GMS Annual Report 2023 | Quarterlytics

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FY2023 Annual Report · GMS

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Gulf Marine Services PLC
Annual Report 2023

HIGHLIGHTS
HIGHLIGHTS

In this report
Strategic Report
Highlights

2023 Financial Highlights

2023 Operational Highlights

2024 Highlights and Outlook

Non-Financial and Sustainability
Information Statement

Chairman’s Review

IFC

Business Model and Strategic Objectives 4

Section 172 Statement

Market Analysis

Risk Management

Key Performance Indicators

Financial Review

Long-term Viability Statement

People and Values

Governance
Chairman’s Introduction

Board of Directors

Report of the Board

Audit and Risk Committee Report

Nomination Committee Report

Remuneration Committee Report

Directors’ Remuneration Policy Report 59

Annual Report on Remuneration

Directors’ Report

Statement of Directors’ Responsibilities

Financial Statements
Independent Auditor’s Report

Group Consolidated
Financial Statements

Company Financial Statements

Glossary

Other Definitions

Corporate Information

Also online at
https://www.gmsplc.com/Results-and-
Presentations.aspx

127

138

140

142

Our Vision
To be the best SESV
operator in the world

2023 Overview
Revenue

US$ 151.6m

(2022: US$ 133.2m)

Adjusted EBITDA

US$ 87.5m

(2022: US$ 71.5m)

Net profit for the year

US$ 42.1m

(2022: US$ 25.4m)

Average fleet utilisation

94%

(2022: 88%)

Underlying G&A
expenses as
percentage of revenue

(2022: 8%)

2023 Financial Highlights
— Group net profits of US$ 42.1 million (2022: US$ 25.4 million), reflecting

the strength of the Group’s recovery.

— Adjusted EBITDA1 increased to US$ 87.5 million (2022: US$ 71.5 million)

driven by an increase in revenue. Adjusted EBITDA margin5 also
increased to 58% (2022: 54%).

— Net bank debt2 reduced to US$ 267.3 million (2022: US$ 315.8 million).

Net leverage ratio3 reduced to 3.05 times (2022: 4.4 times).

— Revenue increased by 14% to US$ 151.6 million (2022: US$ 133.2 million)
driven by increased utilisation on E-Class and K-Class vessels and higher
average day rates across all vessel classes, particularly E-Class.

— Cost of sales as a percentage of revenue6 reduced by five percentage

points to 54% (2022: 59%).

— Underlying general and administrative expenses4 as a percentage of

revenue reduced to 7% (2022: 8%).

— Net reversal of impairment of US$ 33.4 million (2022: US$ 7.8 million)

reflecting continued improved market conditions.

— Finance expenses have increased to US$ 31.4 million (2022: US$ 17.7
million) driven by an increase in LIBOR/SOFR rates, the temporary
introduction of both a 250 bps PIK in Q1 as well as the increase on the
margin rate of the loan from 3.1 to 4.0%, both triggered by the net
leverage ratio exceeding 4:1 times as at 31 December 2022. On achieving
net leverage ratio below 4:1 times, PIK ceased to accrue in the second
quarter of the year, and the margin was thereafter reduced by 90 basis
points to 3.1%. This resulted in a reduction in the cost of financing of
340 basis points.

— Impact of changes in the fair value of the derivative increased to US$ 11.1
million (2022: US$ 2.5 million), primarily due to the increase in the
Group’s share price.

2023 Operational Highlights
— Average fleet utilisation7 increased by six percentage points to 94% (2022: 88%) with an improvement

in E-Class and K-Class vessels at 92% (2022: 82%) and 95% (2022: 87%) respectively.

— Average day rates increased to US$ 30.3k (2022: US$ 27.5k) with improvements across all vessel classes,

particularly for E-Class.

— New charters and extensions secured in the year totalled 8.4 years (2022: 19.4 years).
— Operational downtime decreased to 0.8% (2022: 2.2%).

2024 Highlights and Outlook
— Adjusted EBITDA guidance is set at US$ 92 million

to US$ 100 million for 2024.

— Target utilisation for 2024 is 95% of which 83%

is already secured.

— Anticipate continued improvement on day rates
as our vessel demand outstrips supply on the
back of a pipeline of opportunities.

— Average secured day rates of over 10% higher

than 2023 actual levels.

— Reversal of impairment recognised with a value
of US$ 33.4 million indicative of continued
improvement of long-term market conditions.

— Group anticipates net leverage ratio to be
below 2.5 times before the end of 2024.

See Glossary.
1 Represents operating profit after adding back depreciation, amortisation,
non-operational items and impairment charges or deducting reversal of
impairment. This measure provides additional information in assessing the
Group’s underlying performance that management can more directly influence
in the short term and is comparable from year to year. A reconciliation of this
measure is provided in Note 31 to the consolidated financial statements.

2 Represents total bank borrowings less cash.
3 Represents the ratio of net bank debt to adjusted EBITDA.
4 Represents general and administrative costs excluding depreciation,

amortisation and other exceptional costs. A reconciliation of this measure is
provided in Note 31 to the consolidated financial statements

5 Represents adjusted EBITDA divided by revenue.
6 Represents reported cost of sales divided by revenue.
7 Represents the percentage of available days in a relevant period during which
the fleet of Self Elevating Support Vessels (SESVs) is under contract and in
respect of which a customer is paying a day rate for the charter of the SESVs.

NON-FINANCIAL AND SUSTAINABILITY INFORMATION STATEMENT

The Group has complied with the requirements of section 414C7B of the Companies Act 2006 by including certain non-financial
and sustainability information within the strategic report. We welcome the introduction of LR 9.8.6(8)R, which requires premium listed
companies like GMS, to include TCFD statements in their annual reports. The table below sets out where relevant information can be
found within this report*:

Reporting requirement and policies and standards which govern our approach:

Information necessary to understand our business and its impact,
policy due diligence and outcomes:

Environmental matters
• Greenhouse Gas (GHG) Emissions Policy
• Climate change strategy
• Carbon emission reporting
• Task Force on Climate-related Financial Disclosures (TCFD)

• Carbon emission reporting, page 35
• People and values section, page 26
• Carbon emission reporting, page 35
• TCFD, page 26

Employees
• Anti-Corruption and Bribery Policy
• Social Responsibility Policy
• Whistleblowing Policy

• Health and safety standards
• Diversity and equal opportunities
• Employee engagement and welfare

Human rights
• Disability Policy
• Anti-Slavery Policy
• Code of Conduct Policy

• Ethical practises, page 38
• Ethical practises, page 38
• Ethical practises, page 38, and Audit and

Risk Committee report, page 53

• Health and safety, page 39
• Diversity, page 37, and Directors’ Report, page 72
• Employee engagement and welfare, page 37
• People as at 31 December 2023, Page 38

• Employees and policies, Directors’ Report, page 74
• Ethical practises, page 38
• Ethical practises, page 38, Risk management page 17

Principal risks and impact on business activity

• Risk management, pages 12

Remuneration Policy

Description of the business model

Key Performance Indicators (KPIs)

• Remuneration Policy, page 59

• Our business model, page 6

• KPIs, page 20

* Further details on policies and procedures are available on our corporate website: www.gmsplc.com

Annual Report 2023

Strategic ReportCHAIRMAN’S REVIEW

Committed
to Maximising
Shareholder Value

In 2023, our business thrived amid industry tailwinds, showcasing year-over-year growth in
revenues, utilisation, and day rates. We successfully reduced our net leverage ratio to 3.05 times
from 4.4 times as of 31 December 2022. Looking forward, we will continue our deleveraging
journey as we spare no efforts to continue to increase shareholders value.

During the year, we lowered the cost of
financing by 340 basis points. Key benefits of
being below 4:1 times includes GMS meeting
its covenants, being able to pay dividends
and cutting some debt monitoring fees. This
achievement not only highlights our financial
resilience but also positions us to effectively
address other challenges, as highlighted
in the risk management section, while
advancing on our deleveraging journey.

Concurrent with our deleveraging efforts
aimed at shifting value from lenders to
shareholders, we are initiating plans to
reward our shareholders. Recently approved
by the Board, our residual dividend policy
seeks to strike a balance between investing
in the business and providing returns to
shareholders. Management is currently
evaluating the timing for its implementation,
a consideration that has only recently come
to the forefront.

The Group is in the process of refinancing its
term facility in advance of the bullet payment
becoming due in June 2025. Management’s
ongoing discussions with various lending
entities are aimed at securing terms that
align with our long-term strategic objectives,
ensuring continued financial stability. We are
optimistic about the outcome of these
negotiations and will keep shareholders
updated as we navigate this pivotal phase in
our financial planning. The Board expresses
confidence in our ability to secure favourable
terms that will contribute to the sustained
success and growth.

Governance
In August 2023, we announced the
departure of Rashed Al Jarwan, a non‐
executive Director of the Group, who retired
from the Board. I extend my sincere gratitude
to Rashed for his contributions during the
pivotal period since joining the Board in
2020. Following Rashed’s retirement, we
were pleased to welcome Haifa Al Mubarak
who joined the Board as an independent
non‐executive Director in October 2023.
Haifa brings over 40 years of oil and gas
experience to the business and also reflects
our efforts to create a more representative
Board, demonstrating our commitment to
promoting diversity in all aspects of our
organisation. I look forward to continuing to
benefit from Haifa's insights and expertise.

As a Board, we have continued to emphasise
the development of effective risk
management and internal control systems,
including regular audits and reporting to
ensure accountability and transparency.
Demonstrated by over 50 meetings with
investors and other stakeholders, we have
open lines of communication on relevant
information. We conducted sessions on
transparent and ethical business practices,
including a Code of Conduct review for
employees and stakeholders, and ensuring
compliance with relevant regulations
and laws. This is an example of our
continuous commitment towards
environmental, social, and governance
(ESG) initiatives, including sustainability
practices and community engagement.

Group Performance
In 2023, the Group demonstrated
improvement in its financial performance,
attributed to an increase in both utilisation
and average day rates across the fleet.
Average utilisation was up six percentage
points to 94% and the average day rates
across the fleet increased to US$ 30.3k
compared to the previous year's US$ 27.5k.
It is important to highlight that these figures
represent averages for the entire fleet, and
considering some contracts carried over
from previous years at lower rates, the actual
increase for new contracts surpassed the
reported average. This signals a positive
trend in securing new contracts at rates
higher than the fleet's overall average,
contributing to the overall revenue growth.

The improvement in revenue translated into
an improved adjusted EBITDA of US$ 87.5
million (2022: US$ 71.5 million). This
exceeded both our initial guidance range of
US$ 75 million to US$ 83 million, as well as
surpassing the revised guidance of US$ 86
million. This accomplishment highlights the
success of our operational performance in
maximising financial results.

Capital Structure and Liquidity
As a result of our commitment to
deleveraging, the net leverage ratio on
31 December 2023 was reduced to 3.05
times (31 December 2022: 4.4 times), driven
by a reduction in the net bank debt to
US$ 267.3 million (31 December 2022:
US$ 315.8 million) and with improved
EBITDA for the year. Attaining a net leverage
ratio below 4:1 was crucial, allowing us to
limit the number of quarters we were
charged PIK interest to one quarter.

Gulf Marine Services PLC

Commercial and Operations
The Group successfully secured four
new contracts and extended four existing
ones, totalling 8.4 years in aggregate (2022:
19.4 years in aggregate). Our operational
performance also demonstrated continued
improvement, as evidenced by a reduction in
operational downtime to 0.8%, compared to
2.2% in 2022.

Safety
The Group improved its Lost Time Injury Rate
(LTIR) going from 0.1 in 2022 to zero in 2023.
However, two medical treatment cases were
recorded taking the Total Recordable Injury
Rate (TRIR) from 0.1 in 2022 to 0.18 in 2023.
These levels continue to be below industry
average. We continue to look at areas of
improvement in our systems and processes
and engaging our employees to ensure that
our offshore operations continue to be as
safe as possible in line with the expectations
of our customers and stakeholders.

Task Force on Climate-Related
Financial Disclosures
We continue to comply with LR 9.8.6(8)R
requirements by including climate-related
financial disclosures consistent with Task
Force on Climate related Financial
Disclosures (TCFD) recommendations and
recommended disclosures. The TCFD
recommendations focus on how companies
respond to the risks and opportunities
associated with climate change. Consistent
with the recommendations, a climate
scenario analysis was used to understand
the potential climate-related transition and
physical risks to our operations over the
short, medium, and long term. Climate

change is now integrated into our enterprise
risk assessment process. Risk management
workshops are held at least annually and
attended by the Executive Chairman and
other Directors. Full details are provided in
our TCFD report on page 26.

Outlook
The offshore industry is dynamic, and today
we are more agile to adapt and ensure
sustained relevance in the future. I take pride
in our successful deleveraging efforts, which
along with our much improved operational
and financial performance, underscores our
commitment to enhancing shareholder value.
Concurrently, we are actively exploring
avenues for future growth, aligning ourselves
with emerging trends and positioning for
sustained success.

Given the current high levels of utilisation
secured, combined with higher day rates,
the Group expects the financial performance
to continue to improve and reiterates its
adjusted EBITDA guidance for 2024
between US$ 92 million to US$ 100 million.
This reflects our confidence in sustaining
positive momentum.

Finally, I would like to thank our employees,
shareholders and other stakeholders for their
continued support in achieving the Group’s
ongoing success.

Mansour Al Alami
Executive Chairman
03 April 2024

Annual Report 2023

Strategic ReportBUSINESS MODEL AND STRATEGIC OBJECTIVES

Our business model revolves around providing a practical and cost-effective
solution to customers in the offshore oil, gas, and renewable energy sectors.
We achieve this through a fleet of self-propelled Self-Elevating Support Vessels
(SESVs), designed to meet the specific needs of our clients in challenging
marine conditions.

Our Resources

Our Operations

Prioritising Health,
Environment and Quality
Safety remains our foremost priority,
supported by a resilient Health, Safety,
Environment and Quality (HSEQ)
management framework and a
pervasive safety-centric culture.

Meeting Client Demands
for Efficiency and
Cost Reduction
As clients increasingly prioritise vessels
that reduce costs and improve operational
efficiencies for their projects. Our fleet of 13
SESVs, with an average age of 13 years, is
designed to meet the operating standards
our clients require.

Empowering a Diverse
Workforce for Success
Our workforce, rich in diversity and global
experience, personifies excellence in the
SESV sector. GMS cultivates talent to
unmatched standards by empowering
individuals to grow, develop and realise
their utmost potential, thereby driving
success for our organisation.

Leveraging Flexibility
for Market Resilience
GMS operates across various industries and
geographical regions, leveraging the
adaptability of its fleet to deliver highest
quality services to a diverse clientele. This
strategic flexibility enables us to maintain a
market presence across different business
sectors and geographies, positioning us as a
resilient entity in times of fluctuating demand.

Gulf Marine Services PLC

Drives Performance
Through Reportable Metrics
GMS assesses productivity across the Group
by ensuring reportable metrics are clear,
aligned, communicated and regularly
reported. The annual Short-Term Incentive
Plan incorporates a scorecard focused
on performance, and thereby productivity,
for all employees.

Operates a Fleet of
Self-propelled SESVs
GMS owns and operates a fleet of SESVs,
which are chartered to our clients, providing
cost-effective and safe offshore support
solutions. With an average age of 13 years,
the fleet is well positioned within the market.
GMS currently supports oil, gas and
renewable energy clients in the Arabian
Peninsula region and North-West Europe.

Delivering
Operational Excellence
GMS is dedicated to achieving excellence
across all operational activities, providing
clients with a comprehensive suite of services
aimed at enhancing operational efficiency
while delivering time and cost benefits. Our
commitment to maintaining excellent safety
standards not only safeguards the well-being
of clients, employees and contractors but also
minimises our environmental footprint.

To align with the in-country value
requirements mandated by several of our
Arabian Peninsula-based clients, GMS
collaborates closely with local suppliers.
This strategic partnership maximises
in-country expenditures, thereby fostering
economic growth within the region.
Additionally, we encourage our partners to
similarly prioritise in-country spending within
their own supply chains whenever feasible.

What We Deliver

Shareholders
Generating higher and sustainable profits
through improving utilisation and charter day
rates, reduction in operational cost base.
Transfer of value to shareholders via improved
capital structure through continued
deleveraging of the Group’s balance sheet.

Customers
GMS delivers services that prioritise safety,
reliability and cost-effectiveness, empowering
clients to optimise their operations. Our
commitment to safety highlights our
exceptional track record in consistently
providing clients with market leading services.

People
A dedicated workforce committed to
performance and well-being flourishes within
an environment characterised by positivity
and openness. This engaged workforce
remains a cornerstone of our operations,
fostering a culture of excellence and
continuous improvement.

Suppliers
Long-term partnerships focusing
on local content.

Annual Report 2023

Strategic ReportBUSINESS MODEL AND STRATEGIC OBJECTIVES
continued

Securing Sustainable Value
Creation for Shareholders

Management's primary aim is to deliver resilient shareholder value by swiftly and efficiently
deleveraging the Group. The following strategic priorities are entirely geared towards
accomplishing this key objective.

Strategic Priority

#1
Revenue
Maximisation

What it Means

2023 Progress

Future Priorities

Increase charter day rates driven by the improving
supply/demand dynamics in our core markets.

Maximise utilisation through best-in-class operations.

Continually enhance operating capability while offering
new and improved offshore support solutions, to
anticipate client needs.

#2
Cost management

Deliver safe and cost-effective operations.

Optimise capital expenditure.

Focused efficiencies in operational costs.

#3
Working capital
management

Improved cash management across the Group to help
reduce debtor days whilst improving credit terms with
our key suppliers.

Maximise cashflows from operations to help reduce
leverage levels.

Maintain an efficient and effective control environment.

Develop and maintain a robust internal controls manual.

Equip our staff with greater skills to deliver
quality performance.

Monitoring the implementation of controls with close
exception reporting.

#4
Controls

Gulf Marine Services PLC

Utilisation increased by six percentage points to 94% from the

Focus on local content requirements demanded by our clients across

2022 figure of 88%. This continues to be the highest level of

the Arabian Peninsula region to ensure we are well placed to secure

utilisation achieved since 2014.

new contracts.

Average day rates across the fleet increased by 10%

Maintaining strong relationships with our core customers to win

compared to the previous year’s increase of 7%.

and secure contracts that add to our backlog.

New contracts and extensions secured in the year totalled

Renegotiate contractual terms when existing contracts come to an end with

8.4 years (2022: 19.4 years).

the precursor to day rate improvement and longer-term contracts.

Continue to explore new opportunities in other markets.

Total Recordable Injury Rate (TRIR) slightly increased from

0.1 in 2022 to 0.18 in 2023 which continues to remain below

Ensure key safety Key Performance Indicators (KPIs) are monitored

frequently to allow safe and reliable operation of fleet.

industry average.

Managing inflationary pressures through negotiating terms with current

Limiting capital expenditure to maintaining the fleet to a level

that ensures safe operations and meets client requirements.

key suppliers.

The adjusted EBITDA has improved to US$ 87.5 million

(2022: US$ 71.5 million), through cost control measures.

Focus on maximising cash generation with a continued emphasis on

reducing our leverage.

Reduced leverage levels from 4.4 times at the end of 2022

to 3.05 times at the end of 2023, through effective working

capital management as highlighted by a reduction in the

trade debtors to US$ 30.6 million (2022: US$ 33.2 million).

Group has continued to deleverage by making repayments

of US$ 56.2 million (2022: US$ 51.4 million) towards its

borrowings, of which, US$ 26.2 million (2022: US$ 3.8

million) were over and above its contractual obligations.

A total of US$ 33.7 million (2022: US$ 3.8 million) was

prepaid during 2023.

The Group has to comply with International Maritime

Organization (IMO) regulations and during the year

undertook Internal Audits Marine training in ISM, ISPS and

MLC to fulfil IMO compliance. As such, all offshore staff have

continued to comply with the training requirements to fulfil

our accreditation.

Internal auditors conducted audits of the HR and IT

functions during the year. The IT audit is at its final stages

with observations being discussed with the IT team, while

the HR audit report has been completed. The report

identified control weaknesses, which were assessed as not

representing significant risks.

Closely monitoring the ageing of receivables to ensure sufficient

liquidity to meet our operational and banking requirements.

Make additional prepayments towards the bank loans to

continue to deleverage, thus reducing the finance cost.

Refinancing its term facility in advance of the bullet

payment becoming due in June 2025.

Maintaining an internal control environment to appropriately mitigate the

operating risks inherent in the sector, whilst allowing the Group to achieve its

strategic objectives and deliver value to shareholders.

Monitoring progress of the internal audit and implementing

required controls to ensure a robust controls environment.

Securing Sustainable Value

Creation for Shareholders

Revenue

Maximisation

Working capital

management

Controls

Cost management

Deliver safe and cost-effective operations.

Optimise capital expenditure.

Focused efficiencies in operational costs.

Improved cash management across the Group to help

reduce debtor days whilst improving credit terms with

our key suppliers.

leverage levels.

Maximise cashflows from operations to help reduce

Maintain an efficient and effective control environment.

Develop and maintain a robust internal controls manual.

Equip our staff with greater skills to deliver

quality performance.

Monitoring the implementation of controls with close

exception reporting.

Strategic Priority

What it Means

2023 Progress

Future Priorities

Increase charter day rates driven by the improving

supply/demand dynamics in our core markets.

Maximise utilisation through best-in-class operations.

Continually enhance operating capability while offering

new and improved offshore support solutions, to

anticipate client needs.

Utilisation increased by six percentage points to 94% from the
2022 figure of 88%. This continues to be the highest level of
utilisation achieved since 2014.

Focus on local content requirements demanded by our clients across
the Arabian Peninsula region to ensure we are well placed to secure
new contracts.

Average day rates across the fleet increased by 10%
compared to the previous year’s increase of 7%.

Maintaining strong relationships with our core customers to win
and secure contracts that add to our backlog.

New contracts and extensions secured in the year totalled
8.4 years (2022: 19.4 years).

Renegotiate contractual terms when existing contracts come to an end with
the precursor to day rate improvement and longer-term contracts.

Continue to explore new opportunities in other markets.

Ensure key safety Key Performance Indicators (KPIs) are monitored
frequently to allow safe and reliable operation of fleet.

Managing inflationary pressures through negotiating terms with current
key suppliers.

Focus on maximising cash generation with a continued emphasis on
reducing our leverage.

Closely monitoring the ageing of receivables to ensure sufficient
liquidity to meet our operational and banking requirements.

Make additional prepayments towards the bank loans to
continue to deleverage, thus reducing the finance cost.

Refinancing its term facility in advance of the bullet
payment becoming due in June 2025.

Maintaining an internal control environment to appropriately mitigate the
operating risks inherent in the sector, whilst allowing the Group to achieve its
strategic objectives and deliver value to shareholders.

Monitoring progress of the internal audit and implementing
required controls to ensure a robust controls environment.

Total Recordable Injury Rate (TRIR) slightly increased from
0.1 in 2022 to 0.18 in 2023 which continues to remain below
industry average.

Limiting capital expenditure to maintaining the fleet to a level
that ensures safe operations and meets client requirements.

The adjusted EBITDA has improved to US$ 87.5 million
(2022: US$ 71.5 million), through cost control measures.

Reduced leverage levels from 4.4 times at the end of 2022
to 3.05 times at the end of 2023, through effective working
capital management as highlighted by a reduction in the
trade debtors to US$ 30.6 million (2022: US$ 33.2 million).

Group has continued to deleverage by making repayments
of US$ 56.2 million (2022: US$ 51.4 million) towards its
borrowings, of which, US$ 26.2 million (2022: US$ 3.8
million) were over and above its contractual obligations.
A total of US$ 33.7 million (2022: US$ 3.8 million) was
prepaid during 2023.

The Group has to comply with International Maritime
Organization (IMO) regulations and during the year
undertook Internal Audits Marine training in ISM, ISPS and
MLC to fulfil IMO compliance. As such, all offshore staff have
continued to comply with the training requirements to fulfil
our accreditation.

Internal auditors conducted audits of the HR and IT
functions during the year. The IT audit is at its final stages
with observations being discussed with the IT team, while
the HR audit report has been completed. The report
identified control weaknesses, which were assessed as not
representing significant risks.

Annual Report 2023

Strategic ReportSECTION 172 STATEMENT

The Directors of Gulf Marine Services Plc, as individuals and together, consider that they have acted in a way that would most likely promote
the success of the Group and for the benefit of its members as a whole and its other stakeholders. The key matters considered by the Board
include the following:
•
•
•
•
•
•

the need to act fairly between members of the Group;
the need to maintain the Group’s business relationships with suppliers, customers and other stakeholders;
the interests and safety of the Group’s employees;
the impact of the Group’s operations on the community and the environment;
the desirability of the Group maintaining a reputation for high standards of business conduct; and
the likely consequences of any decision in the long term.

The Board has always taken into account its obligations under Section 172(1) of the Companies Act 2006 (Section 172), including during the
year, in line with current reporting requirements. Key decisions have been specifically confirmed at each Board meeting to take into account
these matters. This has been supplemented by the roles of the individual Directors giving due regard and consideration for each element of
the Section 172 requirements. The Board has always maintained an approach to decision-making that promotes the long-term success of the
business and is in line with the expectations of Section 172. The disclosures set out here demonstrate how GMS deals with the matters set
out in Section 172(1)(a) to (f). Cross-references to other sections of the report for more information are also included.

How GMS Engages
with Stakeholders

Shareholders

GMS shareholders are institutional investors and private
shareholders located across the world. We recognise
the importance of the activities and outcomes of
stewardship and regularly engage with investors on
our financial performance, strategy and business
model and our Environmental, Social and Governance
(ESG) performance.

The Executive Chairman holds regular meetings with
the representatives of major shareholders and an update
on these meetings is provided at each of the main
Board meetings.

GMS’ website has a dedicated section with a specific
email address for all shareholders to use, which is
monitored daily, and all emails receive a response.
There is also an investor presentation that accompanies
the full and half-year results, which shareholders can
dial into. Our Annual General Meeting (AGM) provides
another forum for our shareholder base to engage.

GMS also has an active social media presence on
LinkedIn and posts updates on major developments
in the Group.

Two of our non-executive Directors are nominated by
our two largest shareholders.

Refer to the Board Report on page 46 regarding
protocols to manage information shared with the
Group’s non-independent non-executive Directors.

Clients

GMS works closely with its customers to deliver an
industry-leading offering. The Board is informed of
all tender activity at each Board meeting. Senior
Management engage regularly with clients via face-to-
face meetings to ensure GMS fully understands
operational performance; client service and safety are
the key drivers of meetings. Through this engagement,
GMS learns about, immediate and ongoing tender
requirements and future demand, and changes to
strategy and/or technical or operational requirements.
This informs critical business decisions associated
with fleet deployment, prioritising future business
development activity and resource and local content
investment (HR, Procurement and Local Partnerships).
It also helps with overhead sizing and allocation and
capital expenditure planning, while meeting client needs.

Gulf Marine Services PLC

Stakeholder
Objectives

How did Engagement Support
Board Decision Making?

Investors are interested in
a broad range of matters
including, share price,
financial and operational
performance, strategic
execution, management
of corporate risk and
capital allocation
(including bonus
payments for
management and
returns for investors)
and ESG performance
of the Group.

The Directors of GMS regularly received reports
on the Group’s major shareholders from the registrar.
They also received reports on engagements
with shareholders.

The Executive Chairman engaged with major
shareholders throughout the year. The Executive
Team interacted with shareholders on over 40
occasions during 2023.

The Board continued to have input to the Group’s
communication with its shareholders. There continued
to be a regular flow of trading updates including all
major contract wins and information posted on the
Group’s website and social media to provide
transparency to all current shareholders in the business
and any potential investors.

The Board continued to engage with the major
shareholders as a special resolution was not
passed at the AGM in 2023. The Board hopes
that the shareholders would support all the resolutions
recommended and proposed at the AGM in 2024.

Clients are mainly
concerned with ensuring
value for money in the
services received.
They also wish to ensure
that services meet their
specifications and are
delivered efficiently
and safely.

The Board combines strong relationships with key
clients in the Arabian Peninsula region and a high level
of industry knowledge. Engagement with clients was
crucial in providing the information the Board needed to
drive the Group’s long-term plans, which was key to the
long-term delivery of GMS’ strategy.

Engagement with our clients helped the Group to make
informed decisions on capital expenditure, which remain
limited to keeping vessels in class and equipment in
good condition to meet specific client requirements.

GMS’ focus over the coming years is on delivering a
sustainable capital structure by deleveraging the
balance sheet. Once this is sufficiently progressed,
capital allocation and resources will be reviewed
assuming resources are available. Refer to the
Financial Review for more details.

How GMS Engages
with Stakeholders

Lenders

GMS continued to have extensive interaction with its
lenders and respective teams. Capital structure is
always kept under consideration in any decision making
to ensure that the Group stays within its covenants.

Stakeholder
Objectives

How did Engagement Support
Board Decision Making?

Lenders are primarily
concerned with ensuring
that the capital value
of their loans are
protected, and that
interest is paid. They also
wish to ensure that other
material provisions of the
lending agreements are
complied with.

The increase in adjusted EBITDA meant that the Group
continues to successfully repay significant amounts of
principal and this resulted in a reduction in leverage to
3.05 times (2022: 4.4 times). This was one of the main
priorities for the Board, which Management
successfully delivered.

Refer to the Financial Review on pages 22 to 24 for
further details.

Suppliers

GMS’ supply chain is fundamental to the ability to
deliver reliable operations. The Group has a strategy
of long-term partnerships with key suppliers based on
regular and transparent communication with suppliers
through site visits, calls and surveys. The Group
continuously reviews its existing supply chain which
ensures continuity of supply.

Suppliers are primarily
focused on fair and timely
payment terms as well a
collaborative approach
and open terms of
business.

The Board was given regular presentations and
updates on the Group’s procurement activities
including development of key focus areas for
procurement in future. The Group continues to look
into cost savings initiatives and maximising in-country
value and renegotiate the terms of major supply
contracts to improve efficiency.

The Board received regular updates on this during
the year.

GMS works to maximise
in-country spending,
which is a requirement
from National Oil
Company (NOC) clients.

People

Our employees are our most important asset.
They want to work in an environment where they are
safe and respected, and have the opportunity to learn,
reach their potential and develop successful careers in
a Company they can be proud of. The quality of the
workforce is crucial to the success of GMS. We regularly
communicate with both on and offshore staff via weekly
email updates, meetings and video communication from
the Executive Chairman to all offshore staff.

Employees are
concerned with job
security, opportunities
for training, a culture of
fairness, inclusion and
communication,
compensation
and benefits.

All non-executive Directors have visited our offices in
Abu Dhabi and engaged with staff during their visit.

Lord Anthony St John of Bletso is our dedicated
workforce engagement non-executive Director. An end
of year celebration event was held at the Abu Dhabi HQ
office to celebrate the collective wins as a team in 2023.
During this event, long service employees were also
recognised with awards for 10, 15, 20 and 25 years
of service.

Regular updates on Health and Safety and
HR activities and its future plans are provided
at main Board meetings.

Refer to page 37 for more details on
engagement with our people.

Annual Report 2023

Strategic ReportNorth-West Europe
Offshore wind farms in Europe remains
a pivotal market for GMS across both
operation and maintenance sectors, as
well as in supporting the construction
and commissioning of new wind farms.
Anticipated overall activity is projected to
average 9,150 vessel days annually from
2024 to 2027, with c.40% yoy surge
expected in 2027-2028.

In 2023, the North-West Europe region
revenue contributed 9% (2022: 11%) of the
total Group revenue. GMS currently has one
of its large class vessels working in Europe
engaged in the ongoing maintenance and
operation of existing windfarms. The vessel
is engaged on a long-term contract with
options extending up to 2029.

Market Outlook
Global energy demand is the principal
indicator of all O&G related investments,
driving support for hydrocarbon exploration,
and production and consequently demand
for supply chain services such as SESVs.
The BP Energy Outlook 2023 forecasts
primary energy demand to increase by c.13%
between 2020-2040. The Arabian Peninsula
region is expected to provide the largest
incremental demand of 4.8 mmboe in
offshore O&G production – growing 29%
from 16.6 mmboe to 21.4 mmboe over the
next decade. In addition, it is likely that the
offshore wind industry investment will
generally exceed that of O&G for the
foreseeable future accounting for c.45% of
total offshore energy spending expected
over the 2024-2027 period.

MARKET ANALYSIS

Markets
Arabian Peninsula Region
In the Arabian Peninsula region, Offshore Oil
and Gas (O&G) production is expected to
increase over the next decade, driven by a
planned 29% increase in production capacity.
Self-Elevating Support Vessels (SESV’s)
demand across the Arabian Peninsula region
was at c.21,300 vessel days in 2023, an
increase by 22% year-on-year, with an
implied utilisation of 82%. Over the next five
years, demand across the Arabian Peninsula
markets is expected to grow rapidly and
reach a height of 37,930 vessel days by 2027.
This growth would effectively exceed
available supply, leading to exploration and
production contractors across the region to
attempt to lock in capacity early to secure
SESVs to support committed field
development work. The high utilisation rates
spurred several new build orders in 2022,
which were fulfilled in 2023, consequently
increasing the overall number of SESVs in
the region. Additional orders for SESVs were
placed in 2023, with anticipated delivery
dates in 2024, however a portion of these
new builds are earmarked for contracts
already awarded. Increasing supply tightness
as well as the importance of SESVs to
support major offshore field developments
has seen a uptick in day rates over the past
few years. While day rates averaged US$ 30k
over the 2017-2021 period, new tenders in
2023 drove the average rates to just over
US$ 44k.

In 2023, the Arabian Peninsula region
revenue contributed 91% (2022: 89%) of the
total Group revenue. During the year, the
Group secured eight new contracts and
extensions to current contracts with a total
duration of 8.4 years. The Arabian Peninsula
region saw an increase in fleet average
utilisation from 88% to 95%, driven by the rise
in demand for E-Class and K-Class vessels.

As of 31 December 2023, GMS operates
three vessels in Qatar, three vessels in KSA
and six vessels in the UAE.

Gulf Marine Services PLC

Map legend

E-Class

S-Class

K-Class

Europe

Endeavour

Qatar

Endurance
Evolution
Kikuyu

UAE

Kawawa
Kamikaze
Keloa
Pepper
Scirocco
Shamal

KSA

Enterprise
Kudeta
Sharqi

Annual Report 2023

Strategic ReportRISK MANAGEMENT

Ensuring the effective identification, management and mitigation of business risks, as well as
the pursuit of opportunities, are pivotal for achieving the Group’s strategic goals. A robust risk
management system is established to facilitate the identification, analysis, evaluation, mitigation
and continuous monitoring of risks, as outlined in the framework below.

Board of Directors
The Board has overall responsibility for the Group’s strategy and ensuring effective risk management.

Audit and Risk Committee
Responsibilities include reviewing the Group’s internal control and risk management systems
as well as monitoring the effectiveness of the Group’s internal audit function.

Senior Management
The Executive team implements the risk management process from risk identification
to management and mitigation.

Internal Audit
There are clear
reporting lines from
the internal audit
function to the Audit
and Risk Committee
and the
Executive team.

The Audit and Risk Committee reviewed
control deficiencies identified during the prior
year end and are satisfied that management
have improved areas where control
deficiencies were identified. There were no
significant weaknesses identified by the
Board as part of their review during the year.

The enterprise risk assessment process
begins with identifying risks through quarterly
reviews by individual departments. This
contains an assessment of the principal risks
facing the Group. Mitigating controls are
then identified.

The departmental reviews are then
consolidated by the Executive team to
identify an overall heatmap. Emerging risks
are also identified through these discussions
and included in reporting to the Audit and
Risk Committee, which reviews the risk
profile at least quarterly. The Board reviews
the risk profile formally on an annual basis
(see page 52 for details of the Board’s
actions as part of their review).

The framework incorporates the policies,
culture, organisation, behaviours, processes,
systems and other aspects of the Group that,
when combined, facilitate its effective and
efficient operation. Business risks across the
Group are addressed in a systematic way
through the framework, which has clear lines
of reporting to address the management of
risks, and improvement of internal controls
were considered appropriate.

The Board has overall responsibility for
ensuring that risks are effectively managed.

As an integral part of their regular risk
assessment procedures, the Board evaluates
the relevance of Environmental, Social and
Governance (ESG) issues to GMS'
operations. The Audit and Risk Committee
oversees the evaluation of the Group's
internal control system and procedures.
Following its assessment, the Audit and Risk
Committee has determined that GMS'
operational internal control system, including
risk management practices, remains
effective for day-to-day operations.

The Audit and Risk Committee is responsible
for reviewing the effectiveness of the
Group’s financial controls and the financial
reporting process, which include the timely
identification and resolution of areas of
accounting judgement, and the quality
and timeliness of papers analysing
those judgements.

Gulf Marine Services PLC

Residual Risk Heat Map

K1 Utilisation
K2

Inability to secure appropriate
capital structure

K3 Arabian Peninsula region local

content requirements

Inability to deliver safe and
reliable operations

K5 Liquidity and covenant compliance
K6 People
K7 Legal, economic and political conditions

K8 Compliance and regulation
K9 COVID-19 pandemic (Removed in 2023)
K10 Cyber-crime – security and integrity
K11 Climate change

K10

T
C
A
P
M

K11

LIKELIHOOD

Annual Report 2023

Strategic ReportRISK MANAGEMENT
continued

Principal Risks and Uncertainties
Future results are uncertain due to factors beyond our control. Operating vessels
offshore involves varying levels of uncertainty influenced by weather conditions, sea state and
navigational hazards. Despite advanced technology and experienced crews, there’s always
some uncertainty. Our operations follow strict safety regulations to minimise risks.
It's important to plan and remain adaptable as circumstances change, impacting our
results and investment value. The principal risks facing the Group in the next five years,
along with mitigation measures, are outlined below, though not exhaustive.

Key

Revenue Maximisation

Cost Management

Working Capital Management

Controls

Risk

1 Utilisation

Utilisation levels may be reduced by the
following underlying causes:
• Customer concentration leading to

potential changes in our contract profile
and pipeline. Risks of potential loss of
some clients to competitors.

• ADNOC continues to expand its fleet

thus controlling the UAE market.

• Fleet capabilities may no longer match
with changing client requirements.
Clients may increase the standard
specification required for a Self-Elevating
Support Vessel (SESV), which might require
the Group to upgrade some of its fleet to
be compliant.

Mitigating Factors and Actions

Strengthening Client Engagement and Foster Loyalty
The Group maintains strong client relationships through consistent communication and
a demonstrated history of delivering secure and reliable services. GMS has formulated
strategies for fleet upgrades aligned with anticipated client needs in the future. These
initiatives aim to craft commercial proposals that foster loyalty, encouraging customers
to commit to longer-term contracts involving a greater utilisation of vessels
through incentivisation.

Diversification Strategies Across Business Segments and Geographies
The Group actively seeks opportunities to optimise vessel utilisation and consistently
evaluates avenues for diversifying its market presence by expanding its client portfolio.

Customisation Capabilities for Client Needs
The Group is capable of modifying assets in order to satisfy client requirements.
Further, GMS’ vessels are adaptable to compete for a wider market share, enabling
the Group to maximise the utilisation level and charter day rates.

To comply with LIMS (Lifting Integrity Management System) the Group has involved
engineering companies to perform technical studies on existing equipment to extend
the life of equipment (time limited).

Gulf Marine Services PLC

Risk

Mitigating Factors and Actions

2 Inability to Secure an Appropriate Capital Structure

Poor financial performance, such as declining
revenues or profitability, can make it more
difficult for the Group to attract financing or
negotiate favourable terms.

Focus on Deleveraging
Conscious focus on deleveraging has resulted in reduction in leverage levels to 3.05 times
compared to 4.4 times in 2022. Group anticipates net leverage ratio to be below 2.5 times
before the end of 2024.

A low share price may prevent GMS from
raising sufficient levels of equity to recapitalise
the business.

Investors Relationship Management
Maintain strong investor relations and ensure timely dissemination of Regulatory News
Service (RNS) updates.

As warrants were issued in January 2023, this
may impact the Group’s ability to attract new
investors as there would be a potential dilution
if these warrants are exercised.

Increased share price
The share price has increased from 4.65 pence as of 31 December 2022 to 14.5 pence as of
31 December 2023, reflecting investors’ confidence in the Group’s business strategy.

3 Arabian Peninsula Local Content Requirements

Arabian Peninsula region National Oil
Companies (NOCs) have local content
requirements as part of their tender
processes, which varies for each country,
designed to give preference to suppliers that
commit to improving their local content and
levels of spend and investment in-country.
This may prevent GMS from winning new
contracts or lead to financial loss and/or a
reduction in profit margins on existing
contracts, which will ultimately impact
operating cash flows and net profitability.

Local Content Requirements
GMS fully embraces local content regulations, reflecting its extensive experience
in serving NOCs in the Arabian Peninsula region. The Group maintains offices in Arabian
Peninsula region countries where it operates, actively overseeing its supply chain to prioritise
the enhancement of local content. When required, GMS collaborates with local partners in
targeted markets to strategically position itself for project acquisition. Notably, during the
tendering phase, companies with superior audited local content scores are typically offered
first refusal to match any lower bids.

Market Knowledge and Operational Expertise
The Group has well-established long-term relationships in the Arabian Peninsula region
which provides an understanding of clients’ requirements and operating standards.

Local Content
The Group continues to explore ways to improve its local content scores in all the regions in
which it operates. We are tracking the scores in two jurisdictions.

4 Inability to Deliver Safe and Reliable Operations

Geo-political events or pandemic may impact
ability to safely operate assets due to
restricted crew travel in certain countries.

The Group may suffer commercial and
reputational damage from an environmental
or safety incident involving employees, visitors
or contractors.

Inadequate preparation for situations, such
as sudden equipment failure, inability to fulfil
client requirements and unpredictable weather
could have a negative impact on the business.

Incomprehensive insurance coverage may
lead to financial loss.

Safety Commitment and Operational Reliability
Our highest priority is providing safe and reliable operations. This is achieved through a
resilient Health, Safety, Environment and Quality (HSEQ) management system and a strong
safety-focused culture. Management has appropriate safety practices and procedures
including disaster recovery plans and comprehensive insurance cover across our fleet.

Training and Compliance
Our employees undergo continuous and rigorous training on operational best practices.

Scheduled Maintenance
The Group adheres to regular maintenance schedules on its vessels to ensure compliance
with the highest safety standards.

Business Continuity Plan
The Group has implemented a business continuity management plan, which it regularly
updates to ensure the reliability of its operations, including the capability to transfer crew
and source spares from different regions to maintain safe operations.

Management continues to review and improve the current management systems
and monitors the performance of HSEQ.

Annual Report 2023

Strategic Report
RISK MANAGEMENT
continued

Risk

Mitigating Factors and Actions

5 Liquidity and Covenant Compliance

The business is exposed to short-term liquidity
management risks due to high interest rates
and inflation, which could impact the debt
service obligations and the Group’s bank
facilities covenants.

Reduced liquidity could impact future
operations and lead to an event of default.
This would give lenders the right to accelerate
repayment of the outstanding loans, and then
exercise security over the Group’s assets.

Breach of covenant – All covenants are closely
monitored due to the Group’s performance
being very sensitive to many internal and
external factors such as utilisation, operational
downtime, interest rates and other variables.

6 People

Liquidity Management
The Group continues to manage liquidity carefully through focusing on cash collection from
its customers.

Optimising Capital Expenditure
The Group continues to restrict capital expenditure to essential spending as well as specific
client requirements, but without jeopardising the safe and reliable operations of its vessels.

Covenant Compliance
The management team and Board regularly examine future covenant compliance based
on the latest forecasts and take necessary measures to avoid any potential where a future
breach of covenant is at risk. The Group monitors its various covenants throughout the
remaining period of the loan.

Focus on Deleveraging
Management continues to focus on making early repayments of the bank loans to reduce
the interest costs, improve our leverage position and meet our covenant requirements.

Attracting, retaining, recruiting
and developing a skilled workforce.

Losing skills or failing to attract new
talent to the business has the potential
to undermine performance.

Effective Communication, Training and Engagement Initiatives
Communication has remained a key practice of management. GMS held a full two-day
strategy meeting at the Group’s headquarters in Abu Dhabi. This brought together the
Board and Senior Management in a productive forum discussing longer-term plans for the
business. It included presentations and discussion on each key aspect of the Group’s
operations, recent and future industry developments and ongoing and future strategic plans.

Further, events like our recent Abu Dhabi headquarters celebration, recognising employee
milestones from 10–25 years of tenure, reinforce our united culture. As the Group matures
and longtime experts pass their torches, we are committed to developing the next generation
of leaders equipped to guide our mission.

Remuneration Policy
The Short-Term Incentive Plan (STIP) is based on a single Business Corporate Scorecard to
ensure all staff are aligned and incentivised around delivering a single set of common goals.

Equal Opportunities
GMS is engaged in fair and transparent recruitment practices. It has a zero-tolerance policy
towards discrimination and provides equal opportunities for all employees.

Further, GMS adds value through development programs, promotion from within the
organisation and focus on growing talent.

Resource Planning
The Group has identified all critical roles held by individuals and have adopted processes
to ensure the smooth transition in the event of changes in those personnel. Also, in the short
term, the Group utilised recruitment specialists and head-hunters to fulfil key positions as
the need had arisen.

Gulf Marine Services PLC

Risk

Mitigating Factors and Actions

7 Legal, Economic and Political Conditions

Political instability in the regions in which
GMS operates (and recruit from) may
adversely affect its operations.

As the majority of crew for certain key
positions come from Eastern Europe and
Southeast Asia, political instability may
hamper the recruitment, retention and
deployment of personnel.

Emergency Response Planning and Insurance
For all our major assets and areas of operation, the Group maintains emergency
preparedness plans. Insurance cover over the Group’s assets is reviewed regularly
to ensure sufficient cover is in place.

Workforce Planning and Monitoring
Workforce planning and demographic analysis is undertaken in order to increase diversity
within the Group. Multiple new recruitment agencies registered to source and diversify
crew composition across different geographies.

Monitoring Inflation and Interest Rates
Management is continually monitoring the liquidity position from changes in inflation and a
focus on cost reduction. During the year, GMS has recruited a Cost Controller to monitor
and manage financial expenditures to ensure adherence to budgetary constraints and
optimise cost efficiency. The key aim of the Group is to deleverage through early repayments,
which will reduce the impact of interest.

8 Compliance and Regulation

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

GMS’ operations are subject to international
conventions on – and a variety of complex
federal and local laws, regulations and
guidelines relating to – health, safety and the
protection of the environment. Compliance
with these has become increasingly costly,
complex and stringent. Failure to appropriately
identify and comply with laws and regulations,
could lead to regulatory investigations.

Compliance with recently introduced UAE
Corporate Tax Regulations, including
adherence to transfer pricing requirements,
poses potential administrative and financial
obligations for the Group.

Code of Conduct
The Group has a Code of Conduct which includes anti-bribery and corruption policies, and
all employees are required to comply with this Code when conducting business on behalf
of the Group. It is mandatory for employees to undergo in-house training on anti-corruption.
All suppliers are pre-notified of anti-bribery and corruption policies and required to confirm
their compliance with these policies.

Regulations
A central database is maintained which documents all of GMS’ policies and procedures
which comply with laws and regulations within the countries in which GMS operates.
A dedicated Company Secretary is in place to help monitor compliance, in particular
for UK legal and corporate governance obligations.

External Review
The internal auditors help ensure compliance with GMS policies, procedures, internal
controls and business processes.

Engagement of Tax Consultant
A reputed tax consultant has been engaged to assist with a Group tax health check, a
review of Group's transfer pricing policy and implementation of corporate tax in the UAE.

9 COVID-19 Pandemic – Removed During 2023

Annual Report 2023

Strategic Report

RISK MANAGEMENT
continued

Risk

Mitigating Factors and Actions

10 Cyber-crime – Security and Integrity

Phishing attempts result in inappropriate
transactions, data leakage and financial loss.
The Group is at risk of loss and reputational
damage through financial cyber-crime.

Cybersecurity Monitoring and Defence
GMS operates multi-layer cyber-security defences which are monitored for effectiveness to
ensure they remain up to date.

GMS engages with third-party specialists to provide security services.

Legal and Policy Monitoring
The Group carefully monitors legislative developments to ensure compliance with all
relevant laws both in the UK and the Arabian Peninsula region. The TCFD disclosure in this
report explains our assessment and response to climate-related risks to be transparent
with our stakeholders.

Physical Infrastructure
The Group monitors weather patterns to ensure conditions are suitable for our offshore
employees and vessels. Onshore buildings and offshore vessels are designed to withstand
the heat in the Arabian Peninsula region.

Environmental Impact
GMS aims to minimise its environmental impact by installing energy and water efficiency
measures. We also ensure our machinery and engines are regularly maintained so they
operate efficiently.

Long-term Planning
GMS has a proven track record in the renewables sector which provides versatility in our
business model. Our vessels are built to be as flexible as possible to maximise utilisation.

We are aware that we may need to consider changing sea levels and environmental
legislation when replacing vessels that are being retired in the long term.

Examples of emerging risks include
unexpected changes in the demand for oil,
technological advancements, monitoring of
suppliers’ performance, changes to tax
landscape in regions GMS operates in and
potential client insolvencies.

11 Climate Change

Climate change poses both transition and
physical risks to the Group.

The transition risks come from the
decarbonisation of the global economy.
This could result in changing investor
sentiment making new investors harder to find.
It may bring changing client preferences
leading to reduced demand for our services.

New legislation could require us to increase
reporting and possibly substitute our products
and vessels for greener alternatives.
Physical risks include rising temperatures,
which could further impact working hours,
and rising sea levels, which could affect
where our vessels can operate.

The physical risks also interact with principal
risk 4 – Our inability to deliver safe and
reliable operations.

Emerging Risks
GMS operates an emerging risk framework as
a tool for horizon scanning, with developments
reported to the Audit and Risk Committee on
a routine basis. Emerging risks are defined as
a systemic issue or business practice that has
either not previously been identified, has been
identified but dormant for an extended period
of time (five years); or has yet to arise to an
area of concern. There is typically a high
degree of uncertainty around the likelihood of
occurrence, severity and/or timescales.
Emerging risks are identified and/or monitored
through internal debate by management and
the Audit and Risk Committee, as well as
discussions with key stakeholders (see the
Group’s Section 172 statement), industry-
specific journals, and reviews of reporting
published by peer companies.

Gulf Marine Services PLC

Annual Report 2023

Strategic ReportKEY PERFORMANCE INDICATORS

Key Performance Indicators (KPIs) serve as vital metrics for
evaluating performance of the Group in relation to our strategic
objectives. These KPIs comprise of financial and operational
measures and each links to the four pillars of our strategic
framework. Refer to the Glossary for the definition of each
Alternative Performance Measure (APM).

Key

Revenue Maximisation

Cost Management

Working Capital Management

Control

KPI

Description

2023 Performance

Revenue and utilisation

2023

2022

2021

2020

2019

US$ 152m

94%

US$ 133m

88%

US$ 115m

84%

US$ 102m

81%

US$ 109m

69%

% – SESV utilisation Bars – Revenue

Revenue reflects the amounts recognised
from operating activities with clients during
the year. It is driven by charter day rates and
utilisation levels.

Utilisation is the percentage of days that our fleet
of Self-Elevating Support Vessels (SESVs) are
chartered on a day rate out of total calendar days.

The Group demonstrated an improved financial
performance leading to an increase in revenue
by 14% which is attributed to increase in
both utilisation and average day rates
across the fleet.

Average utilisation was up six percentage
points to reach 94% and the average day rates
across the fleet increased to US$ 30.3k
compared to the previous year’s US$ 27.5k.

Adjusted EBITDA1 and
adjusted EBITDA Margin2

US$ 88m

58%

US$ 72m

54%

US$ 64m

56%

2023

2022

2021

2020

2019

Adjusted EBITDA (Earnings before Interest,
Tax, Depreciation and Amortisation), excluding
exceptional items and non-cash transactions
such as impairments or reversal of
impairments. It is a key measure of the
underlying profitability of GMS’ operations.

The improvement in revenue translated into an
improved adjusted EBITDA of US$ 87.5 million.
This exceeded both our initial guidance range of
US$ 75 million to US$ 83 million, as well as
surpassing the revised guidance of US$ 86
million. The adjusted EBITDA margin has
also increased to 58% (2022: 54%).

US$ 50m

49%

US$ 51m

47%

Adjusted EBITDA margin demonstrates the
Group’s ability to convert revenue into profit.

% – Adjusted EBITDA Margin Bars – Adjusted EBITDA

Adjusted profit and adjusted DLPS/DEPS3

2023

2022

ADEPS US$ 0.01

US$ 10m

ADEPS US$ 0.02

2021

ADEPS US$ (0.03)

US$ 18m

2020

US$ -20m

US$ (15)m

ADLPS US$ (0.04)

2019

US$ (20)m

ADLPS US$ (0.06)

Numbers – Adjusted DLPS/DEPS
Bars – Adjusted profit/loss

Adjusted profit or loss measures the net
profitability of the business adjusted for
exceptional items and non-cash transactions
such as impairment.

Adjusted DEPS means fully diluted earnings
per share and adjusted DLPS means diluted
loss per share, which measures the level of
net profit/loss, including adjusting items,
per ordinary share outstanding.

Adjusted profit was US$ 9.8 million
(2022: US$ 17.6 million). The decrease reflects
higher finance expenses by US$ 13.8 million
due to increase in interest rates and higher
impact of changes in fair value of derivative
by US$ 8.6 million.

Net bank debt4 to adjusted EBITDA

3.1

4.4

5.8

2023

2022

2021

2020

2019

8.0

7.6

Net debt to adjusted EBITDA is the ratio of net
debt at year end to earnings before interest,
tax, depreciation and amortisation, excluding
adjusting items (see Glossary for details),
as reported under the terms of our bank
facility agreement.

Maintaining this covenant below levels set out in
the Group’s bank facilities is necessary to avoid
an event of default.

As a result of our commitment to deleveraging,
the net leverage ratio on 31 December 2023
was reduced to 3.05 times (31 December 2022:
4.4 times), driven by a reduction in the net debt
to US$ 267.3 million (31 December 2022:
US$ 315.8 million) combined with improved
EBITDA for the year.

See Glossary.
1 Represents operating profit after adding back depreciation, amortisation, non-operational items and impairment charges or deducting reversal of impairment. This measure

provides additional information in assessing the Group’s underlying performance that management can more directly influence in the short term and is comparable from year to
year. A reconciliation of this measure is provided in Note 31 to the consolidated financial statements.

2 Represents adjusted EBITDA divided by revenue. This measure provides additional information on underlying performance as a percentage of total revenue derived from the Group.

Gulf Marine Services PLC

Description

2023 Performance

Backlog shows the total order book of
contracts (comprising firm and option periods)
at the relevant date. This is a leading indicator
of future revenue and utilisation levels.

Backlog increased in the year driven by new
long-term contracts secured, partially offset by
the unwinding of existing long-term contracts.

KPI

Backlog

2023

2022

2021

US$ 179

2020

US$ 199

2019

US$ 240

US$ 459

US$ 342

The backlog figures shown above are as at 1 April.

Average FTE retention
(Onshore and Offshore)

2023

2022

2021

2020

2019

% – Employee retention
Bars – Average FTEs

TRIR and LTIR

0.29

0.30

0.19

0.20

0.10

0.00

Employee retention shows the percentage of
staff who continued to be employees in the
year. The percentages shown do not take into
account retirements or redundancies.

Average FTEs (Full Time Equivalent employees)
throughout the year provides an indication of the
Group’s service capacity, scale of operations,
and manpower cost base.

628

88%

567

84%

534

86%

496

92%

482

83%

Group staff retention increased to 88% from
84% reported in 2022.

Average onshore FTEs over the year have
increased to 59 from 55 reported in 2022.
While for offshore FTEs, the average number
throughout the year increased from 511 in 2022
to 569. The total Group headcount increased
from 594 at 31 December 2022 to 660 at
31 December 2023, which was driven by
increased utilisation of our vessels, which required
an increase in recruitment of offshore FTEs.

TRIR is the Total Recordable Injury Rate per
200,000 man hours, which provides a measure
of the frequency of recordable injuries.

The Group improved its LTIR going from 0.1
in 2022 to zero in 2023 as there was no Lost
Time Injury incident.

0.20

0.10

0.18

LTIR is the Lost Time Injury Rate per 200,000
man hours which is a measure of the frequency
of injuries requiring employee absence from
work for a period of one or more days.

However, two medical treatment cases were
recorded taking the TRIR from 0.10 in 2022 to
0.18 in 2023.

0.00

Offshore man hours are calculated based on a
12-hour working period per day.

2019

2020

2021

2022

2023

= TRIR

= LTIR

Underlying G&A5 as percentage of revenue

2023

2022

2021

2020

2019

US$ 11m

US$ 10m

10%

US$ 14m

13%

Underlying General and Administrative (G&A) expenses
excluding depreciation and amortisation, and
exceptional costs.
% – G&A to revenue
Bars – Underlying G&A

Secured utilisation at 1 January after each
reporting date

2023

2022

2021

2020

2019

84%

74%

77%

73%

67%

The underlying G&A to revenue expense ratio
compares revenue to the amount of expenses
incurred in onshore support operations.

The underlying G&A has slightly increased from
US$ 10.4 million in 2022 to US$ 10.7 million in
2023. However, underlying G&A as percentage
of revenue has decreased from 8% in 2022 to
7% in 2023.

Secured utilisation at 1 January represents the
level of secured contracts we have in place for
the year ahead across our fleet of vessels.
The position is as at 1 January after each
reporting date and is an important indicator to
management and the Board of the risks to
delivery of the business plan. The higher the
level of secured work, the less reliant the Group
is on identifying and securing future contracts.

Secured utilisation has decreased by 10
percentage points compared to the prior year.
The decrease is due to three K-Class vessel
and one E-Class contracts coming to an end in
2024. These contracts are in the process of
being renewed.

3 Represents the adjusted earnings/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 warrants and LTIP’s outstanding during the period. The adjusted earnings/loss attributable to equity
shareholders of the Company is used for the purpose of basic gain/loss per share adjusted by adding back any exceptional costs, impairment charges or deducting
reversal of impairment. 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 32 to the consolidated financial statements.

4 Represents total bank borrowings less cash.
5 Represents general and administrative expenses excluding depreciation and amortisation, and other exceptional costs. A reconciliation of this measure is provided in

Note 31 to the financial statements.

Annual Report 2023

Strategic Report

FINANCIAL REVIEW

Revenue

Gross profit

Adjusted EBITDA1

Net impairment reversal

Net profit for the year

Revenue and Segmental
Profit/Loss
The Group posted 14% increase in revenue,
reaching US$ 151.6 million compared to the
previous year’s US$ 133.2 million. This
growth was a result of combination of an
increase in both utilisation and average
day rates.

Utilisation increased by six percentage points
to 94% from the 2022 figure of 88%.
This continues to be the highest level of
utilisation achieved since 2014. Notable
improvements in the utilisation rates were
observed in the E-Class and K-Class vessels,
reaching 92% (2022: 82%) and 95% (2022:
87%) respectively. S-Class vessels utilisation
was slightly lower at 94% (2022: 97%).

Average day rates across the fleet increased
by 10% to US$ 30.3k compared to the
previous year's US$ 27.5k with improvements
across all vessel classes, particularly for
E-Class whereby, the day rates improved
by 17% to US$ 41.4k (2022: US$ 35.4k).
K-Class and S-Class rates increased by
7% and 5%, respectively.

The United Arab Emirates (UAE), Qatar and
Saudi Arabia combined region continue to be
the largest geographical market representing
91% (2022: 89%) of total revenue. The
remaining 9% (2022: 11%) of revenue was
earned from the renewables market
in Europe.

2023
US$m

151.6

102.8

87.5

33.4

42.1

2022
US$m

133.2

60.5

71.5

7.8

25.4

2021
US$m

115.1

60.6

64.1

15.0

31.2

The table below shows the contribution to
revenue, gross profit and adjusted gross
profit2 made by each vessel class during
the year.

Vessel Class

E-Class vessels

S-Class vessels

K-Class vessels

Total

Revenue
US$’000

Gross Profit
US$'000

Adjusted gross profit
US$’000

2023

60,955

35,018

55,630

2022

51,135

33,986

48,036

2023

43,070

21,327

38,440

151,603

133,157

102,837

2022

18,525

12,600

29,409

60,534

2023

26,730

16,865

25,814

69,409

2022

15,205

17,231

20,310

52,746

Cost of Sales, Reversal
of Impairment and
Administrative Expenses
Cost of sales as a percentage of revenue
decreased by five percentage points to 54%
compared to 59% reported in 2022.

As a result of continued improved market
conditions, an impairment assessment of the
Group’s fleet was conducted which resulted
in a net impairment reversal of US$ 33.4
million (2022: net impairment reversal of
US$ 7.8 million). Refer to Note 5 to the
consolidated financial statements for
further details.

Underlying general and administrative
expenses3 (which excludes depreciation,
amortisation and other exceptional costs)
reduced as a percentage of revenue to 7%
in 2023 from 8% in 2022. Reported general
and administrative expenses amounted to
US$14.6 million, up from US$13.2 million in
2022, driven by increased staff costs and
professional fees.

Adjusted EBITDA
The adjusted EBITDA increased to US$
87.5 million (2022: US$ 71.5 million) which
exceeded both our initial guidance range
of US$ 75 million to US$ 83 million as well
as surpassed the revised guidance of

US$ 86 million. The increase reflects
improvement in market conditions leading
to higher utilisation and day rates.

The adjusted EBITDA margin has also
increased to 58% (2022: 54%). Adjusted
EBITDA is considered an appropriate and
comparable measure showing underlying
performance, that management are able to
influence. Please refer to Note 31 to the
consolidated financial statements and
Glossary for further details.

1 Represents operating profit after adding back depreciation, amortisation, non-operational items and impairment charges or deducting reversal of impairment. This

measure provides additional information in assessing the Group’s underlying performance that management is more directly able to influence in the short term and on a
basis comparable from year to year. A reconciliation of this measure is provided in note 31 to the financial statements.

2 Represents gross profit after deducting reversal of impairment/adding back impairment charges. This measure provides additional information on the core profitability of

the Group. A reconciliation of this measure is provided in Note 31.

3 Represents general and administrative expenses excluding depreciation and amortisation, and other exceptional costs. A reconciliation of this measure is provided in

Note 31 to the financial statements.

Gulf Marine Services PLC

Capital Expenditure
The Group’s capital expenditure relating
to drydocking and improvements of the
vessels increased to US$ 11.3 million
(2022: US$ 9.1 million).

Cash Flow and Liquidity
During the year, the Group delivered higher
operating cash flows of US$ 94.4 million
(2022: US$ 82.6 million). This increase is
primarily from higher revenues generated
during the year. The net cash outflow
from investing activities increased to
US$ 12.8 million (2022: US$ 6.3 million).

The Group’s net cash outflow from financing
activities was US$ 85.2 million (2022: US$
72.3 million) mainly comprising of
repayments to the banks of US$ 56.2 million
(2022: US$ 51.4 million) and interest paid of
US$ 27.4 million (2022: US$ 17.5 million). The
repayments towards the bank loan of US$
56.2 million were almost double the Group's
obligation to its lenders for 2023.

The Group has US$ 8.7 million of available
resources comprising cash and cash
equivalents at the reporting date. Further, it
has an available working capital facility of
US$ 15.0 million (2022: US$ 20.0 million)
which can be utilised to draw down cash, of
which US$ 2.0 million (2022: Nil) was utilised,
leaving US$ 13.0 million (2022: US$ 20.0
million) available for drawdown. During the
period, the working capital facility was
reduced by US$ 5.0 million. The facility
expires alongside the main debt facility
in June 2025.

Balance Sheet
Total non-current assets at 31 December 2023
were US$ 621.0 million (2022: US$ 605.3
million), following a net impairment reversal
of US$ 33.4 million (2022: US$ 7.8 million)
on some of the Group’s vessels.

The total current liabilities increased to
US$ 99.5 million from US$ 69.3 million in
2022, primarily due to higher scheduled
repayments under the loan agreement for
2024. Additionally, trade payables and accrued
expenses increased to US$ 13.2 million
(2022: US$ 12.6 million) and US$ 16.1 million
(2022: US$ 11.2 million), respectively.

The Group was in a net current liability position
as of 31 December 2023, amounting to US$
52.1 million (2022: US$ 15.8 million). Total
current assets have decreased as receivables
are converted into cash that was used to
repay the debt. Management closely monitors
the Group's liquidity position including focus
on the forecasted short-term cash flows which
would be sufficient to meet the Group’s
current liabilities, including the current portion
of the bank borrowings which represents the
principal repayments due over the next 12
months. The loan prepayments were also
made after ensuring that forecasted cash
inflows are sufficient to meet the Group's
short-term obligations.

Total non-current liabilities decreased as a
result of reduction in bank borrowings. The
increase in equity reflects the net profit
achieved during the period.

Finance Expense
Finance expenses increased to US$ 31.4
million (2022: US$ 17.7 million) which is
mainly driven by an increase in LIBOR/SOFR
rates. Further, 250 basis points of PIK
interest costs were also applied and the
margin rate on the loan increased from 3%
to 4% for first quarter of the year which were
triggered by the net leverage ratio exceeding
4.0 times as at 31 December 2022. On
achieving a net leverage ratio below 4:1
times, PIK interest ceased to accrue in the
second quarter of the year, and the margin
was thereafter reduced by 90 basis points to
3.1%. This has resulted in reduction in cost of
financing by 340 basis points. Attaining a net
leverage ratio below 4:1 times was crucial,
allowing us to limit the number of quarters
we were charged a PIK interest to one
quarter only. Key benefits of being below 4:1
times is it allows GMS to meet its covenants,
to pay dividends and to cut some debt
monitoring fees.

The accounting driven impact of changes
in fair value of the derivative (the warrants
issued to the lenders) increased to US$
11.1 million (2022: US$ 2.5 million) in 2023,
due to the increase in the share price of the
Company. Company expects valuation
charges over par value to get reversed when
the warrants are either exercised or when
they will expire, on 30 June 2025.

Earnings
Net profit for the year increased to US$ 42.1
million compared to US$ 25.4 million
reported in 2022. The 65.7% increase in net
profit was mainly driven by higher revenue
and the reversal of impairments charged in
the previous years. The increase was partially
offset by an increase in finance expenses
and the accounting impact of changes in the
fair value of derivative (the warrants issued to
the lenders) as explained above.

Annual Report 2023

Strategic ReportFINANCIAL REVIEW
continued

LONG-TERM
VIABILITY STATEMENT

Net Bank Debt and Borrowings
Net bank debt reduced to US$ 267.3 million
(2022: US$ 315.8 million). This was a result of
management’s commitment to accelerate
deleveraging. The Group repaid US$ 56.2
million (2022: US$ 51.4 million) towards its
term loan, of which, US$ 26.2 million (2022:
US$ 3.8 million) were over and above its
contractual obligation for 2023. A total of
US$ 33.7 million (2022: US$ 3.8 million)
was prepaid during 2023.

Going Concern
The Group is in the process of refinancing its
term facility in advance as the bullet payment
becoming due in June 2025. Management’s
ongoing discussions with various lending
entities are aimed at securing terms that align
with our long-term strategic objectives,
ensuring continued financial stability. Given
the improved financial performance reported
during 2023 and the current high levels of
utilisation secured, combined with higher
day rates, the Group expects the financial
performance to continue to improve during the
assessment period. As such, we are optimistic
about the outcome of these negotiations.

The Group’s forecasts indicate that its
anticipated refinanced debt facility will provide
sufficient liquidity for its requirements for at
least the next 12 months and accordingly,
the consolidated financial statements for the
Group have been prepared on the going
concern basis. For further details please refer
the Going Concern disclosure in Note 3 to
the consolidated financial statements.

Related Party Transactions
During the year, there were related party
transactions for catering services of
US$ 0.6 million (2022: US$ 1.2 million),
overhauling services of US$ 2.4 million
(2022: US$ 1.9 million) and laboratory
services of US$ 18k (2022: US$ 7k) with
affiliates of Mazrui International LLC, the
Group’s second largest shareholder (25.6%).

All related party transactions disclosed
herein have been conducted at arm’s length
and entered into after a competitive bidding
process. This process ensures that the terms
and conditions of such transactions are fair,
reasonable, and comparable to those that
would be available in similar transactions
with unrelated third parties.

The Group is not allowed to have any
transactions with its largest shareholder,
Seafox International (29.99%) as agreed with
Lenders. Further details can be found in the
Directors Report on page 73 and Note 24
of the consolidated financial statements.

Adjusting Items
The Group presents adjusted results, in
addition to the statutory results, as the
Directors consider that they provide a useful
indication of performance. A reconciliation
between the adjusted non-GAAP and
statutory results is provided in Note 31 to
the consolidated financial statements with
further information provided in the Glossary.

Alex Aclimandos
Chief Financial Officer
03 April 2024

How We Assess Our Prospects
In assessing the Group’s long-term
prospects, the Directors regularly evaluate
the key risks of the Group including the
factors likely to affect the Group’s future
performance, financial position, cash flows,
liquidity position and debt facilities. These
assessments rely on established risk
management procedures and involve
analysing the Group's exposure to
significant risks and uncertainties.

The Group’s customers are principally
involved in the exploration for and
production of Oil and Gas and installation
of windfarms. The Directors closely monitor
its customers’ operational plans and related
capital expenditure programmes,
particularly in the short term in which
projects will be in progress and for
which requirements for services from
GMS will be more certain.

Assessment Period
In line with Provision 31 of the 2018 UK
Corporate Governance Code, the Directors
have carried out a comprehensive review of
the Group’s prospects and its ability to fulfil
its obligations over a three-year period,
similar to the timeframe assessed in the
2022 long-term viability evaluation.
This period was selected with reference
to the current backlog and business
development pipeline, both of which
offer limited visibility beyond this
point, particularly in light of current
macroeconomic volatility. Taking these
factors into consideration, the Directors
believe that a three-year forward-looking
period, commencing on the date the annual
accounts are approved by the Directors, is
the appropriate length of time to reasonably
assess the Group’s viability. This
assessment is based on management’s
reasonable expectations of the position and
performance of the Group over this period,
forecasts, and its planning timeframes.

The Group is in the process of refinancing
its term facility in advance as the bullet
payment becoming due in June 2025, i.e.
within the long-term viability assessment
period. Management’s ongoing discussions
with various lending entities are aimed at
securing terms that align with our long-term
strategic objectives, ensuring continued
financial stability. Given the improved
financial performance reported during 2023
and the current high levels of utilisation
secured, combined with higher day rates,
the Group expects the financial
performance to continue to improve during
the assessment period. As a result,
management is optimistic about the
outcome of these negotiations and expect
to complete the process on improved
terms in later half of 2024.

Gulf Marine Services PLC

Consideration of Principal Risks
The nature of the Group’s operations
exposes the business to a variety of risks.
The Directors regularly review the principal
risks to the business and assess the
appropriate controls and the key mitigating
actions used to address them. The Directors
have further considered their potential
impact within the context of the Group’s
viability. The risk assessment process,
principal risks, and the actions being taken
to manage or mitigate them, are explained
in detail on pages 12 to 18 of this
Annual Report.

Sensitivity Analysis
To assess the Group’s viability, the Directors
have performed analysis considering the
following scenario:
• no work-to-win in 2024 and 2025;
• a 12%, 26% and 17% reduction
in utilisation in 2024, 2025 and
2026 respectively;

• a reduction in day-rates of an E-Class
and two S-Class vessels by 20% and
25% respectively after expiry of their
currently secured contracts; and
interest rate to remain at current levels
instead of a forecasted decline of 25
basis points commencing second
quarter of 2024.

•

Based on the above scenario, the Group
would not be in breach of its current term
loan facility. The downside case is
considered to be severe but would still leave
the Group in compliance with the covenants
under the Group’s banking facility until
its maturity.

Reverse Stress Testing
In addition to the above downside sensitivity,
the Directors have also conducted a reverse
stress test, wherein EBITDA has been
reduced to the extent of breaching the debt
covenant. This scenario assumes a notable
increase in operational downtime to 7%,
which is in addition to the sensitivities
applied in the downside case above. The
4.5% increase in operational downtime for
FY24 would lead to a breach of the Finance
Service Cover ratio as of 31 December 2024.

Conclusion
Considering the Group’s current position
and its principal risks, the Directors have
reasonable expectation for the Group to
sustain operations and fulfil its obligations
as they arise throughout the assessment
period. The principal basis for this
conclusion revolves around management’s
strategic focus on deleveraging existing
bank obligations and securing refinancing
for the balloon payment due in June 2025,
which continues to remain a key priority.

Mansour Al Alami
Executive Chairman
03 April 2024

Given the recent performance of the Group,
improved market conditions and
strengthening of the demand for GMS
vessels, above breach scenario is highly
unlikely to occur. However, should
circumstances arise that differ from the
Group’s projections, the Directors believe
that a number of mitigating actions can be
executed successfully in the necessary
timeframe to meet debt repayment
obligations as they become due and in order
to maintain liquidity. Potential mitigating
actions include the vessels off hire for
prolonged periods could be cold stacked to
minimise operating costs on these vessels
which has been factored into the downside
case. Additional mitigations could be
considered including but not limited to
reduction in overhead costs, relaxation/
waiver from covenant compliance and
rescheduling of repayments with lenders.

Management is aware of the broader
operating context and acknowledges the
potential impact of climate change on the
Group’s financial statements. However, it is
anticipated that the effect of climate change
will be negligible during the going concern
assessment period.

Annual Report 2023

Strategic ReportPEOPLE AND VALUES

2023 TCFD & CFD
Annual Report for
Gulf Marine Services PLC

TCFD Overview

Executive Statement
“At GMS, we have acknowledged climate
change as an emerging risk since 2019
and a principal risk since 2021. This is in
recognition of the challenges it will pose to
our business and the need for us to respond
to this in our operations. In 2022, we set our
targets for net-zero and developed our
strategy for reaching them. Throughout
2023, we continued our work towards our
commitments to reducing our environmental
impact and limiting our contribution to
climate change. COP28 this year was
hosted close to home, and we were excited
to follow and analyse the outcomes and
future opportunities it brings to our business.
We look forward to reporting back in 2024
on our further developments.”

Mansour Al Alami
Executive Chairman

Table 1: GMS Compliance Statement

TCFD Compliance Statement
GMS has complied with the requirements
of LR 9.8.6(8)R by including climate-related
financial disclosures consistent with the
Task Force on Climate-related Financial
Disclosures (TCFD) recommendations and
recommended disclosures. The current
regulations require reporting on a ‘comply
or explain’ basis. This year, we have
complied with all 11 of the recommendations.
The Companies (Strategic Report) (Climate-
related Financial Disclosure) Regulations
2022 require publicly quoted and large
private companies to integrate climate
disclosures into their annual reports. We
have complied with the eight reporting
disclosure requirements of Climate-related
Financial Disclosure (CFD), details of which
can be found below.

TCFD Recommendation

Climate-related Financial Disclosure

Compliance

Governance

a) Describe the Board’s oversight of climate-
related risks and opportunities.

b) Describe management’s role in assessing
and managing climate-related risks and
opportunities.

Strategy

a) Describe the climate-related risks and
opportunities the organisation has identified
over the short, medium and long term.

(c) a description of the governance arrangements of the
company in relation to assessing and managing climate-related
risks and opportunities.

(d) a description of:
(i) the principal climate-related risks and opportunities arising
in connection with the operations of the company and,
(ii) the time periods by reference to which those risks
and opportunities are assessed.

b) Describe the impact of climate-related risks
and opportunities on the organisation’s
businesses, strategy and financial planning.

(e) a description of the actual and potential impacts of the principal
climate-related risks and opportunities on the business model
and strategy of the company.

c) Describe the resilience of the organisation’s
strategy, taking into consideration different
climate-related scenarios, including a 2°C
or lower scenario.

(f) an analysis of the resilience of the business model and
strategy of the company, taking into consideration of
different climate-related scenarios.

Compliant

Gulf Marine Services PLC

TCFD Recommendation

Climate-related Financial Disclosure

Compliance

Risk Management

a) Describe the organisation’s processes for
identifying and assessing climate-related risks.

(d) a description of how the company identifies, assesses,
and manages climate-related risks and opportunities.

b) Describe the organisation’s processes for
managing climate-related risks.

c) Describe how processes for identifying,
assessing, and managing climate-related
risks are integrated into the organisation’s
overall risk management.

Metrics and Targets

(e) a description of how processes for identifying, assessing,
and managing climate-related risks are integrated into the
overall risk management process in the company.

a) Disclose the metrics used by the
organisation to assess climate-related risks
and opportunities in line with the strategy
and risk management process.

(d) the key performance indicators used to assess progress
against targets used to manage climate-related risks and realise
climate-related opportunities and a description of the calculations
on which those key performance indicators are based.

Compliant

b) Disclose Scope 1, Scope 2, and, if
appropriate, Scope 3 greenhouse gas
(GHG) emissions, and related risks.

c) Describe the targets used to manage
climate-related risks and opportunities
and performance against targets.

Introduction – About TCFD
TCFD provides a framework for assessing
and reporting how climate change will impact
our business. Its recommendations are
divided into four areas, aligned with existing
business processes (governance, strategy,
risk management, and metrics and targets).
We welcome the introduction of LR 9.8.6(8)
R, which requires premium companies like
GMS to include TCFD statements in their
annual reports. It provides a structure to
assess and report our climate-related risks.

As a business focused on supporting various
offshore operations, we are aware of our
impact on the environment and the potential
risks of climate change to our operations. We
believe we have a responsibility to ensure a
sustainable future. We are constantly
researching opportunities to reduce our
impact on the environment. In 2022, we
calculated our Scope 3 emissions for the first
time, which are those associated with our
value chain. Based on those findings, in
2022, we set a net-zero1 target of 2050 and
interim targets to guide our progress. In
2023, we are proud to be making progress
against these targets, which are outlined in
the Metrics and Targets section of the report.

(e) a description of the targets used by the company to manage climate-
related risks and to realise climate-related opportunities and performance
against those targets.

Governance

Overview
The effective identification, management and
mitigation of business risks and opportunities
are essential to successfully delivering the
Group’s strategic objectives. A risk
management system is in place to support
the identification, analysis, evaluation,
mitigation and ongoing monitoring of risks,
as shown in the framework below. The
Group recognises that as part of our
long-term business strategy, we need to
operate responsibly. Therefore, climate
change is an area of interest for the Board,
Senior Management and GMS stakeholders.
It was recognised as an emerging risk in
2019 and classified as a principal risk in
2021. The Board has seven principal
meetings per year, and risk management and
the key risks facing the Group are discussed
at each of these meetings. Environmental,
social and governance (ESG), including
climate change, is a specific agenda item
for the December Board meeting each year.
Following through on the potential risks that
climate change can pose to our business,
we review and evaluate the levels of potential
impacts on an annual basis. Our overall
climate-related risks are assessed as low
likelihood and low impact. We do not believe
climate change will impact demand for our
vessels in the near term.

This is because demand for oil and gas
production in the Group’s core market of the
Arabian Peninsula region is forecasted to
continue. However, should demand change,
we can mobilise more of the fleet to offshore
renewables without significant additional
capital expenditure. We aim to ensure that
we are aware of future developments in the
potential risks and opportunities posed by
climate change. Hence, we have designated
it a principal risk. We have used the TCFD
recommendations to improve our
assessment of climate-related risks and
guide our reporting on the findings. This
financial year, we have conducted our third
climate-scenario analysis, to review any
recent changes in the risk levels and expand
our understanding of our supply chain risks.

Overall responsibility for risk management
lies with the Board, supported by the
Audit and Risk Committee. Our Senior
Management team assists in implementing
the risk management process, including risk
identification, management and mitigation.
This is all overseen by the internal audit
function. Climate change, as a principal risk,
is integrated into each stage of this process.

Annual Report 2023

Strategic Report
PEOPLE AND VALUES
continued

Figure 1: Risk Management Structure Within GMS

Board of Directors
The Board has overall responsibility for the Group’s strategy
and ensuring effective risk management.

The Audit and Risk Committee
Responsibilities include reviewing the Group’s internal control and risk management
systems as well as monitoring the effectiveness of the Group’s internal audit function.

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

Senior Management
The Senior Management team implements the risk management process
from risk identification to management and mitigation.

The Board’s Oversight
The Board has overall responsibility for
ensuring that risks are effectively managed.
ESG topics, including climate change, are
included in the regular risk assessment
procedure. The Board reviews the risk profile
formally on an annual basis and monitors
and oversees progress against goals and
targets for addressing climate-related issues.
Each year, the latest updates to the climate
scenario analysis and climate-related risk
assessment are presented to the Board in
a workshop session. The session also aims
to continue to build the Board’s climate-
related competence.

Board Committees
Risk and Audit Committee
The Audit and Risk Committee consists of
at least two independent non-executive
Directors, of which one is appointed as
Chair. It meets at least twice a year, at
appropriate times in the Company’s financial
reporting and audit cycle. Also, it
communicates (as needed) throughout the
year with key individuals involved in the
Company’s governance, including the
Executive Chairman, the Chief Financial
Officer, the external audit lead partner and
the Head of Internal Audit.

The Board is assisted in its responsibility for
reviewing the effectiveness of the Group’s
system of internal control and procedures
by the Audit and Risk Committee.

The Audit and Risk Committee receives
reports from external advisors (as required)
to ensure sufficient insight into the relevant
issues to enable it to discharge its duties.
An external consultant has been engaged

to provide guidance on climate-related risks
and conduct climate-scenario analysis.
This information is considered when
developing the Company’s strategy and risk
management policies and while setting
budgets. The Financial Controller reviews
the risk register and feeds it back to the
Audit and Risk Committee.

Remuneration Committee
The Remuneration Committee consists
of at least two independent non-executive
Directors, of which one is appointed as Chair.
The Committee meets at least twice a year
and at other times, as required. It is
responsible for designing remuneration
policies and practices for the Company’s
Chair, executive Directors, Company Secretary
and senior executives. The remuneration plan
must support the Company’s long-term
strategy, purpose, and values.

The Committee considers corporate
performance on ESG issues when setting the
executive Directors’ remuneration. The
Committee ensures that the incentive structure
for Senior Management does not raise ESG
risks by inadvertently motivating irresponsible
behaviour. Whilst there are currently no direct
links between Board remuneration and
meeting our climate strategy or targets, we will
revisit the possibility of adding climate strategy
and targets as part of the remuneration
process in the next two reporting years.

Senior Management’s Role
The Senior Management team comprises the
Executive Chairman, Chief Financial Officer,
Business Development & Commercial
Director, Head of HSE & Quality, Director
Operations and Chief Shared Services

Officer. Together, they are responsible for
identifying, managing and mitigating potential
risks, including those associated with climate
change and the transition to a low-carbon
economy. The Senior Management team
discusses climate-related issues a minimum
of twice a year where climate change is an
agenda item and routinely throughout the
year as needed. The Senior Management
team reports to the Board and the Risk and
Audit Committee twice a year, with the main
update prior to the Board’s annual update
meeting. The update consists of information
about climate-related strategy updates,
progress against set targets, an overview
of the workshop agenda and plans for the
upcoming financial year. It meets with the
Executive Chairman at least twice a year to
conduct risk management workshops.

Senior leadership is actively engaged with
an external consultancy, to help guide
climate-related agenda for GMS. They have
participated in December’s climate-risk
workshop along with the Board of Directors.

This financial year, GMS full Scope 3
emissions have been calculated for the third
time, allowing comparisons and measured
progress tracking. Our Senior Management
team will use this information to improve its
understanding of GMS’ GHG emissions,
guided by the Head of HSE & Quality, who
manages Health, Safety and the Environment
(HSE). This will help monitor progress against
our reduction targets and net-zero strategy
and appropriately assess the Group’s
operational risk from climate change in line
with climate-related scenarios.

1 The standard defines net-zero targets as emission reductions of at least 90% across all scopes before 2050 and only a very small number of residual emissions

(up to 10%) can be neutralised with carbon removals.

Gulf Marine Services PLC

Strategy
GMS wants to ensure the long-term
sustainable success of the Company,
which requires responding appropriately to
all relevant risks and adapting our business
strategy, as necessary. As the risks of
climate change become more apparent and
are of increasing interest to our stakeholders,
we have developed how we assess
climate-related risks. Climate change is
considered as our principal risk and we have
a separate climate risk register, which
provides details on the 18 associated risks,
guided by the TCFD recommendations.

Climate Scenario Analysis
To understand the climate change risks,
both physical and transitional, we conduct an
annual climate scenario analysis. Physical risks
are those associated with the physical impacts
of climate change, for example, increased
average temperatures and rising sea levels.
Transition risks arise from the shift to a lower
carbon economy, including increased
regulation, moving to lower emissions
technology and changing consumer demands.

Climate scenario analysis uses possible
representative futures, to model these
potential impacts and the changes that will
need to be made to limit global warming and
reach net-zero. We have rerun the climate
scenario analysis on our key sites and
operations this financial year and have started
to consider their financial impacts. Further
financial modelling will be conducted during
the next financial year, as we continue to
research the medium and long-term actions
in our net-zero strategy.

The Scenarios
Three warming pathways were modelled
using data from several established models,
including CORDEX (Coordinated Regional
Climate Downscaling Experiment), CLIMADA
(Climate Adaptation) and IAM (Integrated

Table 3: Risk Rating Criteria

Assessment Models). The pathways
represent a broad range of potential futures,
to ensure that all risks are considered.

The climate scenarios used in the risk
assessment process make projections on
hypothetical futures and as such come with
a degree of uncertainty. While most of the
information is obtained from existing climate
models which have a high degree of
accuracy, there is still a level of uncertainty.
As such, the results of the analysis should
only be used as a guide for the climate-
related risks and opportunities facing Gulf
Marine Services. Ten climate indicators were
modelled for each site and scenario, for
example, precipitation, aridity, temperature
and water stress. Outlined below are the
three warming pathways.

<2°C by 2100: aligned with the Paris
Agreement target of a maximum 1.5°C of
warming above pre-Industrial levels. This
scenario requires coordinated efforts by
governments and businesses, to rapidly
reduce carbon emissions through policy and
operational changes, leading to high levels of
transitional risks, but limited physical risks.

2–3°C by 2100: this scenario is envisaged
as the outcome of reactive action from
governments, with policies being introduced
on an ad-hoc basis, whilst only the most
committed businesses take serious action.
It is associated with the highest level of
transitional risks, due to the uncoordinated
approach, and some physical risks.

>3°C by 2100: this scenario will occur if
limited action is taken over the next few
decades. Although, this limits the transitional
risks, particularly in the short and medium
term, it has the highest degree of physical
risk, due to increased global temperature
rise. Under this scenario, climate tipping
points are projected to be breached, leading
to irreversible damage to our planet.

The Time Horizons
The impacts of climate change expand
beyond our traditional horizons of business
planning. The UK and UAE have set a
net-zero date of 2050, and climate modelling
is often based on temperature changes by
2100. As a result, and to align with our
net-zero strategy, we have decided to use
the following time horizons to assess our
climate-related risks and opportunities.

Table 2: Time Horizons Used for
Climate Scenario Analysis

Short-term: Medium-term: Long-term:

2023–2027

2028–2037

2038–2052

The Results
Overall, the physical risk level is considered
low for GMS’ operations and buildings.
As most of the Group’s operations are
already in extreme climate conditions, the
infrastructure we own and use has been built
accordingly. Our office buildings in the
Arabian Peninsula region are already
exposed to temperatures above 40°C for
consecutive days. Therefore, the region’s
infrastructure design and our working
schedules consider these extreme
weather conditions.

Our risk management process classifies
risks with an overall rating of red, amber or
green based on a combination of the
inherent risk and the control rating. Across all
timelines and scenarios, no red ratings were
assigned to climate-related transition risks.
Most transition risks were determined to
have a green rating. The number of risks
rated significant increases over time, with
tables 4 to 7 below presenting the scenario
and timeline in which a significant rating is
assigned. All physical risks were assigned
a green risk rating.

Likelihood Factor

Rating

Impact Factor

Rating

Control Effectiveness

Rating

Almost Certain

Likely

Possible

Unlikely

Rare

Inherent risks

Major

Significant

Moderate

Minor

Insignificant

Very Good

Good

Satisfactory

Weak

Unsatisfactory

Green – Inherent risk is equal to or lower than 9, regardless of the control rating.

Amber – Inherent risk is greater than 9 but Controls are either 4 or above, qualifies as material.

Red – Inherent risk is greater than 9 and Controls are 3 or below, qualifies as material.

The steps we have taken to identify and
manage each climate-related issue have
been based on our existing risk management
framework to ensure a consistent and
efficient assessment and categorisation.
Each climate-related issue is classified using
our rating system. Our process ranks risks
initially by their likelihood, then, each issue is
ranked according to its impacts on GMS to
determine an inherent risk score. We then

rank each issue against our control
effectiveness to determine the overall risk
value. Risks scored with an overall score of
greater than 9 are deemed as material.

The findings of the updated climate scenario
analysis were presented to key GMS staff
and the Board in December 2023. As this
was the third year of running this workshop,
it included a discussion of how the risks were

impacted by changes at GMS, within the
broader macroeconomic landscape and by
updates to the underlying data sets. Each
risk was discussed to determine whether the
impact and likelihood ratings needed
amending. It was decided that no updates
were needed from the 2022 ratings, as there
had been no material changes in the past
financial year.

Annual Report 2023

Strategic Report
PEOPLE AND VALUES
continued

Transition Risks – Policy & Legal

Table 4. Policy & Legal risks with a description, the Timeline and Scenario of Highest Impact and
Our Response

Risk

Description

Scenario

Our Response

Enhanced
emissions
reporting
obligations

<2ºC, 2–3°C

Short, Medium

2023 Risk
rating – amber

As a premium listed company on the London
Stock Exchange, with operations primarily in
the Arabian Peninsula region, GMS is subject to
UK and UAE climate change and environmental
reporting regulations. Changes to policy and
reporting requirements are almost certain to
occur in the short term with the UK committing
to net-zero by 2050. However, only one of the
Group’s vessels is currently located in Europe,
which means that the potential operational/
financial impact of such changes would be
limited to Moderate. In the short term, fewer
climate-related policy obligations are
anticipated for operations in the Arabian
Peninsula region sites (as compared to the UK
reporting regulations noted above); however,
the UAE has its own 2050 net-zero target.
Therefore, the potential likelihood of this risk is
deemed to be lower (possible as compared to
almost certain). However, if such policies and
increased regulations were to be introduced
over a longer period, the concentration of GMS’
fleet in the Arabian Peninsula region would
result in a higher (Significant) potential impact.

Exposure to
carbon pricing

In the short term, this risk is unlikely and would
have a minor impact. In the longer term, the
impact would be minor in the 2–3°C scenario.
However, this risk could be more likely and have
a greater impact in the medium term. It is likely
that in a <2°C scenario, carbon pricing and
taxes could be introduced in the short term,
and the potential cost impacts could be
moderate to significant.

2–3ºC

Medium

2023 Risk
rating – amber

Gulf Marine Services PLC

The Group aims to mitigate this risk by carefully
monitoring legislative developments to minimise
non-compliance with all relevant laws in the UK
and the Arabian Peninsula region. Our Annual
Report includes all the legally required information.
We provide additional updates on our website
as appropriate.

There is potential for increased mandates and
regulation of our existing products and services. In
the long term, this is expected to be associated with
the carbon emissions of our vessels. More detail on
this is provided in Table 7 below.

Financial impact: Increased opex.
There are costs associated with this compliance,
including engaging external specialists internal
resources, and potential penalties if regulations are
not followed. Non-compliance could result in fines of
a minimum of £2,500 and a maximum of £50,000.
These costs have been assessed and factored into
the budget, which is currently considered negligible.

A central database is maintained to document
our legally required and regulated policies and
procedures. We are ISO 14001 certified, which
provides a framework for managing the
environmental legislation that applies to
our operations.

There is no indication that carbon pricing will be
introduced, which would affect GMS’ operations in
the short term. In the interim, we have developed
our net-zero strategy, which will reduce our carbon
emissions and minimise the impact should a carbon
tax be introduced. Changes in tax legislation will be
closely monitored, and internal models can be used
to factor this into the business strategy.

Financial impact: increased capex and opex.
Based on our 2023 Scope 1 emissions, our
net-zero target and current projections for global
carbon prices per tCO2e, a carbon tax could have
various financial impact ranges; please see the table
below. This is based on data from The World Bank,
NGFS, IPCC, OECD and Reuters.

Scenario

2027 (£)

2037 (£)

2052 (£)

Proactive

1,875,301

1,531,786

Reactive

605,172

3,784,860

–

Inactive

692,417

981,942

1,252,694

Transition Risks – Reputation

As part of our vision of being the best self-elevating support vessel (SESV) operator in the world, it is important that GMS is seen to be acting
responsibly and contributing to a sustainable future. We are aware that a suitable response to the challenges of climate change is increasingly
important to our investors and shareholders. We believe that through our TCFD reporting and net-zero strategy, we are responding to this
area of risk by proving our commitment to responding appropriately to climate change.

Table 5. Reputation Risks with a Description, the Timeline and Scenario of Highest Impact and
Our Response

Risk

Description

Scenario

Our Response

Increased
stakeholder
concern

In the short term, increased stakeholder
concern may be seen, including from
employees who may start to take company
environmental action and preparedness into
account. This could impact the Group’s revenue
and employee retention. This concern would be
greater in a <2°C scenario, where there is
greater awareness and more action required.
It would be lower in a 2–3°C scenario, where
action is being taken sporadically.

<2ºC, 2–3ºC

Short, Medium

Risk rating – amber

The Group’s workforce requirement is concentrated
in its core market of the Arabian Peninsula region,
which is currently reliant on and supported by the oil
and gas industry. It is expected to remain so in the
near future. GMS does not anticipate struggling to
retain suitably experienced and qualified staff.

Shifts in
consumer
preferences

As climate change becomes increasingly
important and urgent, it will impact investment
decisions. This is especially important following
the outcomes of COP28, as we expect the
general sentiment towards environmental and
climate change matters to become more
prominent. This could impact future access
to capital for businesses that do not
respond appropriately.

<2ºC, 2–3ºC

Short, Medium

Risk rating – amber

Stigmatisation
of sector

Increased climate concerns can lead to the
stigmatisation of certain sectors and industries.

<2ºC, 2–3ºC

Short, Medium

Risk rating – amber

We are committed to acting responsibly towards
the environment, as demonstrated by our net-zero
targets and strategy. This will help mitigate this risk
by showing that we are a proactive company in
regard to climate change and environmental
responsibility.

Financial impact: reduced revenue, cost to recruit
new employees if there is increased turnover.

There is increasing concern over fossil fuel use in
the UK/EU, although demand for oil and gas is
predicted to grow. As a result, new investors may
become more challenging to find. However, current
shareholders are heavily invested in the Company’s
existing strategy and business model. Therefore,
the likelihood of a significant impact is only
considered possible in the short term under the
most optimistic scenario (<2ºC), which is not
currently in line with the UAE’s approach.

Financial impact: reduced ability to raise capital.

This risk would significantly impact the business if
realised, but we do not expect to experience an
impact on demand for or production of oil and gas
in the Arabian Peninsula region within the short to
medium term. The amber rating is first given in the
medium term for the <2ºC scenario, which is not the
current trajectory for the Arabian Peninsula region.

Financial impact: reduced revenue from
decreased demand for services.
Climate opportunities, for example, using our
vessels for the maintenance of offshore renewable
projects, offer versatility and resilience to our
business model.

Annual Report 2023

Strategic ReportPEOPLE AND VALUES
continued

Transition Risks – Market

Transitioning to a net-zero economy will require changes to the products and services sold globally. This poses risks and opportunities for
businesses. The main risk is the potential impact on the supply and demand for our services and changes
in our supply chain.

Table 6. Market Risks with a Description, the Timeline and Scenario of Highest Impact and Our Response

Risk

Description

Scenario

Our Response

Changing
customer
behaviour

<2–3ºC

Medium

Risk rating – amber

In a <2°C scenario, where
urgent action is being taken,
it is possible that there could
be changing customer
preferences resulting in
reduced demand for goods
and services. This could have
a significant impact in the
medium term.

Increased cost
of raw
materials

Climate policies could
lead to additional abrupt
and unexpected shifts in
energy costs.

<2–3ºC

Medium

Risk rating – amber

The Group will continue to monitor any shift in consumer demand
across the regions in which it operates. However, oil and gas have
always been the mainstay of our business. It is only considered
possible for a significant impact to be felt in a <2ºC scenario, which
is not currently considered in the UAE. Globally, the Westwood
Global Energy Group report predicts an increase in demand for
oil and gas over the next 40 years, including in the Group’s core
markets. However, the Group is aware that the UAE, along with
many other governments, has set a net-zero target and, in the long
term, will need to make changes to meet these targets.

GMS has a proven track record in the renewables sector and an
ongoing presence in Europe for offshore wind projects. This
provides versatility in our business model, and vessels are suitable
for use in this sector without major additional capital expenditure.
We are on a six-year contract for one of our vessels on a renewables
project in Europe.

We are researching a business management system that can
support us in identifying potential areas for financial loss and help
us adapt if our strategy needs to change.

Financial impact: reduced revenue.
Given the concentration of revenue in National Oil Companies
in the Arabian Peninsula region, the impact could be significant
if materialised.

This is considered a low risk, with only minor financial impact for
the Group, as our clients pay for the fuel costs. However, we are
always working to improve the efficiency of our vessels to meet
our clients’ expectations, as they expect value for money in the
services they receive.

Financial impact: increased operating costs for clients.

Gulf Marine Services PLC

Transition Risks – Technology

Table 7. Technology Risks with a Description, the Timeline and Scenario of Highest Impact and
Our Response

Risk

Description

Scenario

Our Response

<2ºC, 2–3ºC

Short, Medium

Risk rating – amber

Costs to
transition
to lower
emissions
technology

A requirement to transition to
lower emissions technology is
possible in the medium term,
under a <2°C scenario, which
could be associated with
additional costs for GMS. The
impact would be the same in a
2–3°C scenario, but this is
considered unlikely. The
likelihood of this risk will
increase over time.

Existing vessels will likely need to be retired or will have fully
depreciated across their remaining useful life before we are
required to replace them with greener options. These routine
replacements are factored into our budget and strategy. Therefore,
we do not consider that vessel replacement costs will significantly
impact our business at this point. This risk is higher in Europe, where
we currently have one vessel and is considered lower in the Group’s
core market of the Arabian Peninsula region. However, in the 2024
financial period, we will research the options for replacement vessels
using lower-carbon fuels. If a feasible option is identified, we will
replace our oldest vessel with a low-carbon alternative in 2030.
Planning for net-zero, will help to minimise these risks, as these
costs can be factored into our long-term business plan.

Financial impact: increased capex.

Physical Risks
All the physical risks considered have been
assigned a green rating due to our existing
controls. Therefore, the impact is expected
to be low. Although physical impacts are
expected from climate change, our offices
and most vessels are in the Arabian
Peninsula region, which adapted to an
extreme climate with high temperatures,
low precipitation, and high water stress.
Infrastructure and workers’ rights regulations
have been designed to manage these risks.
The climate scenario analysis suggests that
more frequent sandstorms will occur due to
increased temperatures and decreased
precipitation. Our vessels are prepared for
sandstorms with specialised filtration devices
that reduce the risk of sediment damaging
the vessels’ engines. Decreased precipitation
will exacerbate water stress in the region.
Our vessels are equipped with desalination
equipment to mitigate water stress. We are
trialling machinery which can extract water
from the air.

Climate-related Opportunities
Responding to climate change offers two
major opportunities to GMS. From an
operational perspective, improving our
efficiency reduces our operating costs,
improves our resilience to potential new laws
around energy use and carbon emissions
and demonstrates our commitment to being
a sustainable business. In terms of business
strategy, there is the opportunity to mobilise
more vessels in the renewables sector. We
already have a proven track record in this
area and are keen to maintain an ongoing
presence in Europe, to enable us to continue
accepting offshore wind farm contracts.
Currently, the GMS financial value associated
with climate-related opportunities is 9.5% of
our 2023 revenue (10.8% of 2022 revenue)
as services provided to the renewable
energy sector.

Engaging with Our Clients
and Supply Chain
To manage our climate-related risks and
reduce our carbon emissions, we need to
engage with our clients and supply chain.
We will be introducing additional social and
environmental screening criteria for our
suppliers, which will be the responsibility of
our Procurement Manager. In 2023, we
started, and in 2024, we plan to continue
engaging with our suppliers on their carbon
footprint, asking whether they already collect
data on their Scope 1, 2 and 3 emissions,
which feed into our Scope 3 emissions, and
then starting to work with them to reduce
those emissions. Currently, ten of our top 30
suppliers have already published their
emissions on their websites or using the
annual CDP disclosure questionnaire.

This financial year, we have continued
considering the risks associated with our
suppliers directly and supply chain-
associated risks in general. These cover
three key areas: food, fuel and vessel parts.
As part of our commitment to local sourcing
and due to the in-country value schemes
endorsed by our major clients, our top
suppliers are all located in the Arabian
Peninsula region. They are subject to similar
transitional and physical risks as the Group.
As with GMS, they are already prepared
to cope with extreme conditions and
transitional risks are expected to be limited
in the short to medium term.

Annual Report 2023

Strategic ReportPEOPLE AND VALUES
continued

Risk Management

Our Risk Management Approach
GMS has an established enterprise risk
assessment process into which climate-
related risk management has been integrated
(see Risk Management section on page 12).
Material risks identified in our climate risk
register are integrated into the main risk
register. This is in response to the increasing
importance placed on climate change by the
public, clients, investors and employees.

The first step in the risk management process
is identifying and assessing risks, which is
conducted through reviews by individual
departments. Mitigating controls are then
determined. In the case of climate-related
risks, we have engaged with a third party
to ensure a thorough and informed
understanding of the potential risks and
opportunities, guided by the TCFD framework.

Senior Management consolidates identified
risks into an overall heatmap for principal
risks. The Audit and Risk Committee review
the risk profile at least quarterly. The Board
discusses the Group’s risk register at its
principal meetings and formally reviews the
risk profile annually.

The following steps were taken to assess
climate-related risks through climate
scenario analysis:

Step 1 – Identifying the Risks:
External specialists used climate scenario
analysis in November 2023, for the third year
in a row, to assess 14 potential transitional
and four physical risks to the business over
three climate warming pathways and three
timelines. These were presented to Senior
Management and the Board at the climate-
risk workshop in December 2023 for their
input on the potential size/scale of the risk/
opportunity, which could impact the
business operations and strategy.

Step 2 – Assessing the Risks:
These provisional risks were presented to
relevant internal stakeholders, including the
Chief Financial Officer. The provisional risks
were presented at Group and site levels.
Following our existing enterprise risk
assessment process and drawing on the
relevant expertise of Senior Management,
each provisional climate-related risk and
opportunity was allocated a likelihood and
impact rating, which were combined to
provide the inherent risk rating for each
scenario and timeline.

Step 3 – Addressing the Risks:
Each potential risk is appraised to determine
the current mitigation measures and the
most appropriate approach for managing
residual risk. A provisional control
effectiveness rating was assigned. This was
combined with the inherent risk rating to
provide a provisional overall risk rating of
Red, Amber or Green for each scenario and
timeline. There were no changes to this
assessment from last financial year’s ratings.
Therefore, there are still eight risks assigned
an Amber rating in at least one scenario and
timeline. Risk management workshops are
held at least bi-annually between the
Executive Chairman and the Senior
Management team, where principal risks,
including climate change, are assessed for
impact and likelihood.

In 2022, we developed our net-zero targets
and strategy, which will mitigate some of the
policy, legal, reputation and technology risks
identified. Our net-zero targets and progress
against those targets also demonstrate to
interested stakeholders that we are taking
climate change seriously. The resulting
strategy will allow us to plan for the transition
to a low-carbon economy, especially around
our business travel, vessels and fuel use.

Table 8: 2023 Progress Against Targets

Target

2021 Baseline Value 2023 Value

% Change

Comments

2025: engage with the top ten suppliers by
spend on their carbon emissions and
reporting.

Zero suppliers
engaged.

100%

Achieved

One supplier engaged.
Additionally, ten of our top 30
suppliers have emissions data
published, either on their own
websites, reporting or through
CDP.

No feasibility
assessment
under-taken.

Work has begun to assess the
feasibility of novel energy system
jack-up barges.

14%

In progress

2030: assessing the feasibility of upgrading
vessels’ engines and other equipment,
with lower carbon emission alternatives.
This will form an important part of our
long-term strategy, as it is essential to
reducing our Scope 1 emissions (those
associated directly with our operations,
primarily vessel fuel)

2035: net-zero in absolute Scope 3
emissions from 1: Purchased goods and
services, 4: Upstream transport and
distribution, 5: Waste generated in
operations, 6: Business travel, 7: Employee
commuting and 8: Upstream leased assets.

22,959 tCO2e

9,015 tCO2e

2050: net-zero emissions in absolute Scope
1 and Scope 3 (2: capital goods and 3:
fuel-related emissions)

58,114 tCO2e

68,378 tCO2e

Gulf Marine Services PLC

-60.7%
Driven by a large
decrease in our
purchased
goods and
services and
business travel
emissions.

+17.6%
Due to a 15.5%
increase in fuel
consumed by
our vessels.

On Track
A 2.4% annual reduction
is needed going
forward.

Off Track
We will continue to focus
on our 2030 target of
low-emission vessels to
tackle these emissions.
A 4.0% annual reduction
is needed.

Our Scope 2 emissions account for 0.04% of
total emissions and are considered de-
minimis. Therefore, Scope 2 emissions have
been excluded from these net-zero targets.
Each year, we aim to improve the quality of
our data collection to ensure our reporting is
increasingly accurate. We acknowledge that
sometimes this will increase the figures in
some categories, and we will explain these in
our reporting, as required. We believe this
transparency is an important part of being a
responsible business.

Metrics and Targets

We acknowledge that we have a
responsibility to reduce our environmental
impact as far as possible, while delivering
sustainable business growth. We have been
measuring our Scope 1 and 2 emissions
since 2014 and our Scope 3 emissions since
2021. Therefore, we selected financial year
2021 as our base year for our emission
reduction targets, as this was the first year of
our full emissions footprint. Our near-term
and net-zero targets were approved by our
Board in December 2022, and the progress
against each of them is outlined in Table 8.
Our ultimate net-zero deadline of 2050 is in
line with the national targets of the UK, UAE
and Qatar. Achieving net-zero requires us to
reduce our CO2e emissions by 90% or more
from our baseline year of 2021, offsetting the
remaining 10% in our net-zero year.

Carbon Emissions
In compliance with the UK Government’s
Streamlined Energy and Carbon Reporting,
we have included our emission figures,
energy usage and intensity metrics for this
reporting year. GMS provided relevant data
to a third party which used this data to
calculate our Scope 1, 2 and 3 emissions.
No formal assurance was provided.

Scope 1 emissions result from the direct
combustion of gaseous and transportation
fuels during the reporting year. Scope 2
refers to the emissions associated with
purchased electricity used in our offices.
Scope 3 emissions are the indirect emissions
associated with operating our business.
Although we do not have direct control over
these emissions, we are taking steps to work
with our supply chain and employees to
develop an emission reduction strategy.

Table 9: 2021, 2022 and 2023 Full Carbon Footprint (tCO2e) and Progress since Our 2021 Baseline

Target

Scope 1

Scope 2 (location-based)

Total Scope 3

1. Purchased goods and services

2. Capital goods

3. Fuel-related Emissions

4. Upstream transportation and distribution

5. Waste generated in operations

6. Business travel

7. Employee commuting

8. Upstream leased assets

2023

54,396

22,996

4,811

2,264

11,717

304

1,271

2,481

136

2022

51,860

26,205

6,088

1,141

10,270

5,641

667

2,275

124

–

2021

47,247

33,827

11,970

687

10,180

251

654

10,027

–

Total All Scopes

77,418

78,093

81,105

Progress from 2021 Baseline

>15.1%

<16.1%

<32.0%

<59.8%

>229.5%

>15.1%

>21.1%

>94.3%

<75.3%

>138.6%

>100.0%

<4.5%

Scope 1 and 2 CO2e emissions data has been calculated using the GHG Protocol – A Corporate Accounting and Reporting Standard (World
Business Council for Sustainable Development and World Resources Institute, 2004); Greenhouse Gas Protocol – Scope 2 Guidance (World
Resources Institute, 2015); ISO 14064-1 and ISO 14064-2 (ISO, 2018; ISO, 2019a); Environmental Reporting Guidelines: Including Streamlined
Energy and Carbon Reporting Guidance (HM Government, 2019). Scope 3carbon emissions have been calculated in line with the GHG
Protocol Corporate Value Chain (Scope 3) Reporting Standard. There is no data for categories 9-15, as these are not applicable to GMS.
Category 8, upstream leased assets, became applicable in 2023, as we leased a small amount of shared office space in Qatar and Saudi
Arabia. The large reduction in business travel emissions since the baseline is due to the removal of quarantine requirements for offshore staff
due to COVID-19, which decreased the number of hotel nights. The large increase in capital goods in 2023, was due to an increase in
capital expenditure.

Annual Report 2023

Strategic ReportPEOPLE AND VALUES
continued

Energy Usage and Carbon Intensity
We use average carbon intensity data (tCO2e/$m revenue) to assess our performance against the Paris Agreement target. Our metrics use
location-based Scope 2 emissions. UK energy use and emissions in 2022 and 2023 were zero.

Table 10: Our 2021–2023 Energy Usage and Carbon Intensity Metrics

Year

Scope 1 Energy Usage MWh

Scope 2 Energy Usage MWh

Scope 1 and 2 tCO2e/$m revenue

Scope 1, 2 and 3 tCO2e/$m revenue

2023

198,063

360.41

512.70

2022

190,060

389.47

586.48

2021

171,165

398.78

700.84

Progress from
2021 Baseline

>15.7%

<12.0%

<9.6%

<26.8%

Efficiency Actions
We continually assess how to reduce energy use and the associated carbon emissions. This financial year, we have booked flights based on
carbon emissions, choosing lower-carbon flights when prices are similar.

Waste
Waste management is important in minimising our environmental footprint and will contribute to our net-zero journey. Our waste strategy is
centred around four principles: Reduction, Reuse & Recycle, Treatment and Disposal. Our vessels are fitted with separate waste bins for each
type of recyclable material or disposal method, which ensures that we have detailed data on waste materials. Waste is then emptied and
brought to shore, where it can be appropriately managed. It is securely stored before the treatment process, to ensure our waste does not
degrade, spill or get stolen. Due to the nature of our operations, we produce oil waste. Our oil waste is not contaminated or mixed, to ensure
it can be correctly treated and recycled. We send regular reports to the local governing bodies concerning the quality and quantity of oil
waste and its treatment methods. Table 11 summarises our waste produced and the percentage sent for recycling. Although we prioritise
reducing the volumes of waste produced on board our vessels, our customer's crew make up around 75% of the people on board, with our
crew making up the remainder. Therefore, we are unable to set formal waste reduction targets as our influence on this is limited.

Table 11: A Breakdown of the Waste Types from Our Vessels and Offices during the Financial Year 2023

Metric

Total waste produced (tonnes)

% of waste recycled

2023

6,676

58.5%

2022

4,572

1.0%

2021

7,566

0.0%

Water
Water is the most important resource on the planet. We know that our workers must always have access to adequate, safe drinking water.
The water on our vessels is either sourced from desalination or single-use plastic bottles. Most water used on board is for drinking or
sanitation services. As our crew are working under extreme temperatures, we do not feel it is safe to set water reduction targets,
since a plentiful supply of water and electrolytes are always needed to reduce the risk of heat stroke or illness.

Gulf Marine Services PLC

Social
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
GMS maintains a firm commitment to
the health, safety, and environmental
stewardship of all individuals and
communities connected to our operations.
We embed safety into everything we
operate and maintain.

Our sense of duty extends across all
business relationships – with employees,
subcontractors, clients, partners,
shareholders and beyond. We believe that
diligently managing risks and caring for
people are fundamental to creating
sustainable, long-term value.

As we explore opportunities for growth, we
remain guided by our foundational priorities
of safety and collective welfare. We strive to
deliver excellence while maintaining our
responsibilities to the people we serve, the
environments we protect, and the societies
that grant us license to operate. Our
commitments are ongoing and endured.

Excellence
At GMS, we pursue continuous improvement
and innovation to better serve client needs.
We build on past learnings and explore
new ideas that can enhance delivery for
our partners.

We hold ourselves to high performance
standards that exceed expectations. We set
ambitious targets around superior quality,
value, and outcomes to challenge our
organisation across all levels to deliver
positive impacts for clients and stakeholders.

Our reputation for integrity and transparency
underscores our business and guides
our conduct. We operate rigorously and
ethically to remain the preferred contractor
for clients who value our commitments to
sustainable quality.

As we explore avenues for future growth, we
stay rooted to our core priorities of service
excellence, stakeholder welfare, and a
continued commitment to delivering value
to our clients. These priorities have been
instrumental in establishing GMS as a
respected player in our sector. We work
diligently to uphold and strengthen that
foundation of trust.

Relationships
At GMS, our people drive our success.
We aim to attract and retain top talent and
empower employees to perform their duties
safely and impactfully.

We champion diversity and provide
environments where our team can thrive
and realise their full potential. We reward
excellence and integrity across all levels of
our organisation.

Core values of Responsibility, Excellence
and Collaborative Relationships anchor our
culture and decision-making. We maintain an
unwavering commitment to the health,
safety, and ethical treatment of employees,
subcontractors clients and partners.

Our people exemplify the spirit of world-class
service, expertise and leadership that makes
GMS a preferred partner. As we plan for the
future, we will continue investing in our
team’s growth across technical skills,
well-being and professional development.
Our vision depends on unleashing their
potential for long-term innovation.

Diversity
GMS boasts a global team of 660 personnel
representing 34 countries (2022: 594
personnel representing 36 countries) – with
diversity that fuels our innovation and
connects us closer to the markets we serve.
We leverage experience and specialised
skills to responsibly expand our
operational footprint.

The information on page 38 provides details
of the gender diversity and country of origin
of our personnel as of 31 December 2023.

GMS has a zero-tolerance toward
discrimination either directly or indirectly
on the grounds of gender, race, colour,
nationality, ethnic or racial origins, marital
status, religion or disability. GMS is an equal
opportunities employer committed to
seeking out and retaining the calibre of
human talent that is strategically aligned
with our business growth and performance.
Our business success reflects the quality
and skills of our people. Details of our Equal
Opportunities Policy can be found in the
Governance section of our website.

GMS Organisation Structure
GMS maintains a robust yet agile
organisational structure that positions us
for sustained excellence. We have built a
foundation of Core functions in Operations,
Marine and Engineering, Maintenance and
project delivery that directly steer our
technical capabilities and performance.

Enabling support functions underpin and
amplify these strengths by driving strategy,
business development, procurement, finance
and other essential expert services.

This structure strikes an optimal balance –
sharpening our client delivery focus through
Core forces, while enabling teams streamline
the wider business. With seasoned
leadership guiding strategy, our model
fosters seamless collaboration to mobilise
the right talent for new opportunities.

As markets evolve, GMS remains equipped
for sustainable excellence. Our organisational
foundations will drive growth through
client-centric agility, operational discipline,
unified vision, and governance rigor.
Our structure serves as a robust platform
ready for sustainable growth trajectories in
the years ahead.

Turnover
Employee turnover decreased to 12% in
2023 from 16% in 2022. This decrease in the
turnover trend underscores the success of
various measures taken to retain talent such
as competitive day rates for senior officers
based on market benchmarking and
opportunity for growth for high-
performing 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 Arabian Peninsula region, stipulate
that women cannot work in an inappropriate
environment and hazardous jobs/industries,
meaning the Group 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
Our 2023 engagement survey garnered an
exceptional 91% participation rate. Results
indicated strong workplace solidarity, with
99% agreeing they can stop unsafe work and
95% feeling empowered and valued in their
roles. Another standout data point showed
99% confidence in our organisation's
commitment to safety-first operations
ensuring all personnel return home safe.

Key insights gained will inform our retention
and professional growth programs.
While 34% of respondents indicated they
may explore external opportunities, we aim
to expand internal mobility, upskilling and
career development initiatives.

While participation levels signal strong
workplace solidarity, closing experience
gaps remains a priority. We strive to foster an
environment where all team members feel
invested in long-term personal success,
enabling collective growth.

Annual Report 2023

Strategic ReportPEOPLE AND VALUES
continued

Events like our recent Abu Dhabi headquarters
celebration, recognising employee milestones
from 10-25 years of tenure, reinforce our
united culture. They also highlight
accomplished role models to inspire emerging
talent. As our Company matures and longtime
experts pass their torches, we are committed
to developing the next generation of leaders
equipped to guide our mission.

in prior year. This stabilisation comes after
major pandemic-recovery scale-ups and
indicates prudent pace.

Positively, 20% of onshore promotions
granted last year advanced talented female
staff into expanded responsibilities, signify
efforts to uplift diversity are taking hold.

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. There is no guaranteed
variable pay awards at GMS, with all pay
being performance-based. The 2023 STIP
measures for employees are set out on
page 68.

This aligns with shareholder interests and
encourages a performance-based culture
to achieve Group objectives.

Succession Planning
GMS strives to provide growth opportunities
by promoting from within whenever possible.
We have structured succession planning
processes based on experience and
capabilities to fill key roles with internal
candidates first.

However, external recruitment is also utilised
for highly specialised or volume hiring needs
unsuitable for backfilling. All recruitment
follows fair and ethical practices aligned
with our values.

In 2023, 34 employees were promoted
across levels, a slight decrease from 37

While external hiring fills key gaps,
our priority is nurturing talent internally.
We believe purposeful development not
only rewards employee investments – it
transforms individual growth into
collective gains.

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 training in areas such as,
but not limited to, offshore safety and
awareness and emergency response.

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 are dependent on staff putting
the Code into practice 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. All onshore employees and offshore
key personnel must complete annual
trainings focused on ethical business
practices mandatory for upholding our
standards globally.

Whistleblowing Reporting Service
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 the Executive team 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.

People as at 31 December 2023

Total number of employees

Offshore

660

(2022: 594)

599

(2022: 539)

635

Total number of Direct Reports
to Executive Team

Total number
of Executive Team

(2022: 21)

(2022: 4)

Onshore

(2022: 55)

Nationalities

(2022: 36)

Voluntary turnover

12%

(2022: 16%)

Total Number of Directors

(2022: 6)

Male

Female

Gulf Marine Services PLC

GMS Employees – By Region Review – 2023

Offshore

Onshore

27 2

475

MENA

Asia

Europe

Africa

Others (Canada, Venezuela, New Zealand)

Health and Safety
The Group adheres to the highest
international standards of health and safety
in operating its vessels. Our Management
Systems, which oversee all activities and
operations of the Group, are voluntarily
accredited to ISO 9001, ISO 14001, and ISO
45001. Additionally, 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.

Regular assessments of risks stemming from
operations and activities are conducted to
ensure the implementation of mitigation
procedures, which are then communicated
to all employees. Comprehensive training
and employee engagement initiatives ensure
that all employees are well-informed about
operational risks. Annual training programs
are developed and periodically reviewed to
maintain efficacy.

The Group implemented a remote healthcare
system for all of its offshore workforce in
2021, providing access to onshore doctors
and mental health support 24/7.

they are back to the vessel. This is achieved
because the system acts as a repository
of safety information, guaranteeing access
to the latest safety information anytime
and anywhere.

In 2022, the Group implemented a
Group-wide Marine Enterprise Resources
Planning System to modernise and digitalise
its vessel operations. The system integrates
all aspects of vessel management through
one web-based platform hosted on the
cloud and accessed onshore and offshore.
Management now has access to a
centralised database used to enhance
efficiency and improve decision-making.

In 2023, the Group implemented an online
platform that delivered comprehensive safety
awareness trainings directly to individuals on
board the vessels, ensuring quick
comprehension and immediate application.
With this system, crew that is off rotation
do not miss important and relevant safety
updates that pertains to the Group when

There were two medical treatment cases but
no Lost Time Injuries. As a result, the Lost
Time Injury rate improved from 0.1 in 2022 to
zero in 2023. However, because of the other
recordable injuries, our Total Recordable
Injury Rate (TRIR) increased slightly from
0.1 in 2022 to 0.18 in 2023. These levels
continue to be below industry average and in
both cases, they maintained a downward
trajectory when measured over the last five
years. We continue to look at areas of
improvements in our systems and processes
and engaging our employees to ensure that
our offshore operations continue to be as
safe as possible in line with the expectations
of our customers and stakeholders.

The information below is intended to provide an overview of the Health and Safety performance over the reporting period.

Number of
work-related fatalities

Number of
recordable work-related injuries

Number of
high-consequence work-related injuries

(2022: 0)

(2022: 1)

Number of hours worked

2,378,216

(2022: 1,934,340)

(2022: 0)

Annual Report 2023

Strategic Report

PEOPLE AND VALUES
continued

Governance
For Governance related considerations, please refer to the Governance section of this Annual Report.

Performance Evaluation Framework for 2023
As approved by the Remuneration Committee, the following table outlines the key performance measures and their respective weightings in
determining the overall performance of the Group for 2023.

Measure

EBITDA

EBITDA margin

Securing contract % of 2024 budget revenue

Securing contract % of 2025 budget revenue

Achieving Leverage <4.0 (25%)

Total

Weighting

Performance Range (from zero to full pay-out)

30%

15%

25%

100%

Less than US$ 75m – Greater than US$ 88.0m

Less than 53% – Greater than 60%

Less than 60% – Greater than 85%

Less than 35% – Greater than 55%

After 31 December 2023 – On or before 30 June 2023

The following results highlight key performance measures and their respective outcomes.

120 days
US’000

Current
US$’000

28,714

(110)

28,604

–

30,166

4,216

(2,003)

28,163

(10)

4,206

–

4,132

(2,116)

2,016

786

(6)

780

Total
US’000

32,872

(2,226)

30,646

35,198

(2,019)

33,179

Seven customers (2022: nine) account for 99% (2022: 99%) of the total trade receivables balance (see revenue by segment information in
Note 30). When assessing credit risk, ongoing assessments of customer credit and liquidity positions are performed.

Annual Report 2023

107

Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 31 DECEMBER 2023

10 Prepayments, advances and other receivables

Accrued revenue
Prepayments
Deposits*
Advances to suppliers

At 31 December

2023
US$’000

2022
US$’000

2,656
3,557
86
1,758

8,057

1,303
3,137
85
3,197

7,722

* Deposits include bank guarantee deposits of US$ 39K (2022: US$ 39K). Guarantee deposits are paid by the Group for employee work visas under UAE labour laws.

11 Derivative financial instruments
Warrants
Under the terms of the Group’s loan facility, the Group was required to issue warrants to its lenders as GMS had not raised US$ 50.0 million
of equity by 31 December 2022.

On 2 January 2023, as the US$ 50.0 million equity raise did not take place, therefore 87,621,947 warrants were issued to the lenders. Based
on the final report prepared by a Calculation Agent, the warrants give right to their holders to acquire 137,075,773 shares at an exercise price
of 5.75 pence per share for a total consideration of GBP £7.9 million. Warrant holders will have the right to exercise their warrants up to the
end of the term of the loan facility, being 30 June 2025.

Management commissioned an independent valuation expert to measure the fair value of the warrants, which was determined using Monte
Carlo option-pricing model, which takes into consideration the market values of comparable public companies, considering among other
factors, the use of multiples of earnings, and adjusted to reflect the restrictions on the ability of our shares to trade in an active market. The
simulation considers sensitivity by building models of possible results by substituting a range of values. Warrants valuation represents a Level
3 fair value measurement under IFRS 13 hierarchy. The fair value of the warrants as at 31 December 2023 was US$ 14.3 million (31 December
2022: US$ 3.2 million). The increase in fair value of the warrants is primarily due to increase in share price and its volatility. The share price
increased from 4.65 pence as at 31 December 2022 to 14.5 pence as at 31 December 2023. A 10% change in share price will increase or
decrease the valuation by US$ 0.2 million.

Interest Rate Swap
The Group had an Interest Rate Swap (IRS) arrangement, originally in place, with a notional amount of US$ 50.0 million. The remaining
notional amount hedged under the IRS as at 31 December 2023 was US$ nil (31 December 2022: US$ 23.1 million). The IRS hedged the risk
of variability in interest payments by converting a floating rate liability to a fixed rate liability. The IRS arrangement matured during the year,
therefore, the fair value of the IRS as at 31 December 2023 was US$ nil (31 December 2022: asset value US$ 0.4m). In 2020 cash flows of the
hedging relationship for the IRS were not highly probable and, therefore, hedge accounting was discontinued from that point.

Historically, the fair value measurement of the interest rate swap was determined by independent valuers with reference to quoted market
prices, discounted cash flow models and recognised pricing models as appropriate. They represent Level 2 fair value measurements under
the IFRS 13 hierarchy.

IFRS 13 fair value hierarchy
Apart from warrants, the Group has no other financial instruments that are classified as Level 3 in the fair value hierarchy in the current year
that are determined by reference to significant unobservable inputs. There have been no transfers of assets or liabilities between levels of the
fair value hierarchy. There are no non-recurring fair value measurements.

Derivative financial instruments are made up as follows:

At 1 January 2023
Net loss on changes in fair value of interest rate swap
Final settlement of derivatives
Impact of change in fair value of warrants

As at 31 December 2023

Interest
rate swap
US$’000

386
(59)
(327)
–

–

Warrants
US$’000

(3,198)
–
–
(11,077)

(14,275)

Total
US$’000

(2,812)
(59)
(327)
(11,077)

(14,275)

108 Gulf Marine Services PLC

At 1 January 2022
Settlement of derivatives
Net gain on changes in fair value of interest rate swap
Impact of change in fair value of warrants

As at 31 December 2022

Interest
rate swap
US$’000

(1,076)
384
1,078
–

386

Warrants
US$’000

Total
US$’000

(717)
–
–
(2,481)

(3,198)

(1,793)
384
1,078
(2,481)

(2,812)

These consolidated financial statements include the cost of hedging reserve and cash flow hedge reserve which are detailed further in the
consolidated statement of changes in equity. These reserves are non-distributable.

The balance in the cashflow hedging reserve as at 31 December 2023 was nil (2022: US $ 0.28 million).

12 Cash and cash equivalents

Interest bearing
Held in UAE banks

Non-interest bearing
Held in UAE banks
Held in banks outside UAE

Total cash and cash equivalents

13 Share capital and other reserves
Ordinary shares at £0.02 per share

At 1 January 2023

As at 31 December 2023

At 1 January 2022

As at 31 December 2022

Capital redemption reserve

At 1 January 2023

As at 31 December 2023

2023
US$’000

2022
US$’000

1,422

1,209

964
6,280

8,666

2,824
8,242

12,275

Number of
ordinary shares
(Thousands)

1,016,415

Number of
ordinary shares
(Thousands)

1,016,415

Ordinary
shares
US$’000

30,117

Ordinary
shares
US$’000

30,117

Number of
ordinary shares
(Thousands)

350,488

Capital
redemption
reserve
US$’000

46,445

Annual Report 2023

109

Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 31 DECEMBER 2023

13 Share capital and other reserves continued
Share premium

At 1 January 2023

As at 31 December 2023

Number of
ordinary shares
(Thousands)

Share premium
account
US$’000

1,016,415

99,105

Prior to an equity raise on 28 June 2021 the Group underwent a capital reorganisation where all existing ordinary shares with a nominal value
of 10 pence per share were subdivided and re-designated into 1 ordinary share with a nominal value of 2 pence and 1 deferred share with a
nominal value of 8 pence each. The previously recognised share capital balance relating to the old 10p ordinary shares was allocated pro rata
to the new subdivided 2p ordinary shares and 8p deferred shares. The deferred shares had no voting rights and no right to the profits
generated by the Group. On winding-up or other return of capital, the holders of deferred shares had extremely limited rights, if any. The
Group had the right but not the obligation to buyback all of the deferred shares for an amount not exceeding £1.00 in aggregate, which with
the shareholders approval, was completed on 30 June 2022. Accordingly, 350,487,787 deferred shares were cancelled. Following the
cancellation of the Deferred shares on 30 June 2022, a transfer of $46.4 million was made from Share capital – Deferred to a Capital
redemption reserve. There was no dilution to the shares ownership as a result of the share reorganisation.

Under the Companies Act, a share buy-back by a public company can only be financed through distributable reserves or the proceeds of a
fresh issue of shares made for the purpose of financing a share buyback. The Company had sufficient reserves to purchase the Deferred
shares for £1.00.

The Group has issued warrants to its lenders which may result in increase in issued share capital in future (refer Note 11).

14 Restricted reserve
The restricted reserve of US$ 0.3 million (2022: US$ 0.3 million) represents the statutory reserves of certain subsidiaries. As required by the
Commercial Companies Law in the countries where those entities are established, 10% of profit for the year is transferred to the statutory
reserve until the reserve equals 50% of the share capital. Following a recent change to the Regulations of Companies in Kingdom of Saudi
Arabia, apportions can cease when the reserve equals 30% instead of 50% of the share capital, although the subsidiary continues to
maintain this at 50%. This reserve is not available for distribution. No amounts were transferred to this reserve during the year ended
31 December 2023 (2022: US$ nil).

15 Group restructuring reserve
The Group restructuring reserve arose on consolidation under the pooling of interests (merger accounting) method used for the Group
restructuring. Under this method, the Group was treated as a continuation of GMS Global Commercial Investments LLC (the predecessor
parent Company) and its subsidiaries. At the date the Company became the new parent company of the Group via a share-for-share
exchange, the difference between the share capital of GMS Global Commercial Investments LLC and the Company, amounting to
US$ 49.7 million (2022: US $49.7 million), was recorded in the books of Gulf Marine Services PLC as a Group restructuring reserve.
This reserve is non-distributable.

16 Share based payment reserve
Share based payment reserve of US$ nil (2022: US$ 3.6 million) relates to awards granted to employees under the long-term incentive plans.
Refer to Note 28 for further details.

17 Capital contribution
The capital contribution reserve is as follows:

At 31 December

2023
US$’000

9,177

2022
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.

110

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

2023
US$’000

1,988
726

2,714

2022
US$’000

1,912
76

1,988

The following table summarises the information relating to the subsidiary that has material non-controlling interest, before any
intra-group eliminations.

Statement of financial position information:
Non-current assets
Current assets
Non-current liabilities
Current liabilities

Net assets

Net assets attributable to non-controlling interests

Statement of profit or loss and other comprehensive income information:
Revenue
Profit after tax and zakat

Total comprehensive income

Profit allocated to non-controlling interests

Statement of cashflow information:
Cash flows from operating activities
Cash flows from financing activities (dividends: nil)

Net (decrease) / increase in cash and cash equivalents

2023
US$’000

2022
US$’000

129
16,408
(18)
(6,952)

9,567

76
17,830
(38)
(9,607)

8,261

2,714

1,988

38,088
1,306

1,306

22,569
876

876

726

(1,162)
(795)

(1,957)

1,933
(525)

1,408

20 Provision for employees’ end of service benefits
In accordance with Labour Laws of some of the countries where the Group operates, it is required to provide for end of service benefits for
certain employees. The movement in the provision for employees’ end of service benefits during the year was as follows:

At 1 January
Provided during the year
Paid during the year

At 31 December

21 Trade and other payables

Trade payables
Due to related parties (Note 24)
Accrued expenses
Deferred revenue
VAT payable
Other payables

No interest is payable on the outstanding balances. Trade and other payables are all current liabilities.

2023
US$’000

2022
US$’000

2,140
723
(468)

2,395

2023
US$’000

13,213
962
16,090
3,546
392
851

35,054

2,322
270
(452)

2,140

2022
US$’000

12,618
2,841
11,169
628
365
358

27,979

Annual Report 2023

111

Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 31 DECEMBER 2023

22 Bank borrowings
Secured borrowings at amortised cost are as follows:

Term loans
Working capital facility (utilised)*

2023
US$’000

273,939
2,000

275,939

2022
US$’000

328,085
–

328,085

The revolving working capital facility amounts to US$ 40.0 million (31 December 2022: US$ 45.0 million). US$ 25.0 million (31 December 2022: US$ 25.0 million) of the
working capital facility is allocated to performance bonds and guarantees and US$ 15.0 million (31 December 2022: US$ 20 million) is allocated to funded portion, of
which US$ 2.0 million was utilised as of 31 December 2023, leaving US$ 13.0 million available for drawdown (31 December 2022: US$ 20.0 million). The working capital
facility expires alongside the main debt facility in June 2025.

Bank borrowings are split between hedged and unhedged amounts as follows:

Unhedged bank borrowings
Hedged bank borrowing via Interest Rate Swap*

2023
US$’000

275,939
–

275,939

2022
US$’000

305,008
23,077

328,085

This is an economic hedge and not accounted for in accordance with IFRS 9, Financial Instruments. The Group used an IRS to hedge a portion of the Group’s floating
rate liability by converting SOFR to a fixed rate. The IRS matured during the year, Refer to Note 27 for further details.

Bank borrowings are presented in the consolidated statement of financial position as follows:

Non-current portion
Bank borrowings

Current portion
Bank borrowings – scheduled repayments within one year
Working capital facility

2023
US$’000

2022
US$’000

234,439

298,085

39,500
2,000

30,000
–

275,939

328,085

The principal terms of the outstanding facility as at 31 December 2023 are as follows:
• The facility’s main currency is US$ and is repayable with a Secured Overnight Financing Rate (SOFR) plus a margin based on a ratchet

depending on leverage levels.

• Following the cessation of the LIBOR on 30 June 2023, the reference rate in the Common Terms Agreement has been changed to the

SOFR as the new benchmark rate.

• As of the second quarter of 2023, the Group has achieved a reduction in the net leverage ratio to below 4.0, and PIK is no longer accrued.

As a result, the margin rate on the loan has been decreased from 4% to 3.1%.

• The facility remains secured by mortgages over its whole fleet with a net book value at 31 December 2023 of US$ 562.2 million

(31 December 2022: US$ 549.7 million) (Note 5). Additionally, gross trade receivables, amounting to US$ 32.9 million (31 December 2022:
US$ 35.2 million) have been assigned as security against the loans extended by the Group’s banking syndicate (Note 9).

• The Group has also provided security against gross cash balances, being cash balances amounting to US$ 8.7 million (31 December

2022: US$ 12.3 million) (Note 12) before the restricted amounts related to visa deposits held with the Ministry of Labour in the UAE which
are included in deposits. These have been assigned as security against the loans extended by the Group’s banking syndicate.

• As an equity raise of US $50.0 million did not take place by 31 December 2022, 87.6 million warrants were issued on 2 January 2023,

giving debt holders the right to 137,075,773 million shares at a strike price of 5.75 pence per share.

The facility is subject to certain financial covenants including: Debt Service Cover, Interest Cover, and Net Leverage Ratio, which are tested
bi-annually in June and December. There are also additional covenants relating to general and administrative costs, capital expenditure and
Security Cover (loan to value) which are tested annually in December. Further, there were restrictions to payment of dividends until the net
leverage ratio falls below 4.0 times, a level reached in second quarter of 2023. All applicable financial covenants assigned to the Group’s debt
facility were met as of 31 December 2023.

112

Gulf Marine Services PLC

31 December 2023:
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 2022:
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

39,500
–
2,000

–
234,439
–

39,500
234,439
2,000

Secured
Secured
Secured

June 2025
June 2025
June 2025

41,500

234,439

275,939

30,000
–
–

30,000

–
298,085
–

298,085

30,000
298,085
–

328,085

Secured
Secured
Secured

June 2025
June 2025
June 2025

23 Lease liabilities

As at 1 January
Recognition of new lease liability additions
Interest on lease liabilities (Note 35)
Principal element of lease payments
Derecognition of lease liability
Interest paid

As at 31 December

Maturity analysis:
Year 1
Year 2
Year 3 – 5
Onwards

Split between:
Current
Non – current

2023
US$’000

3,522
3,231
245
(3,330)
(67)
(245)

3,356

1,623
1,297
436
–

3,356

1,623
1,733

3,356

2022
US$’000

2,924
3,122
170
(2,524)
–
(170)

3,522

1,845
834
692
151

3,522

1,845
1,677

3,522

24 Related party transactions
Related parties comprise the Group’s major shareholders, Directors and entities related to them, companies under common ownership and/
or common management and control, their partners and key management personnel. Pricing policies and terms of related party transactions
are approved by the Group’s Board.

Balances and transactions between the Group and its subsidiaries, which are related parties, have been eliminated on consolidation and are
not disclosed in this note.

Key management personnel:
As at 31 December 2023, there were 2.6 million shares held by Directors (31 December 2022: 2.6 million). Refer to the Governance Report on
page 70.

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 73. The other related parties during the year were:

Partner in relation to UAE Operations

National Catering Company Limited WLL
Sigma Enterprise Company LLC
Aman Integrated Solutions LLC

Relationship

Affiliate of a significant shareholder of the Company
Affiliate of a significant shareholder of the Company
Affiliate of a significant shareholder of the Company

The amounts outstanding to National Catering Company Limited WLL as at 31 December 2023 was US$ 0.5 million (2022: US$ 0.8 million)
included in trade and other payables (Note 21).

Annual Report 2023

113

Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 31 DECEMBER 2023

24 Related party transactions continued
The amount outstanding to Sigma Enterprise Company LLC as at 31 December 2023 was US$ 0.5 million, (2022: US$ 1.8 million) included in
trade and other payables (Note 21).

The amounts outstanding to Aman Integrated Solutions LLC as at 31 December 2023 was US$ 3k (2022: US$ nil) included in trade and other
payables (Note 21).

During 2023, there were no transactions with Seafox international or any of its subsidiaries (2022: US $nil).

Significant transactions with the related party during the year:

National Catering Company Limited WLL – Catering services
Sigma Enterprise Company LLC – Vessel maintenance and overhaul services
Aman Integrated Solutions LLC – Laboratory services

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
End of service benefits

2023
US$’000

581
2,372
18

2023
US$’000

983
24

1,007

2022
US$’000

1,232
1,930
7

2022
US$’000

617
24

641

Compensation of key management personnel represents the charge to the profit or loss in respect of the remuneration of the executive
Directors. At 31 December 2023, there were four executive Directors (2022: four). Further details of remuneration of the Board and key
management personnel relating to 2023 are contained in the Directors’ Remuneration Report on page 57.

25 Contingent liabilities
At 31 December 2023, the banks acting for Gulf Marine Middle East FZE, one of the subsidiaries of the Group, had issued performance
bonds amounting to US$ 19.6 million (31 December 2022: US$ 18.0 million), all of which were counter-indemnified by other subsidiaries of
the Group.

26 Commitments

Capital commitments

2023
US$’000

7,825

2022
US$’000

6,221

Capital commitments comprise mainly capital expenditure, which has been contractually agreed with suppliers for future periods for
equipment or the upgrade of existing vessels.

27 Financial instruments
Categories of financial instruments

Financial assets:
Current assets at amortised cost:
Cash and cash equivalents (Note 12)
Trade receivables and other receivables (Note 9,10)*
Current assets recorded at FVTPL:
Interest rate swap (Note 11)

Total financial assets

Trade and other receivables exclude prepayments and advances to suppliers.

114

Gulf Marine Services PLC

2023
US$’000

2022
US$’000

8,666
33,388

–

42,054

12,275
34,567

386

47,228

Financial liabilities:
Derivatives recorded at FVTPL:
Warrants (Note 11)
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)
Non-current bank borrowings – scheduled repayments more than one year (Note 22)

Total financial liabilities

Trade and other payables excludes amounts of deferred revenue and VAT payable.

2023
US$’000

2022
US$’000

14,275

3,198

31,116
3,356
41,500
234,439

324,686

26,986
3,522
30,000
298,085

361,791

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 assets:
Recognised at level 2 of the fair value hierarchy:
Interest rate swap (Note 11)
Financial liabilities:
Recognised at level 3 of the fair value hierarchy:
Warrants (Note 11)

2023
US$’000

2022
US$’000

–

386

14,275

3,198

The fair value of financial instruments classified as level 3 are, in certain circumstances, measured using valuation techniques that incorporate
assumptions that are not evidenced by the prices from observable current market transactions in the same instrument and are not based on
observable market data.

The fair value of the Group’s warrants at 31 December 2023 has been arrived at on the basis of a valuation carried out at that date by
a third-party expert, an independent valuer not connected with the Group. The valuation conforms to International Valuation Standards.
The fair value was determined using a Monte-Carlo simulation.

Favourable and unfavourable changes in the value of financial instruments are determined on the basis of changes in the value of the
instruments as a result of varying the levels of the unobservable parameters, quantification of which is judgmental. There have been no
transfers between Level 2 and Level 3 during the years ended 31 December 2023 and 31 December 2022.

Capital risk management
The Group manages its capital to support its ability to continue as a going concern while maximising the return on equity. The Group does
not have a formalised optimal target capital structure or target ratios in connection with its capital risk management objectives. The capital
structure of the Group consists of net bank debt and total equity. The Group continues to take measures to de-leverage the Company and
intends to continue to do so in the coming years.

Material accounting policies
Details of the material accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the
basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are
disclosed in Note 3 to the consolidated financial statements.

Financial risk management objectives
The Group is exposed to the following risks related to financial instruments – credit risk, liquidity risk, interest rate risk and foreign currency
risk. Management actively monitors and manages these financial risks relating to the Group.

Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group and arises
principally from the Group’s trade and other receivables and cash and cash equivalents.

The Group has adopted a policy of dealing when possible, with creditworthy counterparties while keen to maximize utilization for its vessels.

Cash balances held with banks are assessed to have low credit risk of default since these banks are highly regulated by the central banks of
the respective countries. At the year-end, cash at bank and in hand totaled US$ 8.7 million (2022: US$ 12.3 million), deposited with banks
with Fitch short-term ratings of F2 to F1+ (Refer to Note 12).

Annual Report 2023

115

Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 31 DECEMBER 2023

27 Financial instruments continued
Credit risk management continued
Concentration of credit risk arises when a number of counterparties are engaged in similar business activities, or activities in the same
geographic region, or have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by
changes in economic, political or other conditions. Concentration of credit risk indicates the relative sensitivity of the Group’s performance to
developments affecting a particular industry or geographic location. During the year, vessels were chartered to 7 companies in the Arabian
Peninsula region and 2 companies in Europe, including NOCs and engineering, procurement and construction (“EPC”) contractors. At
31 December 2023, 7 companies in specific regions accounted for 99% (2022: 9 companies in specific regions accounted for 99%) of the
outstanding trade receivables.

The credit risk on liquid funds is limited because the funds are held by banks with high credit ratings assigned by international agencies.

The amount that best represents maximum credit risk exposure on financial assets at the end of the reporting period, in the event
counterparties failing to perform their obligations generally approximates their carrying value.

The Group considers cash and cash equivalents and trade and other receivables which are neither past due nor impaired to have a low credit
risk and an internal rating of ‘performing’. Performing is defined as a counterparty that has a stable financial position and which there are no
past due amounts.

Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board of Directors. The Group manages liquidity risk by seeking to maintain
sufficient facilities to ensure availability of funds for forecast and actual cash flow requirements.

The table below summarises the maturity profile of the Group’s financial liabilities. The contractual maturities of the Group’s financial liabilities
have been determined on the basis of the remaining period at the end of the reporting period to the contractual maturity date. The maturity
profile is monitored by management to assist in ensuring adequate liquidity is maintained. Refer to Going Concern in Note 3.

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 2023
Non-interest bearing financial liabilities

Trade and other payables*

Interest bearing financial liabilities
Bank borrowings – principal
Interest on bank borrowings
Lease liabilities
Interest on lease liabilities

31 December 2022
Non-interest bearing financial liabilities

Trade and other payables*

Interest bearing financial liabilities
Bank borrowings – principal
Interest on bank borrowings
Lease liabilities
Interest on lease liabilities

Interest rate

Carrying
amount

Total
US$’000

Contractual cash flows

1 to 3
months
US$’000

4 to 12
months
US$’000

2 to 5
years
US$’000

8.6% – 9.2%

31,116

–

275,939
133
3,356
–

310,544

275,939
32,984
3,356
251

343,646

Interest rate

Carrying
amount

Total
US$’000

4,000
5,955
618
60

41,749

1 to 3
months
US$’000

37,500
17,164
1,155
110

55,929

4 to 12
months
US$’000

234,439
9,865
1,583
81

245,968

2 to 5
years
US$’000

3.2% – 6.7%

26,986

–

328,085
–
3,522
–

358,593

328,085
40,395
3,522
148

399,136

7,500
2,656
462
20

37,624

22,500
7,603
1,383
42

31,528

298,085
30,136
1,677
86

329,984

Trade and other payables excludes amounts of deferred revenue and VAT payable.

In addition to above table, capital commitments are expected to be settled in next twelve months.

116

Gulf Marine Services PLC

Interest rate risk management
The Group is exposed to cash flow interest rate risk on its bank borrowings. The Group enters into floating interest rate instruments for the
same. Further, the Group had an Interest Rate Swap (IRS) arrangement, originally in place, with a notional amount of US$ 50.0 million. The
remaining notional amount hedged under the IRS as at 31 December 2023 was US$ nil (31 December 2022: US$ 23.1 million). The IRS
hedged the risk of variability in interest payments by converting a floating rate liability to a fixed rate liability. The IRS arrangement matured
during the year, therefore, the fair value of the IRS as at 31 December 2023 was US$ nil (31 December 2022: asset value US$ 0.4 million). In
2020 cash flows of the hedging relationship for the IRS were not highly probable and, therefore, hedge accounting was discontinued from
that point. A change of 100 basis points in interest rates at the reporting date would have increased/(decreased) consolidated statement of
profit or loss and other comprehensive income by US $ 3.3 million.

Foreign currency risk management
The majority of the Group’s transactions are denominated in US Dollars, UAE Dirhams, Euros and Pound Sterling. As the UAE Dirham,
Saudi Riyal and Qatari Riyal are pegged to the US Dollar, balances in UAE Dirham, Saudi Riyal and Qatari Riyal are not considered to
represent significant currency risk. Transactions in other foreign currencies entered into by the Group are short-term in nature and therefore
management considers that the currency risk associated with these transactions is limited.

The carrying amounts of the Group’s significant foreign currency denominated monetary assets include cash and cash equivalents and trade
receivables and liabilities include trade payables. The amounts at the reporting date are as follows:

US Dollars
UAE Dirhams
Saudi Riyals
Pound Sterling
Euros
Qatari Riyals
Norwegian Krone
Others

Assets
31 December

Liabilities
31 December

2023
US$’000

21,912
1,154
8,531
12
6,141
3,694
–
–

41,444

2022
US$’000

26,556
283
10,332
31
4,535
6,237
2
26

48,002

2023
US$’000

3,421
6,482
1,307
2,003
–
–
–
–

13,213

2022
US$’000

13,146
1,110
–
1,218
–
317
–
–

15,791

At 31 December 2023, if the exchange rate of the currencies other than the UAE Dirham, Saudi Riyal and Qatari Riyal had increased/
decreased by 10% against the US Dollar, with all other variables held constant, the Group’s profit for the year would have been higher/lower
by US$ 0.4 million (2022: higher/lower by US$ 0.9 million) mainly as a result of foreign exchange loss or gain on translation of Euro and
Pound Sterling denominated balances.

28 Long term incentive plans
The Group had Long Term Incentive Plans (“LTIPs”) which were granted to senior management, managers and senior offshore officers.

The employment condition attached to the Groups LTIP’s was that each eligible employee of the Company must remain in employment
during the three-year vesting period. For 2019 and 2020 awards, LTIPs were aligned to Company’s share performance. The release of these
shares was conditional upon continued employment and market vesting conditions. There were no LTIP awards granted during 2021.

During the year ended 31 December 2023, the market vesting conditions for the LTIP awards granted in 2020 were not met, and all
LTIP awards issued in 2020 were forfeited.

During the year ended 31 December 2022, additional LTIPs awards were granted to the Chairman and Senior Management. The awards were
to vest over three years subject to the same employment conditions and performance conditions being met in 2024 based on defined ranges.
There was an underpin condition such that no awards would vest if the debt leverage in the Group exceeded 4.0 times EBITDA at
31 December 2022. As this criterion had not been met all LTIP awards issued in 2022 were forfeited.

Annual Report 2023

117

Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 31 DECEMBER 2023

28 Long term incentive plans continued
Equity-settled share-based payments were measured at fair value at the date of grant. The fair value determined, using the Binomial
Probability Model together with Monte Carlo statistical method, at the grant date of equity-settled share-based payments, is expensed on a
straight-line basis over the vesting period, based on an estimate of the number of shares that will ultimately vest. The fair value of each award
was determined by taking into account the performance conditions, the term of the award, the share price at grant date, the expected price
volatility of the underlying share and the risk-free interest rate for the term of the award.

Non-market vesting conditions were taken into account by adjusting the number of equity instruments expected to vest at each balance
sheet date so that, ultimately, the cumulative amount recognised over the vesting period was based on the number of awards that eventually
vest. Any market vesting conditions were factored into the fair value of the share-based payment granted.

To the extent that share-based payments are granted to employees of the Group’s subsidiaries without charge, the share-based payment is
capitalised as part of the cost of investment in subsidiaries.

The number of share awards granted by the Group during the year is given in the table below:

At the beginning of the year
Granted in the year
Cash settled in the year
Forfeited in the year

At the end of the year

2023
000’s

1,176,014
–
–
(1,176,014)

2022
000’s

2,499,714
9,460,000
(921,310)
(9,862,390)

–

1,176,014

The weighted average remaining contractual life for the vesting period outstanding as at 31 December 2023 was nil years (31 December
2022: 0.1 years). The weighted average fair value of shares granted during the period to 31 December 2023 was US$ nil (31 December 2022:
US$ 0.06 million).

Grant date
Share price
Exercise price
Expected volatility
Risk-free rate
Expected dividend yield
Vesting period
Award life

LTIP

14 Jun 2022
£0.06
£0.00
102%
2.17%
0.00%
3 years
3 years

29 May 2020
£0.09
£0.00
120%
0.01%
0.00%
3 years
3 years

15 Nov 2019
£0.08
£0.00
103%
0.48%
0.00%
3 years
3 years

The expected share price volatility of Gulf Marine Services PLC shares was determined by considering the historical share price movements
for a three-year period up to the grant date (and of each of the companies in the peer group). The risk-free return was determined from
similarly dated zero coupon UK government bonds at the time the share awards were granted, using historical information taken from the
Bank of England’s records.

29 Dividends
There was no dividend declared or paid in 2023 (2022: nil). No final dividend in respect of the year ended 31 December 2023 is to be
proposed at the 2023 AGM. The Directors have approved a residual dividend policy which seeks to strike a balance between funding
growth initiatives and providing returns to shareholders. Management is currently evaluating the timing for its implementation.

118

Gulf Marine Services PLC

30 Segment reporting
The Group has identified that the Directors and senior management team are the chief operating decision makers in accordance with the
requirements of IFRS 8 ‘Operating Segments’. Segment performance is assessed based upon adjusted gross profit/(loss), which represents
gross profit/(loss) before depreciation and amortisation and loss on impairment of assets. The reportable segments have been identified by
Directors and senior management based on the size and type of asset in operation.

The operating and reportable segments of the Group are (i) K-Class vessels, which include the Kamikaze, Kikuyu, Kawawa, Kudeta, Keloa
and Pepper vessels (ii) S-Class vessels, which include the Shamal, Scirocco and Sharqi vessels, and (iii) E-Class vessels, which include the
Endeavour, Endurance, Enterprise and Evolution vessels.

All of these operating segments earn revenue related to the hiring of vessels and related services including charter hire income, messing and
accommodation services, personnel hire and hire of equipment. The accounting policies of the operating segments are the same as the
Group’s accounting policies described in Note 3.

Revenue

Gross profit before adjustments for
depreciation, amortisation and
impairment charges

E-Class vessels
S-Class vessels
K-Class vessels

Depreciation charged to cost of sales
Amortisation charged to cost of sales
Expected credit losses

Adjusted gross profit

Impairment loss
Reversal of impairment

Gross profit

Finance expense
Impact of change in fair value of warrants
Other general and administrative expenses
Foreign exchange loss, net
Other income
Finance income

Profit for the year before taxation

2023
US$’000

60,955
35,018
55,630

151,603

2022
US$’000

51,135
33,986
48,036

133,157

2023
US$’000

41,864
23,217
33,375

98,456

(24,153)
(4,687)
(207)

69,409

(3,565)
36,993

102,837

(31,431)
(11,077)
(14,645)
(987)
12
221

44,930

2022
US$’000

32,024
23,899
27,827

83,750

(23,567)
(5,613)
(1,824)

52,746

(13,192)
20,980

60,534

(17,656)
(2,481)
(13,212)
(138)
68
11

27,126

Segment revenue reported above represents revenue generated from external customers. There were no inter-segment sales in the years.

Segment assets and liabilities, including depreciation, amortisation and additions to non-current assets, are not reported to the key decision
makers on a segmental basis and are therefore, not disclosed.

Information about major customers
During the year, four customers (2022: four) individually accounted for more than 10% of the Group’s revenues. The related revenue figures for
these major customers, the identity of which may vary by year, was US$ 49.7 million, US$ 38.1 million, US$ 25.3 million and US$ 15.4 million
(2022: US$ 9.0 million, US$ 22.1 million, US$ 43.1 million and US$ 22.4 million).

Annual Report 2023

119

Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 31 DECEMBER 2023

30 Segment reporting continued
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 – Arabian Peninsula region

Total – Europe

Worldwide Total

2023
US$’000

58,452
38,088
40,680

137,220

14,383

151,603

2022
US$’000

51,848
22,645
44,259

118,752

14,405

133,157

Type of work
The Group operates in both the oil and gas and renewables sector. Oil and gas revenues are driven from both client operating cost
expenditure and capex expenditure. Renewables are primarily driven by windfarm developments from client expenditure. Details are
shown below.

Oil and Gas
Renewables

Total

2023
US$’000

137,220
14,383

151,603

2022
US$’000

118,752
14,405

133,157

Reversal of impairment of US$ 37.0 million and impairment charge of US$ 3.6 million was recognised in respect of property and equipment
(Note 5) (2022: Reversal of impairment of US$ 21.0 million and impairment charge of US$ 13.2 million) attributable to the following
reportable segments:

E-Class vessels
S-Class vessels
K-Class vessels

2023
Depreciation charged to cost of sales
Amortisation charged to cost of sales

Net reversal of impairment

2022
Depreciation charged to cost of sales
Amortisation charged to cost of sales

Impairment charge/(reversal of impairment charge) – net

2023
US$’000

(16,340)
(4,462)
(12,626)

(33,428)

2022
US$’000

(3,319)
4,631
(9,100)

(7,788)

E-Class vessels
US$’000

S-Class vessels
US$’000

K-Class vessels
US$’000

Total
US$’000

12,892
2,035

5,660
692

5,601
1,960

24,153
4,687

(16,340)

(4,462)

(12,626)

(33,428)

12,694
2,302

(3,319)

5,829
839

4,631

5,044
2,472

(9,100)

23,567
5,613

(7,788)

120 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:

Year ended 31 December 2023

Year ended 31 December 2022

Adjusted
non-GAAP
results
US$’000

151,603

Adjusting
items
US$’000

Statutory
total
US$’000

Adjusted
non-GAAP
results
US$’000

–

151,603

133,157

Adjusting
items
US$’000

–

Statutory
total
US$’000

133,157

Revenue
Cost of sales
– Vessel operating expenses before depreciation,

amortisation and impairment
– Depreciation and amortisation
Expected credit losses
Net reversal of impairment*

Gross profit

General and administrative
– Amortisation
– Depreciation
– Other administrative costs
– Exceptional legal costs**

Operating profit

Finance income
Finance expense
Impact of change in fair value of warrants
Other income
Foreign exchange loss, net

Profit before taxation
Taxation (charge)/credit
– Taxation charge
– Exceptional tax expense**

Profit for the year

Profit attributable to:

Owners of the Company
Non-controlling interests
Earnings per share (basic)

Earnings per share (diluted)

(53,147)
(28,840)
(207)
–

69,409

(3,188)
(145)
(10,727)
–

–
–
–
33,428

33,428

(53,147)
(28,840)
(207)
33,428

102,837

–
–
–
(585)

(3,188)
(145)
(10,727)
(585)

55,349

32,843

88,192

221
(31,431)
(11,077)
12
(987)

–
–
–
–
–

221
(31,431)
(11,077)
12
(987)

12,087

32,843

44,930

(2,329)
–

9,758

9,032
726
0.89

0.86

–
(533)

(2,329)
(533)

32,310

42,068

32,310
–
3.18

3.06

41,342
726
4.07

3.92

(49,407)
(29,180)
(1,824)
–

52,746

(2,635)
(128)
(10,449)
–

39,534

11
(17,656)
(2,481)
68
(138)

19,338

(1,724)
–

17,614

17,538
76
1.73

1.71

39,534
31,944

71,478

–
–
–
7,788

7,788

–
–
–
–

7,788

–
–
–
–
–

7,788

–
–

(49,407)
(29,180)
(1,824)
7,788

60,534

(2,635)
(128)
(10,449)
–

47,322

11
(17,656)
(2,481)
68
(138)

27,126

(1,724)
–

7,788

25,402

7,788
–
0.76

0.76

7,788
–

7,788

25,326
76
2.49

2.47

47,322
31,944

79,266

Supplementary non statutory information
Operating profit
Add: Depreciation and amortisation

Adjusted EBITDA

55,349
32,173

87,522

32,843
–

32,843

88,192
32,173

120,365

The reversal of impairment credit/impairment charge on certain vessels have been added back to gross profit to arrive at adjusted gross profit for the year ended
31 December 2023 and 2022 (refer to Note 5 for further details). Management has adjusted this due to the nature of the transaction which it believes is not directly
related to operations management are able to influence. This measure provides additional information on the core profitability of the Group.

** These exceptional legal cost and exceptional tax expense relates to ZATCA transfer pricing case legal fee and expected tax outcome as explained in Note 8.

Annual Report 2023

121

Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 31 DECEMBER 2023

31 Presentation of adjusted non-GAAP results continued

Cash flow reconciliation:
Profit for the year
Adjustments for:
Net reversal of impairment*
Finance expenses
Impact of change in fair value of warrants
Other adjustments**

Cash flow from operating activities before movement

in working capital

Change in trade and other receivables
Change in trade and other payables

Cash generated from operations
Income tax paid

Net cash flows from operating activities

Net cash flows used in investing activities

Payment of issue costs on bank borrowings
Other cash flows used in financing activities

Net cash flows used in financing activities

Net change in cash and cash equivalents

Year ended 31 December 2023

Year ended 31 December 2022

Adjusted
non-GAAP
results
US$’000

Adjusting
items
US$’000

Statutory
total
US$’000

Adjusted
non-GAAP
results
US$’000

Adjusting
items
US$’000

Statutory
total
US$’000

9,758

32,310

42,068

17,614

7,788

25,402

–
31,431
11,077
34,145

86,411

2,003
8,140

96,554
(2,151)

94,403

(12,788)

(374)
(84,850)

(85,224)

(3,609)

(33,428)
–
–
1,118

–

–
–

–

–
–

–

(33,428)
31,431
11,077
35,263

86,411

2,003
8,140

96,554
(2,151)

94,403

(12,788)

(374)
(84,850)

(85,224)

(3,609)

17,656
2,481
35,276

73,027

5,610
5,005

83,642
(1,077)

82,565

(6,304)

(148)
(72,109)

(72,257)

4,004

(7,788)
–
–
–

–

–
–

–

–
–

–

(7,788)
17,656
2,481
35,276

73,027

5,610
5,005

83,642
(1,077)

82,565

(6,304)

(148)
(72,109)

(72,257)

4,004

The reversal of impairment credit/impairment charge on certain vessels and related assets have been added back to cash flow from operating activities before
movement in working capital for the year ended 31 December 2023 and 2022 (refer to Note 5 for further details).

** These exceptional legal cost and exceptional tax expense relates to ZATCA transfer pricing case legal fee and expected tax outcome as explained in Note 8.

32 Earnings per share

Profit for the purpose of basic and diluted earnings per share being profit for the year attributable to Owners

of the Company (US$’000)

Profit for the purpose of adjusted basic and diluted earnings per share (US$’000) (Note 31)

Weighted average number of shares (‘000)

Weighted average diluted number of shares in issue (‘000)

Basic earnings per share (cents)
Diluted earnings per share (cents)
Adjusted earnings per share (cents)
Adjusted diluted earnings per share (cents)

2023

2022

41,342

9,032

25,326

17,538

1,016,415

1,055,003

1,024,124

4.07
3.92
0.89
0.86

2.49
2.47
1.73
1.71

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company (as disclosed in the statement of
comprehensive income) by the weighted average number of ordinary shares in issue during the year.

Adjusted earnings per share is calculated on the same basis but uses the profit for the purpose of basic earnings per share (shown above)
adjusted by adding back the non-operational items, which were recognised in the consolidated statement of profit or loss and other
comprehensive income (Note 31). The adjusted earnings per share is presented as the Directors consider it provides an additional indication
of the underlying performance of the Group.

122 Gulf Marine Services PLC

Diluted earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number
of ordinary shares in issue during the year, adjusted for the weighted average effect of outstanding warrants and LTIPs during the year.

Adjusted diluted earnings per share is calculated on the same basis but uses adjusted profit (Note 31) attributable to equity holders of
the Group.

The following table shows a reconciliation between the basic and diluted weighted average number of shares:

Weighted average basic number of shares in issue
Weighted average effect of LTIPs
Weighted average effect of warrants

Weighted average diluted number of shares in issue

2023
’000s

1,016,415
–
38,588

2022
’000s

1,016,415
7,709
–

1,055,003

1,024,124

33 Revenue
All revenue in the above table is in scope of IFRS 15 with the exception of lease income which is in scope of IFRS 16.

Charter hire
Lease income
Messing and accommodation
Manpower income
Mobilisation and demobilisation
Sundry income

Revenue recognised – over time
Revenue recognised – point in time

2023
US$’000

76,111
57,073
9,173
5,418
2,255
1,573

151,603

149,871
1,732

151,603

2022
US$’000

70,295
44,543
12,746
3,516
1,281
776

133,157

131,958
1,199

133,157

Included in mobilisation and demobilisation income is an amount of US$ 0.6 million (2022 US$ 0.6 million) that was included as deferred
revenue at the beginning of the financial year.

Lease income:

Maturity analysis:
Year 1
Year 2
Year 3 – 5

Split between:
Current
Non-current

Further descriptions on the above types of revenue have been provided in Note 3.

2023
US$’000

2022
US$’000

68,207
56,551
73,649

57,665
36,696
32,947

198,407

127,308

68,207
130,200

198,407

57,665
69,643

127,308

Annual Report 2023

123

Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 31 DECEMBER 2023

34 Finance income

Bank interest

35 Finance expense

Interest on bank borrowings
Gain on IRS reclassified to profit or loss
Net loss/(gain) on changes in fair value of interest rate swap (Note 11)
Interest on lease liabilities (Note 23)
Other finance expenses

36 Profit for the year
The profit for the year is stated after charging/(crediting):

Total staff costs (see below)
Depreciation of property and equipment (Note 5)
Amortisation of dry-docking expenditure (Note 6)
Depreciation of right-of-use assets (Note 7)
Net charge of expected credit losses (Note 9)
Auditor’s remuneration (see below)
Net foreign exchange loss
Other income
Expense relating to short term leases or leases of low value assets (Note 7)
Reversal of impairment loss (Note 5)

The average number of full time equivalent employees (excluding non-executive Directors) by geographic area was:

Arabian Peninsula region
Rest of the world

2023
US$’000

221

2022
US$’000

2023
US$’000

29,456
279
59
245
1,392

31,431

2023
US$’000

31,230
24,297
4,687
3,188
207
1,127
987
(12)
228
(33,428)

2022
US$’000

17,231
279
(1,078)
170
1,054

17,656

2022
US$’000

27,350
23,695
5,613
2,635
1,824
787
138
(68)
965
(7,788)

2023
Number

2022
Number

598
30

628

539
28

567

The total number of full-time equivalent employees (including executive Directors) as at 31 December 2023 was 660 (31 December 2022:
594). The number of full-time employees increased in the year due to an increase in offshore headcount from the second half of the year.

124 Gulf Marine Services PLC

Their aggregate remuneration comprised:

Wages and salaries
End of service benefit (Note 20)
Share based payment charge
Employment taxes*

* Employment taxes include US$ 6K (2022: US $ 0.17 million) in respect of social security costs for our crew working in France.

The analysis of the auditor’s remuneration is as follows:

Group audit fees
Overruns and out of pocket expenses in relation to 2022 Group audit
Subsidiary audit fees

Total audit fees
Audit-related assurance services

Total fees

2023
US$’000

30,477
723
17
13

31,230

2022
US$’000

26,845
270
45
190

27,350

2023
US$’000

2022
US$’000

700
177
100

977
150

1,127

520
–
100

620
167

787

37 Changes in liabilities arising from financing activities
The table below details changes in the Group’s liabilities arising from financing activities, including both cash and non-cash changes.
Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the Group’s
consolidated statement of cash flows as cash flows from financing activities.

At 1 January 2022
Financing cash flows
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 lease liabilities (Note 35)
Interest on bank borrowings (Note 35)
Net gain on change in fair value of IRS (Note 11)
Impact of change in fair value of warrants (Note 11)

Total non-cash changes

At 31 December 2022

Financing cash flows
Repayment of bank borrowings
Working capital facility
Principal elements of lease payments
Settlement of derivatives
Interest paid

Total financing cashflows
Non-cash changes:
Recognition of new lease liability additions
Derecognition of lease liability
Interest on lease liabilities (Note 35)
Interest on bank borrowings (Note 35)
Net gain on change in fair value of IRS (Note 11)
Impact of change in fair value of warrants (Note 11)

Total non-cash changes

At 31 December 2023

Derivatives
(Note 11)
US$’000

1,793

Lease
liabilities
(Note 23)
US$’000

2,924

Bank
borrowings
(Note 22)
US$’000

379,526

–
–
(384)
–

(384)

–
–
–
(1,078)
2,481

1,403

2,812

–

–
327
–

327

–
–
–
–
59
11,077

11,136

14,275

–
(2,524)
–
(170)

(2,694)

3,122
170
–
–
–

3,292

3,522

–

(3,330)
–
(245)

(3,575)

3,231
(67)
245
–
–
–

3,409

3,356

(51,445)
–
–
(17,227)

(68,672)

–
–
17,231
–
–

17,231

328,085

(56,174)
2,000
–
–
(27,428)

(81,602)

–
–
–
29,456
–
–

29,456

275,939

Annual Report 2023

125

Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 31 DECEMBER 2023

38 Events after the reporting period
There were no subsequent events, that impact to these consolidated financial statements after the reporting period.

39 Reclassification
Certain figures have been reclassified since the comparative consolidated financial statements as presented below. We believe the revised
presentation gives users better information to understand these consolidated financial statements given the materiality of the warrants in the
current period.

Consolidated statement of profit or loss and other comprehensive income
Finance expense (Note 35)
Impact of change in fair value of warrants

Before
reclassification
US$’000

Reclassifications
US$’000

After
reclassification
US$’000

(20,137)
–

2,481
(2,481)

(17,656)
(2,481)

A transposition error was identified in relation to the presentation of derivative financial instruments on the face of the consolidated statement
of financial position in the prior period. A current derivative liability ($3.2m) was included in both the current liability and non-current liability
section of the statement of financial position. This has been corrected in the comparative amounts in the current year.

126 Gulf Marine Services PLC

COMPANY STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED 31 DECEMBER 2023

Non-current assets
Investment in subsidiaries
Other receivables

Total non-current assets

Current assets
Other receivables
Cash and cash equivalents

Total current assets

Creditors: Amounts falling due within one year
Other payables
Warrants

Net current liabilities

Net assets

Equity
Share capital – Ordinary
Capital redemption reserve
Share premium account
Share based payment reserve
Retained earnings

Total equity

Notes

2023
US$’000

2022
US$’000

5
7

7
6

9
10

11
11
11

368,666
93,943

462,609

248,580
67,663

316,243

143
25

168

91,464
14,275

105,571

159
2

161

61,631
3,198

64,668

357,038

251,575

30,117
46,445
99,105
–
181,371

357,038

30,117
46,445
99,105
3,631
72,277

251,575

The Company reported a profit for the financial year ended 31 December 2023 of US$ 105.5 million (2022: Profit US$ 14.9 million).

The separate financial statements of Gulf Marine Services PLC (registered number 08860816) were approved by the Board of Directors and
authorised for issue on 03 April 2024. Signed on behalf of the Board of Directors.

Jyrki Koskelo
Independent non-executive Director

Mansour Al Alami
Executive Chairman

The attached Notes 1 to 15 form an integral part of these separate financial statements.

Annual Report 2023

127

Financial StatementsCOMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023

Share
capital –
Ordinary
US$’000

30,117

Share
capital –
Deferred
US$’000

46,445

Capital
redemption
reserve
US$’000

Share premium
account
US$’000

Share based
payment
reserve
US$’000

−

–
–

–

At 1 January 2022

Profit for the year
Other comprehensive income

for the year

Total comprehensive income

for the year

Transactions with owners of the Company
Capital reorganisation (Note 11)
Share based payment charge (Note 13)
Cash settlement of share-based

payments (Note 13)

Total transactions with owners of

the Company

At 31 December 2022

30,117

Profit for the year
Other comprehensive income

for the year

Total comprehensive income

for the year

Transactions with owners of the Company
Share based payment charge (Note 13)
Transfer of share option reserve

(Note 13)

Total transactions with owners of

the Company

−

–

At 31 December 2023

30,117

(46,445)
–

46,445
−

–

−

–

46,445

−

–

−

–

(46,445)

–

−

–

99,105

3,647

−

−
−

−

–

−

−
45

(61)

(16)

−

–

−

–

Retained
earnings
US$’000

57,410

14,867

Total equity
US$’000

236,724

14,867

−

–

14,867

−
−

−

–
45

(61)

(16)

105,463

–

105,463

(17)

(3,648)

3,648

(3,631)

3,631

–

46,445

99,105

–

181,371

357,038

99,105

3,631

72,277

251,575

The attached notes 1 to 15 form an integral part of these separate financial statements.

128 Gulf Marine Services PLC

NOTES TO COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

1 Corporate information
Gulf Marine Services PLC (“the Company”) is a public company limited by shares in the United Kingdom under the Companies Act 2006
and is registered in England and Wales. The address of the registered office of the Company is 107 Hammersmith Road, London, United
Kingdom, W14 0QH. The registered number of the Company is 08860816. The Company is the parent company of the Gulf Marine Services
PLC Group comprising of Gulf Marine Services PLC and its underlying subsidiaries (“the Group”). The shareholder pattern of the Group is
disclosed on page 73 of the annual report. The consolidated Group accounts are publicly available.

2 Material 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 Directors have assessed the Group's financial position through to June 2025 and hold a reasonable expectation of its ability to continue
as going concern for the foreseeable future. With three consecutive years of reported profit and a forecast of continued positive operating
cash flows, particularly in light of the market outlook, the Group remains well-positioned for sustained success.

During the year, the Group made a repayment of US$ 56.2 million (2022: US$ 51.4 million) towards its borrowings, of which, US$ 26.2 million
(2022: US$ 3.8 million) were over and above its contractual obligations, resulting in a reduction in the current ratio. A total of US$ 33.7 million
(2022: US$ 3.8 million) was prepaid during 2023. Hence, the Group was in a net current liability position as of 31 December 2023, amounting
to US $52.1 million (2022: US$15.8 million). Management closely monitors the Group's liquidity position including focus on the forecasted
short-term cash flows which would be sufficient to meet the Group’s current liabilities, in particular, the current portion of the bank borrowings
which represents the principal repayments due over the next 12 months. The loan prepayments were also made after ensuring that
forecasted cash inflows are sufficient to meet the Group's short-term obligations.

The Group also has a revolving working capital facility which amounts to US$ 40.0 million (31 December 2022: US$ 45.0 million). US$ 25.0 million
(31 December 2022: US$ 25.0 million) of the working capital facility is allocated to performance bonds and guarantees and US$ 15.0 million
(31 December 2022: US$ 20 million) is allocated to funded portion, of which US$ 2.0 million was utilised as of 31 December 2023, leaving US$ 13.0
million available for drawdown (31 December 2022: US$ 20.0 million). The working capital facility expires alongside the main debt facility in June 2025.

The Group is in the process of refinancing its term facility in advance as the bullet payment becomes due in June 2025. Management's
ongoing discussions with various lending entities are aimed at securing terms that align with our long-term strategic objectives, ensuring
continued financial stability. Given the strong financial performance reported during 2023 and the current high levels of utilisation secured,
combined with higher day rates, the Group expects the financial performance to continue to improve. As such, we are optimistic about the
outcome of these negotiations.

The forecast used for Going Concern reflects management's key assumptions including those around utilisation, vessel day rates on a vessel-
by-vessel basis and refinancing of its term facility during latter half of the coming year. Specifically, these assumptions are:
• average day rates across the fleet are assumed to be US$ 34.0k for the 18-month period to 30 June 2025;
• 94% forecast utilisation for the 18-month period to 30 June 2025;
• Strong pipeline of tenders and opportunities for new contracts that would commence during the forecast period.

A downside case was prepared using the following assumptions:
• no work-to-win during the 18-months period to 30 June 2025;
• 17 percentage points reduction in utilisation for the 18-months period to 30 June 2025;
•

interest rate to remain at current levels instead of a forecasted decline of 25 bases points commencing second quarter of 2024.

Based on the above scenario, the Group would not be in breach of its current term loan facility. The downside case is considered to be
severe, but it would still leave the Group with US$ 7.9 million of liquidity and in compliance with the covenants under the Group's banking
facilities throughout the assessment period.

In addition to the above downside sensitivity, the Directors have also considered a reverse stress test, where EBITDA has been sufficiently
reduced to breach debt covenant. This scenario assumes a substantial increase in operational downtime to 7%, compared to the base case
cashflows with a 2.5% operational downtime. The significant increase in operational downtime for 2024 would result in breach of the Finance
Service Cover ratio as at 31 December 2024.

Should circumstances arise that differ from the Group's projections, the Directors believe that a number of mitigating actions can be executed
successfully in the necessary timeframe to meet debt repayment obligations as they become due and in order to maintain liquidity. Potential
mitigating actions include the vessels off hire for prolonged periods could be cold stacked to minimise operating costs on these vessels
which has been factored into the downside case. Additional mitigations could be considered including but not limited to reduction in
overhead costs, relaxation/waiver from covenant compliance and rescheduling of repayments with lenders.

Management is aware of the broader operating context and acknowledges the potential impact of climate change on the Group's financial
statements. However, it is anticipated that the effect of climate change will be negligible during the going concern assessment period.

After considering reasonable risks and potential downsides, the Group's forecasts suggest that its bank facilities, combined with increased
utilization at higher day rates and a strong pipeline of near-term opportunities for additional work, will provide sufficient liquidity to meet its
needs in the foreseeable future. Accordingly, the consolidated financial statements for the Group for the year ended 31 December 2023 have
been prepared on a going concern basis.

Annual Report 2023

129

Financial StatementsNOTES TO COMPANY FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 31 DECEMBER 2023

2 Material accounting policies (continued)
Basis of accounting
The separate financial statements of the Company are presented as required by the Companies Act 2006. These 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 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 profit of US$ 105.5
million (2022: US$ 14.9 million). The principal accounting policies are summarised below. They have all been applied consistently throughout
both years.

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 the presentation of a statement of profit or loss and other comprehensive income,
cash flow statement, remuneration of key management personnel, and financial instrument disclosures. Refer to note 24 for remuneration of
key management personnel and note 27 for financial instrument disclosures in consolidated financial statements.

Investments
Investments in subsidiaries 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.

Derivative liability
The Company considers whether a contract contains a derivative liability, including warrants, when it becomes a party to the contract.
Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair
value at each reporting date. The resulting gain or loss is recognised in profit or loss immediately.

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, includes investment in subsidiaries, 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.

130 Gulf Marine Services PLC

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 separate 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 separate financial statements.

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.

Critical judgements in applying the Company’s accounting policies
Critical accounting judgements are those which management make in the process of applying the Company’s accounting policies and that
have the most significant effect on the amounts recognised in the separate financial statements.

Management has not made any critical judgements in applying the Company’s accounting policies for the year ended 31 December 2023.

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
As noted above, 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 and cashflows related to the Group’s debt facility.

The projection of cash flows related to vessels and debt facility requires the use of various estimates including future day rates, vessel
utilisation levels, and discount rates, in which the estimate is most sensitive. 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 reversal of US$ 120.1 million (2022: US$ 18.8 million) on the investment in subsidiaries (see Note 5).
As at 31 December 2023, the Company had investments of US$ 368.7 million (2022: US$ 248.6 million).

Fair valuation of Warrants
Management commissioned an independent valuation expert to measure the fair value of the warrants, which was determined using Monte
Carlo option-pricing model. The simulation considers sensitivity by building models of possible results by substituting a range of values. The
increase in fair value of the warrants is primarily due to increase in share price and its volatility. A 10% change in share price will increase or
decrease the valuation by US$ 0.2 million.

Annual Report 2023

131

Financial StatementsNOTES TO COMPANY FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 31 DECEMBER 2023

4 Dividends
There was no dividend declared or paid in 2023 (2022: nil). No final dividend in respect of the year ended 31 December 2023 is to be
proposed at the 2023 AGM. The Directors have approved a residual dividend policy which seeks to strike a balance between funding growth
initiatives and providing returns to shareholders. Management is currently evaluating the timing for its implementation.

5 Investment in subsidiaries

Gross investment in subsidiaries as at 1 January

Gross investment in subsidiaries as at 31 December

Impairment as at 1 January
Impairment reversal of investments during the year

Impairment as at 31 December

Carrying amount as at 31 December

2023
US$’000

574,472

2022
US$’000

574,472

(325,892)
120,086

(344,666)
18,774

(205,806)

(325,892)

368,666

248,580

Based on the impairment reviews performed in previous years, management recognised impairment losses of US$ 327.7 million and US$ 17.0
million for the year ended 31 December 2020 (“FY20") and for the year ended 31 December 2021 (“FY21”), respectively. As conditions improved,
including day rates, utilization, and market outlook, the historical impairment losses were subsequently reversed of US$ 18.8 million in fiscal
year 2022.

As at 31 December 2023, and in line with the FRS 102 requirements, management concluded that a formal impairment assessment was
required to determine the recoverable amount of its investments in subsidiaries. Factors considered by management included favourable
indicators, including an improvement in utilization, day rates, an increase in market values of vessels and decrease in interest rate, and
unfavourable indicators including the market capitalization of the Group remaining below the book value of the Group’s equity.

The review was done by determining the recoverable amount of each vessel in the fleet as the underlying cash generating units of the
investment in subsidiaries. The net bank debt of the GMS Group was then deducted from the value in use of the investments, which was
based on the combined value in use of vessels within the Group.

The Group also obtained an independent valuation of its vessels as at 31 December 2023 for the purpose of its banking covenant compliance
requirements. However, consistent with prior years, management does not consider these valuations to represent a reliable estimate of the
fair value for the purpose of assessing the recoverable value of the Group’s vessels, noting that there have been limited, if any, “willing buyer
and willing seller” transactions of similar vessels in the current offshore vessel market on which such values could reliably be based. Due to
these inherent limitations, management concluded that recoverable amount should be based on value in use.

Value in use 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. The risk adjusted cash flows were discounted using the post-tax discount rate of 11.5% (2022: 12.1%),
which is based on the Group’s weighted average cost of capital. The cost of equity incorporated in the computation of the discount rate is
based on the industry sector average betas, risk-free rate of return as well as Group specific risk premium reflecting any additional risk factors
relevant to the Group. A post tax discount rate was used as the cashflows to derive the value in use of investment in subsidiaries includes the
impacts of tax as described above.

The review led to the recognition of an aggregate impairment reversal of US$ 120.1 million (2022: US$ 18.8 million) on the investment in
subsidiaries. The assessment described above takes into account complete profitability of underlying investments which also included
implications of tax and debt.

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 day rates over the remaining useful economic life of vessels included in investments.
A second sensitivity modelled a 10% increase/reduction to utilisation rates. Management would not expect an assumption change of more
than 10% across all vessels within the next financial year, and accordingly believes that a 10% sensitivity to day rates and utilisation
is appropriate.

A third sensitivity was modelled where a 1% increase/decrease was applied to the post-tax discount rate mentioned above. Given that the
change in the discount rate from the previous year is less than 1%, a 1% increase or decrease was deemed appropriate for this analysis.

The results of the first sensitivity indicated that a 10% decrease to day rates would reverse the impairment reversal of US$ 120.1 million and result
in additional impairment charge of US$ 1.7 million (total impact of US$ 121.8 million). In comparison, a 10% increase to day rates would increase
the impairment reversal by US$ 113.8 million to US$ 233.9 million. The total carrying amount of investments would be US$ 246.9 million and US$
482.4 million, respectively.

The results of the second sensitivity indicated that a 10% decrease to utilisation would reverse the impairment reversal of 120.1 million and result
in additional impairment charge of US$ 1.7 million (total impact of US$ 121.8 million). In comparison, a 10% increase to utilisation would increase
the impairment reversal by US$ 71.3 million to US$ 191.4 million. The total carrying amount of investments would be US$ 246.9 million and US$
440.0 million, respectively.

132 Gulf Marine Services PLC

The results of the third sensitivity indicated that a 1% decrease to the post-tax discount rate would lead to an increase in impairment reversal by
US$ 45.2 million to US$ 165.3 million, whereas a 1% increase to the post-tax discount rate would lead to decrease to the impairment reversal by
US$ 40.1 million to US$ 80.0 million. The total carrying amount of investments would be US$ 413.9 million and US$ 328.6 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, 24th Karama Street,
P.O. Box 46046, Abu Dhabi, United Arab Emirates

Offshore Holding Invt SA

Panama

Offshore Logistics Invt SA

Panama

Bloc Office Hub, Fifth Floor, Santa Maria Business
District, Panama,Republic of Panama

Proportion of
Ownership Interest

2023

2022 Type of Activity

100%

100% Marine contractors

100%

100% Holding Company

100%

100% Dormant

Offshore Accommodation
Invt SA

Panama

Bloc Office Hub, Fifth Floor, Santa Maria Business
District, Panama,Republic of Panama

100%

100% Dormant

Offshore Jack-up Invt SA

Panama

Bloc Office Hub, Fifth Floor, Santa Maria Business
District, Panama,Republic of Panama

100%

100% Owner of barge “Kamikaze”

Offshore Craft Invt SA

Panama

Bloc Office Hub, Fifth Floor, Santa Maria Business
District, Panama,Republic of Panama

100%

100% Owner of barge

“GMS Endeavour”

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

Bloc Office Hub, Fifth Floor, Santa Maria Business
District, Panama,Republic of Panama

100%

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”

Gulf Marine Services (UK)
Limited

Gulf Marine Saudi Arabia
Co. Limited

United Kingdom

14 Carden Place, Aberdeen, AB10 1UR

100%

100% Operator of offshore barges

Saudi Arabia

King Fahad Road, Al Khobar, Eastern Province ,
P.O. Box 31411 Kingdom Saudi Arabia

75%

75% Operator of offshore barges

Gulf Marine Services (Asia)
Pte. Ltd.

Singapore

1 Scotts Road, #21-07, Shaw Centre, Singapore,
228208

100%

100% Operator of offshore barges

GMS Enterprise Investment
SA

Panama

Bloc Office Hub, Fifth Floor, Santa Maria Business
District, Panama,Republic of Panama

100%

100% Owner of barge “Enterprise”

GMS Sharqi Investment SA

Panama

GMS Scirocco Investment SA Panama

GMS Shamal Investment SA

Panama

GMS Jersey Holdco. 1
Limited*

GMS Jersey Holdco. 2
Limited

Jersey

Bloc Office Hub, Fifth Floor, Santa Maria Business
District, Panama,Republic of Panama

100%

100% Owner of barge “Sharqi”

100%

100% Owner of barge “Scirocco”

100%

100% Owner of barge “Shamal”

12 Castle Street, St. Helier, Jersey, JE2 3RT

100%

100% General investment

12 Castle Street, St. Helier, Jersey, JE2 3RT

100%

100% General investment

GMS Marine Middle East FZE United Arab

Emirates

ELOB, Office No. E-16F-04, P.O. Box 53944, Hamriyah
Free Zone, Sharjah

100%

100% Operator of offshore barges

GMS Global Commercial
Invt LLC

United Arab
Emirates

Office 403, International Tower, 24th Karama Street,
P.O. Box 46046, Abu Dhabi, United Arab Emirates

100%

100% General investment

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

100%

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

Ugland House, Grand Cayman, KY1-1104,
Cayman Islands, P.O. Box 309

100% General investment

GMS Phoenix Investment SA

Bloc Office Hub, Fifth Floor, Santa Maria Business
District, Panama, Republic of Panama

100% 100%

Dormant

*Held directly by Gulf Marine Services PLC. **Wound up on 29 December 2023.

Annual Report 2023

133

Financial StatementsNOTES TO COMPANY FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 31 DECEMBER 2023

6 Cash and cash equivalents

Interest bearing
Cash at bank

Total cash and cash equivalents

7 Other receivables

Non-current assets
Amounts receivable from Group undertakings

Current assets
Prepayments

2023
US$’000

2022
US$’000

2023
US$’000

2022
US$’000

93,943

143

67,663

159

94,086

67,822

Amounts receivable from Group undertakings are interest-free, unsecured and have no fixed repayment terms.

8 Deferred tax asset

At the reporting date, the Company has unused tax losses of US$ 20.8 million available for offset against future profits (2022:
US$ 16.4 million). These UK tax losses may be carried forward indefinitely. The Company is not expected to have any future taxable profits
to be able to utilise the deferred tax assets and therefore, no deferred tax asset has been recognised in the current year (2022: Nil).

9 Other payables

Amounts falling due within one year
Amounts owed to Group undertakings
Accruals

2023
US$’000

2022
US$’000

89,770
1,694

91,464

60,801
830

61,631

Amounts owed to Group undertakings are current, interest-free, unsecured and have no fixed repayment terms.

Balances with related parties are repayable on demand. The present value of the liability is deemed to equal the undiscounted cash amount
payable. No interest charge is therefore, imputed on these amounts.

10 Warrants
Under the terms of the Group’s loan facility, the Group was required to issue warrants to its lenders as GMS had not raised US$ 50.0 million
of equity by 31 December 2022.

On 2 January 2023, as the US$ 50.0 million equity raise did not take place, therefore, 87,621,947 warrants were issued to the lenders. Based
on the final report prepared by a Calculation Agent, the warrants give right to their holders to acquire 137,075,773 shares at an exercise price
of 5.75 pence per share for a total consideration of GBP £7.9 million. Warrant holders will have the right to exercise their warrants up to the
end of the term of the loan facility, being 30 June 2025.

134 Gulf Marine Services PLC

The movement in the warrants is as follows:

As at 1 January
Impacts of change in fair value of warrants

As at 31 December

11 Share capital and reserves
The share capital of Gulf Marine Services PLC was as follows:

Ordinary shares at £0.02 per share

At 1 January 2023

As at 31 December 2023

At 1 January 2022

As at 31 December 2022

Capital redemption reserve

At 1 January 2023

As at 31 December 2023

Share premium

At 1 January 2023

As at 31 December 2023

2023
US$’000

(3,198)
(11,077)

(14,275)

2022
US$’000

(717)
(2,481)

(3,198)

Number of
ordinary shares
(Thousands)

1,016,415

Number of
ordinary shares
(Thousands)

1,016,415

Number of
ordinary shares
(Thousands)

350,488

Number of
ordinary shares
(Thousands)

1,016,415

Ordinary
shares
US$’000

30,117

Ordinary
shares
US$’000

30,117

Ordinary
shares
US$’000

46,445

Ordinary
shares
US$’000

99,105

Prior to an equity raise on 28 June 2021 the Company underwent a capital reorganisation where all existing ordinary shares with a nominal
value of 10 pence per share were subdivided and re-designated into 1 ordinary share with a nominal value of 2 pence and 1 deferred share
with a nominal value of 8 pence each. The previously recognised share capital balance relating to the old 10p ordinary shares was allocated
pro rata to the new subdivided 2p ordinary shares and 8p deferred shares. The deferred shares had no voting rights and no right to the
profits generated by the Group. On winding-up or other return of capital, the holders of deferred shares had extremely limited rights, if any.
The Company had the right but not the obligation to buyback all of the deferred shares for an amount not exceeding £1.00 in aggregate,
which with the shareholders approval, was completed on 30 June 2022. Accordingly, 350,487,787 deferred shares were cancelled. Following
the cancellation of the Deferred shares on 30 June 2022, a transfer of $46.4 million was made from Share capital – Deferred to a Capital
redemption reserve. There was no dilution to the shares ownership as a result of the share reorganisation.

Under the Companies Act, a share buy-back by a public company can only be financed through distributable reserves or the proceeds of
a fresh issue of shares made for the purpose of financing a share buyback. The Company had sufficient reserves to purchase the Deferred
shares for £1.00.

The Company has one class of ordinary shares, which carry no right to fixed income.

The share premium account contains the premium arising on issue of equity shares, net of related costs.

Share based payment reserve of nil (2022: US$ 3.6 million) relates to awards granted to employees under the long-term incentive plans.

The retained earnings represent cumulative profits or losses net of dividends paid and other adjustments.

Annual Report 2023

135

Financial StatementsNOTES TO COMPANY FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 31 DECEMBER 2023

12 Staff numbers and costs
The average monthly number of employees (including executive directors) was:

Administration

Their aggregate remuneration comprised:

Wages and salaries

2023
Number

2022
Number

2023
US$’000

2022
US$’000

244
244

256
256

13 Long term incentive plans
The Company had Long Term Incentive Plans (“LTIPs”) which were granted to senior management, managers and senior offshore officers.

The employment condition attached to the Groups’ LTIPs was that each eligible employee of the Company must remain in employment
during the three-year vesting period. For 2019 and 2020 awards, LTIPs were aligned to Company’s share performance. The release of these
shares was conditional upon continued employment and market vesting conditions. There were no LTIP awards granted during 2021.

During the year ended 31 December 2023, the market vesting conditions for the LTIP awards granted in 2020 were not met, and all LTIP
awards issued in 2020 were forfeited.

Equity-settled share-based payments were measured at fair value at the date of grant. The fair value determined, using the Binomial
Probability Model together with Monte Carlo statistical method, at the grant date of equity-settled share-based payments, is expensed on a
straight-line basis over the vesting period, based on an estimate of the number of shares that will ultimately vest. The fair value of each award
was determined by taking into account the performance conditions, the term of the award, the share price at grant date, the expected price
volatility of the underlying share and the risk-free interest rate for the term of the award.

To the extent that share-based payments are granted to employees of the Company’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 Company during the year is given in the table below:

2023
000s

1,176,014
–
–
(1,176,014)

2022
000s

2,499,714
9,460,000
(921,310)
(9,862,390)

–

1,176,014

At the beginning of the year
Granted in the year
Cash settled in the year
Forfeited in the year

At the end of the year

136 Gulf Marine Services PLC

Grant date
Share price
Expected volatility
Risk-free rate
Expected dividend yield
Vesting period
Award life

LTIP

14 Jun 2022
£0.06
102%
2.17%
0.00%
3 years
3 years

29 May 2020
£0.09
120%
0.01%
0.00%
3 years
3 years

15 Nov 2019
£0.08
103%
0.48%
0.00%
3 years
3 years

14 Events after the reporting period
There were no subsequent events, that impact to these separate financial statements after the reporting period.

15 Rectification of error
A typographical error was identified in relation to the total amount presented for Net current liabilities on the face of the Company statement
of financial position in the prior period. This has been corrected in the comparative amounts in the current year.

Annual Report 2023

137

Financial StatementsGLOSSARY

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 earnings/loss per share – represents the adjusted earnings/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
warrants and Long Term Incentive Plans (LTIPs) outstanding during the period. The adjusted earnings/loss attributable to equity shareholders
of the Company is used for the purpose of basic gain/loss per share adjusted by adding back the reversal of impairment, and any exceptional
costs. 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 32 to the consolidated financial statements.

Adjusted EBITDA – represents operating profit after adding back depreciation, amortisation, non-operational items and impairment charges
or deducting reversal of impairment. This measure provides additional information in assessing the Group’s underlying performance that
management is more directly able to influence in the short term and on a basis comparable from year to year. A reconciliation of this measure
is provided in note 31 to the consolidated financial statements.

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/loss after deducting reversal of impairment/adding back impairment charges. This
measure provides additional information on the core profitability of the Group. A reconciliation of this measure is provided in Note 31 to the
consolidated financial statements.

Adjusted net profit/(loss) – represents net profit/(loss) after deducting net impairment reversals and adjustment for other exceptional costs.
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 to the consolidated financial statements.

Average fleet utilisation – represents the percentage of available days in a relevant period during which the fleet of self-elevating support
vessels (SESVs) is under contract and in respect of which a customer is paying a day rate for the charter of the SESVs.

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.

Cost of sales excluding depreciation and amortisation – represents cost of sales excluding depreciation and amortisation.
This measure provides additional information of the Group’s cost for operating the vessels. A reconciliation is shown below:

Statutory cost of sales
Less: depreciation and amortisation

2023
US$’000

81,987
(28,840)

53,147

2022
US$’000

78,587
(29,180)

49,407

Cost of sales as a percentage of revenue – represents reported cost of sales divided by revenue.

EBITDA – represents earnings before interest, tax, depreciation and amortisation, which represents operating profit after adding back
depreciation and amortisation. 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 cost of sales before depreciation, amortisation and impairment as identified in Note 31 to the consolidated
financial statements.

138 Gulf Marine Services PLC

Net bank debt – represents the total bank borrowings less cash and cash equivalents. This measure provides additional information of the
Group’s financial position. A reconciliation is shown below:

Statutory bank borrowings
Less: cash and cash equivalents

2023
US$’000

275,939
(8,666)

267,273

2022
US$’000

328,085
(12,275)

315,810

Finance leases are excluded from net bank debt to ensure consistency with definition of the Group’s banking covenants.

Net cash flow before debt service – the sum of cash generated from operations and investing activities.

Net leverage ratio – the ratio of net bank debt at year end to adjusted EBITDA which is further adjusted for items including but not limited to
reversal of impairment credits/(impairment charges), exceptional legal costs and non-operational finance-related costs in alignment with the
terms of our bank facility agreement. The reconciliation is shown below:

A: Net bank debt, as identified above
B: Adjusted EBITDA, as disclosed in Note 31 to the consolidated financial statements

Net leverage ratio (A/B):

2023
US$’000

267,273
87,522

3.05

2022
US$’000

315,810
71,478

4.42

Non-operational finance expenses – this pertains to the items such as cost to acquire new bank facility, fair value movement in debt
arrangement, etc.

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 to the consolidated financial statements.

Underlying performance – day-to-day trading performance that management are directly able to influence in the short term.

Annual Report 2023

139

Financial StatementsOTHER DEFINITIONS

Average day rates

Backlog

Borrowing rate

Calendar days

Costs capitalised

Day rates

Demobilisation

we calculate the average day rates by dividing total charter hire revenue per month by total hire
days per month throughout the year and then calculating a monthly average.

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.

SOFR plus margin.

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.

rate per day charge to customers per hire of vessel as agreed in the contract.

fee paid for the vessel redelivery at the end of a contract, in which client is allowed to offload
equipment and personnel.

DEPS/DLPS

diluted earnings/losses per share.

Employee retention

EPC

ESG

Finance service

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.

engineering, procurement and construction.

environmental, social and governance.

the aggregate of
a) Net finance charges for that period; and
b) All scheduled payments of principal and any other schedule payments in the nature of principal

payable by the Group in that period in respect of financing:
i) Excluding any amounts falling due in that period under any overdraft, working capital
or revolving facility which were available for simultaneous redrawing under the terms
of that facility;

ii) Excluding any amount of PIK that accretes in that period;
iii) Including the amount of the capital element of any amounts payable under any finance lease

in respect of that period; and

iv) Adjusted as a result of any voluntary or mandatory prepayment.

Debt Service Cover

represents the ratio of adjusted EBITDA to debt service.

GCC

GMS core fleet

Interest Cover

IOC

KPIs

Lost Time Injuries

Gulf Cooperation Council.

consists of 13 SESVs, with an average age of 13 years.

represents the ratio of adjusted EBITDA to net finance charges.

Independent Oil Company.

key performance indicators.

any workplace injuries sustained by an employee while on the job that prevents them from being
able to perform their job for a period of one or more days.

Lost Time Injury Rate (LTIR)

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.

SOFR

Mobilisation

Secured Overnight Financing Rate.

fee paid for the vessel readiness at the start of a contract, in which client is allowed to load
equipment and personnel.

Net finance charges

represents finance charges as defined by the terms of the Group’s banking facility for that period
less interest income for that period.

140 Gulf Marine Services PLC

Net leverage ratio

represents the ratio of net bank debt to adjusted EBITDA.

NOC

PIK

Secured backlog

National Oil Company.

Payment In Kind. Under the banking documents dated 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; and
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.

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.

Secured day rates

day rates from signed contracts firm plus options held by clients.

Secured utilisation

contracted days of firm plus option period of charter hire from existing signed contracts.

Security Cover (loan to value)

the ratio (expressed as a percentage) of total net bank debt at that time to the market value of the
secured vessels.

SESV

SG&A spend

Self-elevating support vessel.

means that the selling, general and administrative expenses calculated on an accruals basis should
be no more than the SG&A maximum spend for any relevant period.

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

Utilisation

underlying general and administrative expenses excluding depreciation and amortisation, and
exceptional costs.

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.

Vessel operating expense

Cost of sales before depreciation, amortisation and impairment, refer to Note 31 to the
consolidated financial statements.

Warrants

As per the banking document date 31 March 2021, warrants vested on 2 January 2023 upon failure
to raise US$ 50 million. These warrants will expire on 30 June 2025 (maturity date of the facilities).

Annual Report 2023

141

Financial StatementsCORPORATE INFORMATION

Board of Directors
Mansour Al Alami
Executive Chairman

Hassan Heikal
Deputy Chairman, non-Executive Director

Lord Anthony St John of Bletso
Independent non-executive Director

Charbel El Khoury
Non-executive Director

Jyrki Koskelo
Independent non-executive Director

Haifa Al Mubarak
Independent non-executive Director

Auditors
KPMG
1 Stokes Place
St Stephen’s Green
Dublin 2
D02 DE03

Public Relations Advisers
Celicourt Communications Limited
4 Bream’s Buildings
London EC4A 1HP

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

Company Secretary
Tony Hunter

Corporate Brokers
Panmure Gordon
40 Gracechurch Street,
London EC3V 0BT

Legal Advisers
Shearman and Sterling LLP
9 Appold Street
London EC2A 2AP

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

142 Gulf Marine Services PLC

Gulf Marine Services

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.

Gulf Marine Services
P.O. Box 46046
Abu Dhabi, UAE
T: +971 (2) 5028888
F: +971 (2) 5553421
E: IR@gmsplc.com