has been recognised or reversed. They also expand and
clarify the disclosure requirements applicable when an asset or CGU’s recoverable amount has been
determined on the basis of fair value less costs of disposal.

The amendments allow the continuation of hedge accounting when a derivative is novated to a clearing
counterparty and certain conditions are met.

Amendments to IFRS 10 Consolidated
Financial Statements, IFRS 12 Disclosure
of Interests in Other Entities and IAS 27
Separate Financial Statements – Guidance
on Investment Entities

On 31 October 2012, the IASB published a standard on investment entities, which amends IFRS 10, IFRS
12, and IAS 27 and introduces the concept of an investment entity in IFRSs. The objective of this project
is to develop an exemption from the requirement to consolidate subsidiaries for eligible investment
entities (such as mutual funds, unit trusts, and similar entities), instead requiring the use of the fair value
to measure those investments.

New and revised IFRSs in issue but not yet effective
At the date of authorisation of these consolidated financial statements, the following new and revised IFRSs were in issue but not yet effective:

Effective for annual periods
beginning on or after
17 June 2014

new and revised iFrSs
IFRIC 21 – Levies
Annual improvements 2010-2012 covering amendments to IFRS 2, IFRS 3, IFRS 8, IFRS 13, IAS 16, IAS 24 and IAS 38 1 July 2014
1 July 2014
Annual improvements 2011-2013 covering amendments to IFRS 1, IFRS 3, IFRS 13 and IAS 40
1 July 2014
Amendment to IAS 19 Employee Benefits relating to defined benefit plans and employee contributions
Not earlier than 1 January 2018
IFRS 9 Financial Instruments (as revised in 2010)
Amendments to IFRS 9 Financial Instrument to introduce a new expected loss impairment model and limited
changes to the classification and measurement requirements for financial assets
IFRS 14 Regulatory Deferral Accounts
IFRS 15 Revenue from Contracts with Customers
Amendments to IFRS 11 Accounting for Acquisitions of Interests in Joint Operations
Amendments to IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation
Amendments to IAS 16 and IAS 41 Agriculture: Bearer Plants
Amendment to IFRS 7 Financial Instruments: Disclosures relating to transition to IFRS 9 (or otherwise when
IFRS 9 is first applied)

1 January 2018
1 January 2016
1 January 2017
1 January 2016
1 January 2016
1 January 2016

When IFRS 9 is first applied

Amendments to IAS 39 Financial Instruments

When IFRS 9 is first applied

Management anticipates that the adoption of these IFRSs in future periods will have no material impact on the consolidated financial statements
of the Group in the period of initial application, with the exception of IFRS 15 for which the Management is currently in the process of assessing the
impact of adoption.

Financial StatementsGULF MARINE SERVICES PLC Annual Report 20143. Significant accounting policies
The Group’s significant accounting policies adopted in the preparation of these financial statements are set out below. These policies have been
consistently applied to each of the years presented.

Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (‘‘IFRSs’’) as adopted by
the European Union (‘‘EU’’) and therefore the financial information presented complies with Article 4 of the EU IAS Regulation. IFRS includes the
standards and interpretations approved by the International Accounting Standards Board (‘‘IASB’’) including International Accounting Standards
(‘‘IAS’’) and interpretations issued by the International Financial Reporting Interpretations Committee (‘‘IFRIC’’).

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Basis of preparation
The consolidated financial statements have been prepared on the historical cost basis, except for derivative financial instruments and share-based
payments that are measured at revalued amounts or fair values at the end of each reporting period. Historical cost is generally based on the fair value
of the consideration given in exchange for assets.

For financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value
measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

– Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
– Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
– Level 3 inputs are unobservable inputs for the asset or liability.

The principal accounting policies adopted are set out below.

Basis of consolidation
The financial statements incorporate the financial statements of GMS and entities controlled by GMS (its subsidiaries). Management have assessed
the control which GMS has over its subsidiaries in accordance with IFRS 10 Consolidated Financial Statements which provides that an investor controls
an investee when the investor is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those
returns through its power over the investee.

Details of GMS subsidiaries at 31 December 2014 and 2013 are as follows:

proportion of ownership interest

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name
Gulf Marine Services WLL
Offshore Holding Invt SA
Offshore Logistics Invt SA
Offshore Accommodation Invt SA
Offshore Jack-up Invt SA
Offshore Craft Invt SA
Offshore Structure Invt SA
Offshore Maritime Invt SA
Offshore Tugboat Invt SA
Offshore Boat Invt SA
Offshore Kudeta Invt SA
GMS Endurance Invt SA
Mena Marine Limited
GMS GP Management Limited (i)
Gulf Marine Services (UK) Limited
Gulf Marine Services Saudi Arabia Limited
Gulf Marine Services (Asia) Pte. Ltd.
GMS Enterprise Investment SA
GMS Sharqi Investment SA
GMS Scirocco Investment SA

GMS Shamal Investment SA

place of registration
Abu Dhabi
Panama
Panama
Panama
Panama
Panama
Panama
Panama
Panama
Panama
Panama
Panama
Cayman Islands
Cayman Islands
United Kingdom
Saudi Arabia
Singapore
Panama
Panama
Panama

Panama

(i) GMS GP Management Limited was dissolved during the year.

2014

100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
–
100%
60%
100%
100%
100%
100%

100%

2013

100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
60%
100%
–
–
–

type of activity
Marine Contractors
Holding Company
Owner of Barge “Naashi”
Owner of “Khawla 181”
Owner of Barge “Kamikaze”
Owner of Barge “GMS Endeavour”
Owner of Barge “Kikuyu”
Owner of “Helios”
Owner of “Atlas”
Owner of Barge “Kawawa”
Owner of Barge “Kudeta”
Owner of Barge “Endurance”
General investment and trading
General investment and trading
Operator of offshore barges
Operator of offshore barges
Operator of offshore barges
Owner of Barge “Enterprise”
Owner of Barge “Sharqi”
Owner of Barge “Scirocco”

–

Owner of Barge “Shamal”

INTRODUCTIONPERFORMANCEGOVERNANCEADDITIONAL INFORMATIONGULF MARINE SERVICES PLC Annual Report 2014

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Continued
for year ended 31 December 2014

3. Significant accounting policies continued
Basis of consolidation continued
Group restructuring
On 24 January 2014, the Company was incorporated as the new holding company for the Group. On 5 February 2014, the Company legally acquired
GMS Global Commercial Investments LLC (the previous Parent Company of the Group), including the underlying subsidiaries. The transaction was
effected by way of issuing shares in the Company to the existing shareholders of GMS Global Commercial Investments in exchange for their shares
already held in GMS Global Commercial Investments LLC. This transaction falls outside the scope of IFRS 3 Business Combinations, therefore the
pooling of interests (merger accounting) method was applied and the consolidated financial information of the Group is presented as a continuation
of the existing Group. The following accounting treatment was applied:

– the consolidated assets and liabilities of the previous parent, GMS Global Commercial Investments LLC, were recognised and measured at the

pre-restructuring carrying amounts, without restatement to fair value;

– the results for the year ended 31 December 2013 and the period from 1 January 2014 to the date of restructuring are those of GMS Global

Commercial Investments LLC;

– comparative numbers presented in the consolidated financial statements are those of GMS Global Commercial Investments LLC as at

31 December 2013; and

– the difference between historical carrying amounts of net assets transferred and consideration paid has been recognised as a Group

restructuring reserve (note 15).

The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the
effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the results of subsidiaries to bring their accounting policies in line with those used by other members
of the Group.

All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.

Non-controlling interests in subsidiaries are identified separately from the Group’s equity therein. The interests of non-controlling shareholders
may be initially measured either at fair value or at the non-controlling interests’ proportionate share of the fair value of the acquiree’s identifiable net
assets. The choice of measurement basis is made on an acquisition-by-acquisition basis. Subsequent to acquisition, the carrying amount of non-
controlling interests is the amount of those interests at initial recognition plus the non-controlling interests’ share of subsequent changes in equity.
Total comprehensive income is attributed to non-controlling interests even if this results in the non-controlling interests having a deficit balance.

Changes in the Group’s interests in subsidiaries that do not result in a loss of control are accounted for as equity transactions. The carrying
amounts of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries.
Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received
is recognised directly in equity and attributed to owners of the Group. Acquisitions of subsidiaries and businesses are accounted for using the
acquisition method. The consideration for each acquisition is measured at the aggregate of the fair values (at the date of exchange) of assets given,
liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree. Acquisition-related costs are
recognised in profit or loss as incurred. Fair value is determined as the amount for which an asset could be exchanged, or a liability transferred,
between knowledgeable, willing parties in an arm’s length transaction.

The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 (2008) are recognised
at their fair value at the acquisition date.

When the Group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the aggregate of the fair value
of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and
liabilities of the subsidiary and any non-controlling interests. Amounts previously recognised in other comprehensive income in relation to the
subsidiary are accounted for (i.e. reclassified to profit or loss or transferred directly to retained earnings) in the same manner as would be required
if the relevant assets or liabilities were disposed of. The fair value of any investment retained in the former subsidiary at the date when control is lost
is regarded as the fair value on initial recognition for subsequent accounting under IAS 39 Financial Instruments: Recognition and Measurement or,
when applicable, the cost on initial recognition of an investment in an associate or jointly controlled entity.

going concern
The financial statements have been prepared on the going concern basis. The use of this basis of accounting takes into consideration the Group’s
current and forecast financial position, including the capital commitments described in note 32. Further information on the use of going concern has
been disclosed in the Directors’ Report on pages 62 to 64.

Financial StatementsGULF MARINE SERVICES PLC Annual Report 2014i

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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 recognised only when it is probable that the economic benefits associated with a transaction will flow to the Group and the
amount of revenue can be measured reliably and is stated net of sales taxes if applicable (such as VAT) and discounts. If advances are received from
customers for future contractual services, the revenue is deferred until the services are provided.

Revenue from services is recognised as the services are rendered, including where they are based on contractual daily rates for the chartering
of vessels in respect of multi-year service contracts. Income from vessels hired on time and voyage charters and from the hire of equipment
or personnel is accounted for on a time apportionment basis in line with agreed contract terms.

Contract mobilisation/demobilisation revenue
Charter contracts generally provide for payment on a daily rate basis, and revenues are recognised as the work progresses with the passage of time.
In addition, lump-sum payments are occasionally received at the outset or at the end of a contract for equipment moves or modifications. Lump-sum
fees received for equipment moves (and related costs) and fees received for contract-specific equipment modifications or upgrades are initially
deferred and amortised on a straight-line basis over the term of the contract. The costs of contractual equipment modifications or upgrades and
the costs of the initial move of newly acquired rigs are capitalised and depreciated in accordance with the Group’s fixed asset capitalisation policy.
The costs of moving equipment while not under contract are expensed as incurred.

Revenue is recognised for certain reimbursable costs. Each reimbursable item and amount is stipulated in the Group’s contract with the customer,
and such items and amounts are variable from contract to contract. Reimbursable costs are recognised on the gross basis, as both revenues and
expenses, because the Group is the primary obligor in the arrangement, has discretion in supplier selection, is involved in determining product or
service specifications and assumes full credit risk related to the reimbursable costs.

Revenue from messing and accommodation services
Revenue from these services is recognised as the services are rendered, including where they are based on contractual daily rates for providing
accommodation and messing services which may include catering and cleaning services.

Interest income
Interest income is recognised when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably.
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that
exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition.

Maintenance income
Maintenance income relates to maintenance work which is carried out on vessels during times that the vessels are on hire. This is done periodically
throughout the year and is charged to customers in accordance with agreed contractual daily rates. Maintenance revenue is recognised when the
work takes place.

Sundry income
Sundry income relates to handling charges which are applied to costs which are paid by the Group and then recharged to the customer. The revenue
is recognised when the costs are recharged to customers with the handling charge applied.

leasing
Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more
representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating
leases are recognised as an expense in the period in which they are incurred.

In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of
incentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative
of the time pattern in which economic benefits from the leased asset are consumed.

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee.
All other leases are classified as operating leases.

Assets held under finance leases are initially recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the present
value of the minimum lease payments calculated using the Group’s incremental borrowing rate. The corresponding liability to the lessor is included in
the consolidated statement of financial position as a finance lease obligation.

Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on
the remaining balance of the liability. Finance charges are charged directly to profit or loss, unless they are directly attributable to qualifying assets,
in which case they are capitalised in accordance with the Group’s general policy on borrowing costs (see page 81).

INTRODUCTIONPERFORMANCEGOVERNANCEADDITIONAL INFORMATIONGULF MARINE SERVICES PLC Annual Report 2014

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Continued
for year ended 31 December 2014

3. Significant accounting policies continued
property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses (if any). The cost of property,
plant and equipment is their purchase cost together with any incidental expenses of acquisition. Subsequent expenditure incurred on vessels is
capitalised where the expenditure gives rise to future economic benefits in excess of the originally assessed standard of performance of the
existing assets.

Depreciation is recognised so as to write off the cost of property, plant and equipment less their residual values over their useful lives, using the
straight-line method. The residual values of vessels and related equipment are determined taking into consideration the expected scrap value of the
vessel, which is calculated based on the weight and the market rate of steel at the time of asset purchase. If the price per unit of steel at the balance
sheet date varies significantly from that on date of purchase, the residual value is reassessed to reflect changes in market value. The estimated useful
lives used for this purpose are:

Vessels
Land, buildings and improvements
Vessel spares, fittings and other equipment
Office equipment and fittings
Motor vehicles

25 – 35 years
5 – 20 years
3 – 10 years
3 – 5 years
3 years

Taking into consideration independent professional advice, management considers the principal estimated useful lives of vessels for the purpose
of calculating depreciation to be 25 to 35 years from the date of construction. However the useful economic life of one vessel, Naashi, was extended
by 10 years to 45 years as a result of a major upgrade done on the vessel in 2010.

The estimated useful life depends on the type and nature of the vessel.

The estimated useful lives, residual values and depreciation method are reviewed at each year end, with the effect of any changes in estimate
accounted for on a prospective basis.

The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between
the sale proceeds and the carrying amount of the asset and is recognised within administrative expenses in the consolidated statement of
comprehensive income.

The depreciation charge for the period is allocated between cost of sales and administrative expenses, depending on the usage of the respective assets.

Standby equipment
The cost of purchased second hand engines and related refurbishment expenses which are classified as standby equipment are capitalised and
depreciated from the date that the engine has been made ready for use and installed on the vessel.

Second hand refurbished engines are depreciated over the shorter of the useful economic life of the refurbished second hand standby equipment
or the life of the vessel on which such equipment is installed.

Repair expenses relating to used engines belonging to the Group are charged to administrative expenses when incurred.

Drydocking
The costs incurred for periodical drydocking or major overhauls of the vessels are identified as a separate inherent component of the vessels and are
depreciated on a straight-line basis over the period to the next anticipated dry-dock being approximately 60 months.

For acquired or newly built vessels, a notional dry dock cost is allocated from the vessel’s cost based on experience of similar vessels, and (if material)
depreciated on a straight-line basis to the next anticipated drydocking. If a drydocking occurs prior to its anticipated date, any remaining capitalised
drydocking expenditure is expensed.

capital work-in-progress
Properties and vessels in the course of construction for production, supply or administrative purposes, are carried at cost, less any recognised
impairment loss. Cost includes professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the Group’s accounting
policy. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.

intangible assets
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment
losses. Amortisation is recognised on a straight-line basis over their estimated useful lives The estimated useful lives used for this purpose are:

Property leases
Customer relationships

7 years
10 years

The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being
accounted for on a prospective basis.

Financial StatementsGULF MARINE SERVICES PLC Annual Report 2014Intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised at their fair value at the
acquisition date (which is regarded as their cost).

Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and
accumulated impairment losses, on the same basis as intangible assets that are acquired separately. The amortisation expense on intangibles is
included as a part of general and administrative expenses.

An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising
from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset,
are recognised in profit or loss when the asset is derecognised.

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impairment of tangible and intangible assets other than goodwill
At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any
indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order
to determine the extent of the impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual asset, the Group
estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation
can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of
cash-generating units for which a reasonable and consistent allocation basis can be identified.

Intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks
specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset
(or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.

When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment
loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.

Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take
a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are
substantially ready for their intended use or sale.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will
be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting
period, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to
settle the present obligation, its carrying amount is the present value of those cash flows.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised
as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

Employees’ end of service benefits
In accordance with the applicable Labour Laws of UAE, the Group is required to pay end of service benefits to all qualifying employees upon cessation
of employment. The only obligation of the Group with respect to end of service benefits is to make the specified lump-sum payments to employees
which become payable when they leave the Group for reasons other than gross misconduct. The amount payable is calculated as a multiple of a
pre-defined fraction of basic salary based on the number of full years of service.

To meet the requirement of UAE labour laws, a provision is made for the full amount of end of service benefits payable to qualifying employees up
to the end of the reporting period. The provision relating to end of service benefits is disclosed as a non-current liability. The provision has not been
subject to a full actuarial valuation or discounted as the impact would not be material.

The actual payment is made in the year of cessation of employment of a qualifying employee. The payment for end of service benefit is made
as a lump sum along with the full and final settlement of the employee.

The total expense recognised in profit or loss of loss of US$ 0.7 million (2013: US$ 0.5 million) represents end of service benefit payments made
to employees in accordance with UAE Labour Laws.

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INTRODUCTIONPERFORMANCEGOVERNANCEADDITIONAL INFORMATIONGULF MARINE SERVICES PLC Annual Report 2014

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Continued
for year ended 31 December 2014

3. Significant accounting policies continued
Foreign currencies
The individual financial statements of each Group company are prepared in the currency of the primary economic environment in which it operates
(its functional currency). For the purpose of these financial statements US Dollars (US$) is the functional currency of the Group and the presentation
currency of the Group.

In preparing the financial statements of the individual companies, transactions in currencies other than the entity’s functional currency (foreign
currencies) are recorded at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items
denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated
in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured
in terms of historical cost in a foreign currency are not retranslated.

Exchange differences are recognised in profit or loss in the period in which they arise except for exchange differences on monetary items receivable
from or payable to a foreign operation for which settlement is neither planned nor likely to occur, which form part of the net investment in a foreign
operation, and which are recognised in the foreign currency translation reserve and recognised in profit or loss on disposal of the net investment.

For the purpose of presenting consolidated financial information, the assets and liabilities of the Group’s subsidiaries are expressed in US Dollars
using exchange rates prevailing at the end of the reporting period. Income and expense items are translated at the average exchange rates for
the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are
used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity (attributed to non-controlling
interests as appropriate).

On the disposal of a foreign operation (i.e. a disposal of the Group’s entire interest in a foreign operation, or a disposal involving loss of control over
a subsidiary that includes a foreign operation, loss of joint control over a jointly controlled entity that includes a foreign operation, or loss of significant
influence over an associate that includes a foreign operation), all of the accumulated exchange differences in respect of that operation attributable
to the Group are reclassified to profit or loss. Any exchange differences that have previously been attributed to non-controlling interests are
derecognised, but they are not reclassified to profit or loss.

taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.

Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from ‘profit before tax’ as reported in the consolidated
statement of comprehensive income because of items of income and expense that are taxable or deductible in other years and items that are never
taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end
of the reporting period.

Deferred tax
Deferred tax is recognised on temporary differences between the carrying amounts of the assets and liabilities in the financial statements and
the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary
differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits
will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised
if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities
in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint
ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not
reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that
sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised based on tax
laws and rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax is charged or credited in the consolidated
statement of comprehensive income, except when it relates to items charged or credited in other comprehensive income, in which case the deferred
tax is also dealt with in other comprehensive income.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when
they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

Financial StatementsGULF MARINE SERVICES PLC Annual Report 2014long term incentive plans
The fair value of an equity instrument is determined at the grant date based on market prices if available, taking into account the terms and conditions
upon which those equity instruments were granted. If market prices are not available for share awards, the fair value of the equity instruments is
estimated using a valuation technique to derive an estimate of what the price of those equity instruments would have been at the relevant
measurement date in an arm’s length transaction between knowledgeable, willing parties.

Equity-settled share based payments to employees are measured at the fair value of the instruments, using a binomial model together with Monte
Carlo simulations as at the grant date, and is expensed over the vesting period. The value of the expense is dependent upon certain key assumptions
including the expected future volatility of the Group’s share price at the date of grant. The fair value measurement reflects all market based vesting
conditions. Service and non-market performance conditions are taken into account in determining the number of rights that are expected to vest.
The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised
estimate, with a corresponding adjustment to equity reserves.

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Financial assets
The Group has the following financial assets: cash and cash equivalents, trade and other receivables (excluding prepayments and advances to
suppliers) and amounts due from related parties. These financial assets are classified as ‘loans and receivables’. The classification depends on the
nature and purpose of the financial asset and is determined at the time of initial recognition.

Cash and cash equivalents
Cash and cash equivalents include cash in hand and balances held with banks with original maturities of three months or less.

Trade and other receivables and amounts due from related parties
Trade and other receivables (excluding prepayments and advances to suppliers) and amounts due from related parties that have fixed or determinable
payments that are not quoted in an active market are classified as loans and receivables. Loans and receivables are measured at amortised cost using
the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term
receivables or when the recognition of interest would be immaterial.

Impairment of financial assets
Financial assets are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when
there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future
cash flows of the investment have been affected.

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Objective evidence of impairment could include:

– significant financial difficulty of the issuer or counterparty; or
– default or delinquency in interest or principal payments; or
– it becoming probable that the borrower will enter bankruptcy or financial reorganisation.

For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired individually are subsequently assessed
for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of
collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period, and observable changes in
national or local economic conditions that correlate with default on receivables.

A provision for impairment of 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 the receivables. The amount of the provision is the difference between the asset’s carrying amount and the
present value of estimated future cash flows, discounted at the effective interest rate. The provision is determined by reference to previous
experience of recoverability for receivables in each market in which the Group operates.

Impairment of financial assets
For financial assets carried at amortised cost, the amount of the impairment loss recognised is the difference between the asset’s carrying amount
and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables,
where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off
against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the
carrying amount of the allowance account are recognised in profit or loss.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the
impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the
investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

Derecognition of financial assets
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial
asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially
all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and
an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial
asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

INTRODUCTIONPERFORMANCEGOVERNANCEADDITIONAL INFORMATIONGULF MARINE SERVICES PLC Annual Report 2014

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Continued
for year ended 31 December 2014

3. Significant accounting policies continued
Financial liabilities and equity instruments
Classification as debt or equity
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement.

Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments
issued by the Group are recorded at the proceeds received, net of direct issue costs.

Financial liabilities
Financial liabilities are classified as either financial liabilities at Fair Value Through Profit or Loss ‘FVTPL’ or ‘other financial liabilities’.

Derivatives that are not designated and effective as hedging instruments are classified as financial liabilities and are held at FVTPL. Derivatives held
at FVTPL are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at the
end of each reporting period with the resulting gain or loss recognised in profit or loss immediately.

Trade and other payables, bank borrowings, loan from related parties, due to related parties and other liabilities are classified as ‘other financial
liabilities’. Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other financial liabilities are
subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis,
except for short-term payables or when the recognition of interest would be immaterial.

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant
period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability,
or, where appropriate, a shorter period.

Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or expire.

Derivative financial instruments
The Group enters into foreign exchange forward contracts to manage its exposure to foreign exchange risk.

Derivatives that are not designated and effective as hedging instruments are classified as financial liabilities or financial assets and are held at FVTPL.
Derivatives held at FVTPL are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to
their fair value at the end of each reporting period with the resulting gain or loss recognised in profit or loss immediately. All derivatives are carried
at their fair values as assets where the fair values are positive and as liabilities where the fair values are negative. A derivative is presented as a
non-current asset or a non-current liability if the remaining maturity of the instrument is more than 12 months and it is not expected to be realised
or settled within 12 months. Other derivatives are presented as current assets or current liabilities.

Fair values of the derivatives are carried out by independent valuers by reference to quoted market prices, discounted cash flow models and recognised
pricing models as appropriate. They represent Level 2 financial instruments under the IFRS hierarchy. Changes in the fair value of derivative financial
instruments that do not qualify for hedge accounting are recognised in profit or loss as they arise. Derivative financial instruments that do not qualify
for hedge accounting are classified as held for trading derivatives.

4. critical accounting judgments and key sources of estimation uncertainty
In the application of the Group’s accounting policies, which are described in note 3, the Directors are required to make judgments, estimates and
assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated
assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which
the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and
future periods.

The following are the critical judgments and key sources of estimation which management has made in the process of applying the Group’s
accounting policies and that have the most significant effect on the amounts recognised in the financial statements:

critical judgments and key sources of estimation in applying accounting policies
Useful lives and residual values of vessels
Management reviews the residual values and estimated useful lives of its vessels at the end of each annual reporting period in accordance
with IAS 16 Property, Plant and Equipment. The residual values of vessels and related equipment are determined taking into consideration the
expected scrap value of the vessels, which is calculated based on the weight and the market rate of steel at the time of asset purchase. If the
price per unit of steel at the balance sheet date varies significantly from that at the date of purchase the residual value is reassessed to reflect
changes in market value.

The estimated useful lives of vessels of between 25-35 years are management’s best estimate, with the useful life of any given vessel dependent on
factors such as the operating environment it is expected to work in (including water depth and prevailing weather conditions) and the condition of the
vessel both at acquisition and at each balance sheet date.

Financial StatementsGULF MARINE SERVICES PLC Annual Report 2014Impairment of property, plant and equipment
Management evaluate the carrying amounts of the Group’s vessels and vessels under construction to determine whether there is any indication that
those vessels have suffered an impairment loss. If any such indication exists, the recoverable amount of vessels is estimated in order to determine the
extent of the impairment loss (if any).

The recoverable amount is the higher of fair value less costs to sell and value in use. As part of the process of assessing fair values less costs to sell
of the vessel, management obtain vessel valuations from leading, independent and internationally recognised ship brokers on an annual basis or when
there is an indication that the value of the vessel may be impaired. In assessing value in use, the estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset
for which the estimates of future cash flows have not been adjusted. The projection of cash flows related to vessels is complex and requires the use
of various estimates including future day rates, vessel utilisation and discount rates.

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5. Segment reporting
Management have identified that the Directors and the senior management team are the chief operating decision makers in accordance with the
requirements of IFRS 8 ‘Operating Segments’. Segment performance is assessed based upon adjusted gross profit, which represents gross profit
before depreciation and amortisation and loss on write off of assets. The reportable segments have been identified by management based on the
size and type of asset in operation.

The operating and reportable segments of the Group are (i) Small vessels, which include all K-class vessels, (ii) Large vessels, which include all E-class
vessels, and (iii) Other vessels, which include two small legacy vessels and one accommodation barge (Khawla) which do not form part of the Small or
Large vessels segments.

The K-class vessels segment comprises the Naashi, Kamikaze, Kikuyu, Kawawa, Kudeta, Keloa and Kinoa vessels. The E-class vessels segment
comprises of the Endeavour, Endurance and Enterprise vessels. Both of these operating segments earn revenue related to the hiring of vessels and
related services including charter hire income, messing and accommodation services, personnel hire and hire of equipment. The accounting policies
of the operating segments are the same as the Group’s accounting policies described in note 3.

Small vessels
Large vessels
Other

Total

Less:
Loss on scrapping of property, plant and equipment
Depreciation charged to cost of sales
Amortisation charged to cost of sales

Gross profit
General and Administrative expenses
Finance income
Finance expense
Other income
Loss on sale of asset
Foreign exchange

Profit before taxation

revenue

Adjusted gross profit

2014
US$’000

104,424
79,351
12,779

2013
US$’000

94,448
77,701
12,115

2014
US$’000

75,623
60,493
7,574

2013
US$’000

65,533
63,548
7,033

196,554

184,264

143,690

136,114

–
(15,973)
(1,257)
126,460
(25,417)
843
(21,354)
245
–
(408)

(1,507)
(15,085)
(764)
118,758
(14,778)
693
(29,495)
–
(1,247)
(637)

80,369

73,294

The total revenue from reportable segments which comprises the Small and Large vessels is US$ 183.77 million (2013: US$ 172.15 million).
The Other segment does not constitute a reportable segment per IFRS 8 Operating Segments.

Segment assets and liabilities, including depreciation, amortisation and additions to non-current assets, are not reported to the chief operating
decision makers on a segmental basis and are therefore not disclosed.

Segment revenue reported above represents revenue generated from external customers. There were no inter-segment sales in the periods.

information about major customers
Certain customers individually accounted for more than 10% of the Group’s revenue. During the year, 3 customers (2013: 3) accounted for more than
10% of the Group’s revenues. The related revenue figures for these major customers, the identity of which may vary by year, were US$ 53.66 million
(2013: US$ 47.84 million), US$ 42.19 million (2013: US$ 40.80 million) and US$ 21.25 million (2013: US$ 21.13 million). The revenue from these
customers is attributable to the Large vessel and Small vessel reportable segments.

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INTRODUCTIONPERFORMANCEGOVERNANCEADDITIONAL INFORMATIONGULF MARINE SERVICES PLC Annual Report 2014

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Continued
for year ended 31 December 2014

5. Segment reporting continued
geographical segments
Revenue by geographical segment is based on the geographical location of the customer as shown below.

United Arab Emirates
Rest of Middle East and Africa
Total - Middle East and Africa
United Kingdom

Worldwide Total

6. presentation of adjusted results
The following table provides a reconciliation between the Group’s adjusted and statutory financial results:

2014
US$’000

87,417
38,491
125,908
70,646

2013
US$’000

62,795
43,768
106,563
77,701

196,554

184,264

Revenue
Cost of sales
– Operating expenses
– Depreciation and amortisation

Gross profit
General and administrative
– Depreciation
– IPO-related costs*
– Management fee**
– Other administrative costs

Operating profit
Finance income
Finance expense
Other income/(loss)
Loss on sale of asset
Foreign exchange loss, net

Profit before taxation
Tax

Net profit

Profit attributable to
Owners of the Company
Non-controlling interest

Earnings per share (cents)
Supplementary non-statutory information
Operating profit
Add: Depreciation and amortisation charges

EBITDA

Year ended 31 December 2014

Year ended 31 December 2013

Adjusted
results
US$’000

196,554

(52,864)
(17,230)
126,460

(887)
–
–
(18,844)
106,729
843
(21,354)
245
–
(408)
86,055
(4,744)

81,311

80,751
560
23.81

106,729
18,117

124,846

Adjusting
items
US$’000

Statutory
total
US$’000

adjusted
results
US$’000

adjusting
items
US$’000

–

–
–
–

196,554

184,264

(52,864)
(17,230)
126,460

(48,150)
(17,356)
118,758

–
(5,686)
–
–
(5,686)
–
–
–
–
–
(5,686)
–

(5,686)

(887)
(5,686)
–
(18,844)
101,043
843
(21,354)
245
–
(408)
80,369
(4,744)

(901)
–
–
(11,408)
106,449
693
(29,495)
31
(1,278)
(637)
75,763
(3,861)

75,625

71,902

–

–
–
–

–
(2,149)
(320)
–
(2,469)
–
–
–
–
–
(2,469)
–

(2,469)

Statutory
total
US$’000

184,264
–
(48,150)
(17,356)
118,758

(901)
(2,149)
(320)
(11,408)
103,980
693
(29,495)
31
(1,278)
(637)
73,294
(3,861)

69,433

(5,686)
–
(1.67)

75,065
560
22.14

70,670
1,232
23.56

(2,469)
–
(0.83)

68,201
1,232
22.73

(5,686)
–

101,043
18,117

106,449
18,257

(2,469)
–

103,980
18,257

(5,686)

119,160

124,706

(2,469)

122,237

IPO-related costs, by their nature, are not considered part of the Group’s underlying business. Further details are given in note 7.

*
** Management fee represents the fees paid to the controlling shareholders, Gulf Capital PJSC, in 2013. These management fees are no longer payable. This was not

presented as an adjusting item in June 2014 Interim Results.

Financial StatementsGULF MARINE SERVICES PLC Annual Report 2014
7. general and administrative expenses
Transaction costs incurred during the period in relation to the completion of the Company’s Premium Listing on the London Stock Exchange
totalled US$ 15.2 million. US$ 5.7 million has been charged to general and administrative expenses in the consolidated statement of comprehensive
income, and US$ 9.5 million, attributable to the issue of new equity, has been deducted from the share premium account. The IPO costs of
US$ 5.7 million include US$ 1.4 million relating to the remaining 15% of the pre-IPO SARs scheme, further details of which are provided in note 36.

8. earnings per share

Earnings for the purpose of basic and diluted earnings per share being profit for the
period attributable to owners of the parent (US$’000)
Earnings for the purpose of adjusted basic and diluted earnings per share (US$’000) (see note 6)
Weighted average number of shares (‘000)
Weighted average diluted number of shares in issue (‘000)
Basic earnings per share (cents)
Diluted earnings per share (cents)
Adjusted earnings per share (cents)

Adjusted diluted earnings per share (cents)

31 December
2014

31 December
2013

75,065
80,751
339,079
340,523
22.14
22.04
23.81

23.71

68,201
70,670
300,000
300,000
22.73
22.73
23.56

23.56

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Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company for the period (as disclosed in the income
statement) by the weighted average number of ordinary shares in issue during the period.

Adjusted earnings per share is calculated on the same basis but uses the earnings for the purpose of basic earnings per share (shown above)
adjusted by adding back IPO-related costs which have been charged to the income statement in the period (US$ 5.7 million). The adjusted earnings
per share is presented as the Directors consider it provides an additional indication of the underlying performance of the Group.

Diluted earnings per share is calculated by dividing the profit attributable to equity holders of the Company for the period by the weighted average
number of ordinary shares in issue during the period, adjusted for the weighted average effect of share options outstanding during the period.

Adjusted diluted earnings per share is calculated on the same basis but uses adjusted profit (note 6) attributable to equity shareholders of
the Company.

The following table shows a reconciliation between the basic and diluted weighted average number of shares:

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Weighted average basic number of shares in issue
Effect of share options under LTIP schemes

Weighted average diluted number of shares in issue

2014
(000’s)

339,079
1,444

2013
(000’s)

300,000
–

340,523

300,000

The impact of the share appreciation rights, disclosed in note 36, on dilutive earnings per share is not included in the calculation above as the number
of shares that could be exercised is dependent on certain future events.

In accordance with the principles of merger accounting, the weighted average number of shares assumes that the 300 million shares issued as part
of the Group restructuring (see note 3) were in place throughout the comparative period.

INTRODUCTIONPERFORMANCEGOVERNANCEADDITIONAL INFORMATIONGULF MARINE SERVICES PLC Annual Report 2014

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Continued
for year ended 31 December 2014

9. property, plant and equipment

Cost
Balance at 1 January 2013
Additions
Transfers
Disposals
Assets written off

Balance at 1 January 2014
Additions
Transfers
Disposals

Capital
work-in-
progress
US$’000

Land,
building
and
improvement
US$’000

Vessel
– spares,
fittings and
other
equipment
US$’000

Office
equipment
and fittings
US$’000

9,050
52,992
(11,332)
–
–

50,710
136,607
(98,606)
–

6,144
20
197
–
–

6,361
–
1,039
–

9,826
–
532
(2,269)
–

8,089
2,260
505
(268)

3,131
143
–
(9)
–

3,265
143
1,039
–

Total
vessels
US$’000

508,652
224
10,603
–
(1,959)

517,520
1,675
96,023
(50)

Motor
vehicles
US$’000

Total
US$’000

468
93
–
(120)
–

441
33
–
(76)

537,271
53,472
–
(2,398)
(1,959)

586,386
140,718
–
(394)

Balance at 31 December 2014

615,168

88,711

7,400

10,586

4,447

398

726,710

Accumulated depreciation
Balance at 1 January 2013
Eliminated on disposal of assets
Eliminated on assets written off
Depreciation expense

Balance at 1 January 2014
Eliminated on disposal of assets
Depreciation expense

Balance at 31 December 2014

Carrying value

Balance at 31 December 2014

Balance at 31 December 2013

Total
vessels
US$’000

70,228
–
(452)
13,685

83,461
(4)
15,057

98,514

Capital
work-in-
progress
US$’000

Land,
building
and
improvement
US$’000

Vessel
– spares,
fittings and
other
equipment
US$’000

Office
equipment
and fittings
US$’000

–
–
–
–

–
–
–

–

3,925
–
–
300

4,225
–
199

4,424

2,976

2,136

4,308
(163)
–
1,131

5,276
(268)
815

5,823

4,763

2,813

2,534
(7)
–
275

2,802
–
325

3,127

1,320

463

516,654

434,059

88,711

50,710

Motor
vehicles
US$’000

Total
US$’000

271
(102)
–
99

268
(59)
89

298

81,266
(272)
(452)
15,490

96,032
(331)
16,485

112,186

100

173

614,524

490,354

The carrying amount of vessels held under finance leases is US$ 91.4 million (2013: US$ 94.2 million).

Depreciation amounting to US$ 15.97 million (2013: US$ 15.08 million) has been allocated to cost of sales. The balance of the depreciation for
the year is charged to administrative expenses.

Included in additions to the vessels under construction is US$ 3.4 million (2013: US$ 1.06 million) in respect of capitalised borrowing costs.
The capitalisation rate used to determine this figure was 5.65% (2013: 5.96%), based on specific borrowing rates.

Certain vessels, with a total net book value of US$ 337.5 million (2013: US$ 345.9 million), have been mortgaged as security for the loans extended
by the Group’s bankers (note 20).

Financial StatementsGULF MARINE SERVICES PLC Annual Report 201410. intangible assets

Cost
Accumulated amortisation and impairment
Balance at 1 January 2013
Amortisation expense
Balance at 1 January 2014
Amortisation expense

Balance at 31 December 2014

Carrying value

at 31 December 2014

at 31 December 2013

Property
leases
US$’000

Customer
relationships
US$’000

846

7,337

725
121
846
–

846

–

5,837
375
6,212
375

6,587

750

1,125

Total
US$’000

8,183

6,562
496
7,058
375

7,433

750

1,125

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The intangible assets were acquired as part of the acquisition of Gulf Marine Services WLL and Offshore Holding Investment Group (OHI) in 2007.
Amortisation of intangibles amounting to US$ 0.4 million (2013: US$ 0.5 million) has been allocated to general and administrative expenses.

11. Dry docking expenditure
The movement in dry docking expenditure is summarised as follows:

At 1 January
Expenditure incurred during the year
Amortised during the year

At 31 December

Amortisation for the year has been charged to operating costs.

12. trade and other receivables

Trade receivables
Accrued income
Prepayments and deposits*
Advances to suppliers
Other receivables
Due from related parties (see note 29)

2014
US$’000

778
4,656
(1,257)

4,177

2013
US$’000

687
855
(764)

778

2014
US$’000

36,754
5,099
6,923
644
185
343

49,948

2013
US$’000

22,915
14,465
5,215
422
162
70

43,249

* Prepayments and deposits include guarantee deposits and pledged deposits of US$ 0.82 million (2013: US$ 2.34 million). Guarantee deposits are paid by the Group
for employee work visas under UAE labour laws. These deposits become refundable to the Group upon the cancellation of an employee’s work visa. Work visas are
not granted indefinitely in the UAE and as such these deposits which are currently held by the government in the UAE are refundable to the Group. These work visa
deposits amounted to US$ 0.48 million (2013: US$ 0.32 million). Pledged deposits represent an amount set aside as a guarantee for a loan repayment amounting to
US$ 0.34 million (2013: US$ 2.02 million). The Group has no right to access or utilise the proceeds set aside as pledged deposits, other than for repayment of the
underlying loan.

Trade receivables, amounting to US$ 26.2 million (2013: US$ 21.6 million) have been assigned as security against the loans extended by the Group’s
bankers (note 20).

Trade receivables disclosed above are classified as loans and receivables and are therefore measured at amortised cost. Trade and other receivables
are all current and the Directors consider that the carrying amount of trade and other receivables is approximately equal to their fair value due to
the very short time between inception and maturity (based on Level 2 fair value measurements as defined by the fair value hierarchy according to
IFRS 13).

The average credit period given is 60 days (2013: 60 days). The normal credit period granted to customers is 30 days. Before accepting any new
customer the Group assesses the potential credit quality of the customer. The Group has policies in place to ensure that credit sales are rendered
to customers with an appropriate credit history.

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INTRODUCTIONPERFORMANCEGOVERNANCEADDITIONAL INFORMATIONGULF MARINE SERVICES PLC Annual Report 2014

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Continued
for year ended 31 December 2014

12. trade and other receivables continued
The Group reviews the ageing of trade receivables regularly and the need for allowances against doubtful debts is considered for trade receivables
over 60 days based on estimated irrecoverable amounts determined by reference to past default experience of the counterparty and an analysis
of the counterparty’s current financial position.

The Group does not hold any collateral or other credit enhancements over any of its trade receivables nor does it have a legal right of offset against
any amounts owed by the Group to the counterparty.

The movement in the allowance for doubtful receivables during the year was as follows:

At 1 January
Provision during the year
Write-off

At 31 December

2014
US$’000

2013
US$’000

105
1,278
–

1,383

–
105
–

105

Included in the Group’s trade receivables balance are debtors with a carrying amount of US$ 7.59 million (2013: US$ 15.59 million) which are past due
at the reporting date but for which the Group has not provided as there has not been a significant change in credit quality and the amounts are still
considered recoverable. The average age of these receivables is 71 days (2013: 73 days).

In determining the recoverability of a trade receivable, the Group considers any change in the credit quality of the trade receivable from the date
credit was initially granted up to the reporting date. Trade receivables are considered past due once they have passed their contracted due date.

Several customers account for a significant portion of the total trade receivables balance (see revenue by segment information in note 5); however,
credit risk is considered to be limited due to historical performance and ongoing assessments of customer credit and liquidity positions.

ageing of past due but not impaired

Past due for 30 to 60 days
Past due for 60 to 90 days
Past due for 90 to 120 days
Past due for more than 120 days

2014
US$’000

4,132
1,456
179
1,828

7,595

2013
US$’000

8,988
3,261
497
3,205

15,591

The amounts past due for more than 120 days at the end of 2014 primarily relate to retention amounts withheld by Saudi Arabian customers
amounting to US$ 1.80 million.

13. cash and cash equivalents

Interest-bearing
Held in UAE banks
Held in banks outside UAE

Non-interest-bearing
Held in UAE banks
Held in banks outside UAE

Total cash at bank and in hand

Presented as:
Restricted cash included in trade and other receivables (note 12)
Cash and cash equivalents

Total

2014
US$’000

2013
US$’000

36,702
–

5,325
18,325

60,352

–
–

48,311
921

49,232

820
59,532

60,352

2,335
46,897

49,232

The carrying value of these cash assets is approximately equal to their fair value due to the liquid nature of the asset. These represent Level 1 fair
value measurements as defined by the fair value hierarchy according to IFRS 13.

Financial StatementsGULF MARINE SERVICES PLC Annual Report 2014

14. Share capital
The Company was incorporated on 24 January 2014 with a share capital of 300 million shares at a par value of £1 each. Subsequently on 5 February
2014, as part of the Group restructuring, the Company undertook a capital reduction by solvency statement, in accordance with s643
of the Companies Act 2006. The nominal value of the authorised and issued ordinary shares was reduced from £1 to 10p.

On 19 March 2014, the Company successfully completed its initial public offering (IPO) on the London Stock Exchange. A total of 49,527,804 shares
with a par value of 10 pence per share were issued at a price of 135 pence (US$ 2.24) per share.

The movement in issued share capital and share premium is provided below.

The share capital of Gulf Marine Services PLC as at 31 December 2014 was as follows:

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Authorised share capital

Issued and fully paid

The share capital of GMS Global Commercial Investments LLC as at 31 December 2013 was as follows:

Issued and fully paid

Issued share capital and share premium movement for the year ended 31 December 2014:

number
of ordinary
shares
(thousands)

349,528

ordinary
shares
US$’000

57,929

total
US$’000

57,929

number
of ordinary
shares
(thousands)

ordinary
shares
US$’000

273

total
US$’000

273

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At 1 January 2014
Group restructuring
– Restructuring
– Issue of new shares
– Capital reduction
Issue of new shares – IPO
Share issue costs

At 31 December 2014

Number
of ordinary
shares
(thousands)

Notes

Ordinary
shares
US$’000

273

Share
premium
US$’000

–

Total
US$’000

273

(1)
300,000
–
49,528
–

(273)
497,100
(447,390)
8,219
–

–
–
–
102,702
(9,455)

(273)
497,100
(447,390)
110,921
(9,455)

349,528

57,929

93,247

151,176

15. group restructuring reserve
The Group restructuring reserve arises on consolidation under the pooling of interests (merger accounting) method used for Group restructuring.
Under this method, the Group is treated as a continuation of GMS Global Commercial Investments LLC (the predecessor Parent Company) and
its subsidiaries. At the date the Company became the new Parent Company of the Group via a share-for-share exchange, the difference between
the share capital of GMS Global Commercial Investments LLC and the Company, amounting to US$ 49.44 million, was recorded in the books
of Gulf Marine Services PLC as a Group restructuring reserve. This reserve is non-distributable.

16. Share option reserve
Share option reserve of US$ 0.56 million (2013: US$ nil) relates to awards granted to employees under the long-term incentive plan (note 37).
The charge is included in general and administrative expenses in the consolidated statement of comprehensive income.

INTRODUCTIONPERFORMANCEGOVERNANCEADDITIONAL INFORMATIONGULF MARINE SERVICES PLC Annual Report 2014

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Continued
for year ended 31 December 2014

17. capital contribution
As part of the Group restructuring (note 3) the pre-IPO shareholders resolved to transfer a capital contribution balance of US$ 70.75 million
to retained earnings.

The movement in capital contribution reserve is as follows:

Balance as on 1 January 2014
Capital contribution from a shareholder (i)
Share appreciation rights (ii)

Movement during the period
Transfer to Retained Earnings
Provision for Share appreciation rights (ii)

At 31 December 2014

2014
US$’000

70,750
7,777

78,527

(70,750)
1,400

9,177

(i) The capital contribution balance represents the net assets transferred by Bridge Capital LLC, a wholly owned subsidiary of Gulf Capital PJSC, to the Company
for no consideration. This transfer took place on 17 July 2007. Effective 30 June 2014, the shareholders passed a resolution to transfer US$ 70.8 million to
retained earnings.

(ii) During 2013 US$ 7.8 million was transferred from share appreciation rights payable to capital contribution as, effective 1 January 2013, the shareholders have
assumed the obligation to settle the share appreciation rights. This balance is not available for distribution. An additional charge in respect of this scheme of
US$ 1.4 million was made in 2014. See note 36 for further details.

18. restricted reserve
Restricted reserve represents the statutory reserve of certain subsidiaries. As required by the UAE Commercial Companies Law, 10% of profit for the
year is transferred to the statutory reserve until the reserve equals 50% of the share capital. This reserve is not available for distribution. No amounts
were transferred to this reserve during any of the periods shown.

19. reserves
The Group’s consolidated statement of changes in equity is disclosed as a part of the primary statements on pages 72 to 75. Below is a description
of the nature and purpose of the individual reserves:

– Share capital represents the nominal value of shares issued (note 14).
– Share premium account includes the amounts paid over nominal value in respect of share issued, net of related costs (note 14).
– Restricted reserves include certain reserves maintained by subsidiaries in compliance with the relevant Companies Law applicable (note 18).
– Capital Contributions represent certain contributions made by shareholder for nil consideration (note 17).
– Group restructuring reserve represents reserve arises on consolidation under the pooling of interests (merger accounting) method used

for Group restructuring (note 15).

– The Company’s Share option reserve represents the cumulative share-based payment charged to reserves (note 16).
– Foreign currency translation reserves represents differences on foreign currency net investments arising from the retranslation of the net

investments in overseas subsidiaries.

– Retained profits include the accumulated realised and certain unrealised gains and losses made by the Company and the Group.

Financial StatementsGULF MARINE SERVICES PLC Annual Report 201420. Bank borrowings
Secured borrowings at amortised cost:

Working capital facility
Term loans

Less: Unamortised issue costs

Bank borrowings are presented in the consolidated statement of financial position as follows:

Non-current portion
Current portion

2014
US$’000

20,000
240,500
260,500
(11,344)

2013
US$’000

20,000
253,500
273,500
(8,219)

249,156

265,279

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2014
US$’000

225,741
23,415

2013
US$’000

254,269
11,010

249,156

265,279

In February 2014, the bank facility which was entered into in 2013 with Abu Dhabi Islamic Bank (see below) was restructured resulting in amendments
to some of the key terms of the loan as follows:

– The loan repayment period was extended by one (1) year to six (6) years, being repayable in 2019;
– The loan margin rate was reduced to 4.1% (December 2013: 5.2%) per annum plus LIBOR;
– The term loan facility to fund capital expenditure was increased from US$ 80 million to US$ 110 million. The entire loan facility remained undrawn

during the year and is available for draw down until June 2016;

– The working capital facility was increased to US$ 40 million (December 2013: US$ 20 million). During the year ended 31 December 2014

US$ 20 million was utilised with US$ 20 million remaining undrawn during the year.

The facility remains secured by mortgages over certain Group vessels, with a net book value at year end of US$ 337.5 million.

31 December 2014:
Term loan – Syndicated Ijara Facility
Working capital facility
Term loan
Unamortised issue costs

31 December 2013:
Term loan – Syndicated Ijara Facility
Working capital facility
Term loan
Unamortised issue costs

Outstanding amount

Current
US$’000

Non-current
US$’000

Total
US$’000

Unused
facility
US$’000

26,000
–
–
(2,585)

214,500
20,000
–
(8,759)

240,500
20,000
–
(11,344)

–
20,000
110,000
–

23,415

225,741

249,156

130,000

13,000

–
(1,990)

240,499
20,000
–
(6,230)

253,499
20,000
–
(8,220)

11,010

254,269

265,279

–
–
80,000
–

80,000

Security

Interest rate

Maturity

Secured 4.1% per annum plus LIBOR
Secured 4.1% per annum plus LIBOR
Secured 4.1% per annum plus LIBOR

September 2019
September 2019
September 2019

Secured 5.2% per annum plus LIBOR
Secured 5.2% per annum plus LIBOR
Secured 5.2% per annum plus LIBOR

September 2018
September 2018
September 2018

In 2013, a subsidiary of the Group had entered into a Shari’a-compliant syndicated financing arrangement, which is asset-backed, with a consortium
of banks, led by Abu Dhabi Islamic Bank. The legal form of the arrangement is a traditional Islamic Ijara structure (effectively a sale and leaseback
transaction), the facility has, however, been treated as a bank loan as legal ownership of the related assets remains with the Group and the associated
property, plant and equipment have therefore been retained within these financial statements to reflect the substance of the transaction.

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INTRODUCTIONPERFORMANCEGOVERNANCEADDITIONAL INFORMATIONGULF MARINE SERVICES PLC Annual Report 2014

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Continued
for year ended 31 December 2014

21. loans from related parties

Loans from other related parties
Loan (1) Gulf Capital PJSC
Loan (2) Bridge Capital

Loans from shareholders
Loan (3) Green Investment Commercial Investments LLC
Loan (4) Al Ain Capital LLC
Loan (5) Horizon Energy LLC

Total loans from related parties

2014
US$’000

2013
US$’000

–
–

–

–
–
–
–

–

645
13,703

14,348

1,125
2,056
1,975
5,156

19,504

During the year, the Group repaid loans from shareholders and other related parties totalling US$ 19.5 million using proceeds from the IPO.
These payments settled the loans payable to Green Investment Commercial Investments LLC, Al Ain Capital LLC, and Horizon Energy LLC.

22. taxation
Tax is calculated at the rates prevailing in the respective jurisdictions in which the Group operates. The overall effective rate is the aggregate of
taxes paid in jurisdictions where income is subject to tax (being principally Qatar, the United Kingdom, Tunisia and Saudi Arabia), divided by the
Group’s profit.

Profit from continuing operations before tax
Tax at the UK corporation tax rate of 21.5% (2013 : 23.25%)
Effect of lower tax rates in overseas jurisdiction
Total tax charge
Split between:
Adjustment in respect of prior years
Current tax
Deferred tax
Tax charge per financial statements

Effective tax rate on continuing operations

2014
US$’000

80,369
17,279
(12,535)
4,744

2013
US$’000

73,294
17,041
(13,180)
3,861

386
4,358
–
4,744

–
3,890
(29)
3,861

During the year tax on profits and withholding taxes of the Group from operations were 10% in Qatar (2013: 10%) and 21.5% in the United Kingdom
(2013: 23.25%). The Group incurred 5% withholding taxes on revenue (2013: 5%) and 2.5% Zakat tax on profit from operations in Saudi Arabia.
The withholding tax included in the current tax charge amounted to US$ 1.3 million (2013: US$ 1.6 million).

The Group expects the overall effective tax rate in the future to vary according to local tax law changes in jurisdictions which incur taxes, as well
as any changes to the share of the Group profits which arise in tax-paying jurisdictions.

At the balance sheet date, the Group has unused tax losses of $5.07 million available for offset against future profits. No deferred tax asset has
been recognised in respect of this as it is not considered probable that there will be future taxable profits available. Tax losses may be carried
forward indefinitely.

23. Provision for employees’ end of service benefits
The movement in the provision employees’ for end of service benefits during the year was as follows:

At the beginning of the year
Provided during the year
Paid during the year

At the end of the year

2014
US$’000

1,910
701
(143)

2,468

2013
US$’000

1,636
525
(251)

1,910

Financial StatementsGULF MARINE SERVICES PLC Annual Report 201424. trade and other payables

Trade payables
Accrued expenses
VAT and other taxes payable
Other payables
Due to a related party (see note 29)

2014
US$’000

13,109
14,984
1,636
391
–

30,120

2013
US$’000

8,354
10,309
1,733
1,624
13

22,033

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The average credit period on purchases is 90 days (2013: 90). The Group has financial risk management policies in place to ensure that all payables
are paid within the credit timeframe. No interest is payable on the outstanding balances.

Trade and other payables are all current and the Directors consider that the carrying amount of trade and other payables is approximately equal to
their fair value due to the short time between inception and maturity. These represent Level 2 fair value measurements as defined by the fair value
hierarchy according to IFRS 13.

25. revenue
The following is an analysis of the Group’s revenue for the year.

Charter hire
Mobilisation and demobilisation
Messing and accommodation
Maintenance
Sundry and equipment hire income

Further descriptions on the above types of revenue have been provided in note 3.

26. Finance expenses

Interest on bank borrowings
Interest on finance leases
Interest on loans from related parties (note 21)
Write-off of unamortised issue costs
Amortisation of issue costs
Fair value loss on derivative financial instrument
Finance expense
Less: Amounts included in the cost of qualifying assets

27. Finance income

Gain on revaluation of financial derivative
Interest received

2014
US$’000

182,566
1,274
12,247
332
135

2013
US$’000

168,140
4,478
10,381
670
595

196,554

184,264

2014
US$’000

12,252
10,280
382
–
1,816
61
24,791
(3,437)

2013
US$’000

14,072
10,836
2,150
2,154
1,340
–
30,552
(1,057)

21,354

29,495

2014
US$’000

2013
US$’000

–
843

843

541
152

693

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INTRODUCTIONPERFORMANCEGOVERNANCEADDITIONAL INFORMATIONGULF MARINE SERVICES PLC Annual Report 2014

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Continued
for year ended 31 December 2014

28. Profit for the year
The profit for the year is stated after charging:

Total staff costs (see below)
Depreciation of property, plant and equipment
Amortisation of dry docking expenditure
Amortisation of intangibles
(Gain)/loss on disposal of property, plant and equipment
Operating leases rentals
Auditor’s remuneration

The average number of full time equivalent employees (including executive directors) by geographic area was:

Middle East and Northern Africa
Rest of the world

Their aggregate remuneration comprised:

Wages and salaries
Employment taxes
End of service benefit
Share based payments

The analysis of the auditor’s remuneration is as follows:

Group audit fees

Total audit fees
Other assurance services including interim review fees
Corporate finance services
Other services

Total non-audit fees

Total fees

2014
US$’000

34,313
16,485
1,257
375
(38)
374
1,166

2013
US$’000

23,406
15,490
764
496
1,279
132
1,074

2014
Number

2013
number

499
74

573

325
69

394

2014
US$’000

32,879
170
701
563

34,313

2013
US$’000

22,795
86
525
–

23,406

2014
US$’000

2013
US$’000

245
245
153
640
128
921

112
112
–
892
70
962

1,166

1,074

Corporate finance services represent services provided as reporting accountants to the Company’s listing on the London Stock Exchange and form
part of the listing costs described in note 7.

For further information in the Group’s policy in respect of the Auditor’s remuneration see page 49 of the Report of the Audit and Risk Committee.

Financial StatementsGULF MARINE SERVICES PLC Annual Report 201429. related party transactions
Related parties comprise the Group’s major shareholders, Directors and entities related to them, companies under common ownership and/or
common management and control, their partners and key management personnel. Pricing policies and terms of the transactions with related parties
are approved by the Group’s Board.

Balances and transactions between Gulf Marine Services PLC and its subsidiaries, which are related parties, have been eliminated on consolidation
and are not disclosed in this note.

trading transactions
Details of long-term loans from related parties are provided in note 21. In addition, the following balances were outstanding at the end of the
reporting period:

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Amounts owed by related parties (see note 12):
Partner in relation to Saudi operations
Shareholders

Amounts owed to related parties:
Short-term loans from shareholders
Partner in relation to Saudi operations
Amounts due to Gulf Capital (included in accrued expenses
Interest due to First Gulf Bank (included in accrued expenses

Term loans due to First Gulf Bank (included in borrowings note 20)
Bank balances deposited with First Gulf Bank
Loans to related parties:

Loans to key management personnel

Notes

2014
US$’000

2013
US$’000

273
70
343

–
–
–
–
–
–
51

–

–
70
70

792
3
168
81
1,044
18,525
986

445

Amounts owed to related parties includes short-term trading balances classified within trade and other payables (see note 24) as well as an amount of Nil
(2013: US$ 0.78 million) due to the pre-IPO shareholders in relation to the purchase of the share appreciation rights on behalf of key management personnel.

The Group had provided several of its key management personnel with short-term loans at rates comparable to the average commercial rate of
interest. The loans to key management personnel were repaid during the year.

During the period, as part of the IPO, the Directors of the Company acquired 616,415 shares in the company at the IPO price of 135 pence (US$ 2.24)
per share for a total amount of US$ 1.38 million. There has been no change to the number of shares held by Directors as at 31 December 2014.

Certain members of key management personnel received share awards during 2014 with an associated fair value of US$ 19.48 million, under the
terms of the Group’s share appreciation rights (“SARs”) scheme set up prior to the IPO. On 1 January 2013, the obligation under the scheme, of which
85% had vested at 31 December 2013, were assumed by the pre-IPO shareholders of the Company and were settled by them during the current
period as cash of US$ 9.74 million and via the award of 4,348,475 shares at the IPO strike price of 135p per share. There is an additional 15% SAR award
which will become due at the earlier of a substantial exit of the pre-IPO shareholders and an agreed lock up period, and is dependent on achieving
an expected market rate of return. During the year a full provision of US$ 1.4 million was made in respect of the remaining 15% of unvested SAR.

Transactions with related parties included in the consolidated statement of comprehensive income are as follows:

Interest expense on loans from related parties
Interest income on loans to related parties (loans to management)
Management fees charged by Gulf Capital

Interest expense on loans from First Gulf Bank

2014
US$’000

2013
US$’000

382
(3)
–

–

2,150
(17)
320

1,245

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INTRODUCTIONPERFORMANCEGOVERNANCEADDITIONAL INFORMATIONGULF MARINE SERVICES PLC Annual Report 2014

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Continued
for year ended 31 December 2014

29. related party transactions continued
related parties
The Group’s principal subsidiaries are outlined in note 3. The related parties comprising of the Group’s major shareholders are outlined below.

Major shareholders
Green Investment Commercial Investments LLC
Al Ain Capital LLC (formerly Al Bateen Investment Company LLC)
Horizon Energy LLC

Ownership interest
50.05%
6.05%
6.05%

Partner in relation to Saudi operations
Suhayl A.M. Al Shoaibi & Sons Holding Co. Ltd

Relationship
Minority shareholder in GMS Saudi Arabia Ltd.

Other related parties
Gulf Capital PJSC (Gulf Capital)

GC Equity Partners Fund II, LP (‘‘GC Equity Partners II’’)

Relationship
100% shareholding in Green Investment Commercial Investments LLC.
Advises funds that hold shares in the Group.
An institutional fund sponsored and managed by Gulf Capital. The ultimate
controlling party of Gulf Capital.

Abu Dhabi Commercial Bank

8.16% Shareholding in Gulf Capital.

compensation of key management personnel
The remuneration of Directors and other members of key management during the year were as follows:

Short-term benefits
End of service benefits
Share-based payments (LTIPs)1
Dividends paid

2014
US$’000

2013
US$’000

3,073
128
323
4

3,528

1,625
46
–
–

1,671

1. In addition to the LTIP charge, there was a non-recurring charge in 2014 in relation to the SARS scheme, of which US$ 1.4 million related to key management personnel.

Compensation of key management personnel represents the charge to the consolidated statement of comprehensive income in respect of the
remuneration of the executive Directors and certain members of the senior management team.

Financial StatementsGULF MARINE SERVICES PLC Annual Report 201430. Net cash flow from operating activities

Operating activities
Profit for the year before taxation
Adjustments for:
Depreciation of property, plant and equipment
Amortisation of intangibles
Amortisation of dry docking expenditure
End of service benefit charge
End of service benefits paid
Provision for doubtful debts
Fair value loss/(gain) on derivative financial instrument
Loss on scrapping of property, plant and equipment
(Gain)/loss on disposal of property, plant and equipment
Share appreciation rights expense
Share options rights charge
Interest income
Interest expense
Write-off of unamortised issue costs
Payments of share appreciation rights
Other income
Amortisation of issue costs

Cash flow from operating activities before movement in working capital
Increase in trade and other receivables
Increase/(decrease) in trade and other payables

Cash generated from operations
Taxation paid

Net cash generated from operating activities

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2014
US$’000

2013
US$’000

80,369

73,294

16,485
375
1,257
701
(143)
1,278
61
–
38
1,400
562
(843)
19,475
–
–
(284)
1,816

15,490
496
764
525
(251)
105
(541)
1,507
1,278
–

(152)
26,001
2,154
(580)
–
1,340

122,547
(6,665)
8,087

121,430
(4,342)
(22)

123,969
(3,616)

117,066
(3,723)

120,353

113,343

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31. contingent liabilities
At 31 December 2014, the bankers of Gulf Marine Services WLL, one of the subsidiaries of the Group, had issued bid bonds, performance bonds
and labour guarantees amounting to US$ 0.82 million (2013: US$ 2.34 million) all of which were counter-indemnified by Offshore Holding Investment
SA, another subsidiary of the Group.

32. commitments
capital commitment

Contractual capital commitments

2014
US$’000

2013
US$’000

52,793

34,863

Capital commitments comprise mainly of capital expenditure, which has been contractually agreed with suppliers for future periods for new build
vessels or the refurbishment of existing vessels.

lease commitment
In January 2014, a subsidiary of the Group entered into an arrangement with a third party to lease a vessel commencing in 2015 for a five-year term
with a purchase option to acquire the vessel. The amount of the lease commitment during the term is US$ 45.2 million.

INTRODUCTIONPERFORMANCEGOVERNANCEADDITIONAL INFORMATIONGULF MARINE SERVICES PLC Annual Report 2014

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Continued
for year ended 31 December 2014

33. Obligations under finance leases
The Group leased certain vessels (Keloa 4306 and Kinoa 4307) under finance leases which were initially recorded at fair value at the inception of the
lease for US$ 50 million each. The lease term is five years.

The Group’s future minimum lease payments under financing leases are as follows:

Within one year
In the second to fifth year

Less: future finance charges

minimum lease payments

2014

49,228
50,326

2013

17,751
97,012

99,554
(15,603)

114,763
(25,980)

83,951

88,783

present value of minimum
lease payments

2014

41,478
42,473

83,951
–

83,951

2013

5,697
83,086

88,783
–

88,783

The Group has the option to purchase the barges at expiry of the lease period. The fair value of the Group’s lease obligations is approximately equal
to their carrying amount. The fair value of the financial lease obligations were determined in accordance with generally accepted pricing models based
on a discounted cash flow analysis, using appropriate market interest rates. These represent level 2 value measurements as defined by the fair value
hierarchy according to IFRS 13.

34. obligations under operating leases
Operating lease rental payments represent rentals payable by the Group for certain properties.

Lease payments under operating leases recognised as expense during the year

2014
US$’000

2013
US$’000

374

132

At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases,
which fall due as follows:

Within one year
In the second to fifth year

2014
US$’000

374
374

748

2013
US$’000

374
748

1,122

Operating leases are negotiated for an average term of three and five years for our UAE and UK offices, respectively and accordingly, rental costs are
fixed for an average term of three and five years retrospectively.

100

Financial StatementsGULF MARINE SERVICES PLC Annual Report 201435. Financial instruments
Categories of financial instruments

Financial assets:
Current assets
Cash and cash equivalents at amortised cost
Trade receivables and other debtors at amortised cost
Derivative financial instrument at fair value
Loans to related parties carried at amortised cost

Financial liabilities at amortised cost:
Financial liabilities recorded at amortised cost:
– Trade and other payables
– Bank borrowings (non–current)
– Obligations under a finance lease (non-current)
– Loan from related parties (non-current)
– Bank borrowings (current)
– Due to related parties (current)
– Obligations under a finance lease (current)

Financial liabilities recorded at amortised cost:

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2014
US$’000

2013
US$’000

59,532
43,201
–
–
102,733

28,484
225,741
42,473
–
23,415
–
41,478

46,897
39,948
541
445
87,831

20,301
254,269
83,086
19,504
11,010
782
5,697

361,591

394,649

capital risk management
The Group manages its capital to ensure its ability to continue as a going concern while maximising the return on equity. The Group does not have
a formalised optimal target capital structure or target ratios in connection with its capital risk management objectives. The Group’s overall strategy
in this regard remains unchanged throughout the years ended 31 December 2014 and 2013.

Significant accounting policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on
which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 3
to the financial statements.

Financial risk management objectives
The Group is exposed to the following risks related to financial instruments - credit risk, liquidity risk, cash flow, interest rate risk and foreign currency
risk. The management actively monitors and manages these financial risks relating to the Group.

credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group, and arises principally
from the Group’s trade and other receivables and bank balances. The Group has adopted a policy of only dealing with creditworthy counterparties
which have been determined based on credit checks and other financial analysis, such that significant revenue is generated by dealing with high
profile well known customers, for whom the credit risk is assessed to be low. The Group attempts to control credit risk by monitoring credit exposures,
limiting transactions with specific non-related counterparties, and continually assessing the creditworthiness of such non-related counterparties.
Cash balances held with banks are assessed to have low credit risk of default since these banks are highly regulated by the central banks of the
respective countries.

Concentration of credit risk arises when a number of counterparties are engaged in similar business activities, or activities in the same geographic
region, or have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in
economic, political or other conditions. Concentration of credit risk indicates the relative sensitivity of the Group’s performance to developments
affecting a particular industry or geographic location. During the year, vessels were chartered to four Middle East and three international oil
companies. At 31 December 2014, these seven companies accounted for 87% (2013: 85%) of the outstanding trade receivables. The credit risk
on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international agencies.

The amount that best represents maximum credit risk exposure on financial assets at the end of the reporting period, in the event of counterparties
failing to perform their obligations, generally approximates their carrying value. Trade and other receivables and balances with banks are not secured
by any collateral.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Continued
for year ended 31 December 2014

35. Financial instruments continued
Foreign currency risk management
The majority of the Group’s transactions are denominated in UAE Dirhams, Euros and US Dollars. As the UAE Dirham and the Saudi Riyal are pegged to
the US Dollar, balances in UAE Dirhams and Saudi Riyals are not considered to represent significant currency risk. Transactions in other foreign currencies
entered into by the Group are short-term in nature and therefore management considers that the currency risk associated with these transactions
is limited and consequently this risk is typically not hedged, other than in relation to significant foreign currency capital expenditure programmes.

The carrying amounts of the Group’s significant foreign currency denominated monetary assets and liabilities at the reporting date are as follows:

UAE Dirham
Saudi Riyal
Pound Sterling
Euro
Singapore Dollar
Norwegian Krone
Others

liabilities
31 December
2014
US$’000
2,925
28
1,060
4,015
20
26
39

2013
US$’000
1,233
56
511
3,124
486
–
3

assets
31 December
2014
US$’000
24,801
5,864
9,021
4,182
–
–
–

2013
US$’000
3,388
540
4,399
–
–
–
–

8,113

5,413

43,868

8,327

At 31 December 2014, if the exchange rate of the currencies other than the UAE Dirham and Saudi Riyal had increased/decreased by 10% against the
US Dollar, with all other variables held constant. The Group’s profit for the period would have been lower/higher by US$ 0.8 million (2013: lower/higher
by US$ 0.1 million) mainly as a result of foreign exchange loss or gain on translation of Euro and Pound Sterling denominated balances.

interest rate risk management
The Group is exposed to cash flow interest rate risk on its bank borrowings which are subject to floating interest rates.

The sensitivity analyses below have been determined based on the exposure to interest rates for non-derivative instruments at the end of the
reporting period. For floating rate liabilities, the analysis is prepared assuming the amount of liability outstanding at the end of the reporting period
was outstanding for the whole year. A 50 basis point increase or decrease is used when reporting interest rate risk internally to key management
personnel and represents management’s assessment of the reasonably possible change in interest rates.

If interest rates had been 50 basis points higher/lower and all other variables were held constant, the Group’s profit for the year ended 31 December
2014 would decrease/increase by US$ 1.2 million (2013: decrease/increase US$: 0.9 million). This is mainly attributable to the Group’s exposure to
interest rates on its variable rate borrowings.

liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built an appropriate liquidity risk management
framework for the management of the Group’s short, medium and long-term funding and liquidity management requirements. The Group manages
liquidity risk by maintaining adequate reserves by continuously monitoring forecast and actual cash flows and matching the maturity profiles of
financial assets and liabilities.

102

Financial StatementsGULF MARINE SERVICES PLC Annual Report 2014The table below summarises the maturity profile of the Group’s financial liabilities. The contractual maturities of the Groups financial liabilities have
been determined on the basis of the remaining period at the end of the reporting period to the contractual maturity date. The maturity profile is
monitored by management to ensure adequate liquidity is maintained. The maturity profile of the assets and liabilities at the end of the reporting
period based on contractual repayment arrangements was as follows:

31 December 2014
Non-interest bearing financial assets
Interest bearing financial assets

Non-interest bearing financial liabilities
Interest bearing financial liabilities

31 December 2013
Non-interest bearing financial assets
Interest bearing financial assets

Non-interest bearing financial liabilities
Interest bearing financial liabilities

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interest
rate

1 to 3
months
US$’000

4 to 12
months
US$’000

2 to 5 years
US$’000

after 5 years
US$’000

4.1-12%

5.5-9%

65,211
36,702

101,913

28,484
39,515

67,999

86,455
–

86,455

20,120
9,542

29,662

820
–

820

–
–

–

–
25,378

–
268,214

25,378

268,214

390
445

835

–
–

–

963
21,210

–
377,016

22,173

377,016

–
–

–

–
–

–

–
–

–

–
–

–

Management believe that the difference between fair value and carrying value is negligible.

36. Share appreciation rights
Share appreciation rights were granted to key management employees pre the IPO which vest in instalments over a fixed service period and the
achievement of performance conditions by the Group and are payable upon an exit event, which is defined as an employee being a good-leaver,
an initial public offering or a sale of the business to a third party. Half of the share appreciation rights have a fixed service period and do not require
the employee to be employed when an exit event occurs; the balance requires the employee to be employed at the time that the exit event occurs.
Cash settlement of the share appreciation rights is made at the time of the exit event.

The shareholders entered into an agreement with, effective from 1 January 2013, whereby the shareholders agreed to assume the share appreciation
rights obligation due to key management employees under the scheme. This represented a modification of the scheme, effective from the date
of agreement, such that from this date it represented an equity-settled compensation arrangement for the Group and a capital contribution of
US$ 7.8 million from the shareholders. There will be no remaining charge to the Group in future periods in relation to the 85% of the scheme which
has vested.

During the year 2014, a full provision for SARs payable of US$ 1.4 million was made in respect of the remaining 15% of unvested share appreciation
rights which will vest if certain conditions on exit are met.

No further share appreciation rights have been granted in 2014.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Continued
for year ended 31 December 2014

37. long-term incentive plans
During the year, the Group put in place Long-Term Incentive Plans (LTIPs), performance shares and share options are granted to senior management,
managers and senior offshore officers. The details of the senior management LTIP are contained in the Directors’ Remuneration Report on pages 51
to 60. The release of these shares is conditional upon continued employment, certain market vesting conditions and in the case of senior management
LTIP awards performance against three-year target EPS compound annual growth rates. Equity-settled share-based payments are measured at fair
value at the date of grant. The fair value determined, using the Binomial Probability Model together with Monte Carlo simulations, at the grant date of
equity-settled share-based payments, is expensed on a straight-line basis over the vesting period, based on an estimate of the number of shares that
will ultimately vest. The fair value of each award is determined by taking into account the market performance condition, the term of the award, the
share price at grant date, the expected price volatility of the underlying share and the risk-free interest rate for the term of the award.

Non-market vesting conditions, which for the Group mainly relate to the continual employment of the employee during the vesting period, and in
the case of the senior management LTIP awards the achievement of EPS growth targets, are taken into account by adjusting the number of equity
instruments expected to vest at each balance sheet date so that, ultimately, the cumulative amount recognised over the vesting period is based on
the number of options that eventually vest. Any market vesting conditions are factored into the fair value of the options granted.

To the extent that share options are granted to employees of the Group’s subsidiaries without charge, the share option charge is capitalised as part
of the cost of investment in subsidiaries.

The number of share awards made by the Group during the year is given in the table below together with their weighted average fair value (‘WAFV’)
and weighted average grant price (‘WAGP’). The exercise price of the share awards is nil (2013: nil). No share awards vested in the year.

Scheme
2014 LTIPs – Senior Management

2014 LTIPs – Managers and Senior
Officers

WaFV
US$
3.29

Wagp
expiry
US$
date
2.71 May 2017

Number of
options
vested
–

2014
Number of
options
unvested
825,252

Total
outstanding
825,252

number of
options
vested
–

2013
number of
options
unvested
–

total
outstanding
–

3.16

2.59 June 2017

–

796,637

–

Outlined below is a summary of the assumptions which have been used to determine the fair value of the
share awards:

Grant date
Share price
Exercise price
Expected volatility
Risk-free rate
Expected dividend yield
Vesting period
Award life
Sub-optimal co-efficient

Market performance condition

ltip

8 May 2014 30 June 2014
£1.5500
£0.00
46.7%
1.9945%
1.0%
3 years
3 years
1.7

£1.6175
£0.00
46.7%
1.8836%
1.0%
3 years
3 years
1.7

25.68%

25.89%

The expected Gulf Marine Services plc share price volatility was determined taking into account the average of the volatility of two comparable
companies at each of the grant dates.

The risk free return was determined from similarly dated zero coupon UK government bonds at the time the share awards were granted, using
historical information taken from the Bank of England’s records.

The charge arising from share-based payments is disclosed in note 16.

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Financial StatementsGULF MARINE SERVICES PLC Annual Report 2014
38. Dividends
During the year 2014, the Directors declared an interim dividend of 0.41 pence (0.69 cents) per ordinary share, which was paid on 27 October 2014
to shareholders on the register on 26 September 2014. The interim dividend has been recognised in equity attributable to the owners of the parent
as an appropriation of retained earnings.

A final dividend in respect of the year ended 31 December 2014 of 1.06 pence (1.64 cents) per ordinary share is to be proposed at the AGM.
These financial statements do not reflect this final dividend.

During the year 2013, the Directors declared and paid a dividend of US$ 80 million.

39. events after the reporting period
The following events occurred after the reporting period:

(i) On 16 March 2015 the option to purchase the leased vessel Keloa was exercised for US$ 37.5 million. The transaction was funded by a US$ 37.5

million drawdown from the committed loan facility.

(ii) In January 2014, the Group entered into an arrangement to lease a vessel (Pepper) commencing in 2015 for a 5 year term with an option
to purchase the vessel at the end of the lease term. This vessel commenced its inaugural client charter in March 2015 and is now on lease.

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INTRODUCTIONPERFORMANCEGOVERNANCEADDITIONAL INFORMATIONGULF MARINE SERVICES PLC Annual Report 2014

COMPANY BALANCE SHEET
as at 31 December 2014

Fixed assets
Investments

Current assets
Debtors
Cash at bank and in hand

Creditors: Amounts falling due within one year
Net current assets
Total assets less current liabilities

Net assets

Capital and reserves
Called-up share capital
Share premium account
Share option reserve
Profit and loss account

Shareholders’ funds

As at
31 December
2014
US$’000

notes

517,546

57,750
16,619
74,369
(276)
74,093
591,639

591,639

57,929
93,247
563
439,900

591,639

The financial statements of Gulf Marine Services PLC (registered number 08860816) were approved by the Board of Directors and authorised for
issue on 23 March 2015.

Duncan Anderson
Chief Executive Officer
On behalf of the Board of Directors
23 March 2015

106

Financial StatementsGULF MARINE SERVICES PLC Annual Report 2014COMPANY CASH FLOW STATEMENT
for the period from date of incorporation to 31 December 2014

Net cash outflow from operating activities
Acquisitions and disposals

Cash outflow before management of liquid resources and financing
Financing

Increase in cash in the period

The accompanying notes form an integral part of these financial statements.

notes

2014
US$’000
(5,078)
(19,883)
(24,961)
41,580

16,619

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NOTES TO THE COMPANY FINANCIAL STATEMENTS
for the period from date of incorporation to 31 December 2014

1. corporate information
These separate financial statements were approved and authorised for issue by the Board of Directors of Gulf Marine Services PLC (“the Company”)
on 23 March 2015.

The Company was registered in England and Wales on 24 January 2014 (“date of incorporation”) as a private limited company. On 7 February 2014,
the Company re-registered as a public limited company. The address of the registered office of the Company is 1st Floor, 40 Dukes Place, London
EC3A 7NH. The registered number of the Company is 08860816.

The Company is the Parent Company of the Gulf Marine Service Group comprising of Gulf Marine Services PLC and its underlying subsidiaries.
The consolidated financial statements are publicly available. The Company completed its Premium Listing on the London Stock Exchange on
19 March 2014.

2. accounting policies
currency
The functional and presentational currency of the Company is United States Dollars.

going concern
The Company’s business activities, together with the factors likely to affect its future development and position, are set out in the Directors’ Report
and Strategic Report.

The Company participates in the Group’s centralised treasury arrangements and so shares banking arrangements with its underlying subsidiaries.

After making enquiries and on the basis of their assessment of the Group’s financial position, the Company’s Directors have a reasonable expectation
that the Company has adequate resources to continue in operational existence for the foreseeable future. Thus they have adopted the going
concern basis of accounting in preparing the financial statements.

Basis of accounting
The separate financial statements of the Company are presented as required by the Companies Act 2006. They have been prepared under the
historical cost convention and in accordance with applicable United Kingdom Accounting Standards and law. As permitted by section 408 of the
Companies Act 2006, the profit and loss account of the Company is not presented as part of these financial statements. The loss for the period
of the Company amounted to US$ 5.1 million.

The Company had no recognised gains and losses other than the loss for the period. Consequently no statement of total recognised gains and losses
is presented.

The principal accounting policies are summarised below. They have all been applied consistently throughout the period.

investments
Fixed asset investments in subsidiaries and associates are initially recognised at Director’s valuation and are subsequently measured at cost less
provision for impairment.

Financial instruments
Financial assets and financial liabilities are recognised in the Company’s balance sheet when the Company becomes a party to the contractual
provisions of the instrument.

Financial liabilities
Financial liabilities are classified as either financial liabilities at Fair Value Through Profit or Loss (‘‘FVTPL’’) or ‘‘other financial liabilities’’.

Trade and other payables, bank borrowings, loans from related parties and other liabilities are classified as ‘‘other financial liabilities’’. Other financial
liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other financial liabilities are subsequently measured at
amortised cost using the effective interest method, with interest expense recognised on an effective yield basis, except for short-term payables or
when the recognition of interest would be immaterial.

Derecognition of financial liabilities
The Company derecognises financial liabilities when, and only when, the Company’s obligations are discharged, cancelled or they expire.

108

Financial StatementsGULF MARINE SERVICES PLC Annual Report 2014Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Equity
instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

Financial Assets
All financial assets are recognised and derecognised on a trade date basis where the purchase or sale of a financial asset is under a contract whose terms
require delivery of the asset within the timeframe established by the market concerned. They are initially measured at fair value, plus transaction costs,
except for those financial assets classified as at fair value through the profit and loss account, which are initially measured at fair value.

Financial assets are classified into the following specified categories: financial assets ‘at fair value through profit or loss’ (FVTPL), ‘held-to-maturity’
investments, ‘available-for-sale’ (AFS) financial assets and ‘loans and receivables’. The classification depends on the nature and purpose of the
financial assets and is determined at the time of initial recognition.

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Loans and receivables
Loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as ‘loans and receivables’.
Loans and receivables are measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by
applying the effective interest rate method, except for short-term receivables when the recognition of interest would be immaterial.

Impairment of financial assets
Financial assets are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence
that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the
investment have been affected.

Cash at bank and in hand
Cash at bank and in hand comprises cash balances and call deposits. Bank overdrafts that are repayable on demand form an integral part of the
Company’s cash management and are included as a component of cash at bank and in hand for the purpose of the statement of cash flows.

Taxation
Current tax, including UK corporation tax, is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been
enacted or substantively enacted by the balance sheet date.

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or
events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date. Deferred
tax is measured on a non-discounted basis. Timing differences are differences between the Company’s taxable profits and its results as stated in the
financial statements that arise from the inclusion of gains and losses in tax assessment periods different from those in which they are recognised in
the financial statements.

A net deferred tax asset is regarded as recoverable and therefore recognised only to the extent that, on the basis of all available evidence, it can be
regarded as more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can
be deducted.

Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the timing differences are expected to reverse,
based on tax rates and laws that have been enacted or substantively enacted by balance sheet date.

Foreign currencies
Transactions in foreign currencies are recorded using the rate of exchange ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are translated using the contracted rate or the rate of exchange ruling at the balance sheet date and the gains
or losses on translation are included in the profit and loss account.

3. Dividends on equity shares

Dividend declared and paid during the year

Interim dividend for 2014: 0.41 pence (0.69 cents) per ordinary share

2014
US$’000

2,412

A final dividend in respect of the year ended 31 December 2014 of 1.06 pence (1.64 cents) per ordinary share is to be proposed at the AGM. These
financial statements do not reflect this final dividend.

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NOTES TO THE COMPANY FINANCIAL STATEMENTS Continued
for the period from date of incorporation to 31 December 2014

4. Fixed asset investments

At 24 January 2014
Acquisition of subsidiaries
Share options issued to employees of subsidiary entities

The Company has investments in the following subsidiaries which principally affected the profits or net assets of the Group.

2014
US$’000

–
516,983
563

517,546

name
GMS Jersey Holdco 1 Limited +
GMS Jersey Holdco 2 Limited
Gulf Marine Middle East FZE
Gulf Marine Services WLL
Offshore Holding Invt SA
Offshore Logistics Invt SA
Offshore Accommodation Invt. SA
Offshore Jack-up Invt SA
Offshore Craft Invt SA
Offshore Structure Invt SA
Offshore Maritime Invt SA
Offshore Tugboat Invt SA
Offshore Boat Invt SA
Offshore Kudeta Invt SA
GMS Endurance Invt SA
Mena Marine Limited
Gulf Marine Services (UK) Limited
Gulf Marine Services Saudi Arabia Limited
Gulf Marine Services (Asia) Pte. Ltd.
GMS Enterprise Invt SA
GMS Sharqi Investment SA
GMS Scirocco Investment SA

place of
registration
Jersey
Jersey
Sharjah
Abu Dhabi
Panama
Panama
Panama
Panama
Panama
Panama
Panama
Panama
Panama
Panama
Panama
Cayman Islands
United Kingdom
Saudi Arabia
Singapore
Panama
Panama
Panama

Percentage
Ownership at
31 December 2014
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
60%
100%
100%
100%
100%

type of activity
Holding Company
Holding Company
Marine Contractors
Marine Contractors
Holding Company
Owner of Barge “Naashi”
Owner of “Khawla 181”
Owner of Barge “Kamikaze”
Owner of Barge “GMS Endeavour”
Owner of Barge “Kikuyu”
Owner of “Helios”
Owner of “Atlas”
Owner of Barge “Kawawa”
Owner of Barge “Kudeta”
Owner of Barge “Endurance”
General investment and trading
Operator of offshore barges
Operator of offshore barges
Operator of offshore barges
Owner of Barge “Enterprise”
Owner of Barge “Sharqi”
Owner of Barge “Scirocco”

GMS Shamal Investment SA

Panama

100%

Owner of Barge “Shamal”

+ Held directly by Gulf Marine Services PLC.

During the period, the Company acquired the Group by acquiring the entire issued share capital of GMS Jersey Holdco 1 Limited in exchange for the
issue and allotment to the following Shareholders of an aggregate of 299,999,900 new ordinary shares of 1 GBP each (US$ 1.67) in the Company in the
same proportions as their holdings in GMS Jersey Holdco 1 Limited as at that date:

– Green Investment Commercial Investments LLC (79%);
– Ocean Investments Trading LLC (1%);
– Horizon Energy LLC (10%); and
– Al Ain Capital LLC (10%).

Furthermore, subsequent to the IPO, the Company subscribed to additional shares (1000 ordinary shares of 1 GBP each (US$ 1.67)) at a premium in
GMS Jersey Holdco 1 for a value of US$ 19.89 million.

The purchase price of investments were determined based on the underlying market value of assets owned by the Group, as determined by the
Directors’ valuation and based on reports from an independent valuation expert.

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Financial StatementsGULF MARINE SERVICES PLC Annual Report 2014i

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5. Debtors amounts falling due within one year

Amounts owed by Group undertakings
Other receivables

2014
US$’000
57,710
40

57,750

Debtors amounts falling due within one year are all current and the Directors consider that the carrying amount of debtors is approximately equal to
their fair value due to the very short time between inception and maturity.

6. creditors amounts falling due within one year

Amounts owed to Group undertakings
Other creditors

2014
US$’000
167
109

276

Creditors are all current and the Directors consider that the carrying amount of creditors is approximately equal to their fair value due to the short
time between inception and maturity.

7. Share option reserve
The share option reserve for the period of US$ 0.56 million relates to awards granted to employees of a subsidiary undertaking under a long-term
incentive plan, details of which are provided in note 37 of the consolidated financial statements.

8. called-up share capital
The share capital as at 31 December 2014 was as follows:

Allotted, called-up and fully paid 349,527,804 shares of 10 pence each

2014
US$’000

57,929

The Company was incorporated on 24 January 2014 with share capital of 300 million shares at a par value of £1 each. Subsequently on 5 February
2014, the Company undertook a capital reduction by solvency statement, in accordance with s643 of the Companies Act 2006. The nominal value
of the authorised and issued ordinary shares was reduced from £1 to 10 pence and the amount by which the Company’s share capital reduced
(US$ 447.39 million) was credited to the distributable reserves of the Company and is treated for the purposes of Part 23 of Companies Act 2006
as realised profit.

On 19 March 2014, the Company successfully completed its IPO on the London Stock Exchange. A total of 49,527,804 shares with a par value
of 10 pence per share were issued at a price of 135 pence (US$ 2.24) per share.

The Company has one class of ordinary shares which carry no right to fixed income.

The movement in issued share capital and share premium for the for the period ended 31 December 2014 was as follows:

number
of shares
300,000,000
–
49,527,804
–

349,527,804

ordinary shares
US$’000
497,100
(447,390)
8,219
–

57,929

Share
premium
US$’000
–
–
102,702
(9,455)

93,247

Issue of new shares upon incorporation
Capital reduction
Issue of new shares – IPO
Share issue costs (note 6 of the consolidated financial statements)

At 31 December 2014

9. Profit and loss account

Balance at 24 January 2014
Distributable Reserves subsequent to capital reduction by solvency statement
Loss for the period
Interim Dividend declared

Balance at 31 December 2014

total
US$’000
497,100
(447,390)
110,921
(9,455)

151,176

2014
US$’000
–
447,390
(5,078)
(2,412)

439,900

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NOTES TO THE COMPANY FINANCIAL STATEMENTS Continued
for the period from date of incorporation to 31 December 2014

10. reconciliation of movements in shareholders’ funds

Issue of new shares upon incorporation
Issue of new shares through IPO
Share Option Reserve (note 7)
Premium on issue of new shares through IPO (net of expenses)
Loss for the period
Interim dividend distributed

Balance at 31 December 2014

2014
US$’000
497,100
8,219
563
93,247
(5,078)
(2,412)

591,639

11. related party transactions
The Company has taken advantage of the exemption from disclosing related party transactions with other wholly owned Group companies as
afforded by paragraph 3(c) of Financial Reporting Standard 8 (Revised). The Company and all companies with whom related party transactions
took place in the period are wholly owned Group companies, the consolidated financial statements of which are publicly available.

Remuneration of key management personnel during the period comprised short-term benefits of US$ 743,646.

12. Reconciliation of operating loss to cash outflow from operating activities

Operating loss

Adjustment for
Investment income

Cash outflow from operating activities

13. Analysis of cash flows
acquisitions and disposals

Investment in subsidiary

Net cash outflow

2014
US$’000
(5,092)

(5,078)

2014
US$’000
(19,883)

(19,883)

During the period the Company acquired the Group in exchange for the issuance of 299,999,900 new ordinary shares of 1 GBP each (US$ 1.67) in the
Company. No cash was exchanged during the course of this transaction. Refer to note 4.

Financing

Proceeds from issue of new ordinary shares
Transaction costs from issue of ordinary shares
Adjustment for changes in working capital:
Increase in intercompany receivables
Increase in intercompany payables
Increase in other receivables
Increase in other payables
Dividends paid

Net cash inflow

14. reconciliation of net debt

Increase in net cash in the period
Net cash on incorporation

Net cash at 31 December 2014

112

2014
US$’000
110,921
(9,455)

(57,710)
167
(40)
109
(2,412)

41,580

2014
US$’000
16,619
–

16,619

Financial StatementsGULF MARINE SERVICES PLC Annual Report 201415. Financial instruments
capital risk management
The Company manages its capital to ensure that it will be able to continue as a going concern while maximising the return to stakeholders.

The capital structure of the Group consists of cash and short-term deposits and equity attributable to equity holders of the parent, comprising issued
capital, reserves and loss for the period as disclosed in notes 7 to 9.

The Group is not subject to any externally imposed capital requirements.

Significant accounting policies
Details of the significant accounting policies and methods adopted (including the criteria for recognition, the basis of measurement and the bases for
recognition of income and expenses) for each class of financial asset, financial liability and equity instrument are disclosed in the accounting policies
to the financial statements.

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Categories of financial instruments

Financial assets
Cash at bank and in hand
Loans and receivables

Financial liabilities

Creditors

All financial liabilities are repayable upon demand.

2014
US$’000

16,619
57,710

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Financial risk management objectives and policies
The Company is exposed to the following risks related to financial instruments - credit risk, cash flow and liquidity risk, foreign currency risk and
interest rate risk. The management actively monitors and manages these financial risks relating to the Company.

credit risk management
Credit risk refers to the risk that a counter party will default on its contractual obligations resulting in financial loss to the Company, and arises
principally from the Company’s trade and other receivables. The Company has adopted a policy of only dealing with creditworthy counterparties,
for whom the credit risk is assessed to be low. The Company attempts to control credit risk by monitoring credit exposures, limiting transactions
with specific non-related counter-parties, and continually assessing the creditworthiness of such non-related counter-parties. Balances with banks
are assessed to have low credit risk of default since these banks are highly regulated by the central banks of the respective countries.

The amount that best represents maximum credit risk exposure on financial assets at the end of the reporting period, in the event counter parties
failing to perform their obligations generally approximates their carrying value. Trade and other receivables are not secured by any collateral.

The Company’s principal financial assets are bank balances, and intercompany and other receivables. The Company’s main credit risk is primarily
attributable to its key intercompany receivables. The Company has no other significant concentration of credit risk. An allowance for impairment is
made where there is an identified loss event which, based on previous experience, is evidence for a reduction in the recoverability of the cash flows.

Cash flow and liquidity risk
The Company is not exposed to any significant cash flow or liquidity risk. The Company currently has sufficient cash to fund its activities. However,
in the event that additional liquidity is required for ongoing operations and future developments, the Company has access to additional funding from
other Group entities which it controls.

Foreign currency risk management
The majority of the Company’s transactions are in either UAE Dirhams or US Dollars. Transactions in other foreign currencies entered into by the
Company are short term in nature and therefore management considers that the currency risk associated with these transactions is limited and
consequently this risk is not hedged.

interest rate risk management
The Company’s financial assets and financial liabilities are interest-free; accordingly the Company is not subject to any interest rate risk.

Fair value of financial assets and liabilities
The Company’s management considers that the fair value of financial assets and financial liabilities approximates their carrying amounts.

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ADDITIONAL
INFORMATION

Notice of AGM
Glossary
Corporate Information

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INTRODUCTIONPERFORMANCEGOVERNANCEADDITIONAL INFORMATIONGULF MARINE SERVICES PLC Annual Report 2014

NOTICE OF AGM

Notice is hereby given that the first Annual General Meeting of Gulf Marine Services PLC (the “Company”) will be held on Wednesday 6 May 2015
at 11.30am (UK time) at Linklaters LLP, One Silk Street, London, EC2Y 8HQ to transact the business set out in the resolutions below.

Resolutions 1 to 14 (inclusive) will be proposed as ordinary resolutions; this means that for each of those resolutions to be passed, more than half of
the votes cast must be in favour. Resolutions 15 to 17 (inclusive) will be proposed as special resolutions; this means that for each of those resolutions
to be passed, at least three-quarters of the votes cast must be in favour.

Voting on all resolutions will be by way of a poll.

ordinary resolutions
report and accounts
1. To receive the Company’s annual accounts for the financial year ended 31 December 2014 together with the Directors’ reports and the auditor’s

report on those accounts.

Final Dividend
2. To declare a final dividend of 1.06 pence per ordinary share for the year ended 31 December 2014, to all ordinary shareholders on the register of

members on 17 April 2015.

Directors’ remuneration report
3. To approve the Directors’ Remuneration Report (excluding the Directors’ Remuneration Policy) set out on pages 51 to 60 of the Company’s Annual

Report and accounts for the financial year ended 31 December 2014.

Directors’ remuneration policy
4. To approve the Directors’ Remuneration Policy set out on pages 51 to 60 of the Company’s Annual Report and accounts for the financial year

ended 31 December 2014, such Policy to take effect immediately following conclusion of the meeting.

election of Directors
5. To elect Simon Heale as a director.
6. To elect Duncan Anderson as a director.
7. To elect Simon Batey as a director.
8. To elect Richard Dallas as a director.
9. To elect Richard Anderson as a director.
10. To elect Dr Karim El Solh as a director.
11. To elect Mike Straughen as a director.

reappointment of auditor
12. To re-appoint Deloitte LLP as auditor of the Company, to hold office from the conclusion of this meeting until the conclusion of the next general

meeting at which accounts are laid before the Company.

auditor’s remuneration
13. To authorise the Audit and Risk Committee to determine the remuneration of the auditor on behalf of the Board of directors.

authority to allot ordinary shares
14. To authorise the directors generally and unconditionally, in accordance with section 551 of the Companies Act 2006 (the “Act”), to exercise all the

powers of the Company to allot shares in the Company or grant rights to subscribe for, or convert any security into, shares of the Company:

(a) up to a maximum aggregate nominal amount of £11,650,927; and

(b) comprising equity securities (as defined in section 560(1) of the Act) of the Company up to a further nominal amount of £11,650,927 in

connection with an offer by way of a rights issue.

These authorities shall apply in substitution for all previous authorities pursuant to section 551 of the Act and expire on the date of the next
Annual General Meeting or on 30 June 2016, whichever is the earlier, but in each case the Company may, before such expiry, make an offer or
agreement which would or might require equity securities to be allotted after such expiry and the directors may allot equity securities under
any such offer or agreement as if the authority conferred by this resolution had not expired.

For the purposes of this resolution, “rights issue” means an offer to:

i. ordinary shareholders in proportion (as nearly as may be practicable) to their existing holdings; and

ii. people who are holders of other equity securities if this is required by the rights of those securities or as the directors otherwise consider necessary,

to subscribe further securities, subject in both cases to such exclusions or other arrangements as the directors may consider necessary or
expedient in relation to treasury shares, fractional entitlements, record dates or legal, regulatory or practical problems in, or under the laws of,
any territory.

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Additional InformationGULF MARINE SERVICES PLC Annual Report 2014

Special resolutions
authority to disapply pre-emption rights
15. Subject to the passing of resolution 14, to empower the directors generally in accordance with section 570 of the Act to allot equity securities

(as defined in section 560(1) of the Act) for cash:

(a) pursuant to the authority given by paragraph (a) of resolution 14 or where the allotment constitutes an allotment of equity securities by virtue

of section 560(3) of the Act in each case:

in connection with a pre-emptive offer; and

ii. otherwise than in connection with a pre-emptive offer, up to an aggregate nominal amount of £1,747,639; and

(b) pursuant to the authority given by paragraph (b) of resolution 14 in connection with a rights issue,

as if section 561(1) of the Act did not apply to any such allotment.

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This power shall expire on the date of the next Annual General Meeting of the Company or on 30 June 2016, whichever is the earlier, save that the
Company may, before such expiry make an offer or agreement which would or might require equity securities to be allotted after such expiry and
the directors may allot equity securities under any such an offer or agreement as if the authority conferred by this resolution had not expired.

For the purposes of this resolution:

“rights issue” has the same meaning as in resolution 14;

ii. “pre-emptive offer” means an offer of equity securities open for acceptance for a period fixed by the directors to (a) holders (other than
the Company) on the register on a record date fixed by the directors of ordinary shares in proportion to their respective holdings and (b)
other persons so entitled by virtue of the rights attaching to any other equity securities held by them, but subject in both cases to such
exclusions or other arrangements as the directors may deem necessary or expedient in relation to treasury shares, fractional entitlements,
record dates or legal, regulatory or practical problems in, or under the laws of, any territory;

iii. references to an allotment of equity securities shall include a sale of treasury shares; and

iv. the nominal amount of any securities shall be taken to be, in the case of rights to subscribe for, or convert any securities into, shares of the

Company, the nominal amount of such shares which may be allotted pursuant to such rights.

purchase of own shares
16. To authorise the Company generally and unconditionally for the purpose of section 701 of the Act to make market purchases (within the meaning

of section 693(4) of the Act) of ordinary shares of 10 pence each in the capital of the Company, provided that:

(a) the maximum number of ordinary shares which may be purchased is 34,952,780;

(b) the minimum price, exclusive of any expenses, which may be paid for each ordinary share is 10 pence;

(c) the maximum price, exclusive of any expenses, which may be paid for each ordinary share is an amount equal to the higher of:

i. 105% of the average closing price of an ordinary share, as derived from the London Stock Exchange Daily Official List for the five business

days prior to the day on which the purchase is made; and

ii. an amount equal to the higher of the price of the last independent trade of an ordinary share and the highest current independent bid for an

ordinary share as stipulated by Article 5(1) of Commission Regulation (EC)No. 2273/2003 (relating to buy-back programmes and stabilisation
of financial instruments).

This authority shall expire on the date of the next Annual General Meeting of the Company or on 30 June 2016, whichever is the earlier, but, in each
case, save that the company may, before such expiry, enter into a contract to purchase ordinary shares which will or may be executed wholly or
partly after the expiry of such authority.

notice of general meetings, other than annual general meetings
17, THAT a general meeting, other than an annual general meeting, may be called on not less than 14 clear days’ notice.

By order of the Board

John Brown
company Secretary
23 March 2015

Gulf Marine Services PLC
1st Floor, 40 Dukes Place, London EC3A 7NH

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INTRODUCTIONPERFORMANCEGOVERNANCEADDITIONAL INFORMATIONGULF MARINE SERVICES PLC Annual Report 2014

NOTICE OF AGM
Continued

eXplanation oF reSolUtionS:
resolution 1 – to receive the report and accounts
The directors are required to present the accounts, Directors’ reports and auditor’s report to the meeting. These are contained in the Company’s
2014 Annual Report and Financial Statements.

Resolution 2 – To declare a final dividend
The board of directors of the Company (the “Board”) proposes a final dividend of 1.06 pence per share for the year ended 31 December 2014. If
approved, the recommended final dividend will be paid on 12 May 2015 to all ordinary shareholders on the register of members at 6.00 pm on 17 April
2015. The shares will be marked ex-dividend on 16 April 2015.

resolution 3 – to approve the Directors’ remuneration report
This resolution deals with the remuneration paid to the directors during the year under review. Shareholders are invited to vote on the Directors’
Remuneration Report, which appears on pages 51 to 60 in the 2014 Annual Report and Financial Statements (excluding the Directors’ Remuneration
Policy). Resolution 3 is an advisory vote.

resolution 4 – to approve the Directors’ remuneration policy
Shareholders are invited to vote on the Directors’ Remuneration Policy, which appears on pages 51 to 60 in the 2014 Annual Report and Financial
Statements, and which, if approved by shareholders, will take effect immediately after the conclusion of the AGM on 6 May 2015. Resolution 4
is a binding vote.

resolutions 5 to 11 – election of Directors
This, being the Company’s first Annual General Meeting (“AGM”), all directors of the Company will seek election by shareholders. In subsequent
years, all directors wishing to continue their appointment will seek re-election at the AGM in accordance with the provisions of the UK Corporate
Governance Code.

No independent non-executive director seeking election at the AGM has any existing or previous relationship with the Company, nor with any
controlling shareholder of the Company or any associate of a controlling shareholder of the Company within the meaning of Listing Rule 13.8.17R(1).
In considering the independence of the non-executive directors, the Board has taken into account guidance from the UK Corporate Governance
Code. The Board considers Simon Batey, Richard Anderson and Mike Straughen to be independent non-executive directors in accordance with
provision B.1.1 of the UK Corporate Governance Code.

In accordance with changes made to the Listing Rules in May 2014, Richard Dallas and Dr Karim El Solh are classed as representatives of a “controlling
shareholder” of Gulf Marine Services PLC and not considered to be independent non-executive directors. The Company entered into a Relationship
Agreement with its “controlling shareholders” effective 14 March 2014 in accordance with Listing Rule 9.2.2AR(2)(a), which serves to ensure that the
controlling shareholders and their representatives (including Richard Dallas and Dr Karim El Solh) comply with the independence provisions outlined
in Listing Rule 6.1.4DR.

The new Listing Rules require that Independent Non-Executive Directors be elected by a majority of votes cast by independent shareholders in addition
to a majority of votes cast by all shareholders in the Company. Therefore, the resolutions for the election of the Independent Non-Executive Directors
(resolutions 7, 9 and 11) will be taken on a poll and the votes cast by independent shareholders and all shareholders will be calculated separately. Such
resolutions will be passed only if a majority of votes cast by independent shareholders are in favour, in addition to a majority of votes cast by all
shareholders being in favour.

Full biographies of all the directors are set out in the Company’s 2014 Annual Report and are also available for viewing on the Company’s website
(http://www.gmsuae.com). Following a formal Board evaluation process and recommendation from the Nomination Committee, the Board is satisfied
that each of the directors continues to be effective and demonstrates a commitment to the role and that each of the directors continues to be able
to dedicate sufficient time to their duties. The directors believe that the Board continues to include an appropriate balance of skills and provides
effective leadership for the Company.

Resolution 12 – To reappoint Deloitte LLP as auditor of the Company, to hold office until the conclusion of the next general meeting at which accounts
are laid before the company
At each meeting at which the Company’s accounts are presented to its members, the Company is required to appoint an auditor to serve until the
next such meeting. The Board, on the recommendation of its Audit and Risk Committee, recommends the reappointment of Deloitte LLP.

resolution 13 – to authorise the directors to determine the remuneration of Deloitte llp
This resolution gives authority to the Audit and Risk Committee to determine the auditor’s remuneration.

resolution 14 – to authorise the directors to allot ordinary shares
The authority in paragraph (a) of this resolution, if passed, would provide the directors with a general authority to allot new shares and grant rights to
subscribe for, or convert other securities into, shares up to a nominal amount of £11,650,927, which is equal to approximately 33% of the issued share
capital of the Company as at 23 March 2015, being the last practicable date before the publication of this Notice.

Paragraph (b) under resolution 14 will grant the directors additional authority to allot 116,509,268 new shares and grant rights to subscribe for, or
convert other securities into, shares in connection with a rights issue up to a further nominal amount of, which is equal to approximately 33% of the
issued share capital of the Company as at 23 March 2015.

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Additional InformationGULF MARINE SERVICES PLC Annual Report 2014When taken together, the authorities proposed in paragraphs (a) and (b) of this resolution extend (before any reduction) to approximately two thirds
of the current issued share capital of the Company as at 23 March 2015, being the last practicable date before the publication of this Notice.

The resolution would give the Board of directors the maximum flexibility permitted by investor guidelines to respond to market developments,
however, there are no current plans to allot shares except in connection with the Company’s employee share schemes.

This authority will expire at the earlier of 30 June 2016 and the conclusion of the Company’s next AGM. It is the intention of the directors to seek the
annual renewal of each aforementioned authority.

resolution 15 – to authorise the directors to disapply pre-emption rights
This resolution would, if passed, allow the directors to allot shares or sell treasury shares for cash (other than in connection with an employee share
scheme), without having to offer such shares to existing shareholders in proportion to their own holdings (known as pre-emption rights).

The purpose of paragraph (a) of resolution 15 is to authorise the directors to allot new shares pursuant to the authority given by paragraph (a) of
resolution 15, or sell treasury shares, for cash (I) in connection with a pre-emptive offer or rights issue or (II) otherwise up to a nominal value of
£1,747,639, equivalent to approximately 5% of the total issued ordinary share capital of the Company as at 23 March 2015, in each case without the
shares first being offered to existing shareholders in proportion to their existing holdings.

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The purpose of paragraph (b) of resolution 15 is to authorise the directors to allot new shares pursuant to the authority given by paragraph (b)
of resolution 15, or sell treasury shares, for cash in connection with a rights issue without the shares first being offered to existing shareholders
in proportion to their existing holdings. This is in line with corporate governance guidelines.

It is the directors’ intention not to allot shares on a non pre-emptive basis (other than pursuant to a rights issue or pre-emptive offer) in excess of an
amount equal to 7.5% of the total issued share capital of the Company over a three year rolling period, without prior consultation with shareholders.

This authority will expire at the earlier of 30 June 2016 or the conclusion of the Company’s next AGM. It is the intention of the directors to seek to
renew this authority every year.

resolution 16 – to authorise the company to make market purchases of its own shares
This resolution would, if passed, authorise the Company to make market purchases of up to 34,952,780 of its own ordinary shares, representing just
under 10% of the Company’s issued share capital as at 23 March 2015. The resolution specifies the minimum and maximum prices at which the
ordinary shares may be bought under this authority.

This authority will expire at the conclusion of the Company’s next AGM. It is the intention of the directors to seek to renew this authority every year.

The directors have no present intention of exercising this authority granted by this resolution, but the authority provides the flexibility to allow them
to do so in future. The directors would not exercise the authority unless they believed that the expected effect would promote the success of the
Company for the benefit of its shareholders as a whole. Any shares purchased would be effected by a purchase in the market and may either be
cancelled or held as treasury shares, which may then be cancelled, sold for cash or used to meet the Company’s obligations under its employee share
schemes. The Company currently has no shares held in treasury.

As at 23 March 2015, the total number of options to subscribe for shares in the Company was 1,621,889 (approximately 0.5% of the Company’s issued
share capital and approximately 0.4% of the Company’s issued share capital if the full authority proposed by resolution 16 was used and the shares
purchased were cancelled).

resolution 17 – notice of general meetings, other than annual general meetings
Under the Act, the notice period required for all general meetings of the Company is 21 days. An AGM is required by law to be held on at least 21 clear
days’ notice but shareholders can approve a shorter notice period for other general meetings.

This resolution would, if passed, allow the Company flexibility to call general meetings, other than annual general meetings, on not less than 14 clear days’
notice. The approval will be effective until the Company’s next annual general meeting, when it is intended that a similar resolution will be proposed.

The Board confirms that, in its opinion, all of the resolutions are in the best interests of the shareholders of the Company as a whole and
unanimously recommends that shareholders vote in favour of them.

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INTRODUCTIONPERFORMANCEGOVERNANCEADDITIONAL INFORMATIONGULF MARINE SERVICES PLC Annual Report 2014

NOTICE OF AGM
Continued

important noteS
The following notes explain your general rights as a shareholder and your right to attend and vote at this AGM or to appoint someone else to vote
on your behalf.

1. To be entitled to attend and vote at the AGM (and for the purpose of the determination by the Company of the number of votes they may cast),

shareholders must be registered in the Register of Members of the Company at 6.00pm on 1 May 2015 (or, in the event of any adjournment, 6.00pm
on the date which is 48 hours, excluding non-working days, before the time of the adjourned meeting). Changes to the Register of Members after
the relevant deadline shall be disregarded in determining the rights of any person to attend and vote at the meeting. There are no other procedures
or requirements for entitled shareholders to comply with in order to attend and vote at the AGM. In alignment with best practice for Listed
Companies, it is the current intention that each of the resolutions to be put to the AGM will be voted on by way of a poll and not by show of hands.
The Company believes that a poll is more representative of shareholders’ voting intentions because shareholder votes are counted according to
the number of ordinary shares held and all votes tendered are taken into account.

2. The doors will open at 10.30 am and you may wish to arrive by 11.00 am to enable you to register and take your seat in good time. Light refreshments

will be provided at the meeting. If you have any special needs or require wheelchair access to the offices of Linklaters LLP please contact Molly Stewart
by e-mail on gms@bellpottinger.com or telephone +44 203 772 2500 in advance of the meeting. Mobile phones may not be used in the meeting hall,
and cameras and recording equipment are not allowed in the meeting hall.

3. Members are entitled to appoint a proxy to exercise all or part of their rights to attend and to speak and vote on their behalf at the AGM. A shareholder
may appoint more than one proxy in relation to the AGM provided that each proxy is appointed to exercise the rights attached to a different ordinary
share or ordinary shares held by that shareholder. A proxy need not be a shareholder of the Company. A form of proxy which may be used to make
such appointment and give proxy instructions accompanies this Notice. If you do not have a form of proxy and believe that you should have one, or if
you require additional forms, please contact our Registrar, Equiniti, on 0871 384 2030 (or from outside the UK: +44 121 415 7047). Calls to this number
cost 8p per minute plus network extras. Lines are open Monday – Friday, 8.30am – 5.30pm (excluding UK public holidays).

In the case of joint holders, where more than one of the joint holders purports to appoint a proxy, only the appointment submitted by the most
senior holder will be accepted. Seniority is determined by the order in which the names of the joint holders appear in the Company’s Register of
Members in respect of the joint holding (the first named being the most senior).

5. Any person to whom this Notice is sent who is a person nominated under section 146 of the Companies Act 2006 (the “Act”) to enjoy information
rights (a “Nominated Person”) may, under an agreement between him/her and the shareholder by whom he/she was nominated, have a right to be
appointed (or to have someone else appointed) as a proxy for the AGM. If a Nominated Person has no such proxy appointment right or does not
wish to exercise it, he/she may, under any such agreement, have a right to give instructions to the shareholder as to the exercise of voting rights.

6. The statement of the rights of shareholders in relation to the appointment of proxies in notes 3, 4 and 8 do not apply to Nominated Persons.

The rights described in these paragraphs can only be exercised by shareholders of the Company.

7. A vote withheld is not a vote in law, which means that the vote will not be counted in the calculation of votes for or against the resolution. If no voting

indication is given, your proxy will vote or abstain from voting at his or her discretion. Your proxy will vote (or abstain from voting) as he or she thinks fit
in relation to any other matter which is put before the AGM.

8. To be valid, any form of proxy or other instrument appointing a proxy must be received by post or (during normal business hours only) by hand at the
Company’s registrar Equiniti (the “Registrar”), at the address shown on the form of proxy or in the case of shares held through CREST, via the CREST
system, (see note 11 below). For proxy appointments to be valid, they must be received by no later than 11.30am on Friday, 1 May 2015. If you return
more than one proxy appointment that received last by the Registrar before the latest time for the receipt of proxies will take precedence. You are
advised to read the terms and conditions of use carefully. Electronic communication facilities are open to all shareholders and those who use them
will not be disadvantaged.

9. The return of a completed form of proxy or any CREST Proxy Instruction (as described in note 11 below) will not prevent a shareholder attending

the AGM and voting in person if he/she wishes to do so.

10. CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so for the AGM (and any
adjournment of the AGM) by using the procedures described in the CREST Manual (available from www.euroclear.com). CREST Personal Members
or other CREST sponsored members, and those CREST members who have appointed a service provider(s), should refer to their CREST sponsor
or voting service provider(s), who will be able to take the appropriate action on their behalf.

11. In order for a proxy appointment or instruction made by means of CREST to be valid, the appropriate CREST message (a ‘CREST Proxy Instruction’)
must be properly authenticated in accordance with Euroclear UK & Ireland Limited’s specifications and must contain the information required for
such instructions, as described in the CREST Manual. The message must be transmitted so as to be received by the issuers’ agent (ID RA19) by
11:30am on 1 May 2015. For this purpose, the time of receipt will be taken to the time (as determined by the timestamp applied to the message by
the CREST application host) from which the issuers agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST.
After this time, any change of instructions to proxies appointed through CREST should be communicated to the appointee through other means.

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12. CREST members and, where applicable, their CREST sponsors, or voting service providers should note that Euroclear UK & Ireland Limited does

not make available special procedures in CREST for any particular message. Normal system timings and limitations will, therefore, apply in relation
to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST
personal member, or sponsored member, or has appointed a voting service provider(s), to procure that his CREST sponsor or voting service
provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular
time. In this connection, CREST members and, where applicable, their CREST sponsors or voting system providers are referred, in particular,
to those sections of the CREST Manual concerning practical limitations of the CREST system and timings. The Company may treat as invalid
a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001.

13. Any corporation which is a member can appoint one or more corporate representatives who may exercise on its behalf all of its powers as a

member provided that no more than one corporate representative exercises powers relation to the same shares.

14. As at 23 March 2015 (being the last practicable business day prior to the publication of this Notice), the Company’s ordinary issued share capital

consists of 349,527,804 ordinary shares, carrying one vote each. No shares are held in treasury. Therefore, the total voting rights in the Company
as at 23 March 2015 are 349,527,804.

15. Under section 527 of the Act, shareholders meeting the threshold requirements set out in that section have the right to require the Company to
publish on a website a statement setting out any matter relating to: (i) the audit of the Company’s accounts (including the auditor’s report and the
conduct of the audit) that are to be laid before the AGM; or (ii) any circumstances connected with an auditor of the Company ceasing to hold office
since the previous meeting at which annual accounts and reports were laid in accordance with section 437 of the Act. The Company may not
require the shareholders requesting any such website publication to pay its expenses in complying with sections 527 or 528 of the Act. Where the
Company is required to place a statement on a website under section 527 of the Act, it must forward the statement to the Company’s auditor not
later than the time when it makes the statement available on the website. The business which may be dealt with at the AGM includes any
statement that the Company has been required under section 527 of the Act to publish on a website.

16. Any shareholder attending the meeting has the right to ask questions. The Company must cause to be answered any such question relating to the

business being dealt with at the meeting but no such answer need be given if (a) to do so would interfere unduly with the preparation for the meeting
or involve the disclosure of confidential information, (b) the answer has already been given on a website in the form of an answer to a question, or (c)
it is undesirable in the interests of the Company or the good order of the meeting that the question be answered.

17. The following documents are available for inspection during normal business hours at the registered office of the Company on any business day
from 23 March 2015 until the time of the AGM and may also be inspected at the AGM venue (Linklaters LLP, One Silk Street, London, EC2Y 8HQ),
from 10.30 am on the day of the meeting until the conclusion of the AGM:
– copies of the directors’ letters of appointment or service contracts;
– a copy of the articles of association of the Company; and
– a copy of the directors’ deeds of indemnity.

18. You may not use any electronic address provided in either this Notice or any related documents (including the Form of Proxy) to communicate with

the Company for any purposes other than those expressly stated.

A copy of this Notice, and other information required by section 311A of the Companies Act 2006, can be found on the Company’s website at
http://www.gmsuae.com.

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INTRODUCTIONPERFORMANCEGOVERNANCEADDITIONAL INFORMATIONGULF MARINE SERVICES PLC Annual Report 2014

American Bureau of Shipping.
Abu Dhabi International Petroleum Exhibition and Conference .
Abu Dhabi Marine Operating Company, a subsidiary of ADNOC.
Abu Dhabi National Oil Company.
United Arab Emirates Dirham. The currency in United Arab Emirates.
Anchor Handling Tug Support vessel.
Calculated from a base of 365 days from which any unpaid days spent on mobilisation and demobilisation,
planned refurbishment or upgrade work and, in the case of a newly constructed SESV, delivery time are
subtracted. Maintenance days included in our contracts are counted as available days.
Average daily costs incurred to operate a vessel. Calculated as cost of sales less non-cash items, depreciation,
amortisation and impairments divided by 365.
A project involving the upgrade or modification of existing operations.
Defined in the oil and gas sector to include greenfield projects, engineering, procurement and construction
activities, installation and decommissioning and, with respect to EOR activities, water injection and gas
injection. Typically funded out of our clients’ capital expenditure budgets.
Income received by the Company in respect of each day a vessel is chartered to a client.
Dynamic positioning system with full redundancy meaning that should one component fail there is a backup
component that takes over.
A computerised positioning system which maintains the vessel position by using its own propellers
and thrusters.
Earnings Before Interest, Tax, Depreciation and Amortisation.
Enhanced Oil Recovery. Consists of the injection of foreign components (e.g. chemicals) to recover a larger
proportion of the remaining oil at the final stages of the field life .
Engineering, Procurement and Construction.
Gulf Cooperation Council, the political and economic alliance of six Middle Eastern countries comprising
Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, Bahrain, and Oman.
Project involving a completely new area of work.
Income received by the Company for the provision of accommodation and meals provided to client personnel
charged on a per person per day basis.
Health, Safety and Environment.
Health, Safety, Security, Environment and Quality.
Heating, Ventilation and Air Conditioning System
International Financial Reporting Standards.
International Jack Up Barge Owners’ Association.
International Oil Company.
International Safety Management Code.
International Organisation for Standardisation.
Self-elevating support vessels equipped with legs that are lowered to the ocean floor.
Lost Time Injuries.
Income received by the company at the beginning of a new charter party agreement relating to the costs and
time taken to prepare the vessel.
Middle-East and North Africa.
National Oil Company.
Operating expenditure-led activities. Defined in the oil and gas sector to include fabric maintenance, well
intervention, brownfield upgrade and modification projects and retrofit or upgrade activities with respect to
EOR activities. Typically funded out of our clients’ operating budgets.
Persons on board.
Self-Elevated Support Vessel designed to cater to a range of offshore assets and equipment such as drilling
products and to support inspection, maintenance, repair, diving and construction activities.
Consists of the maintenance, modification and operation of platforms during the production phase of the
offshore field lifecycle.
Actual number of days a vessel is on hire divided by the number of available days in a year.
Consists of services (coiled tubine, pumping, workover, subsea landing string and other services) to maintain
production levels in the primary and secondary phases of oil production.

GLOSSARY

ABS
ADIPEC
ADMA-OPCO
ADNOC
AED
AHTS vessel
Available days

Average Daily Operating Costs

Brownfield project
Capex-led Activities

Dayrate
DP2

Dynamic positioning

EBITDA
EOR

EPC
GCC

Greenfield project
Hotel Services

HSE
HSSEQ
HVAC
IFRS
IJUBOA
IOC
ISM
ISO
Jack-up barge
LTIs
Lump sum

MENA
NOC
Opex-led Activities

POB
SESV

Topside Operations
and Maintenance
Utilisation rate
Well intervention

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INTRODUCTIONPERFORMANCEGOVERNANCEADDITIONAL INFORMATIONGULF MARINE SERVICES PLC Annual Report 2014

Board of Directors
Simon Heale
Independent Non-Executive Chairman

Duncan Anderson
Chief Executive Officer

Simon Batey
Senior Independent
Non-Executive Director

Richard Anderson
Independent Non-Executive Director

Mike Straughen
Independent Non-Executive Director

Richard Dallas
Non-Executive Director

Dr Karim El Solh
Non-Executive Director

CORPORATE INFORMATION

Joint corporate Broker
Bank of America Merrill Lynch
2 King Edward Street
London EC1A 1HQ

Joint corporate Broker
Barclays
5 The North Colonnade
Canary Wharf
London E14 4BB

legal advisers
Linklaters LLP
One Silk Street
London EC2Y 8HQ

auditors
Deloitte LLP
2 New Street Square
London EC4A 3BZ

public relations advisers
Bell Pottinger
Holborn Gate
330 High Holborn
London WC1V 7QD

registrar
Equiniti
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA

Registered Office
Gulf Marine Services PLC
1st Floor
40 Dukes Place
London EC3A 7NH

Head Office
Gulf Marine Services
P.O. Box 46046
Abu Dhabi, UAE
Ph: +971 (2) 5028888
Fax: +971 (2) 5553421
Email: IR@gmsuae.com

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Additional InformationGULF MARINE SERVICES PLC Annual Report 2014

This publication was printed with vegetable
oil-based inks by an FSC-recognised printer
that holds an ISO 14001 certification.

Gulf Marine Services
P.O. Box 46046
Abu Dhabi, UAE
Ph: +971 (2) 5028888
Fax: +971 (2) 5553421
Email: IR@gmsuae.com