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Gulf Marine Services PLC
Annual Report 2020
HIGHLIGHTS
In this report
Strategic Report
Highlights
Chairman’s Review
People and Values
Business Model & Strategic Objectives
Section 172 Statement
Market Analysis
Risk Management
Key Performance Indicators
Financial Review
Long-term Viability Statement
Governance
Chairman’s Introduction
Board of Directors
Report of the Board
Audit and Risk Committee Report
Nomination Committee Report
Remuneration Committee Report
Directors’ Report
Financial Statements
Independent Auditor’s Report
Group Consolidated
Financial Statements
Company Financial Statements
Glossary
Other Definitions
Corporate Information
Also online at gmsplc.com/ar2020
2021 commentary is as at 20 May 2021
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Our vision
To be the best SESV operator
in the world
2020 Overview
Revenue
US$ 102.5m
(2019: US$ 108.7m)
Utilisation
81%
(2019: 69%)
Adjusted EBITDA
Annualised cost savings
US$ 50.4m
(2019: US$ 51.4m)
US$ 20.7m
(2019: US$ 13.0m)
Loss for the year
US$ (124.3m)
(2019: US$ (85.5m))
2020 Financial Highlights
— Revenue fell by 6% to US$ 102.5 million (2019: US$ 108.7 million).
Utilisation improved to 81% from 69% in 2019, with improvements in both
of our core markets of MENA and North West Europe. This helped to offset
the decrease in average rates of 18%, arising from the COVID-19 operating
environment where delayed contract awards meant that two of our E-Class
fleet were working at K-Class rates in order to meet demand.
— Cost of sales reduced to US$ 70.9 million (2019: US$ 74.6 million) despite
higher utilisation and incurring costs associated with relocating two vessels
from Europe to the Middle East and costs arising from the impact of
COVID-19 totalling US$ 6.8 million and US$ 2.3 million respectively.
— Adjusted EBITDA1 at US$ 50.4 million was 2% lower than in 2019,
while net cash flow before debt service2 reduced to US$ 31.9 million
(2019: US$ 41.9 million).
— Our cost structure has fundamentally changed, with the cost saving
programme now having delivered US$ 20.7 million on an annualised basis,
helping to improve underlying trading performance.
— Impairment charges totalled US$ 87.2 million, on two of our E-Class
vessels and five of our K-Class.
— Loss for the year rose to US$ 124.3 million from US$ 85.5 million following
the impairment, further restructuring and exceptional costs of US$ 5.6
million and the total write-off of US$ 16.2 million relating to the
renegotiation of bank facilities in June 2020.
2020 Operational Highlights
— HSE Performance improved with Lost Time Injury Rate at 0 (2019: 0.19) at the end of 2020. Total recordable injury rate
was 0 (2019: 0.29).
— Successful first-time deployment of cantilever system on GMS Evolution, a technology designed and developed by GMS.
The vessel is now on a long-term contract with the same client.
— Operational downtime remained low at less than 2%.
— Average fleet utilisation increased to 81% (2019: 69%) with marked improvements in both E- and K-Class vessels to 65%
(2019: 51%) and 86% (2019: 68%) respectively, reflecting increased demand in Middle East and North Africa (MENA)
following the relocation of two E-Class to MENA at the beginning of the year. S-Class declined slightly at 92% (2019: 97%).
— New charters and extensions secured in the year totalled just under seven years.
2020 Governance Highlights
— Four Requisitioned General Meetings held during 2020
resulted in complete Board overhaul.
— New Executive Chairman, Mansour Al Alami
(appointed November 2020).
— Rashed Al Jarwan joined as an Independent Non-
Executive Director (appointed November 2020).
— Saeed Abdullah Khoory joined as an Independent
Non-Executive Director in November 2020 and
sadly passed away in February 2021.
— Hassan Heikal joined as Non-Executive Director
(appointed November 2020). In February 2021
Mr Heikal was appointed Deputy Chairman.
— Tim Summers resigned as Executive Chairman in
November 2020.
— Steve Kersley, Chief Financial Officer (CFO) removed from
Board in June 2020 and resigned in November. Andy
Robertson appointed his successor in February 2021.
— Jyrki Koskelo joined the Board as an Independent Non-
Executive Director in February 2021.
2021 Highlights and Outlook
— Secured backlog was US$ 199.0 million as at 6 May 2021
(US$ 240 million as at 31 March 2020) with the decrease
reflecting delays in some contract awards arising from
COVID-19.
— Seven of the fleet of 13 vessels are fully contracted for 2021.
Secured utilisation for 2021 currently stands at 80% and
41% for 2022.
— Following appointment of the new Board, the agreement
reached with banks in 2021 offers a significant saving in
interest costs and an extension of time in which to carry out
an equity raise to prevent GMS having to issue warrants or
apply PIK3 to its borrowings.
— Current year-to-date4 unaudited EBITDA is in line with the
Group’s 2021 Business Plan.
See Glossary.
1 Represents operating loss after adding back depreciation and amortisation,
impairment charges and exceptional items in 2020. A reconciliation of this
measure is provided in Note 31.
2 Net cash flow before debt service is the sum of cash generated from operations
and investing activities.
3 PIK is calculated at 5.0% per annum on the total term facilities outstanding amount
and would have reduced to:
a. 2.5% per annum when Net Leverage reduces below 5.0x
b. Nil when Net Leverage reduces below 4.0x.
4 Three months to 31 March 2021.
COVID-19
— Significant operational and financial risks experienced by all
businesses across the energy sector persist. Four vessels
reported COVID-19 cases during the year.
— Restrictions on travel and quarantine periods proved the
biggest challenge to the Company in the year. To overcome
this, crew rotations have been temporarily increased to
minimise the number of crew changes required. This
measure will remain in place for the time being.
— Temporary delays in contract awards, with some client
projects unable to commence due to supply chain delays
or inability to mobilise manpower.
— Incurred US$ 2.3 million of additional costs relating to
COVID-19 in the year, which were mainly in relation to crew
quarantine requirements. Changes to operating practices
implemented at end of the year should minimise these
costs going forward.
Material Uncertainty Statement
— As part of the renegotiation of bank facilities agreed in
March 2021, the Company is required to obtain approval
from shareholders and raise a minimum of US$ 25 million
of new equity (net) by 30 June 2021. Seafox and Mazrui
Investments LLC (Mazrui) are related parties under the
Listing Rules, and therefore their respective votes would
not be counted on a shareholder vote on a related party
transaction to which they were party. A fully pre-emptive
offering would not involve such a related party transaction.
Both have informally agreed to take up their prorated share
of an equity raise. If the Company fails to meet these
requirements then lenders would retain the right to call
default on the loans. This would allow a majority of banks,
representing at least 66.67% of total commitments, to
exercise their rights to demand immediate repayment and/
or enforce security granted by the Company as part of this
facility at the asset level and/or by exercising the share
pledge to take control of the Group.
— This indicates a material uncertainty that may cast
significant doubt as to the Group’s ability to continue as a
going concern. Notwithstanding this material uncertainty,
the Directors believe that based on progress to date,
shareholder approval will be obtained and US$ 25 million
of equity will be raised by 30 June 2021. Accordingly, the
going concern basis of accounting has been adopted in
preparing the 2020 consolidated financial statements.
Annual Report 2020
1
Strategic Report
CHAIRMAN’S REVIEW
New debt arrangements
provide a strong platform
for future growth
2020 saw the Group make solid progress, despite the impact of the COVID-19 pandemic.
During the year, GMS recorded a high level of utilisation, on the back of a series of contract
wins, whilst we continued to drive efficiencies to improve our margin1 and deliver operations
safely and securely.
The improved terms to GMS’ debt
arrangements, as recently announced,
combined with progress in two other key
areas, maximising utilisation and cost control,
places the Company in a good position to
deliver further progress in the year ahead. We
ended 2020 with vessel utilisation of 81% and
already have 80% of 2021 utilisation locked in
through secured contracts. Work continues
in streamlining our cost base and since my
appointment we have implemented a further
US$ 3.0 million of annualised savings.
Capital Structure and Liquidity
In November 2020 a new Board was
appointed, and I assumed the role of Executive
Chairman. A key focus since has been the
renegotiation of the terms of the Group’s
debt facilities. I am delighted to say that we
concluded negotiations with our lenders on
an improved structure, which will see a
significant reduction when compared to the
previous arrangements agreed in 2020 and a
deferment to the application of PIK interest
which was to apply from 1 January 2021.
Under the revised agreement, the tenor and
size of facility remain unchanged but certain
key structural changes to the facility will give
significant benefit to GMS. As well as greatly
reducing the cost of borrowings through the
40% reduction in margin in 2021 and 2022,
the Company has been granted an extension
to the requirement to raise the previously
required equity of US$ 75 million. Now a
minimum of US$ 25 million of new equity is
required to be raised by 30 June 2021 and a
further US$ 50 million by the end of 2022.
Subject to successfully raising US$ 25 million
(net) by 30 June 2021, GMS will no longer be
required to issue warrants to its lenders or be
charged PIK interest on the loan facilities in
2021 (as was required under the agreement
negotiated in June 2020).
Seafox and Mazrui are related parties under
the Listing Rules, and therefore their
respective votes would not be counted on
a shareholder vote on a related party
transaction to which they were party. A fully
pre-emptive offering would not involve such
a related party transaction. Both have
informally agreed to take up their prorated
share of an equity raise. The requirement
to obtain approval from our shareholders
and raise US$ 25 million of equity (net) by
30 June 2021, to avoid an event of default,
represents a material uncertainty that may
cast significant doubt as to the Group’s
ability to continue as a going concern, that
has been highlighted in our consolidated
financial statements. Despite this, the
Directors consider there is good reason
to believe that the equity raise will be
successfully completed in a timely fashion.
This is based on the progress made to
date, and two of our existing shareholders,
representing 42% of the share capital of
the Company, having already informally
committed their prorated share of the US$
25 million. The Board would like to thank the
two shareholders for their extensive work
and support to deliver this improved debt
deal, which is a milestone for the business.
The reduced cost of the debt facilities,
combined with a planned equity raise, will
see a significant improvement to GMS’ future
leverage levels. The positive impact this will
have on the business cannot be understated.
It frees up capital that would otherwise have
been tied up in managing the Company’s
debts and gives us the greater flexibility
needed to drive the business forward.
Governance
In November 2020, I joined as Executive
Chairman as part of a new Board, following
resolutions passed by shareholders at a
General Meeting. In light of Tim Summers
having stepped down from the Board, I was
appointed Chairman, and subsequently
Executive Chairman, a role which I continue
to hold in leading the business and the
Board. Whilst holding the positions of both
Chairman and Chief Executive is not
recommended by the 2018 UK Corporate
Governance Code (the Code), the Board has
concluded that this continues to be
appropriate in the Group. This recognises
both the level and pace of change necessary
for the Group and its relatively small scale.
The Board also believes that I am the best
person to chair the Board and lead the
management of the business for the
foreseeable future.
The new Board combines strong
relationships with key clients and banks in
the MENA region, with a high level of industry
knowledge. These strengths have already
benefitted the business through the delivery
of the recent new banking terms. They will
also play a key role in helping deliver on the
planned equity raise and the future direction
and growth of the business.
Andy Robertson was appointed to the role of
Chief Financial Officer, in February this year.
He has been with GMS for 13 years, having
previously held the positions of Finance
Director and Head of Business Development.
With his industry knowledge, understanding
of our business and the relationships he has
developed with key stakeholders over the
years, I am sure that Andy will continue to
add great value to GMS going forward.
1 Margin is defined as revenue less operating expenses (refer to Note 31). At 31 December 2020 this was 59% (2019: 60%). GMS has sought to lessen the impact of
reduced revenue through cost efficiencies.
2
Gulf Marine Services PLC
“The progress GMS has
continued to make, regardless
of the unprecedented
circumstances created by
the COVID-19 pandemic,
is a credit to the business
and the people within it and
provides a firm footing to
look to the future.”
Group Performance
Revenue reduced by 6% to US$ 102.5 million
in 2020. While vessel utilisation increased to
81% from 69% in 2019, average day rates
decreased by 18% arising from the
COVID-19 operating environment where
delayed contract awards meant that two of
our E-Class fleet were available and were
contracted at K-Class rates where short-term
opportunities existed.
Cost management remained a key focus,
such that operating costs decreased by US$
1.0 million (detailed in Note 31), despite the
12 percentage point increase in utilisation.
This decrease is largely down to headcount
reductions, and accordingly general and
administrative expenses similarly decreased
by 24% from US$ 24.1 million to US$ 18.2
million. Since the inception of our cost saving
programme in 2019, over US$ 20 million of
annualised costs have been removed from
our operations.
Adjusted EBITDA was US$ 50.4 million
(2019: US$ 51.4 million), while the loss for
2020 was US$ 124.3 million (2019: US$ 85.5
million), with a non-cash impairment charge
of US$ 87.2 million (2019: US$ 59.1 million)
on five of our K-Class and two of our E-Class
vessels being the driving factor. The Group
also incurred US$ 16.2 million in finance
expenses relating to the earlier renegotiation
of bank facilities in June 2020.
Capital expenditure was allocated to ensure
vessels were kept in class, equipment was well
maintained and able to meet specific client
requirements. GMS’ priority is to deleverage
the balance sheet, meaning capital allocation
will likely remain limited until that is achieved.
Commercial and Operations
COVID-19 has fundamentally changed the
global landscape in which we operate and,
whilst those risks remain, they are actively
managed at both Board and Senior
Management levels. Operations are continuing
without material disruption and processes
have been put in place to mitigate additional
COVID-19 related costs going forward, mainly
relating to periods of quarantine for crew.
In 2020, all business travel for onshore
personnel was stopped and, for a time, our
staff were working remotely as part of
enhanced safety procedures. The phased
reopening of the Head Office began in the
second half of the year, with regular COVID-19
tests provided to all our onshore staff.
Four vessels reported confirmed or suspected
COVID-19 cases and effective measures
were put in place to manage the impact. Our
biggest challenge operationally has been to
effect timely crew changes, due to travel
restrictions and quarantine requirements,
resulting in extended durations of time that
crew were required to be at sea. I would like
to extend my personal thanks to each crew
member impacted by this.
GMS’ UAE based employees have chosen to
take advantage of the COVID-19 vaccination
programme, supporting their health and the
health of contractors and clients. We fully
support their decision, as well as the ongoing
campaign by the UAE Government to vaccinate
all its residents and protect against COVID-19.
In July 2020, GMS announced its first contract
utilising the unique Cantilever Workover
System, installed on the self-propelled vessel,
GMS Evolution. Under contract to a National
Oil Company (NOC) in the MENA region, this
was the first occasion that the cantilever
system, a technology designed and developed
by GMS, has been used on a live well.
The system successfully completed operations
on 13 wells, proving the technology concept
and providing the client with enhanced safety
and lower-cost operations. Following this
successful trial, the client agreed to improved
commercial terms through a new contract
running in direct continuation to Q4 2022.
In the autumn, GMS relocated from its
out-dated base at Musaffah to new facilities
within Abu Dhabi. The move reduces the
combined office & yard costs by around
40% annually.
Environment and Safety
Once again, we have delivered safe and
reliable operations to our customers and
it is pleasing to report that the TRIF (Total
Recordable Injury Frequency) returned
to zero during the year, from 0.19 in the
previous year. GMS remains committed to
providing all personnel and our customers
with a high quality, safe working environment
at all times and continues to maintain a focus
on safe, reliable operations.
In 2020 there were no environmental incidents
across our operations, and we are continuing
to take measures to reduce our emissions
going forward, as part of a broader goal to
align with the Paris Agreement objectives.
We recognise that all of us have an increased
level of responsibility on climate change.
The new Board will be overseeing GMS’
response to climate related challenges and
opportunities in our operating model.
Outlook
GMS is well placed to benefit from the
improving market cycle in oil & gas in the
Middle East and renewables in Europe. In
recent years, the Company has traded through
a period of subdued demand, which now
looks set to change. This change is reflected
in GMS’ vessel utilisation, combined with the
greater pipeline of future activity, which is also
expected to feed into higher day rates, albeit
because of increased supply these are unlikely
to recover to day rates experienced pre-2015.
This increase in market activity is being driven
by increased demand from our core NOC and
EPC clients in the MENA region with NOCs
offering long term contracts having committed
to increases in production levels and EPC
clients catching up on project delays incurred
in 2020 as a result of the COVID-19 pandemic.
The Middle East is the largest region for
shallow water oil production, ideal for SESVs to
operate, with extensive offshore infrastructure,
requiring regular maintenance. The Company
now has 12 of its 13 vessel fleet based in the
MENA region, following the decision to
relocate two vessels from Europe last year.
Utilisation and days rates are also expected to
benefit from the market tightening in the Middle
East, as competitor vessels are relocated to
support the development of the offshore wind
market in China. We began 2021 with an
improved secured utilisation position over last
year, which is encouraging and gives us added
comfort for the year ahead. Secured day rates
for 2021 have remained relatively flat on K- and
S-Class however we have seen an increase
in day rates on E-Class of just over 9% on
2020 average rates through contracts
awarded in 2021.
The Group’s financial performance to the
end of March 2021 remains in line with our
business plan. With 80% of vessel utilisation
already secured, the Board is confident of
delivering further improved results.
Mansour Al Alami
Executive Chairman
Annual Report 2020
3
Strategic Report PEOPLE AND VALUES
Employee
safety remains
our priority
Environmental, Social and
Governance Factors
E-Class vessels, that could significantly
extend the life of lube oils. The results of the
trial are expected to be published this year.
Environment
During the year, the Group has implemented
the following initiatives, aimed at reducing
GMS’ carbon footprint:
Closures of offices and facilities
During 2020, the Group relocated its office
and other facilities, leading to a reduction in
its geographical footprint, which led to a 17%
decrease in electricity consumption. The
relocation included closing the Musaffah
offices and onsite construction base. The
Group opened a new office, at International
Tower, in Abu Dhabi, which has impressive
sustainability credentials, having been
developed in-line with the US Green Building
Council LEED® rating system.
Decrease in business travel
(COVID-19)
All business travel was suspended in 2020,
due to COVID-19. In 2021, the Group has
continued to restrict non-essential business
travel, with positive developments in video
conferencing reducing the need for face to
face interactions. GMS expects this trend to
continue for the foreseeable future, and will
continue to encourage all employees to
minimise non-essential business travel.
Change in refrigerant
The Group changed the refrigerant used on
its vessels, for the cooling process, resulting
in a 30% decrease in refrigerant emissions.
GMS is continuing to evaluate other
alternative refrigerants, with the aim of
further reducing emissions.
Other emission reductions projects
As part of the Group’s drive to reduce it
overall emissions, it is evaluating a number
of measures aimed at reducing its carbon
footprint. Included in these is the trialling of
a lube oil filtration system on one of the
4
Gulf Marine Services PLC
Carbon emission reporting
To monitor the impact of the Group’s
operations on the environment, the Group
collates Greenhouse Gas (“GHG”) data. The
Group consulted an independent third-party
assurer, Net Zero Compliance (a division of
Energy & Carbon Management), to report
on its environmental performance in GHG
emissions. Their report summarises the
organisational and operational boundaries,
associated emissions, annual reporting
figures and methodologies for GMS, in
accordance with the UK Government policy,
Streamlined Energy & Carbon Reporting
(SECR), as implemented by the Companies
(Directors’ Report) and Limited Liability
Partnerships (Energy and Carbon Report)
Regulations, 2018.
The figures outlined on the right make up the
baseline reporting for GMS, with 2020 being
the first year the Group has been required
to report this information. The 2019 totals
have been included from the Mandatory
Greenhouse Gas reporting that preceded it.
Scope 1 consumption and emissions relate
to gas and fuels’ direct combustion or
consumption, utilised for the Group’s
vessel operations.
Scope 2 consumption and emissions
relate to indirect emissions, relating to
the consumption of purchased electricity,
in day to day business operations.
SECR requires the Group to report
consumption in kWh as well as overall
emissions. Refrigerant consumption
does not convert to Kwh and is therefore
excluded from the table below.
The Group’s carbon footprint is derived
primarily from the transportation of our fleet.
The Group’s Scope 1 direct emissions for
this first year of reporting are 42,893 tCO2e.
This is a reduction of 0.5% from the previous
year, while in the same period, vessel
utilisation (the primary source of direct
emissions) increased by 17%.
In 2020, the Group’s total Scope 1 and 2
emissions were 45,891 tonnes of carbon
dioxide equivalent compared to 47,152
tonnes in 2019. The decrease is
predominantly related to reduced electricity
and refrigerant emissions arising from the
changes implemented described above. The
intensity metric increased slightly as revenue
was 6% lower in 2020 compared to 2019.
Financial disclosures
International treaties, such as the Paris
Agreement, combined with changing
patterns of energy demand have
fundamentally changed the regulatory
environment and reporting requirements.
Transparency on climate-related risks and
opportunities in the industry in which GMS
operates must be improved and climate
change is an increasingly important area of
focus to the Board and Senior Management.
GMS has already committed to adopting the
recommendations published by the Task
Force for Climate-related Financial
Disclosures (TCFD) by 2022 and have
published measures implemented to reduce
the Group’s Greenhouse Gas emissions as
outlined above. The emissions metrics
demonstrate that the Group’s carbon
footprint has already reduced as a result of
changes implemented. The new Board
intends to oversee climate-related risks and
opportunities through the current framework
of assessing risk more thoroughly so that
targets on emission reduction will be in place
by the end of 2021. It is the Group’s
expectation that the requirements of TCFD
will be in place in 2022 with an audit to
obtain an unqualified assurance opinion to
follow in future years.
The total consumption (kWh) figures for energy supplies, reportable by GMS, are as follows:
Utility and Scope
Grid-Supplied Electricity
(Scope 2)
Gaseous and other fuels
(Scope 1)
Transportation
(Scope 1)
Total
2019 Consumption
2020 Consumption
2020 UK Consumption
(kWh)
988,254
0
(kWh)
815,940
0
(kWh)
0
0
2020 Global
(excluding UK)
Consumption
(kWh)
815,940
0
160,657,371
166,036,232
18,089,737
147,946,495
161,645,625
166,852,172
18,089,737
148,762,435
The total emission (tCO2e) figures for energy supplies reportable by GMS are as follows:
Utility and Scope
Grid-Supplied Electricity
(Scope 2)
Gaseous and other fuels
(Scope 1)
Transportation
(Scope 1)
Refrigerants
(Scope 1)
Total
2019 Consumption
(tCO2e)
2020 Consumption
(tCO2e)
2020 UK Consumption
(tCO2e)
580
0
43,108
5,554
47,152
479
0
42,893
32,520
45,891
0
0
4,674
0
4,674
An intensity metric of tCO2e per US$m Total Revenue has been applied for the annual total emissions of GMS:
Intensity Metric
tCO2e/US$m
Social
2019 Intensity Metric
2020 Intensity Metric
2020 UK Intensity Metric
433.77
433.75
45.60
2020 Global
(excluding UK)
Consumption
(tCO2e)
479
0
38,219
2,520
41,217
2020 Global
(excluding UK)
Intensity Metric
402.15
Values
Core values of Responsibility, Excellence and Relationships are incorporated into all aspects of the business. GMS is committed to
ensuring the health and safety of its employees, subcontractors, clients and partners and to upholding high ethical standards.
Responsibility
Excellence
Relationships
GMS is committed to the health and safety
of its employees, subcontractors, clients
and partners, and to behaving with
environmental responsibility. The Group’s
focus is on ensuring the safety of
everything it designs, constructs,
operates and maintains.
The Group believes it has a responsibility
across all business relationships.
As part of that, it is continually seeking
opportunities to grow the business and to
create value for shareholders. This includes
being cost-conscious and managing its
risks effectively.
The Company is always looking for
ways to better meet client needs, through
continuous improvement. It aims to
build on past experiences and to
embrace innovation.
GMS sets itself challenging targets
to deliver superior performance, and
to exceed stakeholder expectations,
including that of clients.
The reputation and integrity of the business
are important. GMS works with rigour and
transparency to ensure it is the preferred
contractor of choice.
The Company aims to attract and retain
premium staff and ensure they are
empowered to carry out their duties
safely and effectively.
GMS values employee diversity, the
provision of an environment where
employees can perform to their full
potential and be rewarded for
delivering excellence.
Core values of Responsibility, Excellence
and Relationships are incorporated into
all aspects of the business. GMS is
committed to ensuring the health and
safety of its employees, subcontractors,
clients and partners and to upholding
high ethical standards.
Annual Report 2020
5
Strategic Report PEOPLE AND VALUES
continued
Social continued
Health and safety
The Group operates its vessels to the highest
international health and safety standards.
Management systems, that govern all
Company activities and operations, are
voluntarily accredited to ISO 9001, ISO 14001
and ISO 45001. All vessels operate in
compliance with the International Safety
Management (ISM) Code, meaning the
International Management Code for the Safe
Operation of Ships and for Pollution
Prevention, which is a legal requirement.
advice is required, arrangements are in
place for consultations. Employees have
access to consultation facilities, either
in person or through telemedicine
arrangements. All employee health data is
managed in accordance with the General
Data Protection Regulations and is
maintained as strictly confidential.
The information at the bottom of the page
is intended to provide an overview of the
Health and Safety performance, over the
reporting period.
Risks arising from operations and activities
are routinely assessed to ensure that
mitigation measures are implemented and
communicated to all employees. All
employees are made aware of the risks
associated with operations, through extensive
training and employee engagement. Training
programs are developed annually and
reviewed periodically.
GMS carries out reviews of all safety-critical
tasks and competency assessments, to
ensure employees and subcontractors are
competent to perform hazardous activities.
A culture of proactive workforce engagement
is fostered, by empowering all employees to
report unsafe occurrences and, if required,
intervening to stop unsafe work altogether.
Turnover
Voluntary employee turnover decreased to
8% in 2020, versus 18% in 2019. This was
despite material change in the business, with
the organisational structure simplified and
posts removed through redundancy. During
2020, GMS also promoted 36 employees.
Diversity
The Group’s workforce consists of 532
personnel, recruited from 35 countries. The
significant experience and skills individuals
bring to GMS helps it to conduct its
business globally.
The information to the right provides details
of the gender diversity and country of origin
of our personnel as at 31 December 2020.
Incidents and accidents that may occur at
our work sites or on our vessels are reported
and investigated thoroughly. Investigations
are carried out by multidisciplinary teams,
independent of the area where an incident
has occurred. Incident reporting procedures
also ensure the relevant regulatory bodies
are notified should an incident occur.
Occupational health risks, such as those
arising from noise, vibration, fatigue and
hazardous substances, are managed
in-house by the Health and Safety Team. The
team draws on specialist consultants when
required. If specialist medical or clinical
GMS has a zero-tolerance policy towards
discrimination for all employees, and provides
equal opportunities for all onshore employees.
For cultural and legal reasons, the extent to
which the number of offshore female personnel
can be increased is limited. Local labour laws,
for example, in the countries in which GMS
currently operates in the Middle East, stipulate
that women cannot work in an inappropriate
environment and hazardous jobs/industries,
meaning the Company is unable to employ
them offshore. As the provisions of the UK
Government’s Equality Act 2010, relating to
gender pay gap disclosure, are not applicable
to GMS, this information has not been provided.
Employee engagement and welfare
We launched our first employee engagement
survey at the end of 2019, with an 82%
completion rate. This is consistent with the
global benchmark completion rate of 80%1 for
all companies. The areas employees scored
as needing attention are the frequency of
communication, as a Group and between
departments, and creating opportunities to
provide constructive ideas on how to
improve processes.
In 2020, the primary focus was on employee
safety, due to the potential risks arising from
COVID-19. From March until July, onshore
staff worked remotely. Following this, there
was a phased return to the office,
underpinned by regular COVID-19 onsite
testing and other precautionary measures. All
employees are actively encouraged to receive
the vaccine where it is available. Weekly
communication from the Executive Chairman
on the impact of COVID-19 on our business
continued during the peak of the pandemic,
with other regular communication throughout
the remainder of the year.
Offshore employees unable to commence
their rotations due to the travel restrictions
were provided salary advances, while those
who remained onboard and unable to rotate
for more than 120 days, were provided 10%
extra compensation. Onshore employees are
able to discuss items they feel relevant with
management at Head Office and offshore
employees have regular meetings with
Operations to discuss any issues that affect
them. While the COVID-19 pandemic
continues, this is our primary focus, but we
know we still have work to do on improving
employee engagement. In 2021, Rashed Al
Jarwan was appointed as the new dedicated
Workforce Engagement Director with a Town
Hall style meeting for onshore staff to be held
later in 2021 and a follow up engagement
survey is planned for the end of the year.
Number of work-related fatalities
as a result of a work-related injury
Number of recordable
work-related injuries
Number and rate of high-consequence
work-related injuries
0
(2019: 2)
0
(2019: 0)
0
(2019: 4)
(Rate @1 million work hours – 0.96)
(Rate @1 million work hours – 1.44)
Total number of hours worked
2,030,955
(2019: 2,081,525)
1 What is a good employee survey response rate? – Culture Amp Blog
6
Gulf Marine Services PLC
People
Total number of employees
Offshore
532
(2019: 457)
479
(2019: 377)
Onshore
53
(2019: 80)
Voluntary turnover
8%
(2019: 18%)
Number of offshore employees
Number of onshore employees
Total number of Directors
479
53
4
479
(2019: 377 – all male)
33
(2019: 80 – 49 male/31 female)
20
4
(2019: 6 – 5 male/1 female)
Total number of Direct Reports
to Senior Managers
Total number
of Senior Managers
Nationalities
14
2017
2018
2019
3
2017
2018
2019
10
(2019: 14 – 10 male/4 female)
4
3
(2019: 4 all male)
Male
Female
35
(2019: 36)
2017
2018
2019
GMS Employees – By Region 2020
GMS Employees – By Region 2019
Offshore
Onshore
Offshore
Onshore
2017
2018
7
6
2019
96
2017
2
3
2
2018
2019
4
1
4
94
13
2 3
2
22
370
33
274
51
Africa
Asia
Europe
MENA
Other (Canada, Venezuela, New Zealand)
Annual Report 2020
7
Strategic Report
PEOPLE AND VALUES
continued
Social continued
Share ownership
Employee share ownership is encouraged and
the Group has operated a long-term incentive
plan since 2014. Please see pages 62 to 63 in
the Remuneration Report for further details.
Performance
The Short-Term Incentive Plan (STIP) structure
was redesigned during 2019, so that all
participants, including Executive Directors, are
working towards the same transparent targets,
albeit in 2020 with different weightings. There
are no guaranteed variable pay awards at
GMS, with all pay being performance-based.
The 2020 STIP measures for employees are
set out at the bottom of the page.
This aligns with shareholder interests and
encourages a performance-based culture
to achieve Group objectives.
Succession planning
GMS seeks to promote from within, where
possible and to manage this the Company
has a succession planning process in place
for offshore employees based on years of
experience and qualifications, however due to
the size of the business external hires will be
made where a post cannot be filled internally.
The Group is engaged in fair and transparent
recruitment practices.
Learning and development
GMS aims to ensure that all employees
maintain the relevant technical and regulatory
training required to fulfil their roles. As
seafarers, all crew maintain their relevant
STCW (Standards of Training, Certification
and Watchkeeping – a worldwide convention
that ensures a lateral standard of training is
achieved across all countries in the world)
qualifications that license them to operate
the Group’s vessels, in accordance with
International Maritime Organisation
requirements. For vessels operating within
the offshore Oil & Gas Sector, all crew also
complete additional required training, in areas
such as, but not limited to, offshore safety and
awareness and emergency response. While
the business is repositioned, discretionary
development training has been temporarily
stopped. Discretionary development training
remained discontinued in 2020 due to
COVID-19. The delivery of some mandatory
compliance training has also moved online
to ensure employee safety.
Ethical practice
The Group operates responsibly, in accordance
with the formal legal and regulatory disclosure
requirements expected of a UK listed company.
GMS’ Code of Conduct sets out the basic
rules of the Group. The Code’s purpose is to
ensure work is undertaken safely, ethically,
efficiently, and within the laws of the countries
in which GMS operates. All staff receive Code
of Conduct training, as part of their induction,
and the Group’s reputation and success is
dependent on staff putting the Code into
practise, in all dealings with stakeholders.
GMS maintains an awareness of human
rights issues, which is reflected in its suite
of Group policies, including the Anti-
Corruption and Bribery Policy, Anti-Slavery
Policy, Social Responsibility Policy and
Whistleblowing Policy.
Whistleblowing reporting service
There were no whistleblowing cases
reported in 2020. An independent reporting
service for whistleblowing is in place. It
operates confidentially, is available 24 hours
a day and is staffed by highly skilled
professional call handlers. This service:
• gives a voice to employees, contractors,
suppliers and supply chain and
other stakeholders;
• helps maintain a culture of openness;
• demonstrates that GMS takes
malpractice seriously;
• provides Senior Management with an
overall temperature of the business; and
• supports employees who speak up.
The Whistleblowing policy has a strict
non-retaliation commitment to support
any employees who speak up.
Governance
For Governance related considerations,
please refer to the Governance section
of this Annual Report.
Measure
EBITDA
Securing contract % of 2021 budget revenue
Securing contract % of 2022 budget revenue
Cash generation (unlevered)
EBITDA Margin
Total
Weighting
Performance range (from zero to full pay-out*)
60%
15%
5%
10%
10%
100%
Less than US$ 50m – greater than US$ 70m
Less than 60% – greater than 90%
Less than 40% – greater than 60%
Less than US$ 30m – greater than US$ 37.4m
Less than 44% – greater than 52.5%
1
2
3
4
5
EBITDA*
Score
Securing contracts % of
2021 budget revenue*
Score
Securing contracts % of
2022 budget revenue*
Score
120 days
US$’000
1,829
(4)
1,825
11
−
11
728
(2)
726
634
(2)
632
–
–
–
−
−
−
3
–
3
−
−
−
2,311
(47)
2,264
941
(72)
869
Total
US$’000
24,207
(133)
24,074
25,107
(128)
24,979
Six customers (2019: eight) account for 99% (2019: 99%) of the total trade receivables balance (see revenue by segment information in Note 30);
however, credit risk is considered to be limited due to historical performance and ongoing assessments of customer credit and liquidity positions.
Annual Report 2020
111
Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 31 DECEMBER 2020
10 Derivative financial instruments
Embedded derivative – contract to issue warrants
In June 2020, the Group restructured the terms of its borrowings with its lenders. These terms include warrants to be issued under the
following conditions:
If GMS has not raised US$ 75.0 million of equity, GMS shall issue warrants to its lenders, by no later than 31 December 2020, in accordance
with the following terms:
• Strike price at 9p
• Number of warrants that would give the lenders collectively 20% ownership of GMS
• Vesting: (i) 50% vest on 31 December 2021 and (ii) 50% vest on 30 June 2023, unless the Net Leverage ratio is below 4.0x
•
• Upon vesting, the warrants are (i) exercisable in whole or in part, (ii) allocated pro rata to each lender and exercisable singly and separately
(i.e. not as a syndicate), (iii) payable either in cash or in the form of settling the PIK outstanding at the time of exercise, and (iv) freely tradable
If, at any time, GMS raised US$ 100 million of equity any warrant not yet vested at such date will cease to exist
• Warrants to expire on 30 June 2025 (maturity date of the facilities)
The balance represents the fair value outstanding at 31 December 2020 with a value of US$ 1.4 million. As the derivative was expected to be
settled after 12 months, the balance was recognised as a non-current liability.
As the terms of the loan facility contained separate distinguishable terms with a requirement to issue warrants to banks, management
determined the debt facility to contain an embedded derivative. The Group was required to recognise the embedded derivative at fair value.
Management commissioned an independent valuation expert to measure the fair value of the warrants, which was determined using Monte
Carlo simulations. The fair value based on the valuation carried out as at 31 December 2020 was US$ 1.5 million. The valuation of the contract
to issue warrants is dependent on a number of estimates, including the Company’s share price, the Company’s share price volatility and the
Group’s ability to raise equity. The weighted average risk-free rate was 0.10%. The valuation of fair value of the contract to issue warrants is
more sensitive to changes to market capitalisation. A 10% increase in the assumed market capitalisation required to raise equity would result
in a US$ 1.4 million increase in the fair value of warrants. A 10% decrease would result in a US$ 1.4 million decrease in their fair value.
During the year no warrants were issued.
Interest Rate Swap
The Group uses an interest rate swap to hedge the risk of variability in interest payments by converting a floating rate liability to a fixed rate
liability. As discussed in the 2019 annual report, the Group’s banks agreed to waive the testing requirement of all covenants for the December 2019
testing date. As cashflows of the hedging relationship were not highly probable in 2020, the hedge discontinued and the interest rate swap was
reclassified to fair value through profit and loss. The IRS was expected to be settled after 12 months, therefore the balance as at 31 December 2019
was reclassified to non-current liabilities, refer to Note 3.
Cross Currency Interest Rate Swap
The Group uses a CCIRS hedges the volatility in GBP to USD exchange rates as well as variability in interest rate payments by converting
a USD floating rate loan with USD repayments to a GBP fixed rate loan wherein both the GBP notional and coupon payments are fixed
and matched to actual GBP receivables of highly probable forecast sales. During the year the CCIRS expired.
Derivative financial statements are made up as follows:
As at 1 January 2019
Loss on fair value changes of hedging instruments
Net hedging gain/(loss) on interest hedges reclassified to the profit or loss
As at 31 December 2019
As at 1 January 2020
Gain on fair value changes of hedging instruments
Net hedging gain/(loss) on interest hedges reclassified to the profit or loss
Net loss on changes in fair value of interest rate swap (Note 37)
Initial recognition and subsequent revaluation of embedded derivative
(Note 37)
As at 31 December 2020
Interest rate
swap
US$’000
Cross currency
interest rate
swap
US$’000
Embedded
derivative
US$’000
(781)
(1,245)
289
(1,737)
(1,737)
–
901
(1,551)
–
(2,387)
543
(16)
(530)
(3)
(3)
21
(18)
–
–
–
–
–
–
–
–
–
–
–
(1,449)
(1,449)
Total
US$’000
(238)
(1,261)
(241)
(1,740)
(1,740)
21
883
(1,551)
(1,449)
(3,836)
These statements include the cost of hedging reserve and cashflow hedge reserve which are detailed further in the Statement of Changes in
Equity. These reserves are non-distributable.
Derivative financial instruments represent level 2 value measurements as defined by the fair value hierarchy according to IFRS 13.
112
Gulf Marine Services PLC
11 Cash and cash equivalents
Interest bearing
Held in UAE banks
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 9)
Cash and cash equivalents
Total
2020
US$’000
2019
US$’000
55
47
1,026
2,717
3,798
2020
US$’000
–
3,798
3,798
10,966
12
11,025
2019
US$’000
2,621
8,404
11,025
12 Vessel held for sale
During 2019, Naashi, a non-core vessel and the oldest in the GMS fleet at 37 years was reclassified from Vessels to a Non-current asset held
for sale. In January 2020 the vessel was sold for US$ 0.6 million and the associated mortgage of the vessel was released.
Cost
At 1 January
Disposals
Reclassification from property, plant and equipment
At 31 December
Accumulated depreciation
At 1 January
Disposals
Reclassification from property, plant and equipment
At 31 December
Carrying amount
2020
US$’000
2019
US$’000
35,195
(35,195)
–
–
34,895
(34,895)
–
–
–
–
–
35,195
35,195
–
–
34,895
34,895
300
13 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. On 5 February 2014,
as part of a Group restructuring, the Company undertook a capital reduction by solvency statement, in accordance with s643 of the
Companies Act 2006. Accordingly, the nominal value of the authorised and issued ordinary shares was reduced from £1 to 10p.
On 19 March 2014, the Company 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.
On 6 July 2017, the Company issued a total of 176,169 ordinary shares at a par value of 10 pence per share in respect of the Company’s 2014
long-term incentive plan.
On 12 April 2018, the Company issued a total of 263,905 ordinary shares at par value of 10 pence per share in respect of the Company’s 2015
long-term incentive plan.
On 2 April 2019, the Company issued a total of 519,909 ordinary shares at par value of 10 pence per share in respect of the Company’s 2016
long-term incentive plan.
Annual Report 2020
113
Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 31 DECEMBER 2020
13 Share capital (continued)
The movement in issued share capital and share premium is provided below. The share capital of Gulf Marine Services PLC was as follows:
At 31 December 2020
Authorised share capital
Issued and fully paid
At 31 December 2019
Authorised share capital
Issued and fully paid
Number of
ordinary shares
(thousands)
Ordinary
shares
US$’000
350,488
350,488
58,057
58,057
Total
US$’000
58,057
58,057
350,488
350,488
58,057
58,057
58,057
58,057
Issued share capital and share premium account movement for the year were as follows:
At 1 January 2019
Shares issued under LTIP schemes
At 31 December 2019
Shares issued under LTIP schemes
At 31 December 2020
Number
of ordinary
shares
(thousands)
349,968
520
350,488
Ordinary
shares
US$’000
57,992
65
58,057
Share
premium
account
US$’000
93,080
–
93,080
Total
US$’000
151,072
65
151,137
–
–
–
–
350,488
58,057
93,080
151,137
14 Restricted reserve
Restricted reserve of US$ 0.3 million (2019: US$ 0.3 million) 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 either of the years shown.
15 Group restructuring reserve
The Group restructuring reserve arises on consolidation under the pooling of interests (merger accounting) method used for the Group
restructuring. Under this method, the Group was treated as a continuation of GMS Global Commercial Investments LLC (the predecessor
parent company) and its subsidiaries. At the date the Company became the new parent company of the Group via a share-for-share
exchange, the difference between the share capital of GMS Global Commercial Investments LLC and the Company, amounting to US$ 49.7
million, was recorded in the books of Gulf Marine Services PLC as a Group restructuring reserve. This reserve is non-distributable.
16 Share based payment reserve
Share based payment reserve of US$ 3.7 million (2019: US$ 3.6 million) relates to awards granted to employees under the long-term incentive
plans (Note 28). A charge of US$ 0.2 million (2019: US$ nil) in the year is included in restructuring and US$ nil, (2019: US$ 0.4 million) in the
year is included in cost of sales and, general and administrative expenses in the statement of comprehensive income.
17 Capital contribution
The capital contribution reserve is as follows:
At 31 December
2020
US$’000
9,177
2019
US$’000
9,177
During 2013, US$ 7.8 million was transferred from share appreciation rights payable to capital contribution as, effective 1 January 2013,
the shareholders have assumed the obligation to settle the share appreciation rights. An additional charge in respect of this scheme of
US$ 1.4 million was made in 2014. The total balance of US$ 9.2 million is not available for distribution.
18 Translation reserve and Retained earnings
Foreign currency translation reserve represents differences on foreign currency net investments arising from the re-translation of the net
investments in overseas subsidiaries.
Retained earnings include the accumulated realised and certain unrealised gains and losses made by the Group.
114
Gulf Marine Services PLC
19 Non-controlling interests
The movement in non-controlling interests is summarised as follows:
At 1 January
Share of profit for the year
At 31 December
2020
US$’000
1,659
35
1,694
2019
US$’000
1,346
313
1,659
20 Provision for employees’ end of service benefits
In accordance with UAE and Saudi Arabia Labour Laws, the Group is required to provide for end of service benefits for certain employees.
The movement in the provision for employees’ end of service benefits during the year was as follows:
At 1 January
Provided during the year
Paid during the year
At 31 December
2020
US$’000
2019
US$’000
2,280
527
(617)
2,190
2,722
537
(979)
2,280
During the year, US$ nil (2019: US$ 0.1 million) was pre-paid in relation to accrued end of service benefits to certain employees.
21 Trade and other payables
Trade payables
Due to a related party (Note 24)
Accrued expenses
Deferred revenue
Dividend payable (Note 29)
VAT payable
Other payables
* Refer to Note 3 for details of prior year restatement.
2020
US$’000
12,251
188
8,424
357
–
943
1,207
23,370
2019
US$’000
Restated*
11,500
136
12,084
3,359
658
289
94
28,120
The average credit period on purchases is 152 days (2019: 151 days). No interest is payable on the outstanding balances. Trade and other
payables are all current liabilities.
22 Bank borrowings
Secured borrowings at amortised cost are as follows:
Term loans
Working capital facility
Bank borrowings are split between hedged and unhedged amounts as follows:
Hedged bank borrowings from IRS
Hedged bank borrowings from CCIRS
Unhedged bank borrowings
2020
US$’000
388,558
21,500
410,058
2020
US$’000
38,462
–
371,596
410,058
2019
US$’000
Restated*
377,167
25,000
402,167
2019
US$’000
Restated*
46,154
2,513
353,500
402,167
Annual Report 2020
115
Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 31 DECEMBER 2020
22 Bank borrowings (continued)
Bank borrowings are presented in the consolidated statement of financial position as follows:
Non-current portion
Bank borrowings
Current portion
Bank borrowings – scheduled repayments within one year
Bank borrowings – scheduled repayments more than one year
* Refer to Note 3 for details of prior year restatement.
2020
US$’000
2019
US$’000
Restated*
379,009
−
31,049
–
410,058
92,949
309,218
402,167
In June 2020, the Group amended the terms of its loan facility. The principal terms of the outstanding facility as at 31 December 2020 are
as follows:
• The facilities main currency is US$ and is repayable with a margin at 5% and final maturity in June 2025 (2019: December 2023).
• The revolving working capital facility amounts to US$ 50.0 million. US$ 25.0 million of the working capital facility is allocated to
performance bonds and guarantees and US$ 25.0 million is allocated to cash of which US$ 21.5 million was drawn as at 31 December
2020, leaving US$ 3.5 million available for drawdown (31 December 2019: US$ nil).
• The facility remains secured by mortgages over its whole fleet, with a net book value at 31 December 2020 of US$ 558.6 million (2019:
US$ 662.7 million). Additionally, gross trade receivables, amounting to US$ 24.2 million (2019: US$ 25.1 million) have been assigned as
security against the loans extended by the Group’s banking syndicate.
• The Group has also provided security against gross cash balances, being cash balances before restricted amounts included in trade and
other receivables, amounting to US$ 3.8 million which have been assigned as security against the loans extended by the Group’s
banking syndicate.
• The amended terms contained contingent conditions such that if an equity raise of US$ 75.0 million did not take place by 31 December
2020, PIK interest would accrue and warrants would be due to the banking syndicate, refer to Note 10 for details of warrants valuation.
• The facility is subject to certain financial covenants including; Debt Service Cover; Interest Cover; Net Leverage Ratio; and Security Cover
(loan to value). There was also an additional covenant relating to general and administrative costs, and restrictions to payment of dividends
until leverage falls below 4.0 times.
On 31 December 2020, the Group’s banking syndicate agreed to extend certain obligations on the Group, which it was otherwise required to
have met including the requirement to issue warrants to the banks and accrue PIK interest. This meant the Group was not in an event of
default as at 31 December 2020. This was further extended in January 2021 and February 2021. As the waiver received in December led to a
revision to timing of payments, management assessed the fair value of remaining cashflows as at 31 December 2020.
As at 31 December 2020, the loan facility was remeasured with a gain of US$ 1.5 million (2019: nil) being recognised in the profit and loss
(Note 37). The remeasurement of the bank borrowings was determined in accordance with generally accepted pricing models based on a
discounted cash flow analysis, using appropriate effective interest rates.
In March 2021, the Group signed a term sheet with its bank agreeing significantly improved terms. The amendment was finalised and loan
documentation signed in April 2021. Improved terms include the following:
• Reduction in margin from 5% to 3%. Capital payments increased corresponding to any interest saved from the margin reduction.
• Requirement of US$ 25 million equity to be raised by 30 June 2021 and a further US$ 50 million by 31 December 2022.
Please see Note 40 for further details.
31 December 2020:
Term loan – scheduled repayments within one year
Term loan – scheduled repayments within more than one year
Working capital facility – scheduled repayment within one year
31 December 2019 Restated:
Term loan – scheduled repayments within one year
Term loan – scheduled repayments within more than one year
Working capital facility – scheduled repayment more than one year
Outstanding amount
Current
US$’000
Non-current
US$’000
Total
US$’000
Security
Maturity
9,549
–
21,500
31,049
67,949
309,218
25,000
402,167
–
379,009
–
9,549
379,009
21,500
Secured
Secured
Secured
June 2025
June 2025
June 2025
379,009
410,058
–
–
–
–
–
–
67,949
309,218
25,000
402,167
Secured December 2023
Secured December 2023
Secured December 2023
–
–
116
Gulf Marine Services PLC
23 Lease liabilities
As at 1 January
Recognition of new lease liabilities on adoption of IFRS 16
Recognition of new lease liability additions
Derecognition of lease liabilities
Interest on finance leases (Note 37)
Principal elements of lease payments
Interest paid
As at 31 December
Maturity analysis:
Year 1
Year 2
Year 3 – 5
Onwards
Split between:
Current
Non-current
2020
US$’000
2019
US$’000
1,954
–
3,239
–
182
(1,871)
(193)
3,311
1,739
826
746
3,311
1,739
1,572
3,311
–
6,122
860
(1,593)
284
(3,433)
(286)
1,954
1,204
355
395
1,954
1,204
750
1,954
24 Related party transactions
Related parties comprise the Group’s major shareholders, Directors and entities related to them, companies under common ownership and/
or common management and control, their partners and key management personnel. Pricing policies and terms of related party transactions
are approved by the Group’s Board.
Balances and transactions between the Group and its subsidiaries, which are related parties, have been eliminated on consolidation and are
not disclosed in this note.
Key management personnel:
As at 31 December 2020, there were nil shares held by Directors (31 December 2019: nil).
Related parties
The Group’s principal subsidiaries are outlined in Note 3. The related parties comprising of the Group’s major shareholders are outlined in the
Directors Report on page 72. The other related party during the year was:
Partner in relation to Saudi Operations
Relationship
Abdulla Fouad Energy Services Company
Minority shareholder in GMS Saudi Arabia Ltd.
Refer to Note 21 for details of the amount due to the related party.
Significant transactions with the related party during the year:
Rentals property from Abdulla Fouad
Rentals of breathing equipment from Abdulla Fouad
Compensation of key management personnel
The remuneration of Directors and other members of key management personnel during the year were as follows:
Short-term benefits
Termination payments
End of service benefits
Share based payment charge (LTIPs)
2020
US$’000
54
524
2019
US$’000
112
927
2020
US$’000
2019
US$’000
1,165
1,161
94
141
2,561
2,902
582
125
21
3,630
Annual Report 2020
117
Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 31 DECEMBER 2020
24 Related party transactions (continued)
Compensation of key management personnel (continued)
Compensation of key management personnel represents the charge to the profit or loss in respect of the remuneration of the executive and
non-executive Directors. At 31 December 2020, there were four members of key management personnel (2019: four members). During 2020
the Board was replaced; the previous Board’s remuneration is included in the disclosure above. During 2019, the previous Board was also
replaced; their remuneration is included in the 2019 comparatives. Further details of Board remuneration and the termination of key
management personnel are contained in the Directors’ Remuneration Report on page 61.
25 Contingent liabilities
At 31 December 2020, the banks acting for Gulf Marine Services FZE, one of the subsidiaries of the Group, had issued bid bonds,
performance bonds and labour guarantees amounting to US$ 15.9 million (2019: US$ 17.4 million) all of which were counter-indemnified
by other subsidiaries of the Group.
26 Commitments
Contractual capital commitments
2020
US$’000
7,470
2019
US$’000
3,582
Capital commitments comprise mainly capital expenditure, which has been contractually agreed with suppliers for future periods for
equipment or the refurbishment of existing vessels.
27 Financial instruments
Categories of financial instruments
Financial assets:
Current assets at amortised cost:
Cash and cash equivalents (Note 11)
Trade receivables and other receivables (Note 9)
Total financial assets
Financial liabilities:
Derivatives recorded at FVTPL:
Interest rate swap (Note 10)
Cross currency interest rate swap (Note 10)
Embedded derivative (Note 10)
Financial liabilities recorded at amortised cost:
Trade and other payables (Note 21)
Lease liabilities (Note 23)
Current bank borrowings – scheduled repayments within one year (Note 22)
Current bank borrowings – scheduled repayments more than one year (Note 22)
Non-current bank borrowings – scheduled repayments more than one year (Note 22)
Total financial liabilities
* Refer to Note 3 for details of prior year adjustment.
2020
US$’000
2019
US$’000
3,798
26,517
30,315
2020
US$’000
2,387
–
1,449
21,882
3,311
31,049
–
379,009
439,087
8,404
29,341
37,745
2019
US$’000
Restated*
1,737
3
–
24,336
1,954
92,949
309,218
–
430,197
The following table combines information about the following;
• Fair values of financial instruments (except financial instruments when carrying amount approximates their fair value); and
• Fair value hierarchy levels of financial liabilities for which fair value was disclosed.
Financial liabilities:
Recognised at level 2 of the fair value hierarchy:
Interest rate swap (Note 10)
Cross currency interest rate swap (Note 10)
Embedded derivative (Note 10)
Total recognised at level 2 of the fair value hierarchy:
* Refer to Note 3 for details of prior year adjustment.
118
Gulf Marine Services PLC
2020
US$’000
2019
US$’000
Restated*
2,387
–
1,449
3,836
1,737
3
–
1,740
Capital risk management
The Group uses interest rate swap derivatives to hedge volatility in exchange rates and in interest rates. These were previously formally
designated into hedge accounting relationships. As disclosed in the 2019 annual report, the Group’s banks agreed to waive the testing
requirement of all covenants for the December 2019 testing date. As the cashflows of the hedging relationship subsequent to 31 December 2019
were not highly probable, the hedge discontinued in 2020 and the interest rate swap was reclassified to fair value through profit and loss.
As a result, US$ 1.6 million was recognised in relation to the loss on change in fair value of the interest rate swap in the current year (Note 37).
The Group manages its capital to support its ability to continue as a going concern while maximising the return on equity. The Group does not
have a formalised optimal target capital structure or target ratios in connection with its capital risk management objectives, however under the
revised banking terms signed in March 2021, a minimum of US$ 75 million has to be raised prior to 31 December 2022 in order to accelerate
payments towards term debt. This along with maximising cash wherever possible, the Group looks to delever the Company over the coming
years. The capital structure of the Group consists of net bank debt and total equity.
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, interest rate risk and foreign currency
risk. Management actively monitors and manages these financial risks relating to the Group. In December 2020 an agreement was reached
between the United Kingdom (“UK”) and the European Union (“EU”) for the UK to exit the EU (“Brexit”). The Group has considered the risks
arising from Brexit and on amounts presented in these consolidated financial statements. As the majority of the Group’s operations and our
lending syndicate are in the Middle East, our UK office was closed at the end of 2019 and there is currently one vessel working in North West
Europe, the exposure is not considered to be significant beyond the foreign currency described later.
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 information available
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 suitably 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. At the year-end, cash at bank and in hand totalled US$ 3.8 million (2019: US$ 11.0 million), deposited with banks
with Fitch short-term ratings of F2 to F1+ (Refer to Note 11).
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 ten Middle East and two
international companies, including international oil companies and engineering, procurement and construction (“EPC”) contractors. At
31 December 2020, these 10 companies accounted for 99% (2019: 16 companies accounted for 100%) of the outstanding trade receivables.
The credit risk on liquid funds is limited because the funds are held by banks with high credit ratings assigned by international agencies.
The amount that best represents maximum credit risk exposure on financial assets at the end of the reporting period, in the event counterparties
failing to perform their obligations generally approximates their carrying value.
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board of Directors. The Group manages liquidity risk by seeking to maintain
sufficient facilities to ensure availability of funds for forecast and actual cash flow requirements.
Annual Report 2020
119
Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 31 DECEMBER 2020
27 Financial instruments (continued)
Liquidity risk management (continued)
The table below summarises the maturity profile of the Group’s financial liabilities. The contractual maturities of the Group’s financial liabilities
have been determined on the basis of the remaining period at the end of the reporting period to the contractual maturity date. The maturity
profile is monitored by management to assist in ensuring adequate liquidity is maintained. Refer to Going Concern in Note 3.
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 2020
Non-interest bearing financial assets
Interest bearing financial assets
Non-interest bearing financial liabilities
Interest bearing financial liabilities
31 December 2019 Restated
Non-interest bearing financial assets
Interest bearing financial assets
Non-interest bearing financial liabilities
Interest bearing financial liabilities
Interest
rate
5.2%–7.0%
Interest
rate
7.1%–7.8%
1 to 3
months
US$’000
30,260
55
30,315
21,882
29,618
51,500
1 to 3
months
US$’000
35,077
47
35,124
26,290
406,118
432,408
4 to 12
months
US$’000
2 to 5
years
US$’000
–
–
–
–
24,428
24,428
4 to 12
months
US$’000
2,621
−
2,621
−
19,441
19,441
–
–
–
–
493,603
493,603
2 to 5
years
US$’000
−
−
−
−
50,897
50,897
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 Group uses an IRS to hedge a notional amount of US$ 50.0 million (2019: US$ 50.0 million). The remaining amount of notional hedged
from the IRS as at 31 December 2020 was US$ 38.5 million (2019: US$ 46.2 million). The IRS hedges the risk of variability in interest
payments by converting a floating rate liability to a fixed rate liability. The fair value of the IRS as at 31 December 2020 was a liability value of
US$ 2.4 million (2019: US$ 1.7 million), (see Note 10 for more details). As noted above the hedge discontinued on 1 January 2020 and the
interest rate swap was reclassified to fair value through profit and loss.
The sensitivity analysis below has 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 on the unhedged portion of debt and assumes the amount of liability
outstanding at the end of the reporting period was outstanding for the whole year. A 20 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 20 basis points higher/lower (2019: 50 basis points higher/lower) and all other variables were held constant, the
Group’s loss for the year ended 31 December 2020 would decrease/increase by US$ 0.7 million (2019: decrease/increase US$: 2.0 million).
This is mainly attributable to the Group’s exposure to interest rates on its variable rate borrowings.
Foreign currency risk management
The majority of the Group’s transactions are denominated in UAE Dirhams, Euros, US Dollars and Pound Sterling. As the UAE Dirham and
Saudi Riyal are pegged to the US Dollar, balances in UAE Dirham and Saudi Riyals are not considered to represent significant currency risk.
Transactions in other foreign currencies entered into by the Group are short-term in nature and therefore management considers that the
currency risk associated with these transactions is limited.
Brexit could impact Group operations and our exposure to transactions in pound sterling, creating foreign currency risk for transactions
entered into by the Group in pound sterling. Management continue to monitor changes in legislation and future policies and will develop
suitable mitigants as developments unfold.
During the year ended 31 December 2018, the Group entered into a CCIRS to hedge a notional amount of US$ 36.7 million. The CCIRS
hedges the volatility in GBP to USD exchange rates as well as variability in interest rate payments by converting a USD floating rate loan
with USD repayments to a GBP fixed rate loan wherein both the GBP notional and coupon payments are fixed and matched to actual GBP
receivables of highly probable forecast sales. As at 31 December 2020, the amount of notional hedged from the CCIRS was US$ nil
(2019: US$ 2.5 million) and the fair value of the CCIRS was US$ nil (2019: US$ nil), as the CCIRS expired during the year (see Note 10
for more details).
120 Gulf Marine Services PLC
The carrying amounts of the Group’s significant foreign currency denominated monetary assets include cash and cash equivalents and trade
receivables and liabilities include trade payables. The amounts at the reporting date are as follows:
US Dollars
UAE Dirhams
Saudi Riyals
Pound Sterling
Euros
Qatari Riyals
Norwegian Krone
Others
Assets 31 December
Liabilities 31 December
2020
US$’000
19,193
103
6,719
315
23
1,652
–
–
28,005
2019
US$’000
20,923
2,923
5,216
10
2,184
2,255
–
–
33,511
2020
US$’000
2019
US$’000
6,239
3,347
738
1,054
535
210
126
2
6,011
3,070
285
1,644
412
54
22
2
12,251
11,500
At 31 December 2020, 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 loss for the year would have been higher/lower by US nil (2019: higher/
lower by US$ 0.1 million) mainly as a result of foreign exchange loss or gain on translation of Euro and Pound Sterling denominated balances.
28 Long term incentive plans
The Group has Long Term Incentive Plans (“LTIPs”) which were granted to senior management, managers and senior offshore officers.
The details of the senior management LTIPs are contained in the Directors’ Remuneration Report on page 63.
From 2019 onwards the employment condition is that each eligible employee of the Company must remain in employment during the
three year vesting period. LTIPs have been aligned to the Company’s share performance therefore only financial metrics will be applied.
The time-dependent element of the LTIPs has been removed in awards since 2019. EPS (“Earnings Per Share”) has been dropped as the
financial metric and TSR (“Total Shareholder Return”) is now the sole financial metric.
In the prior years, the release of these shares was conditional upon continued employment, certain market vesting conditions and in the case
of senior management LTIP awards, performance against three-year target EPS compound annual growth rates. Equity-settled share-based
payments were measured at fair value at the date of grant. The fair value determined, using the Binomial Probability Model together with
Monte Carlo simulations, at the grant date of equity-settled share-based payments, is expensed on a straight-line basis over the vesting
period, based on an estimate of the number of shares that will ultimately vest. The fair value of each award was determined by taking into
account the market performance condition, the term of the award, the share price at grant date, the expected price volatility of the underlying
share and the risk-free interest rate for the term of the award.
Non-market vesting conditions, which for the Group mainly related 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, were taken into account by adjusting the number of
equity instruments expected to vest at each balance sheet date so that, ultimately, the cumulative amount recognised over the vesting period
was based on the number of awards that eventually vest. Any market vesting conditions were factored into the fair value of the share-based
payment granted.
To the extent that share-based payments are granted to employees of the Group’s subsidiaries without charge, the share-based payment is
capitalised as part of the cost of investment in subsidiaries.
The number of share awards granted by the Group during the year is given in the table below:
At the beginning of the year
Granted in the year
Exercised during the year
Forfeited in the year
Lapsed
At end of the year
Exercisable at the end of the year
2020
No
8,768,294
2,661,388
–
(4,856,453)
–
2019
No
9,814,485
3,425,775
(519,909)
(1,424,494)
(2,527,563)
6,573,229
8,768,294
–
–
The weighted average remaining contractual life for the vesting period outstanding as at 31 December 2020 was 1.0 years (2019: 1.9 years).
The weighted average fair value of shares granted during the year was US$ 0.10 (2019: US$ 0.70).
Annual Report 2020
121
Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 31 DECEMBER 2020
28 Long term incentive plans (continued)
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
Expected volatility
Risk-free rate
Expected dividend yield
Vesting period
Award life
LTIP
LTIP
LTIP
29 May 2020
£0.09
120%
0.01%
0.00%
3 years
3 years
15 November 2019
£0.08
102.79%
0.48%
0.00%
3 years
3 years
23 March 2018
£0.37
52.89%
1.04%
1.00%
3 years
3 years
The expected share price volatility of Gulf Marine Services PLC shares was determined taking into account the historical share price movements
for a three year period up to the grant date (and of each of the companies in the comparator group).
The risk free return was determined from similarly dated zero coupon UK government bonds at the time the share awards were granted,
using historical information taken from the Bank of England’s records.
The charge arising from share-based payments is disclosed in Note 16.
29 Dividends
There was no dividend declared or paid in 2020 (2019: nil). No final dividend in respect of the year ended 31 December 2020 is to be
proposed at the 2021 AGM.
During the year ended 31 December 2017 and 31 December 2018, the Group’s subsidiaries declared a dividend of US$ 0.3 and US$ 0.3 million
respectively to non-controlling interests. Both these dividends were paid during 2020.
30 Segment reporting
Management have identified that the Directors and senior management team are the chief operating decision makers in accordance with the
requirements of IFRS 8 ‘Operating Segments’. Segment performance is assessed based upon adjusted gross profit/(loss), which represents
gross profit/(loss) before depreciation and amortisation and loss on impairment of assets. The reportable segments have been identified by
Directors and senior management based on the size and type of asset in operation.
The operating and reportable segments of the Group are (i) K-Class vessels, which include the Kamikaze, Kikuyu, Kawawa, Kudeta, Keloa
and Pepper vessels (ii) S-Class vessels, which include the Shamal, Scirocco and Sharqi vessels, (iii) E-Class vessels, which include the
Endeavour, Endurance, Enterprise and Evolution vessels, and (iv) Other vessels, considered non-core assets, which does not form part of
the K-, S- or E-Class vessels segments. The composition of the Other vessels segment, which are non-core assets, was amended in 2018,
following the reclassification of the vessel Naashi from K-Class vessels to Other vessels. In 2019, Naashi was reclassified from Other vessels
to a non-current asset held for sale. The sale was completed in January 2020 (refer to Note 12 for further details).
All of these operating segments earn revenue related to the hiring of vessels and related services including charter hire income, messing and
accommodation services, personnel hire and hire of equipment. The accounting policies of the operating segments are the same as the Group’s
accounting policies described in Note 3.
122 Gulf Marine Services PLC
K-Class vessels
S-Class vessels
E-Class vessels
Other vessels
Less:
Depreciation charged to cost of sales
Amortisation charged to cost of sales
Impairment charge
Gross loss
Restructuring costs
Exceptional legal costs
Other general and administrative expenses
Finance income
Finance expenses
Other income
(Loss)/gain on disposal of property, plant and equipment
Gain on disposal of assets held for sale
Foreign exchange loss, net
Loss for the year before taxation
Revenue
Segment adjusted
gross profit/(loss)
2020
US$’000
40,947
32,136
29,407
2
2019
US$’000
37,313
35,422
35,984
2
102,492
108,721
2020
US$’000
25,349
22,210
12,676
(10)
60,225
(25,524)
(3,073)
(87,156)
(55,528)
(2,492)
(3,092)
(12,632)
15
(46,740)
257
(2,073)
259
(993)
(123,019)
2019
US$’000
23,200
23,578
18,779
(87)
65,470
(29,045)
(2,274)
(59,125)
(24,974)
(6,322)
–
(17,788)
16
(32,063)
529
14
–
(1,181)
(81,769)
The total revenue from reportable segments which comprises the K-, S- and E-Class vessels was US$ 102.5 million (2019: US$ 108.7 million).
The Other vessels segment does not constitute a reportable segment per IFRS 8 Operating Segments.
Segment revenue reported above represents revenue generated from external customers. There were no inter-segment sales in the years.
Segment assets and liabilities, including depreciation, amortisation and additions to non-current assets, are not reported to the chief operating
decision makers on a segmental basis and are therefore not disclosed.
Information about major customers
During the year, two customers (2019: three) individually accounted for more than 10% of the Group’s revenues. The related revenue
figures for these major customers, the identity of which may vary by year was US$ 39.3 million and US$ 17.7 million (2019: US$ 32.7 million,
US$ 24.5 million and US$ 18.4 million). The revenue from these customers is attributable to the E-Class vessels, S-Class vessels and
K-Class vessels reportable segments.
Geographical segments
Revenue by geographical segment is based on the geographical location of the customer as shown below.
United Arab Emirates
Saudi Arabia
Qatar
Total – Middle East and North Africa
United Kingdom
Rest of Europe
Total – Europe
Worldwide Total
2020
US$’000
53,363
17,745
19,047
90,155
5,353
6,984
12,337
102,492
2019
US$’000
35,671
32,476
13,411
81,558
20,498
6,665
27,163
108,721
Annual Report 2020
123
Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 31 DECEMBER 2020
30 Segment reporting (continued)
Type of work
The Group operates in both the oil and gas and renewables sector. Oil and gas revenues are driven from both client operating cost expenditure
and capex expenditure. Renewables are primarily driven by windfarm developments from client expenditure. Details are shown below.
Oil and Gas – Client Opex
Oil and Gas – Client Capex
Renewables
Total
2020
US$’000
74,889
15,307
12,296
102,492
2019
US$’000
73,587
7,971
27,163
108,721
Impairment losses of US$ 87.2 million (2019: US$ 59.1 million) were recognised in respect of property, plant and equipment (Note 5).
These impairment losses were attributable to the following reportable segments:
K-Class vessels
S-Class vessels
E-Class vessels
Other vessels
2020
Depreciation charged to cost of sales
Amortisation charged to cost of sales
Impairment charge
2019
Depreciation charged to cost of sales
Amortisation charged to cost of sales
Impairment charge
2020
US$’000
61,130
–
26,026
–
87,156
2019
US$’000
–
2,845
54,564
1,716
59,125
K-Class vessels
US$’000
S-Class vessels
US$’000
E-Class vessels
US$’000
Other vessels
US$’000
Total
US$’000
7,432
1,863
61,130
7,317
1,434
–
5,807
605
–
5,776
340
2,845
12,092
605
26,026
15,541
500
54,564
193
–
–
411
–
1,716
25,524
3,073
87,156
29,045
2,274
59,125
124 Gulf Marine Services PLC
31 Presentation of adjusted non-GAAP results
The following table provides a reconciliation between the Group’s adjusted non-GAAP and statutory financial results:
Revenue
Cost of sales
– Operating expenses
– Depreciation and amortisation
Impairment charge*
Gross profit/(loss)
General and administrative
– Depreciation
– Amortisation of IFRS 16 Leases
– Other administrative costs
Restructuring costs**
Exceptional legal costs***
Operating profit/(loss)
Finance income
Finance expenses
Cost to acquire new bank facility****
Expensing of unamortised issue costs in relation to
previous loan*****
Other income
(Loss)/gain on disposal of property plant and
equipment
Gain on disposal of assets held for sale
Foreign exchange loss, net
Loss before taxation
Taxation charge
Loss for the year
Loss attributable to
Owners of the Company
Non-controlling interests
Loss per share (basic and diluted)
Year ended 31 December 2020
Year ended 31 December 2019
Adjusted
non-GAAP
results
US$’000
102,492
Adjusting
items
US$’000
Statutory
total
US$’000
Adjusted
non-GAAP
results
US$’000
Adjusting
items
US$’000
Statutory
total
US$’000
–
102,492
108,721
–
108,721
(42,267)
(28,597)
–
–
–
(87,156)
(42,267)
(28,597)
(87,156)
31,628
(87,156)
(55,528)
(313)
(2,543)
(9,776)
–
–
–
–
–
(2,492)
(3,092)
(313)
(2,543)
(9,776)
(2,492)
(3,092)
18,996
(92,740)
(73,744)
15
(30,495)
–
–
257
(2,073)
259
(993)
(14,034)
(1,285)
–
–
(15,797)
(448)
–
–
–
–
15
(30,495)
(15,797)
(448)
257
(2,073)
259
(993)
(108,985)
–
(123,019)
(1,285)
(15,319)
(108,985)
(124,304)
(15,354)
35
(4.38)
(108,985)
–
(31.10)
(124,339)
35
(35.48)
(43,251)
(31,319)
–
34,151
(804)
(2,889)
(14,095)
–
–
16,363
16
(32,063)
–
–
529
14
–
(1,181)
(16,322)
(3,696)
(20,018)
(20,331)
313
(5.80)
–
–
(59,125)
(59,125)
–
–
–
(6,322)
–
(43,251)
(31,319)
(59,125)
(24,974)
(804)
(2,889)
(14,095)
(6,322)
–
(65,447)
(49,084)
–
–
–
–
–
–
–
–
(65,447)
–
(65,447)
(65,447)
–
(18.68)
16
(32,063)
–
–
529
14
–
(1,181)
(81,769)
(3,696)
(85,465)
(85,778)
313
(24.48)
Supplementary non statutory information
Operating (loss)/profit
Add: Depreciation and amortisation
Non-GAAP EBITDA
18,996
31,453
50,449
(92,740)
–
(73,744)
31,453
(92,740)
(42,291)
16,363
35,012
51,375
(65,447)
−
(65,447)
(49,084)
35,012
(14,072)
*
The impairment charge on certain vessels and assets have been added back to gross loss to arrive at adjusted gross profit for the year ended 31 December 2020 and
2019 (refer to Note 5 for further details). This measure provides additional information on the core profitability of the Group.
** Restructuring costs incurred are not considered part of the regular underlying performance of the business and so have been added back to arrive at adjusted loss for
the year ended 31 December 2020 and 2019 (refer to Note 34 for further details). This measure provides additional information in assessing the Group’s total
performance that management is more directly able to influence and on a basis comparable from year to year. See KPI section on page 26 for further details.
*** Exceptional legal costs incurred are not considered part of the regular underlying performance of the business and so have been added back to arrive at adjusted loss
for the year ended 31 December 2020 (refer to Note 35 for further details). This measure provides additional information in assessing the Group’s total performance that
management is more directly able to influence and on a basis comparable from year to year. See KPI section on page 26 for further details.
**** Costs incurred to arrange a new bank facility have been added back to loss before taxation to arrive at adjusted loss for the year ended 31 December 2020. This
measure provides additional information in assessing the Group’s total performance that management is more directly able to influence and on a basis comparable
from year to year. See KPI section on page 26 for further details.
***** The expensing of unamortised issue costs in relation to previous loan has been added back to loss before taxation to arrive at adjusted loss for the year ended
31 December 2020. This measure provides additional information in assessing the Group’s total performance that management is more directly able to influence and
on a basis comparable from year to year. See KPI section on page 26 for further details.
Annual Report 2020
125
Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 31 DECEMBER 2020
32 Loss per share
Loss for the purpose of basic and diluted loss per share being loss for the year attributable to Owners of the
Company (US$’000)
Loss for the purpose of adjusted basic and diluted loss per share (US$’000) (Note 31)
Weighted average number of shares (‘000)
Weighted average diluted number of shares in issue (‘000)
Basic loss per share (cents)
Diluted loss per share (cents)
Adjusted loss per share (cents)
Adjusted diluted loss per share (cents)
2020
2019
(124,339)
(15,354)
350,488
350,488
(35.48)
(35.48)
(4.38)
(4.38)
(85,778)
(20,331)
350,357
350,357
(24.48)
(24.48)
(5.80)
(5.80)
Basic loss per share is calculated by dividing the loss attributable to equity holders of the Company (as disclosed in the statement of
comprehensive income) by the weighted average number of ordinary shares in issue during the year.
Adjusted loss per share is calculated on the same basis but uses the loss for the purpose of basic loss per share (shown above) adjusted by
adding back the non-operational items, which were recognised in the consolidated statement of profit or loss and other comprehensive income
in the prior year. The adjusted loss per share is presented as the Directors consider it provides an additional indication of the underlying
performance of the Group.
Diluted loss per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number of
ordinary shares in issue during the year, adjusted for the weighted average effect of share-based payment charge outstanding during the
year. As the Group incurred a loss in 2020 and 2019, diluted loss per share is the same as loss per share, as the effect of share-based
payment charge is anti-dilutive.
Adjusted diluted loss per share is calculated on the same basis but uses adjusted loss (Note 31) attributable to equity holders of the Company.
The following table shows a reconciliation between the basic and diluted weighted average number of shares:
Weighted average basic number of shares in issue
Weighted average diluted number of shares in issue
33 Revenue
Charter hire
Lease income
Messing and accommodation
Mobilisation and demobilisation
Maintenance service
Sundry income
Maintenance
2020
’000s
350,488
350,488
2020
US$’000
60,797
33,252
5,506
1,030
1,267
640
–
2019
’000s
350,357
350,357
2019
US$’000
59,060
39,144
7,724
1,639
–
832
322
102,492
108,721
Included in mobilisation and demobilisation income is an amount of US$ 0.3 million (2019 US$ 0.1 million) that was included as deferred
revenue at the beginning of the financial year.
Further descriptions on the above types of revenue have been provided in Note 3.
126 Gulf Marine Services PLC
34 Restructuring costs
During 2019, the organisational structure was simplified with a number of management posts removed and not replaced. In addition, the
operational footprint was reviewed and certain operations in the UK and MENA were closed. Consultancy costs incurred mainly relate to
legal advice on restructuring and Board changes. In 2020, further restructuring occurred.
The total estimated restructuring costs is expected to be US$ 9.1 million, of which US$ 6.3 million was incurred in 2019 and US$ 2.5 million
was incurred in 2020. At 31 December 2020 the remaining provision was US$ 0.3 million (31 December 2019: US$ 1.9 million), which is
expected to be fully utilised over the next 12 months.
Staff costs
Consultancy fees
Business travel
Office/port closures
2020
US$’000
2019
US$’000
1,862
403
82
145
2,492
4,269
1,489
197
367
6,322
35 Exceptional legal costs
During the year, as a result of the non-binding proposed offer to buy the share capital of the Company from our largest shareholder, several
requests for General Meetings, and legal advice for Director disputes, additional fees have been incurred totalling US$ 3.1 million (2019: US$ nil).
36 Finance income
Bank and other income
37 Finance expenses
Interest on bank borrowings (Note 22)
Loss on settlement of derivatives reclassified through profit or loss
Interest on finance leases
Bank commitment fees
Bank arrangement fees
Other finance expenses
Recognition of embedded derivative for warrants (Note 10)
Net loss on changes in fair value of interest rate swap (Note 10)
Revaluation gain on revision of debt cash flows as at 31 December 2020 (Note 22)
Cost to acquire new bank facility* (Note 22)
Expensing of unamortised issue costs in relation to previous loan (Note 31)
* Costs incurred to acquire new loan facility including arrangement, advisory and legal fees.
38 Loss for the year
The loss for the year is stated after charging/(crediting):
Total staff costs (see below)
Depreciation of property, plant and equipment (Note 5)
Impairment charge (Note 5)
Amortisation of dry docking expenditure (Note 6)
Amortisation of Right-of-use assets (Note 7)
Movement in ECL provision during the year (Note 9)
Recovery of ECL provision (Note 9)
Foreign exchange loss, net
Loss/(Gain) on disposal of property plant and equipment
Gain on disposal of assets held for sale (Note 12)
Auditor’s remuneration (see below)
2020
US$’000
15
2020
US$’000
27,626
904
182
(187)
115
373
1,449
1,551
(1,518)
15,797
448
46,740
2020
US$’000
28,264
25,837
87,156
3,074
2,543
69
(64)
993
2,073
(259)
1,025
2019
US$’000
16
2019
US$’000
31,107
259
284
249
164
–
–
–
–
–
–
32,063
2019
US$’000
35,926
29,849
59,125
2,275
2,891
(16)
–
1,181
(14)
–
771
Annual Report 2020
127
Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 31 DECEMBER 2020
38 Loss for the year (continued)
The average number of full time equivalent employees (excluding non-executive Directors) by geographic area was:
Middle East and Northern Africa
Rest of the world
2020
Number
2019
Number
467
29
496
426
56
482
The total number of full time equivalent employees (including executive Directors) as at 31 December 2020 was 533 (31 December 2019: 461).
Their aggregate remuneration comprised:
Wages and salaries
Employment taxes
End of service benefit (Note 20)
Share based payment charge
The analysis of the auditor’s remuneration is as follows:
Group audit fees
Subsidiary audit fees
Total audit fees
Audit-related assurance services – interim review
Total fees
2020
US$’000
27,692
38
527
7
28,264
2019
US$’000
35,025
138
537
226
35,926
2020
US$’000
2019
US$’000
784
95
879
146
1,025
287
164
451
320
771
* The Group audit fee in 2020 includes overruns in respect of the 2019 audit amounting to US$ 84k which were agreed subsequent to the issuance of the 2019 Annual Report.
For further information on the Group’s policy in respect of Auditor’s remuneration see page 47 of the Report of the Audit and Risk Committee.
39 Notes to the consolidated statement of cash flows
Operating activities
Loss for the year
Adjustments for:
Depreciation of property, plant and equipment (Note 5)
Amortisation of dry docking expenditure (Note 6)
Impairment charge (Note 5)
Amortisation of IFRS 16 leases (Note 7)
Income tax expense (Note 8)
End of service benefits charge (Note 20)
End of service benefits paid (Note 20)
Movement in ECL provision during the year (Note 9)
Provision for doubtful debts on accrued revenue (Note 9)
Recovery of ECL provision (Note 9)
Share based payment charge (Note 16)
Interest income (Note 36)
Finance expenses (Note 37)
Loss/(gain) on disposal of property, plant and equipment (Note 38)
Gain on disposal of assets held for sale (Note 38)
Hedging revenue adjustment (Note 10)
Unrealised forex loss
Other income
Cash flow from operating activities before movement in working capital
Decrease in trade and other receivables
(Decrease)/increase in trade and other payables
Cash generated from operations
Taxation paid
Net cash generated from operating activities
128 Gulf Marine Services PLC
2020
US$’000
2019
US$’000
(124,304)
(85,465)
25,837
3,074
87,156
2,543
1,285
527
(617)
69
–
(64)
168
(15)
46,740
2,073
(259)
(21)
–
(257)
43,935
4,866
(3,770)
45,031
(763)
44,268
29,849
2,275
59,125
2,891
3,696
537
(979)
(16)
(530)
–
227
(16)
32,063
(14)
–
–
77
(513)
43,207
2,875
8,320
54,402
(3,058)
51,344
Changes in liabilities arising from financing activities
The table below details changes in the Group’s liabilities arising from financing activities, including both cash and non-cash changes.
Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the Group’s consolidated
statement of cash flows as cash flows from financing activities.
At 1 January 2019
Financing cash flows
Bank borrowings received
Repayment of bank borrowings
Principal elements of lease payments
Settlement of derivatives
Interest paid
Total financing cashflows
Non-cash changes:
Recognition of new leases on adoption of IFRS 16
Recognition of new lease additions
Derecognition of lease liabilities
Interest on leases (Note 37)
Interest on bank borrowings (Note 37)
Bank commitment fees (Note 37)
Loss on fair value changes of hedging instruments (Note 10)
Other movements
Total non cash changes
At 31 December 2019
Financing cash flows
Bank borrowings received
Repayment of bank borrowings
Principal elements of lease payments
Settlement of derivatives
Interest paid
Total financing cashflows
Non-cash changes:
Recognition of new lease liability additions
Interest on leases (Note 37)
Interest on bank borrowings (Note 37)
Bank commitment fees (Note 37)
Gain on fair value changes of hedging instruments (Note 10)
Net loss on change in fair value of IRS (Note 10)
Loss on fair value changes on the embedded derivative (Note 10)
The expensing of unamortised issue costs in relation to previous loan (Note 37)
Revaluation gain on revision of debt cash flows at the date of modification (Note 37)
Total non cash changes
At 31 December 2020
Derivatives
(Note 10)
US$’000
Lease liabilities
(Note 23)
US$’000
Bank
borrowings
(Note 22)
US$’000
238
–
–
–
241
–
241
–
–
–
–
–
–
1,261
–
1,261
1,740
–
–
–
(883)
–
(883)
–
–
–
–
(21)
1,551
1,449
–
–
2,979
3,836
–
411,515
–
–
(3,433)
–
(286)
(3,719)
6,122
860
(1,593)
284
–
–
–
–
5,673
1,954
–
–
(1,871)
–
(193)
(2,064)
3,239
182
–
–
–
–
–
–
–
3,421
3,311
5,000
(18,329)
–
–
(27,663)
(40,992)
–
–
–
–
31,107
249
–
288
31,644
402,167
21,500
(12,075)
–
–
(27,903)
(18,478)
–
–
27,626
(187)
–
–
–
448
(1,518)
26,369
410,058
40 Events after the reporting period
Extension to waiver to renegotiate banking terms
On 27 January 2021, the Group’s banking syndicate agreed an extension of certain obligations on the Group, which it was otherwise required
to have met by 31 January 2021, including the requirement to issue warrants to the banks to 28 February 2021. These obligations were
further extended on 25 February to 31 March 2021 at which point they were superseded.
New bank deal
On 31 March 2021, the Group together with its banking syndicate executed an amendment to its common terms agreement and related loan
documentation, delivering significantly improved terms, which were consistent with the term sheet announced on 16 March 2021.
The revised deal provides additional time needed to seek to complete an equity raise, with a requirement to raise US$ 25 million by 30 June
2021 and a further US$ 50 million by 31 December 2022. Provided the Company meet these requirements then no PIK shall be charged or
warrants issued. It also reduces interest cost during 2021 and 2022 with the cash saving being utilised to accelerate repayment of the loans.
Please refer to Note 22 for further details.
Appointment of new Director
As announced on 16 March 2021, Jyrki Koskelo was appointed as an Independent Non-Executive Director to the Board of Directors in
February 2021.
Annual Report 2020
129
Financial Statements COMPANY STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED 31 DECEMBER 2020
Fixed assets
Investments in subsidiaries
Total fixed assets
Current assets
Other receivables
Cash and cash equivalents
Total current assets
Creditors: Amounts falling due within one year
Other payables
Net current liabilities
Total assets less current liabilities
Creditors: Amounts falling due after more than one year
Derivatives
Net assets
Equity
Share capital
Share premium account
Share based payment reserve
Retained earnings
Total equity
Notes
5
2020
US$’000
2019
US$’000
247,325
247,325
573,546
573,546
48
64
112
14
1
15
15,375
15,375
12,998
12,998
232,062
560,563
1,449
–
230,613
560,563
58,057
93,080
3,739
75,737
230,613
58,057
93,080
3,569
405,857
560,563
7
8
9
9
9
The Company reported a loss for the financial year ended 31 December 2020 of US$ 330.1 million (2019: US$ 2.8 million).
The financial statements of Gulf Marine Services PLC (registered number 08860816) were approved by the Board of Directors and authorised
for issue on 21 May 2021. Signed on behalf of the Board of Directors
Mansour Al Alami
Executive Chairman
Andy Robertson
Chief Financial Officer
The attached Notes 1 to 13 form an integral part of these financial statements.
130 Gulf Marine Services PLC
COMPANY STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED 31 DECEMBER 2020
At 1 January 2019
Loss for the year
Share based payment charge (Note 9)
Shares issued under LTIP schemes (Note 9)
Share
capital
US$’000
57,992
–
–
65
Share
premium
account
US$’000
93,080
–
–
–
Share based
payment
reserve
US$’000
Retained
earnings
US$’000
Total equity
US$’000
3,410
408,646
563,128
–
224
(65)
(2,789)
–
–
(2,789)
224
–
At 31 December 2019
58,057
93,080
3,569
405,857
560,563
Loss for the year
Share based payment charge (Note 9)
At 31 December 2020
–
–
–
–
58,057
93,080
–
170
3,739
(330,120)
–
(330,120)
170
75,737
230,613
The attached Notes 1 to 13 form an integral part of these financial statements.
Annual Report 2020
131
Financial Statements NOTES TO COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
1 Corporate information
Gulf Marine Services PLC (“the Company”) was a private company limited by shares, incorporated in the United Kingdom under the
Companies Act 2006 and is registered in England and Wales. On 7 February 2014, the Company re-registered as a public limited company.
The address of the registered office of the Company is 6th Floor, 65 Gresham Street, London, EC2V 7NQ. The registered number of the
Company is 08860816. The Company is the parent company of the Gulf Marine Services Group comprising of Gulf Marine Services PLC
and its underlying subsidiaries (“Group”). The consolidated group accounts are publicly available.
2 Accounting policies
Currency
The functional and presentational currency of the Company is US Dollars (“US$”).
Going concern
The Company’s ability to continue as a going concern is premised on the same assessment as the Group.
The Company’s Directors have assessed the Group’s and therefore the Company’s financial position for a period of not less than 12 months
from the date of approval of the full year results and have a reasonable expectation that the Group and the Company will be able to continue
in operational existence for the foreseeable future.
On 31 December 2020, the Group’s banking syndicate agreed to extend certain obligations on the Group, which it was otherwise required to
have met including the requirement to issue warrants to the banks. This meant the Group was not in an event of default as at 31 December
2020. This was subsequently extended on two further occasions through to 31 March 2021 at which point the Company entered into a new
agreement with its lenders, delivering significantly improved terms, which were consistent with the term sheet announced on 16 March 2021.
The revised deal provides additional time needed to complete an equity raise with a lower initial quantum and now includes a requirement of
US$ 25 million of equity to be raised by 30 June 2021 and a further US$ 50 million by 31 December 2022. This must be put to the Company’s
shareholders to approve. Seafox and Mazrui Investments LLC (Mazrui) are related parties under the Listing Rules, therefore their respective
votes would not be counted on a shareholder vote on a related party transaction to which they were party. A fully pre-emptive offering would
not involve such a related party transaction. Both have informally agreed to take up their prorated share of an equity raise. Failure to obtain
the necessary shareholder approval and raise US$25 million of new equity by 30 June 2021 will result in an event of default and indicates
a material uncertainty that may cast significant doubt as to the Group’s and the Company’s ability to continue as a going concern.
Notwithstanding this material uncertainty, the Directors believe that based on the progress made to date and an informal commitment from
these two shareholders representing 42% of the share capital of the Company to take up their prorated share, that the equity raise will be
successfully completed prior to 30 June 2021. Accordingly, they have adopted the going concern basis of accounting in preparing the
consolidated financial statements, and also in preparing these Company financial statements.
If shareholder approval is not obtained and US$ 25 million of new equity is not placed by 30 June 2021 the banks would retain the right,
under the existing loan terms, to call default on the loans as of that date. This would allow a majority of banks, representing at least 66.67%
of total commitments, to exercise their rights to recall all credit facilities, demand immediate repayment and/ or enforce its rights over the
security granted by the Company as part of this facility either through enforcing security over assets and/or exercising the share pledge to
take control of the Group.
GMS remains cognisant of the wider context in which it operates and the impact that climate change could have on the financial statements
of the Group. The Board’s view is that the transition risk associated with climate change remains an emerging risk with no appreciable impact
in the going concern forecast period.
The impact of COVID-19 has also been considered with vessel downtime, as a contingency, for 2021. The forecast has been amended to
allow for additional hotel and testing costs for offshore crew whilst in quarantine. Terms and conditions of crew rotations have also been
amended and costs updated to reflect this. Rotations have been extended for all crew to limit the number of times in quarantine and the
number of changeouts on the crew which increases the risk of infection each time it occurs. All policies are in line with Government and
client guidelines for offshore activities.
Brexit
GMS supports the free movement of goods, services and people. On 24 December 2020 agreement was reached between the UK and EU.
As our UK office was closed at the end of 2019 and there is currently one vessel owned by the Company’s subsidiaries, working in North
West Europe, the impact of Brexit is not considered to be a principal risk to the Company. GMS will continue to monitor the status of
implementation, including changes in legislation and future policies.
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, modified to include certain items at fair value, and in accordance with Financial Reporting Standard 102 (FRS
102) issued by the Financial Reporting Council. The Company has applied the amendments to FRS 102 issued by the FRC in December 2017
with effect from 1 January 2019. The transitional provisions relating to the triennial review amendments have not resulted in any restatements
of comparative information by the Company.
The Company has elected to take the exemption under Section 408 of the Companies Act 2006 (the ‘Act’) to not present the Company
Income Statement nor the Company Statement of Comprehensive Income. The result for the Company for the year was a loss of US$ 330.1
million (2019: loss of US$ 2.8 million). The principal accounting policies are summarised below. They have all been applied consistently
throughout both years.
132 Gulf Marine Services PLC
The Company meets the definition of a qualifying entity under FRS 102 and has therefore taken advantage of the disclosure exemptions available
to it. Exemptions have been taken in relation to presentation of a cash flow statement and remuneration of key management personnel.
Investments
Investments in subsidiaries and associates are recognised at cost less impairment.
Financial instruments
Financial assets and financial liabilities are recognised in the Company’s statement of financial position, 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’’.
Other payables are classified as ‘‘other financial liabilities’’. Other financial liabilities, are initially measured at the transaction price, net of
transaction costs. Other financial liabilities are subsequently measured at amortised cost using the effective interest rate (“EIR”) method,
with interest expense recognised on an effective interest rate, except for short-term payables or when the recognition of interest would
be immaterial.
The EIR method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period.
The EIR is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where
appropriate, a shorter period.
Derecognition of financial liabilities
The Company derecognises financial liabilities when, and only when, the Company’s obligations are discharged, cancelled or they expire.
Embedded Derivatives
The Company considers whether a contract contains an embedded derivative when it becomes a party to the contract. Derivatives
embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are
not closely related to those of the host contracts, a separate instrument with the same terms as the embedded derivative would meet the
definition of a derivative and the entire instrument is not measured at fair value with changes in fair value recognised in the profit or loss.
Equity 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
Basic financial assets including other receivables and cash and bank balances are initially measured at transaction price, plus transaction
costs. Such assets are subsequently carried at amortised cost using the effective interest method.
Interest income is recognised by applying the effective interest rate method, except for short-term receivables when the recognition of interest
would be immaterial.
Other financial assets are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair
value and the changes in fair value are recognised in profit or loss.
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 and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits.
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 reporting 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 reporting 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.
Annual Report 2020
133
Financial Statements NOTES TO COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
2 Accounting policies (continued)
Taxation (continued)
Unrelieved tax losses and other deferred tax assets are 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 using the tax rates and laws that have been enacted or substantively enacted by the reporting date that are
expected to apply to the reversal of the timing difference.
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 or loss account.
Share-based payments
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 Company’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.
3 Critical accounting judgements and key sources of estimation uncertainty
In the application of the Company’s accounting policies, which are described in Note 2, the Directors are required to make judgements,
estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The
estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results
may differ from these estimates.
The following are the critical accounting judgements and key sources of estimation, which management have made in the process of applying
the Company’s accounting policies and that have the most significant effect on the amounts recognised in the financial statements.
Critical judgements in applying the Company’s accounting policies
Management has not made any critical judgements in applying the Company’s accounting policies for the year ended 31 December 2020.
Key source of estimation uncertainty
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period
in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects
both current and future periods.
The key assumptions concerning the future, and other key sources of estimation uncertainty that may have a significant risk of causing a
material adjustment to the carrying value of assets and liabilities within the next financial year, are outlined below.
Recoverability of investments
Investments in subsidiary undertakings are included in the statement of financial position of the Company at cost less any provision for
impairment. The Company performs impairment reviews in respect of investments whenever events or changes in circumstance indicate that
the carrying amount may not be recoverable. An impairment loss is recognised when the recoverable amount of an asset, which is the higher
of the asset’s net realisable value and its value in use, is less than its carrying amount. The recoverability of investments is primarily impacted
by the cash flows of the vessels owned by the Group’s subsidiary undertakings. The projection of cash flows related to vessels requires the
use of various estimates including future day rates, vessel utilisation levels and discount rates. These estimates are based on a number of key
assumptions including asset replacement cost, ongoing maintenance and repair costs and estimated asset usage over the relevant period.
For further details on analysis of the sensitivities of these estimates, refer to Note 5.
The Company undertook a full impairment review of its investments during the year. The review led to the recognition of an aggregate
impairment of US$ 327.7 million (2019:US$ nil) on the investment in subsidiaries (see Note 5).
As at 31 December 2020, the Company had investments of US$ 247.3 million (2019: US$ 573.5 million).
4 Dividends
There was no interim dividend declared or paid in 2020 (2019: Nil).
No final dividend in respect of the year ended 31 December 2020 (2019: Nil at the 2020 AGM) is to be proposed at the 2021 AGM.
134 Gulf Marine Services PLC
5 Investment in subsidiaries
Investments in subsidiaries
Capital contribution in subsidiary in relation to embedded derivative (Note 8)
Impairment of investments
2020
US$’000
573,546
1,449
(327,670)
247,325
2019
US$’000
573,546
–
–
573,546
As at 31 December 2020, the net assets of the Company exceed the net assets of the Group prior to any impairment by US$ 351.4 million
(2019: US$ 230.9 million). This and the continued low market capitalisation were identified as indicators of impairment and accordingly the
Company undertook a full assessment of recoverable amount of its investments in subsidiaries at the reporting date.
The review was done by identifying the value in use of each vessel in the fleet as the underlying cash generating units of the investments in
subsidiaries. This assessment is based on management’s projections of utilisation and day rates and associated cash flows and adjusted
to include full overheads and future tax charges. Projections used to derive future cashflows reflect the ongoing COVID-19 pandemic and
oil price environment. The risk adjusted cash flows have been discounted using a nominal post-tax discount rate of 9.86% (2019: 9.25%),
which reflects the current market assessment of the time value of money and is based on the Group’s weighted average cost of capital.
The discount rate has been calculated using industry sector average betas, risk free rates of return as well as specific adjustments for
country risk and tax regimes in the countries in which the Group operates and a size premium. For further details of the Group’s
impairment assessment, refer to Note 5 of the consolidated financial statements.
The review led to the recognition of an aggregate impairment of US$ 327.7 million (2019: US$ nil) on the investment in subsidiaries.
The Company has conducted an analysis of the sensitivity of the impairment test to reasonably possible changes in the key assumptions (day
rates, utilisation and nominal post-tax discount rates) used to determine the recoverable amount of investments. The first sensitivity modelled
a 10% increase/reduction to projected revenue for the remaining useful economic life. A further sensitivity was modelled where a 1% increase/
decrease was applied to the post-tax discount rate mentioned above.
The results on the first sensitivity indicated that a 10% decrease to revenue would lead to an additional impairment charge of
US$ 129.9 million. In comparison, a 10% increase to revenue would reduce the impairment charge booked in the period by US$ 127.3 million.
The total carrying amount of investments would be US$117.4 million and US$ 374.6 million respectively.
The results on the second sensitivity indicated that a 1% decrease to the nominal post-tax discount rate would lead to a reduction of the
impairment charge booked during the period of US$ 58.8 million and a 1% increase to the nominal post-tax discount rate would lead to
an increase to the impairment charge booked during the period of US$ 51.2 million. The total carrying amount of investments would be
US$ 188.5 million and US$ 298.5 million respectively.
The Company has investments in the following subsidiaries:
Name
Place of Registration
Registered Address
Gulf Marine Services W.L.L.
United Arab Emirates Office 403, International Tower,
Proportion of
Ownership Interest
2020
100%
2019
Type of Activity
100% Marine Contractors
Offshore Holding Invt SA
Panama
Offshore Logistics Invt SA
Panama
Offshore Accommodation Invt
Panama
SA
Offshore Jack-up Invt SA
Panama
Offshore Craft Invt SA
Panama
24th Karama Street, P.O. Box
46046, Abu Dhabi,
United Arab Emirates
Bloc Office Hub, Fifth Floor,
Santa Maria Business District,
Panama, Republic of Panama
Bloc Office Hub, Fifth Floor,
Santa Maria Business District,
Panama, Republic of Panama
Bloc Office Hub, Fifth Floor,
Santa Maria Business District,
Panama, Republic of Panama
Bloc Office Hub, Fifth Floor,
Santa Maria Business District,
Panama, Republic of Panama
Bloc Office Hub, Fifth Floor,
Santa Maria Business District,
Panama, Republic of Panama
100%
100% Holding Company
100%
100% Owner of Barge “Naashi”
100%
100% Holding Company
100%
100% Owner of Barge “Kamikaze”
100%
100% Owner of Barge “GMS
Endeavour”
Annual Report 2020
135
Financial Statements NOTES TO COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
5 Investment in subsidiaries (continued)
Name
Place of Registration
Registered Address
Offshore Structure Invt SA
Panama
Offshore Maritime Invt SA
Panama
Offshore Tugboat Invt SA
Panama
Offshore Boat Invt SA
Panama
Offshore Kudeta Invt SA
Panama
GMS Endurance Invt SA
Panama
Gulf Marine Services (UK)
United Kingdom
Limited
Gulf Marine Saudi Arabia Co.
Saudi Arabia
Limited
Gulf Marine Services (Asia) Pte.
Singapore
Ltd.
GMS Enterprise Investment SA Panama
GMS Sharqi Investment SA
Panama
GMS Scirocco Investment SA
Panama
GMS Shamal Investment SA
Panama
GMS Jersey Holdco. 1 Limited* Jersey
GMS Jersey Holdco. 2 Limited Jersey
Bloc Office Hub, Fifth Floor,
Santa Maria Business District,
Panama, Republic of Panama
Bloc Office Hub, Fifth Floor,
Santa Maria Business District,
Panama, Republic of Panama
Bloc Office Hub, Fifth Floor,
Santa Maria Business District,
Panama, Republic of Panama
Bloc Office Hub, Fifth Floor,
Santa Maria Business District,
Panama, Republic of Panama
Bloc Office Hub, Fifth Floor,
Santa Maria Business District,
Panama, Republic of Panama
Bloc Office Hub, Fifth Floor,
Santa Maria Business District,
Panama, Republic of Panama
c/o MacKinnon’s, 14 Carden
Place, Aberdeen, AB10 1UR
King Fahad Road, Al Khobar,
Eastern Province, P.O. Box
31411 Kingdom of Saudi Arabia
1 Scotts Road, #21-07, Shaw
Centre, Singapore, 228208
Bloc Office Hub, Fifth Floor,
Santa Maria Business District,
Panama, Republic of Panama
Bloc Office Hub, Fifth Floor,
Santa Maria Business District,
Panama, Republic of Panama
Bloc Office Hub, Fifth Floor,
Santa Maria Business District,
Panama, Republic of Panama
Bloc Office Hub, Fifth Floor,
Santa Maria Business District,
Panama, Republic of Panama
12 Castle Street, St. Helier,
Jersey, JE2 3RT
12 Castle Street, St. Helier,
Jersey, JE2 3RT
Proportion of
Ownership Interest
2020
100%
2019
Type of Activity
100% Owner of Barge “Kikuyu”
100%
100% Owner of “Helios” –
Dormant
100%
100% Owner of “Atlas” – Dormant
100%
100% Owner of Barge “Kawawa”
100%
100% Owner of Barge “Kudeta”
100%
100% Owner of Barge
“Endurance”
100%
100% Operator of Offshore
Barges
75%
75% Operator of Offshore
Barges
100%
100% Operator of Offshore
Barges
100%
100% Owner of Barge
“Enterprise”
100%
100% Owner of Barge “Sharqi”
100%
100% Owner of Barge “Scirocco”
100%
100% Owner of Barge “Shamal”
100%
100% General Investment
100%
100% General Investment
GMS Marine Middle East FZE
United Arab Emirates ELOB, Office No. E-16F-04, P.O.
100%
100% Operator of Offshore
Box 53944, Hamriyah Free
Zone, Sharjah
Barges
GMS Global Commercial Invt
United Arab Emirates Office 403, International Tower,
100%
100% General Investment
LLC
24th Karama Street, P.O. Box
46046, Abu Dhabi,
United Arab Emirates
136 Gulf Marine Services PLC
Name
Place of Registration
Registered Address
GMS Keloa Invt SA
Panama
GMS Pepper Invt SA
Panama
GMS Evolution Invt SA
Panama
Bloc Office Hub, Fifth Floor,
Santa Maria Business District,
Panama, Republic of Panama
Bloc Office Hub, Fifth Floor,
Santa Maria Business District,
Panama, Republic of Panama
Bloc Office Hub, Fifth Floor,
Santa Maria Business District,
Panama, Republic of Panama
Proportion of
Ownership Interest
2020
100%
2019
Type of Activity
100% Owner of Barge “Keloa”
100%
100% Owner of Barge “Pepper”
100%
100% Owner of Barge
“Evolution”
Gulf Marine Services LLC
Qatar
Qatar Financial Centre, Doha
100%
100% Marine Contractor
Mena Marine Limited
Singapore
GMS Phoenix Investment SA
* Held directly by Gulf Marine Services PLC.
Ugland House, Grand Cayman,
KY1-1104, Cayman Islands,
P.O. Box 309
Bloc Office Hub, Fifth Floor,
Santa Maria Business District,
Panama, Republic of Panama
100%
100% General Investment and
Trading
100%
100% Dormant
6 Deferred tax asset
At the reporting date, the Company has unused tax losses of US$ 12.1 million available for offset against future profits (2019: US$ 9.6 million).
These UK tax losses may be carried forward indefinitely. The Company had insufficient future taxable profits to justify the recognition of a
deferred tax asset and therefore no deferred tax asset has been recognised in the current year (2019: US$ Nil).
7 Other payables
Amounts owed to Group undertakings
Other payables
2020
US$’000
14,648
727
15,375
2019
US$’000
12,321
677
12,998
Amounts owed to Group undertakings have no fixed terms of repayment and are repayable on demand. Therefore the present value of the
liability is deemed to equal the undiscounted cash amount payable, reflecting the lender’s right to demand immediate repayment. No interest
charge is therefore imputed on these amounts.
8 Derivative financial instruments
Embedded derivative – contract to issue warrants
In June 2020, the Group restructured the terms of its borrowings with its lenders. These terms include warrants to be issued under the
following conditions:
If GMS has not raised US$ 75.0 million of equity by no later than 31 December 2020, GMS shall issue warrants to its lenders, in accordance
with the following terms:
• Strike price at 9p
• Number of warrants that would give the lenders collectively 20% ownership of GMS
• Vesting: (i) 50% vest on 31 December 2021 and (ii) 50% vest on 30 June 2023, unless the Net Leverage ratio is below 4.0x
•
• Upon vesting, the warrants are (i) exercisable in whole or in part, (ii) allocated pro rata to each lender and exercisable singly and separately
If, at any time, GMS raised US$ 100 million of equity any warrant not yet vested at such date will cease to exist
(i.e. not as a syndicate), (iii) payable either in cash or in the form of settling the PIK outstanding at the time of exercise, and (iv)
freely tradable
• Warrants to expire on 30 June 2025 (maturity date of the facilities)
As the terms of the loan facility contained separate distinguishable terms with a requirement to issue warrants to banks, management
determined the debt facility to contain an embedded derivative. The Group were required to recognise the embedded derivative at fair value.
The loan facility was a tri-partite agreement between the Company, a subsidiary of the Group and the Groups banking syndicate. As the
embedded derivative was over the Company’s equity, the balance has been recorded on the Company’s balance sheet.
Annual Report 2020
137
Financial Statements NOTES TO COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
8 Derivative financial instruments (continued)
Embedded derivative – contract to issue warrants (continued)
The balance represents the fair value outstanding at 31 December 2020 with a value of US$ 1.4 million. As the derivative was expected to be
settled after 12 months, the balance was recognised as a non-current liability.
Management commissioned an independent valuation expert to measure the fair value of the warrants, which was determined using Monte
Carlo simulations. The fair value based on the valuation carried out as at 31 December was US$ 1.5 million. The valuation of the contract to
issue is dependent on a number of estimates, including the Company’s share price, the Company’s share price volatility and the Group’s
ability to raise equity. The weighted average risk-free rate was 0.10%. The valuation of fair value of the contract to issue warrants is more
sensitive to changes to market capitalisation.
A 10% increase in the assumed market capitalisation required to raise equity would result in a US$ 1.4 million increase in the fair value of
warrants. A 10% decrease would result in a US$ 1.4 million decrease in their fair value.
During the year no warrants were issued.
Derivative financial statements are made up as follows:
As at 1 January 2019 and 1 January 2020
Initial recognition and subsequent revaluation of embedded derivative
As at 31 December 2020
9 Share capital and reserves
The share capital of Gulf Marine Services PLC was as follows:
At 31 December 2020
Authorised share capital
Issued and fully paid
At 31 December 2019
Authorised share capital
Issued and fully paid
At 1 January 2020
Shares issued under LTIP schemes
At 31 December 2020
Embedded
derivative
US$’000
–
1,449
1,449
Ordinary
shares
US$’000
58,057
58,057
Total
US$’000
–
1,449
1,449
Total
US$’000
58,057
58,057
Number
of ordinary
shares
(thousands)
350,488
350,488
350,488
350,488
58,057
58,057
58,057
58,057
Number
of ordinary
shares
(thousands)
350,488
–
350,488
Ordinary
shares
US$’000
Share premium
account
US$’000
58,057
–
58,057
93,080
–
93,080
Share based
payment
reserve
US$’000
3,569
170
3,739
Total
US$’000
154,706
170
154,876
The Company has one class of ordinary shares, which carry no right to fixed income.
The Company was incorporated on 24 January 2014 with a share capital of 300 million shares at a par value of £1 each. On 5 February 2014,
as part of a Group restructuring, the Company undertook a capital reduction by solvency statement, in accordance with s643 of the
Companies Act 2006. Accordingly, the nominal value of the authorised and issued ordinary shares was reduced from £1 to 10p.
On 19 March 2014, the Company 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.
On 6 July 2017, the Company issued a total of 176,169 ordinary shares at a par value of 10 pence per share in respect of the Company’s 2014
long-term incentive plan.
On 12 April 2018, the Company issued a total of 263,905 ordinary shares at par value of 10 pence per share in respect of the Company’s
2015 long-term incentive plan.
On 2 April 2019, the Company issued a total of 519,909 ordinary shares at par value of 10 pence per share in respect of the Company’s 2016
long-term incentive plan.
The share premium account contains the premium arising on issue of equity shares, net of related costs.
138 Gulf Marine Services PLC
The Company’s share based payment reserve of US$ 3.7 million (2019: US$ 3.6 million) relates to awards granted to employees of a
subsidiary undertaking under a long-term incentive plan, details of which are provided in Note 11. The share-based payment charge
during the year was US$ 0.2 million (2019: US$ 0.2 million).
The retained earnings represent cumulative profits or losses net of dividends paid and other adjustments.
10 Staff numbers and costs
The average monthly number of employees (including executive directors) was:
Administration
Their aggregate remuneration comprised:
Wages and salaries
Employment taxes
2020
Number
2019
Number
3
3
5
5
2020
US$’000
2019
US$’000
931
11
942
1,301
69
1,370
11 Long term incentive plans
The Company has Long Term Incentive Plans (“LTIPs”), performance shares and share-based payments which were granted to senior
management, managers and senior offshore officers. The details of the senior management LTIPs are contained in the Directors’
Remuneration Report on page 63.
From 2019 onwards the employment condition is that each eligible employee of the Company must remain in employment during the three
year vesting period. LTIPs have been aligned to the Company’s share performance therefore only financial metrics will be applied. The
time-dependent element of the LTIPs has been removed. EPS (“Earnings Per Share”) has been dropped as the financial metric and TSR
(“Total Shareholder Return”) is now the sole financial metric.
In the prior years, the release of these shares were conditional upon continued employment, certain market vesting conditions and in the
case of senior management LTIP awards, performance against three-year target EPS compound annual growth rates. Equity-settled
share-based payments were measured at fair value at the date of grant. The fair value determined, using the Binomial Probability Model
together with Monte Carlo simulations, at the grant date of equity-settled share-based payments, is expensed on a straight-line basis over
the vesting period, based on an estimate of the number of shares that will ultimately vest.
The fair value of each award was determined by taking into account the market performance condition, the term of the award, the share price
at grant date, the expected price volatility of the underlying share and the risk-free interest rate for the term of the award.
Non-market vesting conditions, which for the Company mainly related to the continual employment of the employee during the vesting period,
and in the case of the senior management LTIP awards the achievement of EPS growth targets, were taken into account by adjusting the
number of equity instruments expected to vest at each balance sheet date so that, ultimately, the cumulative amount recognised over the
vesting period was based on the number of share-based payments that eventually vest. Any market vesting conditions were factored into
the fair value of the share-based payments granted.
To the extent that share-based payments are granted to employees of the Company’s subsidiaries without charge, the share-based payment
charge is capitalised as part of the cost of investment in subsidiaries.
The number of share awards granted by the Company during the year is given in the table below:
At the beginning of the year
Granted in the year
Exercised during the year
Forfeited in the year
Lapsed
At end of the year
Exercisable at the end of the year
2020
No.
2019
No.
8,768,294
2,661,388
–
(4,856,453)
–
9,814,485
3,425,775
(519,909)
(1,424,494)
(2,527,563)
6,573,229
8,768,294
–
–
The weighted average remaining contractual life for the vesting period outstanding as at 31 December 2020 was 1.0 years (2019: 1.9 years).
The weighted average fair value of shares granted during the year was US$ 0.10 (2019: US$ 0.07).
Annual Report 2020
139
Financial Statements NOTES TO COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
11 Long term incentive plans (continued)
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
Expected volatility
Risk-free rate
Expected dividend yield
Vesting period
Award life
LTIP
LTIP
LTIP
29 May 2020
£0.09
120%
0.01%
0.00%
3 years
3 years
15 November 2019
£0.08
102.79%
0.48%
0.00%
3 years
3 years
23 March 2018
£0.37
52.89%
1.04%
1.00%
3 years
3 years
The expected share price volatility of Gulf Marine Services PLC shares was determined taking into account the historical share price
movements for a three year period up to the grant date (and of each of the companies in the comparator group).
The risk-free return was determined from similarly dated zero coupon UK government bonds at the time the share awards were granted,
using historical information taken from the Bank of England’s records.
The charge arising from share-based payments is disclosed in Note 9.
12 Financial instruments
The Company applies Sections 11 and 12 of FRS 102 in respect of financial instruments.
Further 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 (see Note 2).
The Company has the following financial instruments:
Financial assets:
Financial assets at amortised cost:
Other receivables
Cash and cash equivalents
Total financial assets
Financial liabilities at FVTPL:
Embedded derivative (Note 8)
Financial liabilities at amortised cost:
Other payables (Note 7)
Total financial liabilities
All financial liabilities are repayable upon demand.
2020
US$’000
2019
US$’000
48
64
112
14
1
15
2020
US$’000
2019
US$’000
1,449
15,375
16,824
–
12,998
12,998
Capital risk management
The Company manages its capital to support its ability to continue as a going concern while maximising the return on equity. The Company
does not have a formalised optimal target capital structure or target ratios in connection with its capital risk management objectives, however
under the revised banking terms signed in March 2021, a minimum of US$ 75 million of equity has to be raised prior to 31 December 2022
in order to accelerate payments towards term debt. This along with maximising cash wherever possible, the Group looks to delever the
Company over the coming years. The capital structure of the Company consists of cash and short-term deposits and equity attributable
to equity holders of the Company, comprising issued capital, reserves and loss for the period as disclosed in Note 9.
The Company was not subject to any externally imposed capital requirements other than a requirement to issue warrants to its lenders if
US$ 75 million equity was not raised by 31 December 2020, refer to Note 8 for further details.
140 Gulf Marine Services PLC
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. Management actively monitors and manages risks relating to the Company and policies implemented to mitigate
risk exposures.
Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company, and arises
principally from the Company’s 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 counterparties,
and continually assessing the creditworthiness of such non-related counterparties. 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
counterparties failing to perform their obligations generally approximates their carrying value. 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 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. Cash balances held at year end were deposited with banks with Fitch short-term ratings of F2 to F1+.
Cash flow and 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$. Transactions in other foreign currencies entered into by the
Company are short term in nature and therefore management considers that the currency risk associated with these transactions is limited
and consequently this risk is not hedged.
Interest rate risk management
The Company’s financial assets and financial liabilities are interest-free; accordingly, the Company is not subject to any interest rate risk.
Fair value of financial assets and liabilities
The Company’s management considers that the fair value of financial assets and financial liabilities approximates their carrying amounts.
13 Events after the reporting period
Appointment of new Director
As announced on 16th March 2021, Jyrki Koskelo was appointed as an Independent Non-Executive Director to the Board of Directors in
February 2021.
New bank deal
On 31 March 2021, the Group together with its banking syndicate executed an amendment to its common terms agreement and related
loan documentation, delivering significantly improved terms, which were consistent with the term sheet announced on 16 March 2021.
The revised deal provides additional time needed to seek to complete an equity raise, with a requirement to raise US$ 25 million by 30 June
2021 and a further US$ 50 million by 31 December 2022. Provided the Company meet these requirements then no PIK shall be charged or
warrants issued. It also reduces interest cost during 2021 and 2022 with the cash saving being utilised to accelerate repayment of the loans.
The Company will be required to recognise an embedded derivative in relation to the terms of the warrants contained in the new loan facility.
As the loan facility is a tri-partite agreement between the Company, a subsidiary of the Group and the Group’s banking syndicate, and the
warrants will be over the Company’s equity, the embedded derivative will be recorded on the balance sheet.
Annual Report 2020
141
Financial Statements GLOSSARY
Alternative Performance Measure (APMs) – An APM is a financial measure of historical or future financial performance, financial position,
or cash flows, other than a financial measure defined or specified in the applicable financial reporting framework.
APMs are non-GAAP measures that are presented to provide readers with additional financial information that is regularly reviewed by
management and the Directors consider that they provide a useful indicator of underlying performance. Adjusted results are also an important
measure providing useful information as they form the basis of calculations required for the Group’s covenants. However, this additional
information presented is not uniformly defined by all companies including those in the Group’s industry. Accordingly, it may not be comparable
with similarly titled measures and disclosures by other companies. Additionally, certain information presented is derived from amounts
calculated in accordance with IFRS but is not itself an expressly permitted GAAP measure. Such measures should not be viewed in isolation
or as an alternative to the equivalent GAAP measure. In response to the Guidelines on APMs issued by the European Securities and Markets
Authority (ESMA), we have provided additional information on the APMs used by the Group.
Adjusted diluted loss per share – represents the adjusted loss attributable to equity holders of the Company for the period divided by
the weighted average number of ordinary shares in issue during the period, adjusted for the weighted average effect of share options
outstanding during the period. The adjusted loss attributable to equity shareholders of the Company is used for the purpose of basic loss
per share adjusted by adding back impairment charges, restructuring charges, exceptional legal costs and costs to acquire new bank
facilities. This measure provides additional information regarding earnings per share attributable to the underlying activities of the
business. A reconciliation of this measure is provided in Note 31.
Adjusted EBITDA – represents operating profit after adding back depreciation, amortisation, impairment charges, restructuring costs
and exceptional legal costs in 2020. This measure provides additional information in assessing the Group’s underlying performance that
management is more directly able to influence in the short term and on a basis comparable from year to year. A reconciliation of this
measure is provided in Note 31.
Adjusted EBITDA margin – represents adjusted EBITDA divided by revenue. This measure provides additional information on underlying
performance as a percentage of total revenue derived from the Group.
Adjusted gross profit/(loss) – represents gross profit after adding back impairment charges. This measure provides additional information
on the core profitability of the Group. A reconciliation of this measure is provided in Note 31.
Adjusted loss – represents loss after adding back impairment charges, restructuring costs, exceptional legal costs and finance expenses
relating to the renegotiation of the bank facilities in 2020. This measure provides additional information in assessing the Group’s total
performance that management is more directly able to influence and on a basis comparable from year to year. A reconciliation of this
measure is provided in Note 31 of these results.
Average fleet utilisation – represents the percentage of available days in a relevant period during which the fleet of SESVs is under
contract and in respect of which a customer is paying a day rate for the charter of the SESVs.
Average fleet utilisation is calculated by adding the total contracted days in the period of each SESV, divided by the total number of days
in the period multiplied by the number of SESVs in the fleet.
EBITDA – represents Earnings before Interest, Tax, Depreciation and Amortisation, which represents operating loss after adding back
depreciation and amortisation in 2020. This measure provides additional information of the underlying operating performance of the
Group. A reconciliation of this measure is provided in Note 31.
Margin – revenue less operating expenses as identified in Note 31 of the consolidated financial statements.
Net bank debt – represents the total bank borrowings less cash. This measure provides additional information of the Group’s financial
position. A reconciliation is shown below:
Statutory bank borrowings
Less cash and cash equivalents
2020
US$’000
410,058
(3,798)
406,260
2019
US$’000
402,167
(8,404)
393,763
Net cash flow before debt service – the sum of cash generated from operations and investing activities.
Net debt to EBITDA – the ratio of net debt at year end to earnings before interest, tax, depreciation and amortisation as reported under
the terms of our bank facility agreement.
Operational downtime – downtime due to technical failure.
Segment adjusted gross profit/loss – represents gross profit/loss after adding back depreciation, amortisation and impairment charges.
This measure provides additional information on the core profitability of the Group attributable to each reporting segment. A reconciliation
of this measure is provided in Note 30.
Underlying trading performance – day to day trading excluding vessel relocation and COVID-19.
142 Gulf Marine Services PLC
OTHER DEFINITIONS
Backlog
represents firm contracts and extension options held by clients. Backlog equals (charter day rate x remaining days
contracted) + ((estimated average Persons On Board x daily messing rate) x remaining days contracted) +
contracted remaining unbilled mobilisation and demobilisation fees. Includes extension options.
Borrowing rate
LIBOR plus margin.
Calendar days
Costs capitalised
takes base days at 365 and only excludes periods of time for construction and delivery time for newly
constructed vessels.
represent qualifying costs that are capitalised as part of a cost of the vessel rather than being expensed as they
meet the recognition criteria of IAS 16 Property, Plant and Equipment.
DEPS/DLPS
Diluted earnings/losses per share.
Employee retention
percentage of staff who continued to be employed during the year (excluding retirements and redundancies) taken
as number of resignations during the year divided by the total number of employees as at 31 December.
EPC
ESG
engineering, procurement and construction.
environmental, social and governance.
Finance Service Cover represents the ratio of Adjusted EBITDA to Finance Service (being Net finance charges plus scheduled repayments
plus capital payments for finance leases adjusted for voluntary or mandatory prepayments), in respect of that
relevant period.
Interest Cover
represents the ratio of Adjusted EBITDA to Net finance charges.
IOC
KPIs
LTIR
Independent Oil Company.
Key performance indicators.
the lost time injury rate per 200,000 man hours which is a measure of the frequency of injuries requiring employee
absence from work for a period of one or more days.
LIBOR
London Interbank Offered Rate.
Net finance charges
represents finance charges for that period less interest income for that period.
Net leverage ratio
represents the ratio of net bank debt to Adjusted EBITDA.
NOC
OSW
PIK
Security Cover
(loan to value)
National Oil Company.
Offshore Wind.
Payment In Kind. Under the banking documents dated 17 June 2020 and 31 March 2021, PIK is calculated at 5.0%
per annum on the total term facilities outstanding amount and reduces to:
a 2.5% per annum when Net Leverage reduces below 5.0x
b Nil when Net Leverage reduces below 4.0x
Under the documents dated 31 March 2021, PIK accrues on either 1 July 2021 if the US$ 25 million equity is not
raised by 30 June 2021, or from 1 January 2023 if the US$ 50 million is not raised by 31 December 2022.
PIK stops accruing at the date on which all loans are paid or discharged in full.
the ratio (expressed as a percentage) of Total Net Debt at that time to the Market Value of the Secured Vessels.
Total Recordable Injury
Rate (TRIR)
calculated on the injury rate per 200,000 man hours and includes all our onshore and offshore personnel and
subcontracted personnel. Offshore personnel are monitored over a 24-hour period.
Underlying G&A
Underlying General and Administrative (G&A) expenses excluding depreciation and amortisation, exceptional and legal costs.
Utilisation
Warrants
the percentage of calendar days in a relevant period during which an SESV is under contract and in respect of which
a customer is paying a day rate for the charter of the SESV.
Under the banking documents dated 17 June 2020, if GMS had not satisfied the US$ 75 million Equity Condition,
GMS shall issue warrants to the Banks, by no later than 31 December 2020, in accordance with the following terms:
• Strike price at the lower of (i) average price over the 90 trading days preceding execution of documents, or
(ii) exercise price of the stock options granted to Senior Management
• Number of warrants that would give the Banks collectively 20% ownership of GMS
• Vesting: (i) 50% vest on 31 December 2021 and (ii) 50% vest on 30 June 2023, unless the Net Leverage ratio is
•
below 4.0x
If, at any time, GMS satisfies the US$ 100 million Equity Condition any warrant not yet vested at such date will
cease to exist
• Upon vesting, the warrants are (i) exercisable in whole or in part, (ii) allocated pro rata to each Bank and
exercisable singly and separately (i.e. not as a syndicate), (iii) payable either in cash or in the form of settling
the PIK outstanding at the time of exercise, and (iv) freely tradable
• Anti-dilution mechanism
• Price adjustment mechanism
• Warrants to expire on 30 June 2025 (maturity date of the facilities)
Under the banking documents date 31 March 2021, if Warrants are issued on 1 July 2021 because of the failure to
raise US$ 25 million by 30 June 2021, half of the issued warrants vest on that date. The other half will only vest on
2 January 2023 if there is a failure to raise US$ 50 million. If warrants are issued on 2 January 2023 because of the
failure to raise US$ 50 million all of the issued warrants vest on the same date. If the US$ 50 million equity raise is
successful but the US$ 25 million is unsuccessful, the balance of the unvested warrants issued on 1 July 2021
will lapse. All warrants to expire on 30 June 2025 (maturity date of the facilities).
Annual Report 2020
143
Financial Statements Board of Directors
Mansour Al Alami
Executive Chairman
Hassan Heikal
Deputy Chairman, Non-Executive Director
Rashed Saif Al Jarwan
Senior Independent Non-Executive Director
Saeed Mer Abdulla Khoory
Independent Non-Executive Director
Jyrki Koskelo
Independent Non-Executive Director
CORPORATE INFORMATION
Corporate Broker
Panmure Gordon
One New Change,
London EC4M 9AF
Legal Advisers
Shearman and Sterling LLP
9 Appold Street
London EC2A 2AP
Auditors
Deloitte LLP
2 New Street Square
London EC4A 3BZ
Public Relations Advisers
Celicourt Communications Limited
Orion House
5 Upper St Martin’s Lane
London WC2H 9EA
Registrar
Equiniti
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
Registered Office
Gulf Marine Services PLC
Masters House
107 Hammersmith Road
London W14 0QH
Head Office
Gulf Marine Services
P.O. Box 46046
Abu Dhabi, UAE
T: +971 (2) 5028888
F: +971 (2) 5553421
E: IR@gmsplc.com
Gulf Marine Services
P.O. Box 46046
Abu Dhabi, UAE
T: +971 (2) 5028888
F: +971 (2) 5553421
E: IR@gmsplc.com
www.gmsplc.com
144 Gulf Marine Services PLC
OUR CLIENTS
This publication was printed with vegetable oil-based inks by
an FSC-recognised printer that holds an ISO 14001 certification.
The outer cover of this report has been laminated with a biodegradable film.
Around 20 months after composting, an additive within the film will initiate
the process of oxidation.
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Gulf Marine Services
P.O. Box 46046
Abu Dhabi, UAE
T: +971 (2) 5028888
F: +971 (2) 5553421
E: IR@gmsplc.com
www.gmsplc.com