System1 Annual Report 2014

← All annual reports

FY2014 Annual Report · System1

Loading PDF…

ANNUAL REPORT 2014

CONTENTS

Brief Proﬁ le of Steamships Trading Company Limited . . . 2

Financial Highlights . . . . . . . . . . . . . . . . . . . . 4

Chairman’s Report . . . . . . . . . . . . . . . . . . . . . 6

Directors’ Review . . . . . . . . . . . . . . . . . . . . . 7

Review of Operations - LOGISTICS . . . . . . . . . . . . 8

Steamships Coastal Shipping & Stevedoring . . . . . 8

Consort Express Lines . . . . . . . . . . . . . . . . 9

Paciﬁ c Towing . . . . . . . . . . . . . . . . . . . 10

East West Transport . . . . . . . . . . . . . . . . 10

Review of Operations - PROPERTY . . . . . . . . . . . 11

Coral Sea Hotels . . . . . . . . . . . . . . . . . . 11

Paciﬁ c Palms Property . . . . . . . . . . . . . . . 12

Review of Operations - COMMERCIAL . . . . . . . . . 13

Laga Industries . . . . . . . . . . . . . . . . . . . 13

Colgate Palmolive . . . . . . . . . . . . . . . . . 13

Sustainability . . . . . . . . . . . . . . . . . . . . . . . 14

Corporate Governance . . . . . . . . . . . . . . . . . . 14

Financial Section . . . . . . . . . . . . . . . . . . . . . 15

Statements of Comprehensive Income . . . . . . . 16

Statement of Changes in Equity . . . . . . . . . . 17

Balance Sheets . . . . . . . . . . . . . . . . . . . 18

Statements of Cash Flows . . . . . . . . . . . . . 19

Notes to the Financial Statements . . . . . . . . . 20

Independent Auditor’s Report . . . . . . . . . . . 52

Directors’ Report . . . . . . . . . . . . . . . . . . 54

Stock Exchange Information . . . . . . . . . . . . 58

Company Directory . . . . . . . . . . . . . . . . . . . 59

Steamships Annual Report 2014 1
Steamships Annual Report 2014 1

BRIEF PROFILE OF STEAMSHIPS TRADING COMPANY LTD

Steamships Trading Company Limited (Steamships) has a long history in Papua New Guinea
and is one of the country’s leading businesses. Today Steamships is a well-established
business conglomerate with diverse commercial interests and listings on both the Australian
and Port Moresby Stock Exchanges.

Steamships has a vision to build a valuable and proﬁ table business that is widely respected as
being the best group to work for and with which to do business.

Integral to this vision are the following business strategies:

•

The long-term development of a diversiﬁ ed range of
businesses in which shareholder value can be created,

Employment of staff who we believe will further our
strategic objectives and will be committed to the
Group for the long term and providing them with
rewarding careers,

Operational excellence in the way we conduct our
business,

Doing business in a sustainable manner, and

Commitment to the highest standards of corporate
governance.

The Group employs just over 4,000 PNG citizens and
non-citizens in 8 diverse divisions grouped under
the 3 operating categories of Logistics, Property and
Commercial.

Steamships core values include the following:

•

Integrity – Taking the more ethical and honest path;
honouring our commitments and delivering on our
promises; creating a bond of trust that sustains
relationships with our staff, customers, shareholders,
business partners and the communities in which we
do business.

Excellence – Our customers and colleagues expect
us to deliver high quality goods and services. If
something is to be done, we believe it should be done
in the best possible way.

Humility – We believe in the need to respect and
to learn from others. To do this we must be aware
of our own limitations and to seek to understand
other perspectives. Humility guides our approach to
colleagues, customers and partners. This does not

mean that we lack self-conﬁ dence but that we act
with humble pride.

Continuity – We take a long term view. We grow
our business sustainably and create enduring value
that earns the respect of our customers, our staff, our
communities and our shareholders.

Customer Focus – Our customers are the ﬁ nal judges
of our success or failure. We understand and respond
to the needs of our customers.

Safety – We prioritise safety awareness and
compliance to ensure our business operations are
conducted safely.

People Development – We value a working
environment that fosters innovation and encourages
personal development and learning.

•

Steamships is aware of its pre-eminent position in the
community and its responsibility to serve that community.
The Group continues to be one of PNG’s largest private
sector employers and one of the largest supporters of
community initiatives in education, health, environment
and social welfare. Steamships ensures that core
sustainability concepts are embedded in its business
models and systems. The Group is wholly aware that its
business goals cannot be achieved unless this is the case.
Steamships cannot succeed without the engagement
and support of the people it employs, the loyalty of and
satisfaction of its customers, the local communities and the
environment in which it operates.

Ninety-six years on, Steamships is still showing it has the
resources and capacity, vision and capability to meet the
dynamic needs of a growing country.

2 Steamships Annual Report 2014

BRIEF PROFILE OF STEAMSHIPS TRADING COMPANY LTD

STEAMSHIPS’ ORGANISATIONAL STRUCTURE

STEAMSHIPS HEAD OFFICE

LOGISTICS

PROPERTY

COMMERCIAL

Steamships Shipping

Coral Sea Hotels

Datec*

- Coastal Shipping

Paciﬁ c Palms Property

Laga Industries

- Joint Venture
Stevedoring

Consort Express Lines

East West Transport

Paciﬁ c Towing

* Sold 31 July 2014
** Joint Venture

Colgate-Palmolive**

Steamships Annual Report 2014 3

FINANCIAL HIGHLIGHTS

2014 FINANCIAL HIGHLIGHTS

Revenue (including discontinued operations)

Proﬁ t attributable to shareholders
Cash generated from operations
Net cash inﬂ ow/(outﬂ ow) before ﬁ nancing
Shareholders’ funds
External Borrowings

Earnings per share
Dividends per share
Shareholders’ funds per share

2014
K’000

941,708

88,655
222,512
13,193
735,964
700,883

286
140
2,373

2013
K’000

930,934

114,011
237,638
(73,984)
713,977
640,284

368
185
2,303

Underlying proﬁ t attributable to shareholders
Underlying earnings per share

108,808
351

128,367
414

Gearing ratio
Interest cover
Dividend cover

47.8%
5.8
2.0

46.5%
7.4
2.0

Change
%

-22%
-6%
118%
3%
9%

-22%
-24%
3%

-15%
-15%

3%
-22%
3%

4 Steamships Annual Report 2014

SUMMARY OF PAST PEFORMANCE

2005
K’000

2006
K’000

2007
K’000

2008
K’000

2009
K’000

2010
K’000

2011
K’000

2012
K’000

2013
K’000

2014
K’000

FINANCIAL HIGHLIGHTS

INCOME STATEMENT (including discontinued operations)
Revenue
Proﬁ t before tax
Share of associates proﬁ t
Income tax expense
Minority interests
Net proﬁ t attributable to shareholders
Depreciation transfer
Equity adjustment
Dividends paid or provided
Earnings retained this year

363,565 333,966 404,592
91,208
53,502
45,434
15,029
15,115
13,389
(27,869)
(18,357)
(16,589)
(4,211)
(2,781)
(2,026)
74,157
47,479
40,208
1,467
1,467
1,467
0
0
0
(38,760)
(31,008)
(20,157)
36,864
17,938
21,518

930,934 941,708
462,972 495,976 789,918 920,357 986,310
79,747 134,789
111,615 120,602 180,834 233,967 265,574
3,843
9,697
13,859
11,416
16,837
14,188
16,732
(14,042) (38,487)
(67,727) (81,414)
(53,935)
(32,808) (34,637)
(11,490)
(6,137)
(5,418)
38,609
(21,838) (20,648)
(21,870)
88,655
96,560 116,445 158,261 177,700 114,011
90,226
0
0
(1,061)
159
0
(8,994)
0
0
(57,365) (43,411)
45,244
47,652

0
0
(45,272) (45,272)
51,288
45,113

0
0
(58,916) (88,373)
89,327
98,284

0
0
(31,008)
85,437

Underlying proﬁ t attributable to
shareholders

BALANCE SHEET
SHARE CAPITAL & RESERVES
Issued Capital
Retained Earnings
Shareholders’ funds
Minority Shareholder’s Interest
EQUITY

Fixed Assets / Investment Properties
Investments in Associated Companies
Future Income Tax Beneﬁ t
Goodwill
Current assets
TOTAL ASSETS

Current Liabilities
Non-Current Liabilities
TOTAL LIABILITIES

28,696

35,067

49,926

67,770

85,120 113,597 153,566 156,213 128,367 108,808

24,200
24,200
24,200
302,595 353,883 428,157 554,349 652,978

24,200
24,200
24,200
24,200
24,200
196,161 218,833 254,230
689,777 711,764
220,361 243,033 278,430 326,795 378,083 452,357 578,549 677,178 713,977 735,964
30,773
230,417 254,127 292,114 345,131 421,937 515,208 653,914 761,500 736,884 766,737

24,200

62,851

75,365

10,056

24,200

18,336

43,854

11,094

13,684

84,322

22,907

193,639 227,773 263,276
22,225
16,839
10,572
5,358
12,944
24,207
3,568
3,068
3,568
98,006 137,623
98,588

353,261 664,196 786,510 938,709 1,023,861 1,066,393 1,115,123
33,193
28,445
33,337
31,471
33,521
0
4,150
21,081
93,617
80,491
17,183
7,578
352,549 366,479
330,074 359,130 432,050 552,834 910,103 1,122,595 1,283,971 1,491,651 1,565,111 1,628,807

38,687
15,416
0
9,282
17,183
17,183
154,508 203,480 294,203 299,634 411,920

17,939
7,305
17,183

90,867
8,790

98,517 134,941
4,995
6,486

230,390 190,621
597,837 671,449
99,657 105,003 139,936 207,703 488,166 607,386 630,057 730,151 828,227 862,070

122,562 236,847 273,055 283,445 370,396
85,141 251,319 334,331 346,612 359,755

NET ASSETS

230,417 254,127 292,114 345,131 421,937 515,208 653,914 761,500 736,884 766,737

RATIOS
Current assets to current liabilities
Borrowings to shareholders funds
Gearing
Tangible net asset backing per share (toea)
Net proﬁ t to revenue %
Net proﬁ t to shareholders’ funds %
Underlying proﬁ t to shareholders’ funds %
Dividends per share (toea)
EPS (toea)
Underlying EPS (toea)
Earnings retained %

1.08
13.7%
11.6%
7.33
10.9%
18.2%
13.0%
65
130
93
53.5%

0.99
10.6%
9.2%
8.08
14.1%
19.5%
14.4%
100
153
113
37.8%

1.02
13.6%
11.5%
9.31
18.2%
26.6%
17.9%
125
239
161
49.7%

1.26
34.8%
24.8%
10.89
19.4%
27.6%
20.7%
146
291
219
50.0%

0.86
89.1%
44.4%
13.05
19.3%
25.5%
22.5%
146
311
275
53.1%

1.08
89.7%
44.0%
16.06
14.5%
25.7%
25.1%
100
376
366
73.4%

1.06
70.1%
38.3%
20.53
16.9%
27.4%
26.5%
190
510
495
62.1%

1.11
72.6%
39.2%
24.00
17.1%
26.2%
23.1%
285
573
504
50.3%

1.53
89.7%
46.5%
20.75
12.2%
16.0%
18.0%
185
368
414
41.8%

1.92
95.2%
47.8%
22.13
9.4%
12.0%
14.8%
140
286
351
51.0%

Notes
Earnings per share = proﬁ t attributable to shareholders / average shares in issue
Gearing = debt / debt plus equity
Interest cover = earnings before interest and tax / net ﬁ nance charge
Dividend cover = proﬁ t attributable to shareholders / total dividend paid and provided

Steamships Annual Report 2014 5

CHAIRMAN’S REPORT

Trading conditions slowed as anticipated in 2014 as the stimulus provided by the
construction phase of the LNG project came to an end. Weaker agricultural commodity
prices and the stronger Kina also took their toll on the non-resource sector of the economy
which supports the vast majority of Papua New Guinea’s citizens. The mid-year intervention
by the Bank of Papua New Guinea added unwelcome disruption and uncertainty to foreign
currency transactions and created an additional cost burden for much of the business
community.

The sale of Datec was completed in 2014. The potential of
this information technology and communications service
provider was considered to be more readily realisable if
aligned with a telecoms provider in an industry that is
increasingly communications dependent. Datec was a
good business for Steamships but should better realise its
potential with its new owner, Telikom.

Steamships continued to invest signiﬁ cantly in 2014 (Kina
201.3 million) as several large property projects were
completed and vessels delivered. The pace of investment
will be decelerated in the short term as the economic
downturn is digested but Steamships will remain vigilant
to identifying opportunities that could arise during this
period.

The recent collapse in oil and gas prices will bring
uncertainty and possible delays to anticipated projects
but the quality of PNG resources should mean that it a
question of when not if development will commence.
Steamships remains conﬁ dent in the longer term prospects
for the PNG economy. In the short term a degree of caution
will be exercised and disciplines applied that have assisted
Steamships over 96 years to navigate the occasional bumpy
road on PNG’s journey of development.

Steamships will continue to invest in the training and
development of its staff despite the slowdown. We intend
to be well positioned for when the economy regathers
steam and our team can continue to grow Steamships. I
thank all our staff for their commitment and hard work
which have been and will remain critical to the success of
Steamships.

GL Cundle
Chairman

March 2015

The logistics businesses; Consort, Steamships Shipping,
East West Transport and Paciﬁ c Towing are early
barometers of PNG’s economic health with their exposure
to trade ﬂ ows and resource sector development. 2014
experienced slowing activity levels and the critical focus
for 2015 will be on reducing structural costs to enhance
competitiveness. Investment in ﬂ eet retonnaging was
signiﬁ cant in 2014 and the modern tonnage will improve
cost efﬁ ciency and reliability. Consort continued to suffer
from severe congestion delays in Lae but the welcome
completion of the ﬁ rst stage of the Lae Tidal Basin should
remove this infrastructure bottleneck in 2015.

In recent years Paciﬁ c Palms Property has increasingly
focused investment upon developments of scale and
quality in good strategic locations. These attributes should
position the business to ride out the stresses created by
over-supply in some property sectors in Port Moresby.
Windward West, Waigani Central, Kittyhawk Industrial
Complex, the Madang retail centre and SVS supermarket
in Lae were all completed during 2014 and fully tenanted
upon opening.

Coral Sea Hotels has and will continue to invest
signiﬁ cantly in the upgrade of its product and the service
standards of its staff to better attract and retain custom in
an increasingly competitive market. Yields were managed
to ensure room occupancy rates were maintained despite
the entry of new room capacity in the Port Moresby and
Lae markets. The Division has expansion plans to meet
anticipated demand growth, especially for leisure dining,
as disposable incomes are expected to increase over the
medium term.

Management of the transition of Laga from a manufacturer
of a variety of consumer goods to a business more focused
upon ice cream manufacturing, sales and distribution has
been a challenge. New management will be applying a
more disciplined and structured approach to delivering
the basics in a more reliable manner. Investment in a
doubling of freezer and manufacturing capacity reﬂ ects the
commitment to the potential of the ice cream business.

6 Steamships Annual Report 2014

DIRECTORS’ REVIEW

The Directors of Steamships advise a proﬁ t after tax and minority interests of K88.7 million
for the 12 months to December 2014, compared to a proﬁ t of K114.0 million (restated) for
the same period in 2013 (a 22.2% reduction).

Sales of K941.7 million have increased by 1.2% against
2013 sales of K930.9 million. Depreciation in 2014
was K106.9 million (excluding impairments) against
K106.7 million in 2013, and interest on borrowings
(excluding capitalised interest) was K28.9 million against
K17.8 million in 2013. Capital expenditure for the 12
months was K201.3 million (with capitalised interest of
K4.9million) against K224.7 million (with capitalised
interest of K16.5 million) in 2013. A ﬁ nal dividend of
60 toea per share has been proposed and will be paid
following approval at the company’s annual general
meeting on the 26th of May 2015. This brings the total
dividend for the year to 140 toea per share (2013; 185 toea
per share).

As allowed by IFRS 3, the 2013 comparative results have
been restated to include an adjustment of K3.0 million
to reduce the equity gain on assuming control of Paciﬁ c
Towing; this is as a result of a reassessment of the estimated
fair value associated with outstanding salvage jobs at the
point of gaining control.

As reported to the Stock Exchange on the 16th February
2015, East West Transport implemented a decision to
exit its operations on the Highlands Highway given an
unsustainable operation. This together with a number of
other impairments, netted off by a gain on the sale of Datec
(PNG) Limited in July 2014, sees an adjusted underlying
proﬁ t attributable to shareholders of K108.8 million as
compared to a K128.4 million for the same period in 2013
(a 15.2% decline).

Steamships Annual Report 2014 7

REVIEW OF OPERATIONS - LOGISTICS

STEAMSHIPS COASTAL SHIPPING & STEVEDORING

Steamships has been a leader in coastal shipping in PNG
since 1919. Through its Steamships Shipping division,
the Group today operates a ﬂ eet of 16 coastal vessels.
Designed for shallow water and river passage, their safety
and technical speciﬁ cations are maintained to international
standards. The ﬂ eet includes landing craft, bulk carriers,
tankers, tugs and barges. While the Division specialises
in river shipping, it also has vessels fully certiﬁ ed for
international trading, which regularly operate charters to
Australia.

Steamships Shipping provides short and long term vessel
charters, as well as reliable scheduled cargo liner services
to the shores and rivers of the Gulf of Papua. It also
develops, implements and supports intermodal logistics
solutions linked to land based services such as road
transport, cargo handling, storage, agencies, customs
clearance, lay down areas and warehousing.

In addition to owning vessels, Steamships JV Stevedoring
businesses offer a full range of stevedoring and handling
facilities. They operate in the ports of Port Moresby, Lae,
Oro, Madang, Kimbe, Kavieng and Kiunga. With a ﬂ eet
of specialist equipment the businesses handle all types of
containers, as well as project cargo, break-bulk, RO-RO,
LO-LO and grains. Local trucking businesses are also
operated at several locations. The stevedoring companies
are joint ventures between Steamships Shipping and
local landowner groups at the respective ports. Each joint
venture employs a local workforce and is structured in
a manner so that earnings are able to ﬁ lter back into the
community.

A disappointing year as demand for landing craft on
project charters was weak due to the fall in exploratory
activity for resource companies as a result of weakening
commodity prices. The liner trades to Kiunga and Daru
also reported poor results with weaker cargo volumes and
continued competitive pressure on rates.

Costs were inﬂ ated by the salvage of two vessels that
grounded in the Kikori River where navigational conditions
are challenging. There was also a subsequent loss of hire
for the two vessels. Steamships is introducing new vessels
with shallow draft and double bottom hulls to provide
the most environmentally sound operating solution for

these regions where exploration activity is expected to be
centred in the future.

The ﬁ rst half of the year beneﬁ ted from continued spot
employment with Ok Tedi for the Obo Chief and Bosset
Chief but with the cessation of this work both vessels are
now scheduled for disposal. A 5 year charter extension for
Kiunga Chief has been conﬁ rmed with Ok Tedi.

The ﬂ eet retonnaging plans continued through 2014
with a replacement tug (Ok Tarim) delivered in March, a
new design 480 dead weight tons B-class (Balimo Chief)
arriving in November and an additional 1,450 dead weight
tons K-class (Kerema Chief) delivered in December. The
new B-class is designed to meet the demand for shallow
draft river project work and replaces the retiring Erima
Chief.

A group reorganisation has been announced with the
consolidation of Steamships Shipping into Consort Express
Lines, a related entity in which Steamships has a 51%
shareholding, expected to take place in mid 2015. Consort
will combine its existing main port coastal liner service
with Steamships liner services to the Papuan Gulf offering a
more seamless service to customers. The expanded Consort
will also be able to offer project and charter services on a
national basis whereas the Steamships traditional focus has
been on the Papuan Gulf. The consolidation should also
provide cost efﬁ ciencies.

The Joint Venture Stevedoring businesses with local
partners in key PNG ports had a satisfactory year with
ﬂ at tonnage in most ports except Port Moresby, which
experienced a downturn with the completion of the LNG
Project decommissioning phase. A new Joint Venture, Palm
Stevedoring & Transport, was successfully established in
Alotau and met expectations.

Prospects for the project charter business in 2015 appear
challenging with the collapse in commodity prices
potentially delaying development of the Elk Antelope
and Western Province LNG projects. The ﬂ eet renewal
undertaken in recent years (another B-class vessel,
Bamu Chief, will be delivered in Q1 2015) will position
Steamships/Consort to be a strong contender for the
eventual recovery in market conditions. 2015 will have a
strong focus on cost efﬁ ciency as the consolidation with
Consort is progressed.

8 Steamships Annual Report 2014

REVIEW OF OPERATIONS - LOGISTICS

CONSORT EXPRESS LINES

As a complementary business to Steamships Shipping,
Consort Express Lines Limited (Consort), established
in 1978, provides the most comprehensive network of
scheduled liner shipping services in PNG. Operating from
its hub in Lae, Consort connects 15 ports in PNG and
provides an international service to Townsville, Australia.
The Division has scheduled services to the North Coast
(Madang, Basamuk, Wewak, Vanimo), South Coast (Port
Moresby, Oro Bay, Alotau), New Guinea Islands (Kimbe,
Rabaul, Kavieng), Bougainville (Buka, Kieta), Australia
(Townsville) and with Steamships Coastal Shipping a
transhipment to Western Province (Daru, Kiunga). Consort
proudly serves the people of PNG by providing the sole
supply link to many of the communities on its routes.

Consort owns seven geared, multi-purpose vessels
(PNG ﬂ agged and manned) with all safety and technical
speciﬁ cations maintained according to international
standards. The Division can carry a range of cargoes
including containerised, break-bulk, reefer, LCL and
project cargo. Consort transports cargo for a diverse
customer base from domestic manufacturers and
wholesalers to international liner carriers transhipping
cargoes to outports.

In addition to owning and operating ships, Consort
provides complementary depot services to customers
at its Lae hub (including bond yard, container storage
and wash bay facilities) and is a shareholder and
manager of stevedoring operations at ﬁ ve PNG ports
(Riback Stevedoring, Lae; United Stevedoring, Lae;
United Stevedoring, Port Moresby; Makerio Stevedoring,
Buka; Nikana Stevedoring, Kieta). These stevedoring
companies are partnerships between Consort and local
landowner companies and provide signiﬁ cant employment
opportunities for the nearby communities.

The coastal shipping industry continued to face
challenging conditions as the non-resource sector of
the economy struggled with weaker commodity prices
and the revaluation of the Kina imposed by the Bank of
PNG. Coastal tonnages had been improving in the ﬁ rst

half but activity in the second half was signiﬁ cantly and
progressively weaker. Overseas tonnages on the Townsville
service were in line with what had been a poor prior year.
Competition remained ﬁ erce on all key sectors.

Berth congestion in Lae was signiﬁ cantly worse than 2013
and added appreciably to operating costs. The opening of
the ﬁ rst phase of the Lae Tidal Basin should bring some
welcome relief to this problem once the new berth is fully
operational.

A new service to Manus reported start-up losses and was
also hampered by congestion – it is hoped that a contract/
sourcing review may assist PNG-service providers in 2015.

Operating costs were negatively impacted by charter costs
incurred to bridge the gap between retiring older tonnage
and the delayed purchase of replacement tonnage. The
ﬂ eet renewal programme is on track to provide Consort
with larger capacity (8000 dwt) vessels to better meet
customer requirements and to enable improved and more
reliable scheduling. Gazelle Coast (October delivery) and
Bougainville Coast (November) have entered service and
are performing well. Consort continues to invest in the
expansion and upgrading of its container ﬂ eet with 1000
new boxes delivered in 2014 and a further 2000 boxes
ordered for 2015 delivery.

Stevedoring tonnages for associate, Riback Stevedoring,
were signiﬁ cantly down on 2013 as project cargoes
declined and the contribution attributable to Consort was
consequently much reduced.

Prospects for 2015 are clouded by the weakening non-
resource sector of the economy. There will be a strong
focus on improved cost efﬁ ciency to be delivered from
the consolidation with Steamships Shipping and the new
vessel deliveries. The Lae Tidal Basin opening should also
bring signiﬁ cant operational efﬁ ciencies and an improved
service to customers with an anticipated fall in congestion
delays.

Steamships Annual Report 2014 9

REVIEW OF OPERATIONS - LOGISTICS

PACIFIC TOWING

Paciﬁ c Towing became a wholly owned Steamships
subsidiary at the end of November 2013. The Division
is the leading provider of harbour towage and mooring
services in PNG and offers coastal and ocean towage
services. It also retains a fast responder salvage capability
complimented by a comprehensive range of commercial
dive services.

Paciﬁ c Towing is headquartered in Port Moresby and
operates 22 vessels, including tugs and line boats, in
ﬁ ve ports across PNG (Port Moresby, Lae, Rabaul, Kimbe
and Madang). Dedicated harbour towage services were
extended to the Solomon Islands in 2013 through a newly
formed subsidiary company operating in Honiara.

2014 was the ﬁ rst year of operation for Paciﬁ c Towing as
a wholly-owned subsidiary. The result was satisfactory
despite a 3% drop in harbour jobs due to fewer ship calls

as the LNG project decommissioning came to a close.
Tug charters and diving services had positive growth and
costs were well contained with the introduction of 3 crew
manning on the two tugs acquired in 2013. Maintenance
costs were also reduced with the deployment of the new
tugs.

Two salvages of Steamships Coastal vessels were reported
as extraordinary income.

The retonnaging plan progressed with the acquisition of
a third 50 ton bollard pull AST tug, Paciﬁ c Salvor, to be
deployed in Lae in early 2015 after completion of reﬁ tting.
The two similar scoped tugs acquired in 2013 have
performed very reliably. Two new line boats were delivered
for service in Port Moresby during 2014.

Prospects are expected to be steady for 2015. A new
mooring service will be offered in Kimbe.

EAST WEST TRANSPORT

East West Transport (EWT) is one of Papua New Guinea’s
main multifaceted transport and logistics companies. Based
in Lae, it also has a presence in Port Moresby, Kimbe,
Rabaul, Madang, Wewak and Kavieng. The Division
has a sizable ﬂ eet of prime movers, heavy trucks, light
trucks, forklifts and reach stackers ranging from 2.5 to 45
tons in capacity. All equipment is supported by localised
workshop facilities, safety and emergency vehicles and in
house training programmes.

EWT operates across a wide spectrum of transport-related
activities including bulk fuel, containerised cargoes, bulk
grain, sawdust and coffee along with break-bulk cargoes
and depot services such as equipment hire, warehousing
and yard storage. EWT also offers a licensed customs cargo
clearance service in Lae and Port Moresby and operates a
large export coffee processing facility in Lae. The Division
capitalises on its close relationships with sister companies
in shipping and stevedoring by offering specialised project
solutions for the mining, oil and gas sectors.

East West continued to operate in difﬁ cult market
conditions and operating margins remained compressed
despite signiﬁ cant efforts to reduce costs, which
unfortunately necessitated a number of staff redundancies
through 2014. Operating conditions on the Highlands
Highway continued to deteriorate with security problems
endemic and maintenance costs inﬂ ated by the poor road

10 Steamships Annual Report 2014

conditions and consequent vehicle damage. The Highlands
economy was hit by another disappointing coffee crop
which impacted East West haulage volumes and its coffee
bulking facility. The slowdown in mining activity has
led to excess truck capacity having to be absorbed at
a time of weakening demand with an inevitable fall in
rates. As reported to the stock markets in February, this
situation sadly resulted in a decision to close the Division’s
Highlands Highway Operations with an impairment charge
of PGK 15.7 million (post tax) recognised in the 2014
results.

Haulage activity in Port Moresby and Lae was impacted by
the economic slowdown and there was some relocation
of excess vehicles from the Highlands into both markets.
Customs clearance work and warehousing was weaker
in both markets again due to the slowing economy. Fuel
haulage was relatively stable. The Kimbe operation was
effected by weakening palm oil prices and their impact on
the local economy and there is expected to be a reduction
in fertiliser imports (and consequent haulage for East West)
for 2015 as growers seek to reduce input costs.

No improvement in market conditions is anticipated in
the short term and cost rationalisation will be a key focus
for 2015. Consequently the residual East West Transport
business will during the course of 2015 be amalgamated
with that of Steamships’ Joint Venture Stevedoring business
to form an overall land based logistics division.

REVIEW OF OPERATIONS - PROPERTY

CORAL SEA HOTELS

Coral Sea Hotels (CSH) operates nine hotel and apartment
complexes offering full hotel facilities and serviced
apartments as well as extensive meeting, conference and
banqueting facilities.

CSH remains the largest hotel group in PNG, offering
646 hotel rooms and 136 apartments. The Group
comprises the Grand Papua Hotel, the Gateway Hotel
and Apartments, the Ela Beach Hotel and Whittaker
Apartments in Port Moresby; the Huon Gulf Hotel and
Apartments and Melanesian Hotel and Apartments in Lae;
the Highlander Hotel and Apartments in Mount Hagen; the
Bird of Paradise Hotel and Apartments in Goroka, and the
Coastwatchers Hotel in Madang.

Margin declined as average rates fell 10% on prior year
with the impact of a slowing economy on business travel,
growing competition in Port Moresby and Lae, budget
constraints on government department expenditure and
reduced consumer discretionary spend in restaurants all
being contributory factors. Room occupancy levels were
maintained in line with prior year and serviced apartment
performance was generally stable in the major centres.

Revenue and margin improved with the internalisation
of food and beverage services at the Grand Papua Hotel
following cancellation of its previous external service
provider contract.

Investment was maintained in the upgrade of room
standards, Project Cambridge, with the Ela Beach
Hotel being the initial beneﬁ ciary. The project will
be extended to other hotels through 2015. Free wi-ﬁ
service was introduced to the Port Moresby hotels and
service performance will be evaluated for extension to
other centres. Signiﬁ cant investment in staff training was
maintained to improve the quality of service offering for
customers and to develop capability in advance of the
planned expansion of food and beverage outlets over the
next few years.

Plans for 2015 include redevelopment of the Huon Gulf
Hotel in Lae, extensions for the Highlander Hotel in Mt
Hagen, a new restaurant extension for the Gateway Hotel
and new restaurant outlets for the Grand Papua Hotel.
Development of a new hotel in Kiunga in co-operation
with Ok Tedi Development Fund has also been announced.

A recovery in business travel is not anticipated for
2015 and new competition will enter the Port Moresby
market but the Port Moresby hotels will beneﬁ t from
the Steamships Gold sponsorship of The Paciﬁ c Games
and designation of Coral Sea Hotels as “Preferred
Accommodation Provider of the Event”.

Steamships Annual Report 2014 11

REVIEW OF OPERATIONS - PROPERTY

PACIFIC PALMS PROPERTY

Paciﬁ c Palms Property is one of the largest and most
dynamic property developers in PNG. The Division
provides residential, commercial, retail and industrial
property throughout the country.

Paciﬁ c Palms Property has two separate streams of business
activity. The development team manages land acquisition,
investment assessment and construction management,
while the lettings team manages marketing, tenant
placements, rental collections and property maintenance.

Building and land assets are located in Port Moresby,
Lae, Madang, Wewak, Goroka, Mt Hagen, Popondetta
and Rabaul. The Division currently holds a total lettable
space of 25,488m2 of commercial property, 189,944m2 of
industrial property, 36,949m2 of retail property and 160
residential townhouses and apartments.

Paciﬁ c Palms had a satisfactory year with new
developments attracting strong support. The anticipated
weakening in the Port Moresby residential market was
realised with reduced demand as the LNG demobilisation
phase coincided with an inﬂ ux of new capacity entering
the market. Rentals came under pressure, primarily for
older units, but demand for the premium Windward East
complex ensured full occupancy from opening.

The Blaikie Apartments in Lae, completed at the end of
2013, attracted high occupancy levels throughout the
year. Occupancies in Port Moresby fell in the ﬁ nal quarter
as renovation work commenced on the Windward West
apartments to bring them to an equivalent standard as

Windward East. The renovations will impact occupancy
through 2015.

In the Retail sector, the pre-let SVS supermarket and
commercial centre in Lae and the Waigani Central
supermarket, hardware and cinema complex were
completed and have proven popular new retail
destinations. A retail and mixed use development in
Madang was completed in the ﬁ rst half and was fully let
upon opening.

Demand remained satisfactory in the industrial category.
Eight new warehouses were completed at the Kittyhawk
centre at 6 Mile, Port Moresby and were fully let upon
opening. Two new warehouses were completed at Baruni,
Port Moresby and were again fully let upon opening.

Demand in the commercial ofﬁ ce category was steady.
The 11,743m2 twin tower Harbourside ofﬁ ce development
remains on schedule for completion in early 2015. The
ground ﬂ oor, originally planned for mixed use has been
redesigned as purely a restaurant and bar area to take
advantage of its attractive location overlooking the harbour.

Prospects for 2015 are expected to be relatively stable
for the industrial and retail sector. Demand for older
residential units is expected to remain under pressure
and selective disposals of less strategic properties will be
considered. The Harbourside ofﬁ ce towers will be leased
into a softening commercial sector market but the quality
of the product should stimulate solid interest. Paciﬁ c Palms
has no plans to commence any new major developments
in 2015 but will remain alert for opportunities to increase
its land banks.

12 Steamships Annual Report 2014

REVIEW OF OPERATIONS - COMMERCIAL

LAGA INDUSTRIES

Headquartered in Lae, Laga Industries is PNG’s premier
consumer goods business and the country’s leading
manufacturer of ice creams, vegetable oils, drink powders,
condiments and spirits.

Brands include Gala Ice Cream, distributed from the Gala
Parlours found in most leading retail supermarkets, Laga
and Highlands Meadow oils, Kools drinking powders, and
Trade Winds spirits including popular ready-to-drink (RTD)
premixed beverages. Laga Industries also bottles pure
drinking water.

Operationally, the Division has a fully integrated
production facility in Lae and has a freezer and dry goods
distribution facility in Port Moresby, with sales ofﬁ ces in
Madang, Wewak, Goroka, Mt Hagen, Kimbe, Kavieng,
Rabaul and Buka.

Laga Industries experienced another disappointing year
with poor manufacturing reliability leading to failures to
meet customer requirements. Addressing these issues will
be the key priority for 2015.

A strategic decision to reduce manufacturing complexity
in the Lae factory and the inﬂ ux of aggressively priced
imports led to the cessation of domestic bottling of cooking

oil. The transition to overseas sourcing was not well
managed and led to out-of-stocks but performance was
improving towards the year end.

Operations were disrupted from mid-year by the Bank of
PNG introduction of new controls on foreign exchange
which led to lengthy and unreliable processing of
applications for foreign exchange payment approvals. The
disruption to supply chains and resultant additional costs
in sourcing raw materials served to further under-mine
the competitiveness of domestic manufacturing. Power
supplies to the Lae factory were extremely unreliable and
added to cost, waste and increased maintenance.

Trade Winds had a disappointing year due to
manufacturing breakdowns and lack of focus which new
management is expected to address.

Freezer warehouse capacity has been doubled and a new
blast freezer commissioned in 2014, which will improve
stock availability and product quality. The completion of
the ice cream manufacturing upgrade in Q1 2015 will
double production capacity.

New management will focus on getting the basics right
in a business that has signiﬁ cant potential and results are
expected to recover in 2015.

COLGATE PALMOLIVE

Steamships holds a 50 per cent beneﬁ cial interest in
Colgate-Palmolive (PNG) Ltd (Colgate), a company that
markets and distributes oral, personal, home and fabric
care products in PNG. Joint control is exercised by the
Board however day to day management is performed by
Colgate-Palmolive Australia.

Colgate Palmolive had a much improved performance in
2014 with strengthened supply chain processes and stock
control avoiding the product availability problems that
undermined the prior year performance. Margins were
compressed in the ﬁ rst half due to high soap chip costs and
the impact of the strong Kina on import costs. Input costs
eased in the second half.

Sales volumes grew in most categories with improved stock
availability. Soap powder sales were an exception due to
increased competitive activity. Improved in-store execution
and an enhanced distribution presence in second tier
markets had a positive impact on sales.

Marketing focus was maintained on consumer education
programmes in all media to promote the health beneﬁ ts
of oral and personal hygiene. The “Bright Smiles, Bright
Futures” campaign for Colgate toothpaste had a direct
interaction between Colgate Palmolive’s oral health
ambassadors and 150,000 consumers (the majority being
schoolchildren) across PNG.

Steamships Annual Report 2014 13

SUSTAINABILITY

Steamships remains committed to the principles of Sustainable Development. Our People
remain our key asset and focus on their health, safety and security is paramount in all we do.

Steamships will continue to invest in the training and
development of its staff despite the slower economy.
We intend to be well positioned for when the economy
regathers steam and our team can continue to grow
Steamships.

We continue to promote community engagement
initiatives and are acutely aware of the need to minimise

our environmental footprint. We continue for a second
year to report against the Global Reporting Initiative
measures at the C level.

Steamships’ full annual Sustainability Report can be
found at http://www.steamships.com.pg/sustainability/
sustainability-reporting

CORPORATE GOVERNANCE

Steamships and its Board are committed to achieving and demonstrating the highest
standards of corporate governance and ethical behaviour, and they expect these standards
from all employees. The Group believes that the maximisation of long term returns to
shareholders is best achieved by acting in a socially responsible manner that recognises the
interests of community stakeholders.

Steamships is committed to:

•

Providing high-quality products and services to meet
customers’ needs;

Maintaining high standards of business ethics and
corporate governance;

Ensuring the safety and wellbeing of employees and
others with whom the Group has contact; and

•

Promoting sustainable business practice.

Steamships reports against the Australian Stock Exchange
(ASX) and Port Moresby Stock Exchange (POMSOX)
recommendations by addressing each key principle in the

order it is listed in the guidelines. Each section addressing
a key principle includes references to relevant information
that appears elsewhere in the 2014 Annual Report or on
the Steamships’ website.

Steamships believes it complied with the 2010 Australian
Stock Exchange Corporate Governance Principles and
Recommendations with 2010 amendments during the
twelve months ended 31 December 2014, except where
noted in the annual Corporate Governance Report.

Steamships’ full annual Corporate Governance Report
can be found at http://www.steamships.com.pg/aboutus/
corporate-goverance

14 Steamships Annual Report 2014

Steamships Annual Report

FINANCIAL
CONTENTS

Statements of Comprehensive Income . . . . . . . . . . 16

Statement of Changes in Equity . . . . . . . . . . . . . . 17

Balance Sheets . . . . . . . . . . . . . . . . . . . . . . 18

Statements of Cash Flows . . . . . . . . . . . . . . . . 19

Notes to the Financial Statements . . . . . . . . . . . . 20

Independent Auditor’s Report . . . . . . . . . . . . . . 52

Directors’ Report . . . . . . . . . . . . . . . . . . . . . 54

Stock Exchange Information . . . . . . . . . . . . . . . 58

Company Directory . . . . . . . . . . . . . . . . . . . 59

Steamships Annual Report 2014 15

STATEMENTS OF COMPREHENSIVE INCOME
Steamships Trading Company Limited Year ended 31 December 2014 (Amounts in Kina 000’s)

Consolidated

Parent Entity

Continuing Operations

Revenue

Other income

Operating expenses

OPERATING PROFIT

Finance income/(costs) - net

Share of proﬁ t of associates and joint ventures

PROFIT BEFORE INCOME TAX

3(a)

3(b)

3(e)

4(b)

Note

2014

2013

2013
(restated)

827,936

37,791

879,267

11,674

(730,630)

(769,090)

(4,706)

160,311

96,637

95,209

(28,808)

(17,690)

3,844

135,347

9,697

88,644

78,347

21,568

417

56,971

6,103

(6,001)

57,073

95,626

57,145

Income tax expense

5(a)

(37,295)

(13,815)

(70)

(572)

PROFIT FROM CONTINUING OPERATIONS

Proﬁ t after tax from discontinued operations

98,052

2,093

74,829

95,556

56,573

573

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

100,145

75,402

95,556

56,573

Attributable to:

Non-controlling interests

Shareholders

Basic and Diluted Earnings per share

Continuing & discontinued (toea)

Continuing (toea)

11,490

88,655

100,145

(38,609)

114,011

75,402

3(f)

286t

279t

368t

366t

95,556

56,573

These Statements of Comprehensive Income are to be read in conjunction with the accompanying notes.

16 Steamships Annual Report 2014

STATEMENT OF CHANGES IN EQUITY
Steamships Trading Company Limited Year ended 31 December 2014 (Amounts in Kina 000’s)

Share
Capital

Retained
Earnings

Other

Total Capital Controlling

Reserves & Reserves

Interest

Total
Equity

Non-

BALANCE AT 1 JANUARY 2013

24,200

652,978

677,178

84,322

761,500

Proﬁ t for the year

Restatement (note 24)
Change in ownership interest resulting in a
change in control

Dividends paid 2013

117,050

(3,039)

117,050

(38,609)

78,441

(3,039)

(8,994)

(17,104)

(26,098)

(68,218)

(5,702)

(73,920)

BALANCE AT 31 DECEMBER 2013 (Restated)

24,200

698,771

(8,994)

713,977

22,907

736,884

Proﬁ t for the year

Dividends paid 2014

88,655

(66,668)

88,655

11,490

100,145

(66,668)

(3,624)

(70,292)

BALANCE AT 31 DECEMBER 2014

24,200

720,758

(8,994)

735,964

30,773

766,737

This Statement of Changes in Equity is to be read in conjunction with the accompanying notes.

No Statement of Changes in Equity is presented for the Parent Entity as the only movement in equity is represented by the retained
earnings as shown in the statement of comprehensive income and dividend movements as reﬂ ected above for the Group.

Steamships Annual Report 2014 17

BALANCE SHEETS
Steamships Trading Company Limited Year ended 31 December 2014 (Amounts in Kina 000’s)

Current assets
Cash and cash equivalents
Trade and other receivables
Inventories

Non-current assets
Property, plant and equipment
Investment properties
Investments in related companies
Loans to related companies
Intangible assets
Deferred tax asset

TOTAL ASSETS
Current liabilities
Trade and other payables
Provisions for other liabilities and charges
Loans from related company
Loan from shareholder
Borrowings
Income tax payable

Non-current liabilities
Deferred tax liability
Provisions for other liabilities and charges
Borrowings

TOTAL LIABILITIES
NET ASSETS

EQUITY
Issued capital
Retained earnings
Capital and reserves attributable to the
Company’s shareholders
Non-controlling interests
TOTAL EQUITY

Consolidated

Parent Entity

Note

2014

6
7
8

11
12
4(a)
10
13
5(c)

14
15
10
16
16

5(c)
15
16

15,273
160,551
37,060
212,884

714,630
400,493
33,193
153,595
80,491
33,521
1,415,923
1,628,807

101,181
12,411
13,579
17,615
42,014
3,821
190,621

32,106
11,836
627,507
671,449
862,070
766,737

24,200
711,764

735,964
30,773
766,737

2013
(restated)

11,640
177,966
59,878
249,484

722,735
343,658
31,471
103,065
93,617
21,081
1,315,627
1,565,111

130,662
10,176
15,998
15,160
50,681
7,713
230,390

27,710
12,019
558,108
597,837
828,227
736,884

24,200
689,777

713,977
22,907
736,884

2014

2 0 1 3

765
3,376
-
4,141

26,820
-
128,319
5,712
-
701
161,552
165,693

17
-
108,110
-
-
-
108,127

-
-
-
-
107,523
57,566

24,200
33,366

57,566
-
57,566

643
2,690
-
3,333

28,944
-
145,365
5,712
-
771
180,792
184,125

213
-
155,234
-
-
-
155,447

-
-
-
-
154,843
28,678

24,200
4,478

28,678
-
28,678

These Balance Sheets are to be read in conjunction with the accompanying notes.

For and on behalf of the Board:

30 March 2015

G.L. Cundle
Chairman

P.W. Langslow
Managing Director

18 Steamships Annual Report 2014

STATEMENTS OF CASH FLOWS
Steamships Trading Company Limited Year ended 31 December 2014 (Amounts in Kina 000’s)

Consolidated

Parent Entity

Note

2014

2013

2014

2013

CASH FLOWS FROM OPERATING ACTIVITIES

Receipts from customers

933,365

962,288

2,303

Payments to suppliers and employees

(631,622)

(642,030)

(2,288)

Interest received

Interest and other ﬁ nance costs paid

Income tax paid

106

417

(28,899)

(50,423)

(17,796)

(64,930)

Net cash provided by/(used in) operating activities

222,512

237,638

432

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property, plant & equipment

(201,328)

(224,734)

(610)

Proceeds from sales of property, plant & equipment

11,414

52,463

Loans made (to)/repaid by associated companies

(50,494)

(51,609)

(46,168)

Dividends received

2,122

5,921

78,337

1,206

(1,177)

101

(497)

86,780

56,971

Acquisition of subsidiaries and non-controlling interests(net of cash acquired)

(93,663)

(77,719)

Proceeds from sale of subsidiary

28,967

Net cash (used in)/provided by investing activities

(209,319)

(311,622)

34,795

66,354

65,535

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from borrowings

Repayments of borrowings

Dividends paid

92,626

220,000

(86,401)

(16,490)

(70,292)

(73,920)

(66,668)

(68,218)

Net cash provided by/(used in) ﬁ nancing activities

5,844

59,679

(66,668)

(68,218)

NET INCREASE/(DECREASE) IN CASH HELD

CASH AT BEGINNING OF THE YEAR

CASH AT END OF THE YEAR

CASH COMPRISES:

Cash and cash equivalents

Bank overdrafts

19,037

(29,978)

(10,941)

15,273

(26,214)

(10,941)

(14,305)

(15,673)

(29,978)

11,640

(41,618)

(29,978)

122

643

765

(2,582)

3,225

643

These Statements of Cash Flows are to be read in conjunction with the accompanying notes.

Steamships Annual Report 2014 19

NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year ended 31 December 2014 (Amounts in Kina 000’s)

Limited scope amendments to IAS 36 Impairment
of assets.

Restatement

•

Summary of signiﬁ cant accounting policies

The Company is a company limited by shares and is
incorporated and domiciled in Papua New Guinea.

These Group consolidated ﬁ nancial statements were
authorised for issue by the Board of Directors on 30th
March 2015.

The Board of Directors has the power to amend the
ﬁ nancial statements after their issue.

The ﬁ nancial statements have been prepared in
accordance with International Financial Reporting
Standards (“IFRS”).

Changes in accounting policy and disclosures

Standards, amendment and interpretations
effective in the year ended 31 December 2014

The following new standards and amendments
were applicable for the ﬁ rst time during the
accounting period beginning 1 January 2014, but
did not have a signiﬁ cant impact.

Amendments to IFRS 10, Consolidated ﬁ nancial
statements, IFRS 12 and IAS 27 for investment
entities.

Amendments to IAS 32, Financial instrument:
Presentation.

Amendments to IAS 39, “Financial instruments:
Recognition and measurement” in relation to
novation of derivatives.

•

IFRIC 21 Levies.

ii.

New standards, amendment and interpretations
issued but not yet effective for the year ended 31
December 2014 or adopted early

A number of new standards, amendments and
interpretations to existing standards have been
published and are mandatory for the entity’s
accounting periods beginning on or after 1
January 2015 or later periods, but the entity
has not early adopted them. None of these
is expected to have a signiﬁ cant effect in the
consolidated ﬁ nancial statements, but their
potential full impact has yet to be assessed.

•

Amendment to IAS 19 regarding deﬁ ned beneﬁ t
plans.

• Amendment to IFRS 11 Joint arrangements.

20 Steamships Annual Report 2014

•

Amendments to IFRS 10 Consolidated
ﬁ nancial statements and IAS 28 Investments
in associates and joint ventures.

There are no other IFRS’s or IFRIC interpretations
that are not yet effective that would be expected
to have a material impact on the Group.

(a) Basis of preparation

The consolidated ﬁ nancial statements of the
Group have been prepared in accordance with
International Financial Reporting Standards
(IFRS) and IFRIC interpretations. The consolidated
ﬁ nancial statements have been prepared under
the historical cost convention as modiﬁ ed by
ﬁ nancial assets and liabilities at fair value through
proﬁ t and loss.

The preparation of ﬁ nancial statements in
conformity with IFRS requires the use of certain
critical accounting estimates. It also requires
management to exercise its judgement in the
process of applying the Group’s accounting
policies. The areas involving a higher degree
of judgement or complexity, or areas where
assumptions and estimates are signiﬁ cant to the
consolidated ﬁ nancial statements are disclosed in
note 1 (z).

As allowed by IFRS 3, the 2013 comparative
results have been restated to include a negative
adjustment to reduce the equity gain on gaining
control of Paciﬁ c Towing (PNG) Limited; this
is as a result of a reassessment of the fair value
associated with outstanding salvage jobs at the
point of gaining control.

(b) Foreign currency

The Company’s functional and presentation
currency is the Papua New Guinea Kina.
Transactions in foreign currencies have been
translated into the functional currency at rates
ruling at the date of the transaction. Amounts
payable to and by the Group in foreign currencies
have been translated to the functional currency
at rates of exchange ruling at the year end. Gains
and losses arising from movements in foreign
exchange rates are recognised in the statement of
comprehensive income when they arise.

(i) Subsidiaries

The consolidated ﬁ nancial statements incorporate
the assets and liabilities of all subsidiaries of the
Steamships Trading Company Limited as at 31
December 2014 and the results of all subsidiaries
for the year then ended. Steamships Trading

NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year ended 31 December 2014 (Amounts in Kina 000’s)

Company Limited and its subsidiaries together
are referred to as the Group or the consolidated
entity.

Subsidiaries are all entities over which the Group
has control that is when the Group is exposed
to or has rights to, variable returns from its
involvement with the entity and has the ability
to affect those returns through its power over the
entity.

Subsidiaries are fully consolidated from the date
on which control is transferred to the Group.
They are de-consolidated from the date that
control ceases.

The acquisition method of accounting is used to
account for business combinations by the Group
(refer to note 1d).

Intercompany transactions, balances and
unrealised gains on transactions between group
companies are eliminated. Unrealised losses
are also eliminated unless the transaction
provides evidence of the impairment of the asset
transferred. Accounting policies of subsidiaries
have been changed where necessary to ensure
consistency with the policies adopted by the
Group.

Non-controlling interests in the results and
equity of subsidiaries are shown separately in
the consolidated statement of comprehensive
income, statement of changes in equity and
balance sheet respectively.

(ii) Associates

Associates are all entities over which the Group
has signiﬁ cant inﬂ uence but not control generally
accompanying a shareholding of between 20%
and 50% of the voting rights. Investments in
associates are accounted for using the equity
method of accounting, after initially being
recognised at cost. The Group’s investment
in associates includes goodwill identiﬁ ed on
acquisition (refer to note 13).

The Group’s share of its associates’ post-
acquisition proﬁ ts or losses is recognised in proﬁ t
or loss, and its share of post-acquisition other
comprehensive income is recognised in other
comprehensive income. The cumulative post-
acquisition movements are adjusted against the
carrying amount of the investment. Dividends
receivable from associates are recognised
as a reduction in the carrying amount of the
investment.

When the Group’s share of losses in an associate

equals or exceeds its interest in the associate,
including any other unsecured long-term
receivables, the Group does not recognise further
losses, unless it has incurred obligations or made
payments on behalf of the associate.

Unrealised gains on transactions between the
Group and its associates are eliminated to the
extent of the Group’s interest in the associates.
Unrealised losses are also eliminated unless the
transaction provides evidence of an impairment
of the asset transferred. Accounting policies of
associates have been changed where necessary to
ensure consistency with the policies adopted by
the Group.

(iii) Joint ventures

Joint venture entities

The interest in a joint venture is accounted for
using the equity method after initially being
recognised at cost as for associates.

(iv) Changes in ownership interests

The Group treats transactions with non-
controlling interests that do not result in a loss
of control as transactions with equity owners
of the Group. A change in ownership interest
results in an adjustment between the carrying
amounts of the controlling and non-controlling
interests to reﬂ ect their relative interests in the
subsidiary. Any difference between the amount
of the adjustment to non-controlling interests and
any consideration paid or received is recognised
in a separate reserve within equity attributable to
shareholders.

When the Group ceases to have control or
signiﬁ cant inﬂ uence, any retained interest in
the entity is re-measured to its fair value with
the change in carrying amount recognised
in proﬁ t or loss. This fair value becomes the
initial carrying amount for the purposes of
subsequently accounting for the retained interest
as an associate or ﬁ nancial asset. In addition,
any amounts previously recognised in other
comprehensive income in respect of that entity
are accounted for as if the Group had directly
disposed of the related assets or liabilities. This
may mean that amounts previously recognised in
other comprehensive income are reclassiﬁ ed to
proﬁ t or loss.

If the ownership interest in a jointly-controlled
entity or an associate is reduced but signiﬁ cant
inﬂ uence is retained, only a proportionate share
of the amounts previously recognised in other
comprehensive income are reclassiﬁ ed to proﬁ t
or loss where appropriate.

Steamships Annual Report 2014 21

NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year ended 31 December 2014 (Amounts in Kina 000’s)

(d) Business combinations

The acquisition method of accounting is used to
account for all business combinations, regardless
of whether equity instruments or other assets
are acquired. The consideration transferred for
the acquisition of a subsidiary comprises the
fair values of the assets transferred, the liabilities
incurred and the equity interests issued by
the Group. The consideration transferred also
includes the fair value of any asset or liability
resulting from a contingent consideration
arrangement and the fair value of any pre-existing
equity interest in the subsidiary. Acquisition-
related costs are expensed as incurred.
Identiﬁ able assets acquired and liabilities and
contingent liabilities assumed in a business
combination are, measured initially at their fair
values at the acquisition date. On an acquisition-
by-acquisition basis, the Group recognises any
non-controlling interest in the acquiree either
at fair value or at the non-controlling interest’s
proportionate share of the acquiree’s net
identiﬁ able assets.

The excess of the consideration transferred, the
amount of any non-controlling interest in the
acquiree and the acquisition date fair value
of any previous equity interest in the acquiree
over the fair value of the Group’s share of the
net identiﬁ able assets acquired is recorded as
goodwill. If those amounts are less than the
fair value of the net identiﬁ able assets of the
subsidiary acquired and the measurement of all
amounts has been reviewed, the difference is
recognised directly in determining proﬁ t or loss
as a bargain purchase.

Where settlement of any part of cash
consideration is deferred, the amounts payable in
the future are discounted to their present value as
at the date of exchange. The discount rate used
is the entity’s incremental borrowing rate, being
the rate at which a similar borrowing could be
obtained from an independent ﬁ nancier under
comparable terms and conditions.

Contingent consideration is classiﬁ ed either as
equity or a ﬁ nancial liability. Amounts classiﬁ ed
as a ﬁ nancial liability are subsequently re-
measured to fair value with changes in fair value
recognised in proﬁ t or loss.

(e) Revenue recognition

The Group recognises revenue when the amount
of revenue can be reliably measured, it is
probable that future economic beneﬁ ts will ﬂ ow
to the entity and speciﬁ c criteria have been met
for each of the Group’s activities as described

22 Steamships Annual Report 2014

below. The Group bases its estimates on historical
results, taking into consideration the type of
customer, the type of transaction and the speciﬁ cs
of each arrangement.

Revenue is recognised for the major business
activities as follows:

Sale of goods - Revenue from the sale of goods
is recognised when the entity sells a product to
the customer and all signiﬁ cant risks and rewards
have been transferred.

Services - Service revenue is recognised when
the service has been rendered.

Freight - Freight revenue is recognised as the
service has been provided.

Interest income - Interest income is recognised
using the effective interest method.

Dividend income - Dividends are recognised
when the right to receive payment is established.

Rental income - Rental income is recognised on
a straight line basis over the term of the lease.

(f) Income tax

The income tax expense or beneﬁ t for the period
is the tax payable on the current period’s taxable
income based on the notional income tax rate
adjusted by changes in deferred tax assets and
liabilities attributable to temporary differences
between the tax bases of assets and liabilities
and their carrying amounts in the ﬁ nancial
statements, and to unused tax losses.

Deferred income tax is provided in full, on
temporary differences arising between the tax
bases of assets and liabilities and their carrying
amounts in the ﬁ nancial statements. Currently
enacted tax rates are used in the determination
of deferred income tax. Deferred tax assets are
recognised to the extent that it is probable that
the future taxable proﬁ t will be available, against
which the temporary differences can be utilised.

(g) Cash and cash equivalents

For the purpose of the statement of cash ﬂ ows,
cash and cash equivalents includes cash on hand,
deposits held at call with banks and Treasury
Bills with a maturity less than 90 days. Bank
overdrafts are shown in current liabilities in the
statement of ﬁ nancial position.

(h) Receivables

Trade receivables are amounts due from
customers for merchandise sold or services
provided in the ordinary course of business.
There are classiﬁ ed as current assets if collection

NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year ended 31 December 2014 (Amounts in Kina 000’s)

is expected within one year. Receivables are
recognised initially at fair value and subsequently
measured at amortised cost using the effective
interest method, less provision for impairment. A
provision is established when there is objective
evidence that the Group will not be able to
collect all amounts due according to the original
terms of receivables.

(i)

Inventories

Inventories are valued at the lower of cost
and net realisable value. In general, cost is
determined on the weighted average basis and,
where appropriate, includes a proportion of
variable overhead expenditure. Net realisable
value is the estimated selling price in the ordinary
course of business, less applicable variable
selling costs.

(j) Non-current assets held for resale

Non-current assets (or disposal groups) are
classiﬁ ed as held for sale if their carrying amount
will be recovered principally through a sale
transaction rather than through continuing use
and a sale is considered highly probable. They
are measured at the lower of their carrying
amount and fair value less costs to sell, except
for assets such as deferred tax assets, assets
arising from employee beneﬁ ts, ﬁ nancial
assets and contractual rights under insurance
contracts, which are speciﬁ cally exempt from this
requirement.

An impairment loss is recognised for any initial or
subsequent write down of the asset (or disposal
group) to fair value less costs to sell. A gain is
recognised for any subsequent increases in fair
value less costs to sell of an asset (or disposal
group), but not in excess of any cumulative
impairment loss previously recognised. A gain or
loss not previously recognised by the date of the
sale of the non-current asset (or disposal group) is
recognised at the date of derecognition.

Non-current assets (including those that are
part of a disposal group) are not depreciated or
amortised while they are classiﬁ ed as held for
sale. Interest and other expenses attributable to
the liabilities of a disposal group classiﬁ ed as
held for sale continue to be recognised.

Non-current assets classiﬁ ed as held for sale
and the assets of a disposal group classiﬁ ed as
held for sale are presented separately from the
other assets in the balance sheet. The liabilities
of a disposal group classiﬁ ed as held for sale are
presented separately from other liabilities in the
balance sheet.

A discontinued operation is a component of the
entity that has been disposed of or is classiﬁ ed
as held for sale and that represents a separate
major line of business or geographical area
of operations, is part of a single coordinated
plan to dispose of such a line of business or
area of operations, or is a subsidiary acquired
exclusively with a view to resale. The results of
discontinued operations are presented separately
in the income statement.

(k) Financial assets

Classiﬁ cation

The Group classiﬁ es its ﬁ nancial assets in the
following categories: at fair value through proﬁ t
or loss and loans and receivables. The Group
does not hold any held to maturity investments
or available for sale ﬁ nancial assets. The
classiﬁ cation depends on the purpose for which
the ﬁ nancial assets were acquired. Management
determines the classiﬁ cation of its ﬁ nancial assets
at initial recognition.

(i) Financial assets at fair value through proﬁ t or

loss

Financial assets at fair value through proﬁ t or loss
are ﬁ nancial assets held for trading. A ﬁ nancial
asset is classiﬁ ed in this category if acquired
principally for the purpose of selling in the short
term. Derivatives are also categorised as held
for trading unless they are designated as hedges.
Assets in this category are classiﬁ ed as current
assets.

(ii) Loans and receivables

Loans and receivables are non-derivative
ﬁ nancial assets with ﬁ xed or determinable
payments that are not quoted in an active market.
They are included in current assets, except
for maturities greater than 12 months after the
balance sheet date. These are classiﬁ ed as non-
current assets. The Group’s loans and receivables
comprise ‘trade and other receivables’ and ‘cash
and cash equivalents’ in the balance sheet.

Recognition and measurement

Regular purchases and sales of ﬁ nancial assets
are recognised on the trade date – the date on
which the Group commits to purchase or sell the
asset.

Financial assets carried at fair value through
proﬁ t or loss are initially recognised at fair
value, and transaction costs are expensed in
the income statement. Financial assets are
derecognised when the rights to receive cash
ﬂ ows from the investments have expired or have

Steamships Annual Report 2014 23

NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year ended 31 December 2014 (Amounts in Kina 000’s)

been transferred and the Group has transferred
substantially all risks and rewards of ownership.
Loans and receivables are carried at amortised
cost using the effective interest method.

Gains or losses arising from changes in the fair
value of the ‘ﬁ nancial assets at fair value through
proﬁ t or loss’ category are presented in the
income statement within ‘other (losses)/gains –
net’ in the period in which they arise. Dividend
income from ﬁ nancial assets at fair value
through proﬁ t or loss is recognised in the income
statement as part of other income when the
Group’s right to receive payments is established.

The Group assesses at each balance sheet date
whether there is objective evidence that a
ﬁ nancial asset or a group of ﬁ nancial assets is
impaired. Impairment testing of trade receivables
is described in note 1(h).

(l) Property, plant and equipment

All property, plant and equipment are initially
recorded at cost. Borrowing costs directly
attributable to the acquisition or construction of
qualifying assets are added to the cost of those
assets until the assets are ready for their intended
use. Depreciation is calculated on the straight-
line method to write off the cost of each asset
to their residual values using the below rates
which is reﬂ ective of their estimated useful life as
follows:

0 - 10%
5 - 10%

Properties
Ships
Plant and ﬁ ttings 10 - 33%
20 - 33%

Motor vehicles

Where the carrying amount of an asset is greater
than its estimated recoverable amount, it is
written down immediately to its recoverable
amount. Gains and losses on disposal of property,
plant and equipment are determined by reference
to their carrying amount and are taken into
account in determining operating proﬁ t.

Subsequent costs are included in the asset’s
carrying amount or recognised as a separate
asset, as appropriate, only when it is probable
that future economic beneﬁ ts associated with the
item will ﬂ ow to the Group and the cost of the
item can be measured reliably. All other repairs
and maintenance are charged to the statements
of comprehensive income during the ﬁ nancial
period in which they are incurred.

(m) Investment properties

Investment properties include land held for
long-term capital appreciation and buildings

24 Steamships Annual Report 2014

leased out under operating leases. Properties
that comprise a portion held to earn rentals
and a portion for own use or occupation will
only be classiﬁ ed as investment property if
an insigniﬁ cant portion is held for own use of
occupation. Investment properties are recognised
when it is probable that future economic beneﬁ ts
associated with the property will ﬂ ow to the
Group and the cost of the investment property
can be reliably measured. Investment properties
are stated at cost less accumulated depreciation
and accumulated impairment losses. Transaction
costs are included on initial measurement.
Borrowing costs directly attributable to the
acquisition or construction of qualifying assets
are added to the cost of those assets until the
assets are ready for their intended use. The fair
values of investment properties are disclosed
in the Note 13. These are assessed using
internationally accepted valuation methods,
such as taking comparable properties as a guide
to current market prices or by applying the
discounted cash ﬂ ow method. Like property,
plant and equipment, investment properties
are normally depreciated using the straight-line
method over similar useful lives.

(n) Goodwill

Goodwill represents the excess of the cost of
an acquisition over the fair value of the Group’s
share of the net identiﬁ able assets of the acquired
business at the date of acquisition.

Goodwill is capitalised and assessed for
impairment annually or more frequently if
events or changes in circumstances indicate
a potential for impairment and is carried at
cost less impairment losses. Any impairment is
recognised immediately as an expense and is not
subsequently reversed.

Gains and losses on the disposal of an entity
include the carrying amount of goodwill relating
to the entity sold. Goodwill is allocated to cash-
generating units for the purpose of impairment
testing.

(o) Trade and other payables

These amounts represent obligations to pay for
goods and services that have been acquired in
the ordinary course of business from suppliers.
They are classiﬁ ed as current liabilities if payment
is due within one year or less. Trade payables are
recognised initially at fair value and subsequently
measured at amortised cost using the effective
interest method. The amounts are unsecured and
are usually paid within 30 days of recognition.

NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year ended 31 December 2014 (Amounts in Kina 000’s)

(p) Provisions

Provisions are recognised when the Group has a
present legal or constructive obligation as a result
of past events; it is probable that an outﬂ ow of
resource embodying economic beneﬁ ts will be
required to settle the obligation; and a reliable
estimate of the amount of the obligation can be
made.

A liability for annual leave is recognised and
measured at the amount of unpaid leave at
amounts expected to be paid to settle the present
entitlements. A liability for long service leave is
recognised taking into consideration expected
future wage and salary levels, experience of
employee departures and periods of service,
discounted to present values.

A provision for estimated ship dry docking
costs is only recognised where the Group has a
contractual obligation under a Bare Boat charter
agreement in from a third party. Dry docking
costs relating to ships not under third party long
term charter agreements are only recognised as
incurred, and are capitalised to the extent that the
previously assessed economic beneﬁ ts associated
with the asset are restored.

(q) Employee beneﬁ ts

(i) Short term obligations

Liabilities for wages and salaries, including
non-monetary beneﬁ ts, annual leave and
accumulating sick leave expected to be settled
within 12 months after the end of the period in
which the employees render the related service
are recognised in respect of employees’ services
up to the end of the reporting period and are
measured at the amounts expected to be paid
when the liabilities are settled. The liability
for annual leave and accumulating sick leave
is recognised in the provision for employee
beneﬁ ts. All other short term employee beneﬁ t
obligations are presented as payables.

(ii) Other long-term employee beneﬁ t obligations

The liability for long service leave and annual
leave which is not expected to be settled within
12 months after the end of period in which
the employees render the related service is
recognised in the provision for the employee
beneﬁ ts and measured as the present value of
expected future payments to be made in respect
of services provided by employees up to the end
of the reporting period using the projected unit
credit method. Consideration is given to expected
future wage and salary levels, experience of
employee departments and periods of service.
Expected future payments are discounted using

the market yields at the end of the reporting
period on national government bonds with terms
to maturity and currency that match, as closely as
possible, the estimated future cash outﬂ ows.

(iii) Termination beneﬁ ts

Termination beneﬁ ts are payable when
employment is terminated by the Group before
the normal retirement date, or whenever an
employee accepts voluntary redundancy
in exchange for these beneﬁ ts. The Group
recognises termination beneﬁ ts at the earlier
of the following dates: (a) when the Group can
no longer withdraw the offer of those beneﬁ ts;
and (b) when the entity recognises costs for a
restructuring that is within the scope of IAS 37
and involves the payment of termination beneﬁ ts.
In the case of an offer made to encourage
voluntary redundancy, the termination beneﬁ ts
are measured based on the number of employees
expected to accept the offer. Beneﬁ ts falling
due more than 12 months after the end of the
reporting period are discounted to their present
value.

(r) Borrowings

Borrowings are recognised initially at fair value,
net of any transaction costs incurred, and are
subsequently measured at amortised cost using
the effective interest method. Borrowings are
classiﬁ ed as current liabilities unless the Group
has an unconditional right to defer settlement of
the liability for at least 12 months after the end of
the reporting period.

(s) Impairment of assets

Assets that have an indeﬁ nite useful life are
not subject to amortisation and are tested
annually for impairment. Assets that are subject
to depreciation or amortisation are reviewed
for impairment whenever events or changes in
circumstances indicate that the carrying amount
may not be recoverable. An impairment loss is
recognised for the amount by which the asset’s
carrying value exceeds its fair value less costs to
sell. For the purpose of assessing impairment,
assets are grouped at the lowest levels for which
there are separately identiﬁ able cash ﬂ ow (cash
generating units).

(t) Borrowing costs

Borrowing costs incurred for the construction
of qualifying assets which are assets that take a
substantial period of time to get ready for their
intended use or sale, are capitalised during the
period of time that is required to complete and
prepare the asset for its intended use or sale.
Other borrowing costs are expensed.

Steamships Annual Report 2014 25

NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year ended 31 December 2014 (Amounts in Kina 000’s)

The capitalisation rate used to determine the
amount of borrowing costs to be capitalised is the
weighted average interest rate applicable to the
entity’s outstanding borrowings during the year,
in this case 5.7% (2013 – 6.8%).

(y) Rounding of amounts

Amounts in the ﬁ nancial statements have been
rounded off to the nearest thousand Kina.

(z) Critical accounting estimates and judgments

(u) Segment reporting

Operating segments are reported in a manner
consistent with the internal reporting provided
to the chief operating decision maker. The chief
operating decision maker who is responsible for
allocating resources and assessing performance
of the operating segments, has been identiﬁ ed as
the Strategic Steering Committee.

(v) Earnings per share

Basic earnings per share is calculated by dividing
the proﬁ t attributable to equity holders of the
Group, by the weighted average number of
ordinary shares outstanding during the ﬁ nancial
year. There are no potential ordinary shares on
issue and hence the diluted earnings per share is
equal to the basic earnings per share.

(w) Goods and services tax (GST)

Revenues, expenses and assets are recognised
net of the amount of associated GST. Receivables
and payables are stated inclusive of GST. The
amount of GST recoverable from, or payable
to, the Taxation authority is included with other
receivables or payables in the balance sheet.

(x) Leases

Leases under which the Group assumes
substantially all the risks and rewards incidental
to ownership have been classiﬁ ed as ﬁ nance
leases and are capitalised. The asset and
corresponding liability are recorded at inception
of the lease at the fair value of the leased asset,
at amounts equivalent to the discounted present
value of minimum lease payments including
residual values.

The ﬁ nance cost is charged to the proﬁ t or loss
over the lease period so as to produce a constant
periodic rate of interest on the remaining balance
of the liability for each period.

Capitalised leased assets are depreciated over
their expected lives in accordance with rates
established for other similar assets.

Operating lease payments are representative of
the pattern of beneﬁ ts derived from the leased
assets and accordingly are charged to the proﬁ t
and loss account in the periods in which they are
incurred.

26 Steamships Annual Report 2014

Estimates and judgments are continually
evaluated and are based on historical experience
and other factors, including expectations of future
events that may have a ﬁ nancial impact on the
entity and that are believed to be reasonable
under the circumstances.

The Group makes estimates and assumptions
concerning the future. The resulting accounting
estimates will, by deﬁ nition, seldom equal
the related actual results. The estimates and
assumptions that have a signiﬁ cant risk of causing
a material adjustment to the carrying amounts of
assets and liabilities within the next ﬁ nancial year
are discussed below:

(i) Estimated impairment of goodwill

The Group tests annually whether goodwill
has suffered any impairment. The recoverable
amounts of cash-generating units have been
determined based on value-in-use calculations.

(ii) Estimated fair values of investments

The Group carries an indirect investment in
an unlisted entity with changes in fair value
being recognised in proﬁ t or loss. At the end
of each reporting period, a future maintainable
earnings calculation is performed, or if available,
non-observable market information is used
to determine the appropriate fair value of the
investment.

(iii) Provision for dry docking

For vessels on long term bare boat charter
agreement in from a third party and where
the Group has a contractual obligation for dry
docking costs, the cost of future dry docking
is provided. The cost of dry docking is not
accurately known until the vessels are surveyed
and assessed at the commencement of docking.
Estimates are based on the dry docking interval
(i.e. Special or Interim), repairs considered
necessary identiﬁ ed at balance date, its age, and
docking history. Docking intervals are assumed to
be 5 years.

Docking costs are often incurred in either
AUD, USD or SGD currencies. The costings are
updated monthly for the foreign exchange rate.

(iv) Estimated impairment of ships and other

plant and equipment

Impairment losses have been recognised in

NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year ended 31 December 2014 (Amounts in Kina 000’s)

relation to ships and plant and vehicles. The
impairment of these ships arose from changes
in expectations of future freight volumes and
pricing and changes in ship replacement strategy.
A change in the freight market and consequent
vehicle replacement policy has given rise to
an impairment charge for vehicles, while a
change in manufacturing strategy has resulted
in an impairment charge for plant. Recoverable
amounts have been determined using the higher
of fair value less cost to sell and its value in use.
Fair value has been determined using market
based information while value in use has been
determined using a post-tax discount rate of
15.9% (pre-tax approximately 20.7%).

During the year the Directors performed an
impairment review on all key assets of the Group
given the economic slowdown. As a result of
this assessment the impaired charge on ships
includes an additional Knil (2013: K92.4M). The
impairment cost on vehicles, plant and buildings
includes K20.9M (2013: K11.5M) impairment on
vehicles and K3.9M (2013: K2.4M) on plant and
buildings.

2. Financial risk management

The Group’s activities expose it to a variety of
ﬁ nancial risks including market risk (including
currency, and interest rate risk), credit risk,
liquidity risk and capital risk. The Group’s overall
risk management programme focuses on the
unpredictability of ﬁ nancial markets and seeks to
minimise potential adverse effects on the ﬁ nancial
performance of the Group. Risk management is
carried out under policies approved by the Board of
Directors.

(a) Market risk

(i) Foreign exchange risk

The Group engages in international purchase
transactions and is exposed to foreign exchange
risk arising from various currency exposures,
primarily with respect to the Australian dollar.
Foreign exchange risk arises from recognised
assets and liabilities.

The Group’s foreign currency purchases do not
represent a signiﬁ cant proportion of the Group’s
costs and as such exposure to foreign currency
risk is minimal. It is not the Group’s policy
to hedge foreign currency risk. As the foreign
currency exposure is minimal no sensitivity
analysis is provided.

(ii) Price risk

The Group is not signiﬁ cantly exposed to equity
securities or commodities price risk.

(iii) Cash ﬂ ow interest rate risk

The Group’s interest rate risk arises from long-
term borrowings. Borrowings issued at variable
rates expose the Group to cash ﬂ ow and fair
value interest rate risk. Borrowings issued at
ﬁ xed rates expose the Group to fair value interest
rate risk. Long term borrowings are a mix of ﬁ xed
and variable rate interest. It is not the Group’s
policy to hedge cash ﬂ ow and interest rate risk.

At 31 December 2014, if interest rates on
PNG Kina-denominated borrowings had been
1% higher/lower with all other variables held
constant, post-tax proﬁ t for the year would have
been K1,350,000 (2013: K1,350,000) lower/
higher, mainly as a result of higher/lower interest
expense on ﬂ oating rate borrowings.

(b) Credit risk

The Group has no signiﬁ cant concentration of
credit risk and it is not the Group’s policy to
hedge credit risk. The Group has policies in place
to ensure that sales of products and services are
made to customers with an appropriate credit
history and has policies that limit the amount
of credit exposure to any one customer. Where
credit limits were exceeded during the reporting
period management has made provision for
amounts considered uncollectible.

Prudent liquidity risk management implies
maintaining sufﬁ cient cash and the availability
of funding through an adequate amount
of committed credit facilities. The Group
manages liquidity risk by maintaining sufﬁ cient
bank balances to fund its operations and the
availability of funding through committed credit
facilities.

Management monitors rolling forecasts of the
Group’s liquidity reserve on the basis of expected
cash ﬂ ows.

Undrawn ﬁ nance facilities as of 31 December
were as follows:

2014
K’000

2013
K’000

Undrawn Facilities

56,000

26,000

The table below analyses the Group’s ﬁ nancial
liabilities which will be settled on a net basis
into relevant maturity groupings based on the
remaining period at the balance sheet date to the
contractual maturity date. The amounts disclosed
in the table are the contractual undiscounted
cash ﬂ ows.

Steamships Annual Report 2014 27

NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year ended 31 December 2014 (Amounts in Kina 000’s)

At 31 December 2014
Borrowings
Borrowings from shareholders
Borrowing from related parties
Trade and other payables
Income tax payable

At 31 December 2013
Borrowings
Borrowings from shareholders
Borrowing from related parties
Trade and other payables
Income tax payable

Less than
1 year
K’000

Between 1
& 2 years
K’000

Between 2
& 5 years
K’000

Over 5
years
K’000

(79,032)
(17,615)
(13,579)
(116,657)
(3,821)

(50,681)
(15,160)
(16,335)
(130,662)
(7,713)

(552,507)
-
-
-
-

(42,849)
-
-
-
-

(75,000)
-
-
-
-

(515,259)
-
-
-
-

-
-
-
-
-

Total
K’000

(669,521)
(17,615)
(13,579)
(116,657)
(3,821)

(608,789)
(15,160)
(16,335)
(130,662)
(7,713)

The Group does not hold derivative ﬁ nancial instruments.
All loan covenants associated with borrowing arrangements have been met.

(d) Capital risk management

(e) Fair value estimation

The Group’s objectives when managing capital
are to safeguard the Group’s ability to continue
as a going concern in order to provide returns to
shareholders and beneﬁ ts for other stakeholders
and to maintain an optimal capital structure to
reduce the cost of capital.

In order to maintain or adjust the capital
structure, the Group may adjust the amount of
dividends paid to shareholders, return capital to
shareholders, issue new shares or sell assets to
reduce debt.

The Group monitors capital on the basis of the
gearing ratio. This ratio is calculated as net debt
divided by total capital. Net debt is calculated
as external borrowings and unsecured loans
less cash and cash equivalents. Total capital is
calculated as capital and reserves attributable to
the Company’s shareholders plus net debt.

The gearing ratios at each balance date were as
follows:

2014
K’000

2013
K’000
(restated)

700,715

639,949

15,273

685,610

766,737

11,640

628,644

736,884

1,452,347

1,368,567

47%

46%

Total external borrowing
& unsecured loans

Less: Cash & Cash equivalents

Net debt

Total equity

Total capital

Gearing ratio

IFRS 7 ”Financial Instruments: Disclosures”
requires disclosure of fair value measurements
by level of the following fair value measurement
hierarchy:

Quoted prices (unadjusted) in active markets for
identical assets or liabilities (level 1).

Inputs other than quoted prices included
within level 1 that are observable for the asset
or liability, either directly (that is, as prices) or
indirectly (that is, derived from prices) (level 2).

Inputs for the asset or liability that are not based
on observable market data (that is, unobservable
inputs) (level 3).

If one or more of the signiﬁ cant inputs is not
based on observable market data, the instrument
is included in level 3.

The following table presents the change in level
3 instruments for the year ended 31 December
2014.

Financial asset at fair value through proﬁ t and
loss (consolidated).

Opening balance
Losses recognised in proﬁ t and loss
Closing Balance

2014
K’000

-
-
-

2013
K’000

20,307
(20,307)
-

Total losses for the period included in other operating expenses
that relate to assets held at the end of the
reporting period

20,307

Minority Interest in share of loss

(20,307)

28 Steamships Annual Report 2014

The parent entity does not hold any ﬁ nancial assets.

NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year ended 31 December 2014 (Amounts in Kina 000’s)

3. Operating results

(a) Revenue and other income comprises:

Revenue from sale of goods

Revenue from provision of services

Dividend income

Total Revenue

Other income *

Consolidated

Parent Entity

2014

2013

2014

2013

114,729

764,538

114,092

713,844

879,267

827,936

78,347

56,971

11,674

37,791

21,568

6,103

* Other income principally represents a gain of K7M on the sale of Datec Limited on a consolidated basis and a gain of K17M for
the parent entity (2013: a restated gain of K34.5M on re-measuring to fair value the existing interest in Paciﬁ c Towing Limited on
acquiring a controlling interest).

(b) Expenses comprise:

Cost of sales

Staff costs (note 3c)

Depreciation and amortisation

Impairment of ﬁ xed assets (refer note 11b)

Impairment of other assets

Impairment of goodwill

Electricity and fuel

Other operating expenses

Total Operating expense

Wages and salaries

Retirement beneﬁ t contributions

Accommodation and other beneﬁ ts

Number of staff employed by the

Group at year end:

187,369

177,053

104,723

20,865

9,725

4,010

78,989

147,896

730,630

120,986

7,453

48,614

177,053

153,646

167,637

103,037

106,427

71,678

166,665

769,090

115,810

7,424

44,403

167,637

Full Time

4,159

4,000

2,613

3,995

2,093

4,706

2,006

6,001

Steamships Annual Report 2014 29

NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year ended 31 December 2014 (Amounts in Kina 000’s)

3. Operating results (continued)

Consolidated

Parent Entity

2014

2013

2014

2013

(d) The operating proﬁ t before income tax is arrived at after charging and crediting the following speciﬁ c items:

After charging:

Audit fees

Fees for non-audit services to Auditors

Bad and doubtful debts

Donations

Fair value impairment on ﬁ nancial assets

Loss on sale of property, plant and equipment

After crediting:

Gain on acquiring a controlling interest (net) (refer note 24)

Gain on disposal of subsidiary

Net foreign exchange transaction gains

Impairment of goodwill

Impairment of ﬁ xed assets

Impairment of other assets

(e) Cost of ﬁ nancing – net:

Expense

Income

Net ﬁ nance costs

(f) Earnings per share

1,050

679

1,764

2,366

3,365

7,079

1,455

4,010

20,865

9,725

1,033

462

2,420

1,887

20,307

919

34,795

1,801

28,899

(91)

28,808

17,796

(106)

17,690

17,548

(417)

(72)

Basic earnings per share are calculated by dividing the net proﬁ t attributable to shareholders by the average number of ordinary
shares on issue during the year. There is no difference between the basic and diluted earnings per share.

Net proﬁ t attributable to shareholders

Average number of ordinary shares on issue (thousands)

Basic earnings per share (continuing & discontinued operations)

Basic earnings per share (continuing operations)

88,655

31,008

286t

279t

114,011

31,008

368t

366t

30 Steamships Annual Report 2014

NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year ended 31 December 2014 (Amounts in Kina 000’s)

Investments in subsidiaries, associates and joint ventures

Consolidated

Parent Entity

2014

2013

2014

2013

(a) Investments are accounted for in accordance with the policy set out in Note 1(c) and relate to:

Investments in subsidiary companies (note 21)

Investments in associates (note 22)

Investments in joint ventures (note 23)

(b) Share of proﬁ t in associates and joint ventures

Share of proﬁ t in associates

Share of proﬁ t in joint ventures

Income Tax

(a) Income tax expense
Current tax

Deferred tax

17,636

15,557

33,193

1,808

2,036

3,844

108,268

125,314

16,449

15,022

31,471

20,051

128,319

20,051

145,365

4,354

5,343

9,697

Consolidated

Parent Entity

2014

2013
(restated)

2014

2 0 1 3

45,339

(8,044)

37,295

40,311

(26,496)

13,815

465

107

572

(b) The income tax in the Statement of Comprehensive Income is determined in accordance with the policy set out in note 1(f).

The effective rate of tax charged differs from the statutory rate of 30% for the following reasons:

Prima facie tax on proﬁ t before income tax

Tax effect of rebateable dividends

Expenses not deductible for tax

Deductible expenses not recognised for accounting purposes

Income not assessable for tax

Prior year (over)/under provisions

Provisions

Tax losses

Prepayments

Property, plant and equipment

Comprising of

Deferred tax asset

Deferred tax liability

39,451

4,596

(448)

(1,220)

(5,084)

37,295

14,318

19,773

(2,284)

(30,392)

1,415

33,521

(32,106)

1,415

23,684

9,672

(666)

(10,640)

(8,235)

13,815

4,174

9,979

(3,296)

(17,485)

(6,629)

21,081

(27,710)

(6,629)

23,491

(23,674)

(38)

17,144

(17,091)

(26)

291

696

701

545

572

706

771

Steamships Annual Report 2014 31

NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year ended 31 December 2014 (Amounts in Kina 000’s)

Income tax (continued)

(d) The gross movement on the deferred tax account is as follows:

Consolidated

Provisions

Tax losses

Prepayment

Property and equipment

Total

Parent Company

Provisions

Prepayment

Property and equipment

Total

6. Cash and cash equivalents

Cash and short term deposits

Beginning
Balance (restated)

Charge to
proﬁ t

Ending
Balance

4,174

9,979

(3,296)

(17,485)

(6,629)

10,144

9,795

1,012

(12,907)

8,044

14,318

19,773

(2,284)

(30,392)

1,415

706

771

(60)

(10)

(70)

696

701

Consolidated

Parent Entity

2014

2013

2014

2013

15,273

11,640

765

643

The maximum exposure to credit risk at the reporting date is the fair value of cash and cash equivalents on the balance sheet. Cash
and short term deposits are held with the Bank of South Paciﬁ c and Westpac PNG who have Standard and Poor’s long term credit
ratings of B+ and AA- respectively.

Consolidated

Parent Entity

2014

2013
(restated)

2014

2 0 1 3

104,227

(5,305)

98,922

61,629

160,551

114,132

(6,415)

107,717

70,249

177,966

3,376

2,690

7. Trade and other receivables

Trade and other receivables

Trade receivables

Provision for impairment

Other receivables & prepayments

32 Steamships Annual Report 2014

NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year ended 31 December 2014 (Amounts in Kina 000’s)

7. Trade and other receivables (continued)

Consolidated

Parent Entity

2014

2013

2014

2013

(i) Impaired trade receivables

As at 31 December 2014, trade receivables of K5.3M (2013: K6.4M) relating to trade debtors were considered impaired and were
provided for by management. The ageing of these receivables is as follows:

3 to 6 months

Over 6 months

1,084

4,221

5,305

Movement in the provision for impairment of trade receivables is as follows:

Opening balance

Impairments recognised during the year

Provision released

Total

6,415

1,764

(2,874)

5,305

704

5,711

6,415

5,102

2,420

(1,107)

6,415

The creation and release of the provision for impaired receivables is included in operating expenses in the statement of
comprehensive income. Amounts charged to the provision account are generally written off when there is no expectation of
recovering the balance outstanding.

(ii) Past due but not impaired

As at 31 December 2014, trade receivables of K2.9M (2013: K2.1M) were past due but not impaired. These relate to a number of
independent customers for whom there is no recent history of default. The ageing analysis of these trade receivables is as follows:

3 to 6 months

Over 6 months

546

2,310

2,856

1,692

416

2,108

The other classes within trade and other receivables do not contain impaired assets and are not past due. The maximum exposure
to credit risk at the reporting date is the fair value of each class of receivable mentioned above. The Group does not hold any
collateral as security in relation to these receivables.

(iii) Other receivables and prepayments

Other receivables generally arise from transactions outside the usual operating activities of the Group. Interest may be charged at
commercial rates where the terms of repayment exceed three months. Collateral is not normally obtained.

Prepayments relate to advance payments for expenses not yet incurred.

Steamships Annual Report 2014 33

NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year ended 31 December 2014 (Amounts in Kina 000’s)

Inventories

Raw materials

Work in progress

Finished goods

Provision for obsolescence

Consolidated

Parent Entity

2014

2013

2014

2013

2,720

37,380

(3,040)

37,060

16,907

44,627

(1,687)

59,878

Inventories recognised as an expense during the year ended 31 December 2014 and included in cost of sales and cost of providing
services amounted to K77.3M (2013: K76.9M). The provision for obsolescence of inventories during the year increased by K1.7M
(2013: K0.4M reduction).

9. Financial assets at fair value through proﬁ t and loss

Consolidated

Parent Entity

2014

2013

2014

2013

Opening balance

Fair value loss recorded in the proﬁ t and loss

Closing balance

20,307

(20,307)

10. Loans to/(from) related companies

Non-Current

Harbourside Development Limited

Colgate Palmolive (PNG) Limited

Kelton Investments Limited

Loans to subsidiaries

Consolidated

Parent Entity

2014

2013

2014

2013

152,305

101,775

500

790

500

790

153,595

103,065

153,595

103,065

500

5,212

5,712

500

5,212

5,712

Loans from associates and joint ventues:

Consort Express Lines Limited’s associates

Loans from subsidiaries

(13,579)

(13, 579)

(15,998)

(108,110)

(155,234)

Loan to Harbourside Development Limited is based on a ﬁ xed rate of 6.5% p.a. which is deemed to be the market interest rate.

(13, 579)

(15,998)

(108,110)

(155,234)

34 Steamships Annual Report 2014

NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year ended 31 December 2014 (Amounts in Kina 000’s)

11. Property, plant & equipment

Property

Ships

Plant and
Vehicles

Total

Consolidated
2014

Cost

464,285

445,022 414,901

1,322,308

Accumulated depreciation (including impairment losses)

(106,759)

(287,323) (213,596)

(607,038)

355,626

157,699 201,305

714,630

376,605

(150)

(14,075)

(6,754)

114,566

68,497

(251)

(25,113)

231,564

66,102

(10,778)

(13,901)

(50,818)

722,735

134,599

(10,928)

(14,152)

(90,006)

- -

(6,754)

355,626

157,699

(20,865)

201,305

(20,865)

714,630

Net book value

Opening value

Additions

Sale of subsidiary

Disposals

Depreciation

Transfers

Impairment losses

Closing value

2013
Cost

471,550

394,758

478,197

1,344,505

Accumulated depreciation (including impairment losses)

(94,945)

(280,192)

(246,633)

(621,770)

Net book value

376,605 114,566

231,564

722,735

Opening value

Additions

Business combinations

Disposals

Transfer from asset held for sale

Transfer to investment property (note12)

Depreciation

Impairment losses

Closing value

Parent
2014

Cost

Accumulated depreciation

Net book value

Opening value

Additions

Disposals

Depreciation

Closing value

358,444

29,323

124

8,426

(730)

(18,982)

178,015

41,038

15,683

218,890

70,333

755,349

140,694

11,197 27,004

(121)

(4,431) (4,552)

(27,617)

(92,432)

(50,430)

(13,995)

8,426

(730)

(97,029)

(106,427)

376,605

114,566

231,564

722,735

74,580

(49,207)

25,373

27,296

224

(109)

(2,041)

25,370

6,118

80,698

(4,671) (53,878)

1,447

26,820

1,648

28,944

386

(12)

(572)

1,450

610

(121)

(2,613)

26,820

Steamships Annual Report 2014 35

NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year ended 31 December 2014 (Amounts in Kina 000’s)

11. Property, plant & equipment (continued)

Property

Ships

Plant and
Vehicles

Total

Parent
2013

Cost

Accumulated depreciation

Net book value

Opening value

Additions

Disposals

Depreciation

Closing value

75,540

(48,244)

27,296

30,646

105

(3,455)

6,474

(6,474)

27,296 -

5,822

(4,174)

87,836

(58,892)

1,648 28,944

1,832

392

32,478

497

(35) (35)

(541)

1,648

(3,996)

28,944

(a) Assets in the course of construction

The carrying amounts of the assets disclosed above include the following expenditure recognised in relation to property, plant and
equipment and investment properties which are in the course of construction:

Property (classiﬁ ed as investment properties in note 12)

Ships

Plant and vehicles

Total assets in the course of construction

Consolidated

Parent Entity

2014

2013

2014

2013

34,918

31,531

20,892

87,341

243,348

15,954

569

259,871

The cost of additions in 2014 includes capitalised borrowing costs of K4.9M (2013: K16.5M) in relation to qualifying assets.

(b) Impairment losses

During the year the Directors performed an impairment review on all key assets of the group given the economic slowdown. As a
result of this assessment the impairment charge on ships of Knil (2013: K92.4M) resulted. The impairment charge to property, plant
and vehicles includes K20.9M (2013: K11.5M) on vehicles and K3.9M (2013: K2.4M) on plant.

Impairment losses have been recognised in relation to property, plant and vehicles. A decision to close the Highlands Highway
operations of East West Transport has led to an impairment charge for vehicles, while a change in manufacturing strategy has
resulted in an impairment charge for plant. Recoverable amounts have been determined using the higher of fair value less cost to
sell and its value in use. Fair value has been determined using market based information while value in use has been determined
using a post-tax discount rate of 15.9% (the group’s WACC).

There are no other conditions that indicate impairment of property, plant and equipment as at 31 December 2014.

36 Steamships Annual Report 2014

NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year ended 31 December 2014 (Amounts in Kina 000’s)

12. Investment properties

Investment properties represent the group’s residential and commercial properties that are available for external lease rather than
internal use. Properties used by the group are shown in ‘Property’ within note 11.

Non-current assets – at cost
Cost
Accumulated depreciation
Net book value

Opening value
Additions
Disposals
Transfers from property (note 11)
Depreciation
Closing value

(a) Amounts recognised in proﬁ t/loss for investment properties

Rental income
Repairs and maintenance attributable to rental
properties under non-cancellable leases
Operating expenses directly attributable to rental
properties under non-cancellable leases

(b) Valuation basis

Consolidated

Parent Entity

2014

2013

2014

2013

497,697
(97,204)
400,493

343,658
66,729
(1,932)
6,754
(14,716)
400,493

426,146
(82,488)
343,658

268,512
84,040
-
730
(9,624)
343,658

-
-
-

-
-
-
-
-
-

-
-
-

-
-
-
-
-
-

Consolidated

Parent Entity

2014

2013

2014

2013

112,927

90,069

(3,607)

(3,675)

(11,408)

(8,249)

Properties include commercial and residential properties occupied by Group businesses together with commercial and residential
investment properties which are available for external lease. An analysis of the carrying amount and estimated range of fair values
for each category of property is shown below. Fair values have been estimated internally, based on market evidence of property
values, supported by independent professional valuations as at December 2014 for a selected sample of representative properties
and discounted value in use assessments for hotel properties.

Included in properties are the following:

Investment properties
Other properties (note 11)
Total

NBV

Valuation Lower

Range Higher

400,493
355,626
756,119

793,726
780,433
1,574,159

992,158
975,541
1,967,699

The independent valuer utilised certain historical facts and relevant market data available up to the date of valuation in reaching
their opinion to the valuation of the properties.

Refer to note 16 for information on non-current assets pledged as security by the group.

(d) Contractual receivables

Minimum lease receivables under non-cancellable operating leases of investment properties not recognised in the ﬁ nancial
statements are receivable as follows:

Within one year

Later than one year but not later than ﬁ ve years
Later than ﬁ ve years

Consolidated

Parent Entity

2014

2013

2014

2013

110,728
116,264
148,385
375,377

76,989
141,079
145,059
363,127

-
-
-
-

Steamships Annual Report 2014 37

NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year ended 31 December 2014 (Amounts in Kina 000’s)

13. Intangible assets

Goodwill opening value

Additions

Disposal of Subsidiary

Impairment during the year

Closing value

Impairment tests for goodwill

Consolidated

Parent Entity

2014

2013
(restated)

2014

2013

93,617

(9,116)

(4,010)

80,491

17,183

76,331

93,617

Goodwill is allocated to the Group’s cash-generating units (CGUs) identiﬁ ed according to operating segment. The goodwill balance
of K80.5M (2013: K93.6M) is attributable to various business acquisitions in the logistics and commercial segments including
Consort (K0.5M), Laga Industries (K3.6M), Paciﬁ c Towing (K67.4M) and New Britain Shipping (K9M). The recoverable amount of
a CGU is determined based on value-in-use calculations. These calculations use pre-tax cash ﬂ ow projections based on ﬁ nancial
budgets approved by management covering a ten-year period. Growth beyond year ten for the purpose of the impairment testing
is set at 0%. A post-tax discount rate of 15.9% (2013: 15.92%) has been used and reﬂ ects speciﬁ c risks relating to the operating
segment.

14. Trade and other payables

Trade Payables

Accruals

Other payables

Consolidated

Parent Entity

2014

2013

2014

2013

49,921

34,036

17,224

50,177

57,281

23,204

101,181

130,662

All trade and other payables are due and payable within 12 months and are recorded at their carrying value.

15. Provisions for other liabilities and charges

Opening value

Charged to proﬁ t & loss

Write off during sale of business unit

Transfer in on acquisition

Utilised during year

Closing value

Current

Non-current

Employee

Dry
Dock

Other

19,304

10,793

(2,326)

2,442

3,304

449

4,348

2014
Total

22,195

18,445

(2,326)

(9,362)

(1,600)

(3,103)

(14,065)

(11,211)

18,409

6,572

11,837

18,409

4,146

1,694

24,247

12,411

11,836

24,247

22,195

10,176

12,019

22,195

A description of employee and dry dock provisions is disclosed in note 1p.

38 Steamships Annual Report 2014

213

2013
Total

22,643

9,318

1,445

NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year ended 31 December 2014 (Amounts in Kina 000’s)

16. Borrowings

Current:

Bank overdrafts (secured)

Bank loans (secured)

Other loans (unsecured)

Non-current:

Other loans (secured)

Bank loans (secured)

Total Borrowings

Consolidated

Parent Entity

2014

2013

2014

2013

26,214

15,800

17,615

59,629

135,000

492,507

627,507

687,136

41,618

9,063

15,160

65,841

135,000

423,108

558,108

623,949

Mortgages over certain of the Group’s properties and a registered equitable charge over the remainder of the Group’s assets,
undertakings and uncalled capital are held by the Group’s bankers as security for the bank overdrafts and secured loans.

Interest is paid on all loans at commercial rates at a discount to Indicator Lending Rates. The effective interest rate on bank
facilities at the balance sheet date was 5.7% (2013: 6.8%). Bank overdrafts are interest-only with no agreed repayment schedule.
Bank loans are secured loans with varying terms.

The fair value of borrowings approximates their carrying amounts. Borrowing terms, margins and credit risk factors approximate
currently obtainable levels for similar facilities.

17. Issued capital

Consolidated

Parent Entity

2014

2013

2014

2013

(a) Issued and paid up capital

Ordinary shares

24,200

Balance brought forward

Share issue

Balance carried forward

(b) Number of shares

Number of shares

Ordinary shares

Balance brought forward

Share issue

Balance carried forward

24,200

Number of shares (000’s)

31,008

In accordance with the Papua New Guinea Companies Act 1997 the shares have no par value.

The Company’s securities consist of ordinary shares which have equal participation and voting rights.

Steamships Annual Report 2014 39

NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year ended 31 December 2014 (Amounts in Kina 000’s)

18. Related party disclosures

(a) Parent entity

The Group is controlled by John Swire & Sons (PNG) Limited, which owns 72.12% of the Company’s shares. The ultimate
Holding Company is John Swire & Sons Limited, incorporated in England.

(b) Interest in subsidiaries, associates and joint ventures:

These are set out in notes 21, 22 and 23.

G.L. Cundle, P.W. Langslow and S.C.Pelling are Directors of John Swire & Sons (PNG) Limited. Dividends were received by
those Directors holding an interest in the Company as set out in the Directors’ Report.

(d) Remuneration:

Income received or due and receivable both by Directors and senior managers in connection with the management of the
Group companies is shown in the Directors’ Report.

Key management personnel disclosure

Consolidated

Parent Entity

2014

2013

2014

2013

Wages and salaries

Other short term beneﬁ ts
Long-term beneﬁ ts

(e) Material transactions:

Sales of goods and services

- Associates & joint ventures
- Key Management
- Associated Groups

Lease and rental income
- Associates & joint ventures
- Associated Groups

Dividends received

- Subsidiaries, associates & joint ventures
- Other shareholders

Management fees income
- Associates & joint ventures
- Key Management

Purchase of goods and services

- Associates & joint ventures
- Associated Groups
- Shareholders of associated companies

Management fees paid
- Associates & joint ventures
- Other shareholders
Purchase of assets

- Associates & joint ventures

Lease rental expense

- Other Shareholders

Container/Charter hire fee

- Other Shareholders

40 Steamships Annual Report 2014

10,258
1,415
342

246
21
29,146

-
3,287

2,935
-

-
6

(140)
(106)
-

(100)
(1,548)

(830)

(291)

(15,334)

9,386
1,126
313

951
17
11,662

4,067
4,536

5,922
-

868
-

(20,979)
-
(12,313)

-
(99)

-
-
-

-
-

-
-
-

-
-

78,347
-

56,971
-

-
-

-
-
-

-
-

-
-
-

-
-

NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year ended 31 December 2014 (Amounts in Kina 000’s)

18. Related party disclosures (continued)

Consolidated

Parent Entity

2014

2013

2014

2013

Finance Cost

Other Shareholders

Fellow subsidiary of ultimate shareholder

Dividends paid

Associates & joint ventures

Other shareholders

Shareholders of associated companies

Loans to/(from) related companies

Other shareholders

Shareholders of associated companies

(3,533)

(3,624)

(435)

(504)

(1,169)

(5,702)

(49,198)

(62,586)

(50,636)

973

All transactions with related parties are made on normal commercial terms and conditions.

Balances with related companies:

Associates and joint ventures:

Consort associates (note 10)

Consort shareholders (note 16)

Basilok Ltd (note 16)

Loans to related Companies:

Colgate Palmolive Ltd (note 10)

Harbourside Development Limited (note 10)

Kelton Investments (note 10)

Subsidiary Companies (note 10)

(13,579)

(17,455)

(160)

(15,998)

(15,000)

(160)

500

152,303

790

500

101,775

790

500

5,212

500

5,212

Steamships Annual Report 2014 41

NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year ended 31 December 2014 (Amounts in Kina 000’s)

19. Reconciliation of proﬁ t after income tax to net cash inﬂ ow from operating activities

Consolidated

Parent Entity

2014

2013
(restated)

2014

2 0 1 3

95,556

2,613

56,573

3,995

(78,347)

(56,971)

Proﬁ t for the year after tax

Depreciation and impairment

Dividend and interest income

Net loss (gain) on sale of ﬁ xed assets

Fair value adjustment on acquisition

Fair value adjustment on ﬁ nancial assets

Goodwill impairment

Gain on sale of investment

Share of proﬁ t after tax of associates

Income tax expense

100,145

127,689

(91)

3,365

4,010

(7,097)

(3,844)

37,295

75,402

213,080

919

(35,467)

20,307

(9,697)

14,042

Change in operating assets and liabilities, net of effects from purchase of controlled entity

(Increase)/decrease in trade debtors

(Increase)/decrease in inventory

(Increase)/decrease in deferred tax asset

(Increase)/decrease in operating assets

Increase/(decrease) in trade creditors

(Decrease)/increase in other operating liabilities

(Decrease)/increase in provision for income tax payable

Increase/(decrease) in deferred tax liability

(1,939)

28,818

(12,440)

(41,666)

(14,005)

(2,052)

(3,892)

4,396

(1,053)

9,487

(19,509)

36,029

(26,070)

3,631

(26,190)

(7,300)

(17,548)

(1,717)

(195)

Net cash inﬂ ow from operating activities

222,512

237,638

432

134

(4,130)

438

101

20. Retirement beneﬁ t plans

The total cost of retirement beneﬁ ts of the Group in 2014 was K7.9M (2013: K7.8M). The Group participates in the National
Superannuation Fund of Papua New Guinea, a multi-employer deﬁ ned contribution fund, on behalf of all citizen employees
with minimum employer and employee contribution rates established by legislation. The Group also contributes to a deﬁ ned
contribution superannuation plan on behalf of expatriates. The deﬁ ned contribution superannuation plan was established in 2002.

The parent entity does not employ staff directly; consequently there was no charge during the year.

42 Steamships Annual Report 2014

NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year ended 31 December 2014 (Amounts in Kina 000’s)

21. Subsidiaries and transactions with non-controlling interests

(a) Signiﬁ cant investments in subsidiaries

The consolidated ﬁ nancial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with
the accounting policy described in Note 1 (c):

Name of Entity

Country of Incorporation

Class of Shares

Consort Express Lines Limited

Papua New Guinea

Ordinary

Datec (PNG) Limited***

Papua New Guinea

Ordinary

Kavieng Port Services Limited

Papua New Guinea

Ordinary

Kiunga Stevedoring Company Limited

Papua New Guinea

Ordinary

Lae Port Services Limited

Papua New Guinea

Ordinary

Laga Industries Limited

Papua New Guinea

Ordinary

Madang Port Services Limited

Papua New Guinea

Ordinary

Middle Fly Shipping Limited**

Papua New Guinea

Ordinary

New Britain Shipping Limited**

Papua New Guinea

Ordinary

Oro Port Services Limited

Papua New Guinea

Ordinary

Paciﬁ c Towing (PNG) Limited

Papua New Guinea

Ordinary

Paciﬁ c Rumana Limited**

Papua New Guinea

Ordinary

Paciﬁ c Rumana Mobile Investments Limited

Papua New Guinea

Ordinary

Palm Stevedoring & Transport Limited

Papua New Guinea

Ordinary

Port Services PNG Limited

Papua New Guinea

Ordinary

Steamships Limited

Papua New Guinea

Ordinary

Windward Apartments Limited

Papua New Guinea

Ordinary

Equity
Holdings*
2014

Equity
Holdings*
2013

100

79.8

50.3

100

79.8

100

*The portion of ownership is equal to the proportion of voting power held.

** Consolidated by virtue of control over the operating decisions and returns. As at December 31,2014 Steamships Trading
Company still has controls over these entities.

***Datec (PNG) Limited was sold on July 31, 2014.

Shares in subsidiary companies have been stated at cost or fair value on acquisition less dividends received from pre-acquisition
proﬁ ts.

The major non-controlling interest is in Consort Express Lines Limited. The loss after tax attributable to non-controlling interest in
this entity was K2.7M (2013: K26.1M loss) and the accumulated non-controlling interest in the entity at 31 December 2014 was
K17.6M (2013: K16.8M). Consort Express Lines Limited paid a total dividend during 2014 of K0.4M (2013:K0.6M).

Steamships Annual Report 2014 43

NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year ended 31 December 2014 (Amounts in Kina 000’s)

21. Subsidiaries and transactions with non-controlling interests (continued)

(b) New subsidiary established during the year

On 1 January 2014 Palm Stevedoring and Transport Limited was established with operations in Alotau, of which Steamships
Trading Company holds a 33% share, Consort Express Lines Limited a 33% share (net Group holding of 50.3%) and an external
party 33%.

On 1 October 2013, Steamships Trading Company Limited acquired the remaining 32% shares of Laga Industries Limited for a
purchase consideration of K26.1M. The carrying amount of the non-controlling interest in Laga Industries on the date of acquisition
was K17.1M. The Group recognised a decrease in non-controlling interest of K17.1M. and a decrease in equity attributable to
owners of the parent of K9.0M. The effect of changes in the ownership interest of Laga Industries on the equity attributable to
owners of Steamships Trading Company Limited during the year is summarised as follows:

Consolidated

Parent Entity

2014

2013

2014

2013

Carrying amount of non-controlling interests acquired

Consideration paid to non-controlling interests

Excess of consideration paid recognised in the transactions
with non-controlling interests reserve within equity

17,104

26,098

8,994

22. Investment in associates

(a) Movement in carrying amounts

Opening value

Share of proﬁ ts before tax

Income tax expense

Dividends received/receivable

Closing value

Consolidated

Parent Entity

2014

2013

2014

2013

16,499

2,583

(775)

(621)

17,636

12,177

6,538

(2,184)

(82)

16,449

The equity method is used to account for all interests in associates on a consolidated basis.

44 Steamships Annual Report 2014

NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year ended 31 December 2014 (Amounts in Kina 000’s)

22. Investment in associates (continued)

(b) Summarised ﬁ nancial information of equity accounted associates.

The Group’s share of the results of its principal associates and its aggregated assets (including goodwill) and liabilities are as follows:

2014

Makerio Stevedoring Limited

Nikana Stevedoring Limited

Riback Stevedoring Limited

United Stevedoring Limited

Ownerships
Interest
%

Assets

Liabilities

Carrying
Value

Revenue

Proﬁ t

916

933

138

779

885

18,438

2,510

15,927

179

134

686

364

8,620

2,208

291

198

1,310

20,465

2,830

17,636

11,877

1,807

2013

Makerio Stevedoring Limited

Nikana Stevedoring Limited

Riback Stevedoring Limited

United Stevedoring Limited

Ownerships
Interest
%

Assets

Liabilities

Carrying
Value

Revenue

Proﬁ t

842

1,247

182

110

660

1,137

462

329

118

207

17,499

2,881

14,618

10,997

4,014

172

138

2,022

19,760

3,311

16,449

13,810

4,354

The Stevedoring Companies provide stevedoring services to various external and Group shipping entities.

All associated companies are incorporated and operate in Papua New Guinea.

There are no contingent liabilities relating to the Group’s interest in the associates.

Steamships Annual Report 2014 45

NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year ended 31 December 2014 (Amounts in Kina 000’s)

23. Investment in joint ventures

(a) Movement in carrying amounts

Opening value

Share of proﬁ ts before tax

Income tax expense

Dividends received/receivable

Transfers/sales

Closing value

Consolidated

Parent Entity

2014

2013

2014

2013

15,021

2,907

(871)

(1,500)

15,557

26,510

7,634

(2,292)

(5,840)

(10,991)

15,021

20,051

20,190

20,051

(139)

20,051

The interest in joint ventures is accounted for in the ﬁ nancial statements using the equity method of accounting.

(b) Information relating to the joint ventures are set out below.

2014

Ownership
Interest
%

Assets

Liabilities

Carrying
Value

Revenue

Proﬁ t

Colgate Palmolive (PNG) Limited

Harbourside Development

11,393

3,695

7,859

7,698

7,859

32,989

2,036

19,252

3,695

15,557

32,989

2,036

2013

Assets

Liabilities

Ownership
Interest
%

Paciﬁ c Towing Limited (note 24)

100

Colgate Palmolive (PNG) Limited

Harbourside Development

16,844

9,681

61,067

53,208

Carrying
Value

7,163

7,859

Revenue

Proﬁ t

4,637

32,766

706

77,911

62,889

15,022

32,766

5,343

Paciﬁ c Towing Limited became a wholly owned subsidiary during 2013.

Colgate Palmolive (PNG) Limited is a long held investment providing investment returns to the Group.

Harbourside Development is a property investment company that is currently developing a commercial property in Port Moresby.
The Group’s share of the capital commitments at 31 December 2014 is K11.1 M (2013: K43.5M).

There are no contingent liabilities arising from the Group’s interests in the joint ventures.

Joint ventures have been presented separately from associates consistent with IFRS 11 and 12 which became effective 1 January
2013.

46 Steamships Annual Report 2014

NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year ended 31 December 2014 (Amounts in Kina 000’s)

24. Business combinations

2013

Acquisition of the remaining shares of Paciﬁ c Towing Limited

On 1 December 2013, the Group acquired a further 50% of the issued share capital, and obtained control, of Paciﬁ c Towing
(PNG) Limited. Together with the 50% of the issued share capital already held, this gave Steamships Trading Company Limited
control of 100% of Paciﬁ c Towing (PNG) Limited. Paciﬁ c Towing (PNG) Limited is a company incorporated in Papua New Guinea
whose business includes harbor tug boat operations, tug boat charter, diving and marine salvage activities.

The carrying value of the Group’s 50% interest in Paciﬁ c Towing Limited before the acquisition was K11.0m. The Group recognised
a gain of K34.8m as a result of remeasuring this interest, which is included in other income in the consolidated income statement.

The goodwill arising on the acquisition of Paciﬁ c Towing Limited amounting to K67.3m (which is not tax-deductible) consists of the
beneﬁ t of port access and relationships with customers, none of which is subject to contractual arrangements.

Restatement of previous year (2013) ﬁ gures

As allowed by IFRS 3, the 2013 comparative results have been restated to include a negative adjustment to reduce the equity gain
on gaining control of Paciﬁ c Towing (PNG) Limited; this is as a result of a reassessment of the fair value associates with outstanding
salvage jobs at the point of gaining control. Deferred tax was also amended to reﬂ ect correct position at time of acquisition.

Statement of ﬁ nancial position (extract)

Trade & other receivables

Intangibles

Deferred tax liability

Net Assets

Statement of comprehensive income - including discontinued
operations (extract)

Other Income

Proﬁ t before income tax

Income tax expense

Proﬁ t for the year

Acquisition of Kimbe Shipping and Transport

31 Dec
2013

Increase/
(Decrease)

31 Dec 2013
(Restated)

178,996

93,514

(25,598)

739,923

38,718

90,371

(11,930)

78,441

(1,000)

103

(2,112)

(3,039)

(927)

(2,112)

(3,039)

177,996

93,617

(27,710)

736,884

37,791

89,444

(14,042)

75,402

On 1 March 2013, the Group acquired, through New Britain Shipping Ltd, the trade and ﬁ xed assets of Kimbe Shipping and
Transport Limited, as road transport operator and container storage, equipment hire and workshop services provider. The
acquisition complimented the Group’s presence in Kimbe.

The goodwill of K9.0M was attributable to the increased market access in New Britain. It is not tax-deductible.

Steamships Annual Report 2014 47

NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year ended 31 December 2014 (Amounts in Kina 000’s)

25. Discontinued Operations

On 31st July 2014, the Group disposed of its 100% interest in Datec (PNG) Ltd to Telikom PNG Ltd.

The 31st December 2014 results from the Discontinued activities were derived from:

a) Proﬁ t & loss for the period were:

Revenue

Operating expenses

Proﬁ t before tax

Proﬁ t after tax

7 Months
2014

12 Months
2013

62,441

(59,156)

3,285

2,093

102,998

(102,198)

800

572

b) The subsequent sale for cash consideration of K36M resulted in a capital gain for the Group of K7M (parent K17M).

c) Cash ﬂ ow statement as 31 July 2014 as follows:

Operating cash ﬂ ows

Investing cash ﬂ ows

Financing cash ﬂ ows

26. Segmental reporting

(a) Description of segments

10,814

2,048

(4,998)

7,864

(947)

(1,013)

(965)

(2,925)

The Board considers the business from a product perspective and have identiﬁ ed four reportable segments. A brief description of
each segment is outlined below:

•

Commercial – consists of the retail arm of the Group and is involved in the manufacture and distribution of consumer
products.

Hotels and property – consists of the hotels owned and operated by the Group and also its property leasing division. The
assets are stated at historical cost net of accumulated depreciation and includes new assets in the course of construction.

Logistics – consists of shipping and land based freight transport and related services divisions.

Finance and investment – consists of the head ofﬁ ce administration function.

48 Steamships Annual Report 2014

NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year ended 31 December 2014 (Amounts in Kina 000’s)

26. Segmental reporting (continued)

(b) Segment information

The segment information provided to the Board for the reportable segments for the year ended 31 December 2014 is as follows:

Commercial

Hotels &
Property

Logistics

Finance &
Investment

Total

2014

External revenue

Intersegmental revenue

Interest revenue

Interest expense

Depreciation and amortisation

Impairment losses

Gain on sale of properties

Segment results

181,588

661

(8)

(6,991)

(4,562)

278,621

34,821

(3,709)

(40,277)

(3,568)

(12,172)

116,886

Share joint ventures and associates proﬁ t

Total tax expense

2,035

3,329

Proﬁ t from continuing & discontinued operations

(6,807)

Segment assets

Segment liabilities

Net assets

85,739

5,923

79,816

(37,459)

79,427

780,428

137,050

643,378

481,332

5,332

(7,033)

(58,250)

(22,460)

23,265

1,808

(3,988)

21,086

504,616

139,273

167

941,708

40,815

(5,787)

(28,899)

(1,306)

(106,824)

(30,590)

11,107

6,809

(369)

6,440

134,788

3,843

(38,486)

100,145

294,535

1,665,318

616,335

898,581

766,737

365,343

(321,800)

Total assets includes investment in joint ventures
and associates of

7,698

17,636

7,859

33,193

Capital expenditure

10,094

59,418

130,790

1,026

201,328

Steamships Annual Report 2014 49

NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year ended 31 December 2014 (Amounts in Kina 000’s)

26. Segmental reporting (continued)

2013

External revenue

Intersegmental revenue

Interest revenue

Interest expense

Depreciation and amortisation

Impairment losses

Fair value loss on ﬁ nancial asset

Commercial

Hotels &
Property

Logistics

Finance &
Investment

Total

229,434

995

(8)

(7,023)

(2,487)

260,270

39,564

(7)

(40,808)

441,093

12,502

(5,773)

(57,364)

(103,940)

137

930,934

53,061

106

(12,008)

(17,796)

(1,458)

(106,653)

(106,427)

(20,307)

Segment results

(16,456)

133,160

(57,707)

20,750

Share joint ventures and associates proﬁ t

Total tax expense

Proﬁ t from continuing operations

Segment assets

Segment liabilities

Net assets

706

4,057

(11,693)

122,155

21,599

100,556

(35,807)

97,353

822,810

40,699

782,111

8,991

17,010

698

(32,633)

22,375

79,747

9,697

(14,042)

75,402

442,633

124,865

317,768

177,850

641,400

(463,550)

1,565,448

828,564

736,884

Total assets includes investment in joint ventures
and associates of

7,162

16,450

7,859

31,471

Capital expenditure

13,425

118,297

117,998

926

250,646

These ﬁ gures include non-controlling interests share of operating proﬁ ts and assets.

The Group operates almost wholly in Papua New Guinea. It is not practical to provide a segment analysis by geographical region
within Papua New Guinea. The Group has one insigniﬁ cant business operation in the Solomon Islands.

50 Steamships Annual Report 2014

NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year ended 31 December 2014 (Amounts in Kina 000’s)

27. Contingent liabilities

There were contingent liabilities at the Balance Sheet date as follows:

(a) The parent entity has given a secured guarantee in respect of the bank overdrafts of certain subsidiaries.

(b) The parent entity has given letters of continuing ﬁ nancial support in respect of certain subsidiaries, associates and joint

ventures.

No losses are anticipated in respect of these guarantees.

28. Commitments

(a) Capital commitments

Contracts outstanding for capital expenditure:

- less than 12 months

- 1-5 years

(b) Lease commitments: group as lessee

Consolidated

Parent Entity

2014

2013

2014

2013

25,404

23,433

48,837

47,400

The Group leases various properties under non-cancellable operating leases. The leases have varying terms and renewal rights. On
renewal, the terms of the lease are renegotiated.

Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows:

Within one year

Later than one year but not later than ﬁ ve years

Later than ﬁ ve years

2,779

5,075

449

5,524

29. Subsequent events

In March 2015 the Directors declared a ﬁ nal dividend of 60 toea per share payable immediately after the Annual General Meeting
on 26 May 2015.

Steamships Annual Report 2014 51

INDEPENDENT AUDITOR’S REPORT
to the Shareholders of Steamships Trading Company Limited

Report on the ﬁ nancial statements
We have audited the accompanying ﬁ nancial statements of Steamships Trading Company Limited (the Company), which
comprise the statements of ﬁ nancial position as at 31 December 2014, the statements of comprehensive income, statements
of changes in equity and statements of cash ﬂ ows for the year then ended, and the notes to the ﬁ nancial statements that
include a summary of signiﬁ cant accounting policies and other explanatory information for both the Company and the
Group. The Group comprises the Company and the entities it controlled at 31 December 2014 or from time to time during
the ﬁ nancial year.

Directors’ responsibility for the ﬁ nancial statements
The Directors are responsible for the preparation of these ﬁ nancial statements such that they give a true and fair view in
accordance with generally accepted accounting practice in Papua New Guinea and the Companies Act 1997 and for such
internal controls as the Directors determine are necessary to enable the preparation of ﬁ nancial statements that are free from
material misstatement, whether due to fraud or error.

Auditor’s responsibility
Our responsibility is to express an opinion on these ﬁ nancial statements based on our audit. We conducted our audit
in accordance with International Standards on Auditing. These standards require that we comply with relevant ethical
requirements and plan and perform the audit to obtain reasonable assurance about whether the ﬁ nancial statements are free
from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the ﬁ nancial
statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material
misstatement of the ﬁ nancial statements, whether due to fraud or error. In making those risk assessments, the auditor
considers the internal controls relevant to the Company and the Group’s preparation of ﬁ nancial statements that give
a true and fair view of the matters to which they relate, in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company and the Group’s
internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates, as well as evaluating the overall presentation of the ﬁ nancial statements.

We believe that the audit evidence we have obtained is sufﬁ cient and appropriate to provide a basis for our audit opinion.

Opinion
In our opinion, the accompanying ﬁ nancial statements:

comply with International Financial Reporting Standards and other generally accepted accounting practice in Papua
New Guinea; and

give a true and fair view of the ﬁ nancial position of the Company and the Group as at 31 December 2014, and their
ﬁ nancial performance and cash ﬂ ows for the year then ended.

52 Steamships Annual Report 2014

INDEPENDENT AUDITOR’S REPORT
to the Shareholders of Steamships Trading Company Limited

Report on other legal and regulatory requirements
The Companies Act 1997 requires in carrying out our audit we consider and report on the following matters. We conﬁ rm in
relation to our audit of the ﬁ nancial statements for the year ended 31 December 2014:

1. we have obtained all the information and explanations that we have required;

in our opinion, proper accounting records have been kept by the Company as far as appears from an examination of
those records; and

we have no relationships with or interests in the Company or any of its subsidiaries other than in our capacities as
auditor and tax advisor. These services have not impaired our independence as auditor of the Company and the Group.

Restriction on distribution or use
This report is made solely to the Company’s shareholders, as a body, in accordance with the Companies Act 1997. Our
audit work has been undertaken so that we might state to the Company’s shareholders those matters which we are required
to state to them in an auditor’s report and for no other purpose. We do not accept or assume responsibility to anyone other
than the Company and the Company’s shareholders, as a body, for our audit work, for this report or for the opinions we have
formed.

PricewaterhouseCoopers

Grant Burns
Partner

Port Moresby
30 March 2015

By: Stephen Beach
Partner
Registered under the Accountants Act 1996

Steamships Annual Report 2014 53

DIRECTORS’ REPORT
Steamships Trading Company Limited Year ended 31 December 2014

Steamships Trading Company Limited and Subsidiary Companies

The Directors submit their Annual Report for the year ended 31 December 2014 for the Company and its subsidiaries

Principal Activities and Review of Operations

Full details of the Group’s activities are given in the Directors’ Review on page 7. The Group continues to operate in the
segments of Commercial, Hotels and Property, and Logistics.

The Directors believe that there will be no signiﬁ cant changes in the Group’s activities for the foreseeable future.

Changes in Accounting Policies

There are no changes in Accounting Policies in the year.

Result

The Group operating proﬁ t for the year attributable to shareholders was K88,655,000 (2013: K114,011,000 restated).

Dividend

The Directors advise that a ﬁ nal dividend of 60 toea per share will be paid immediately after the Annual General Meeting on
26 May 2015. The exchange rate Kina to Australian Dollar applying on 1 May 2015 will be used to calculate the dividends
to shareholders resident outside Papua New Guinea.

Rounding Off

Amounts in the Directors’ Report and accounts have been rounded off to the nearest thousand Kina.

54 Steamships Annual Report 2014

DIRECTORS’ REPORT
Steamships Trading Company Limited Year ended 31 December 2014

Experience & Interests Register

Directors serving at the date of this report have disclosed the following experience and interests in shares in the Company
and provided general disclosure of companies in which the Director is to be regarded as interested as set out below:

G.L. Cundle

Appointed Chairman on 28th February 2015 following W.L. Rothery’s retirement

Managing Director from 1st January 2013 to 12th January 2015

Member of the Remuneration Committee

Member of the Strategic Planning Committee

Director since 2013

Mr Cundle joined the Swire Group in 1979 and has extensive corporate experience having worked with the Group in
various divisions in Hong Kong, Australia, Korea, Japan and Papua New Guinea. He was a Non-Executive Director of
Steamships in 2006-2007 and Steamships Shipping General Manager from 1989-1992. He is a Director of John Swire &
Sons (PNG) Ltd and various Steamships Trading Company subsidiaries, joint ventures and associate companies. He was the
Managing Director of Steamships Trading Company Limited from 1st January 2013 to 12th January 2015.

P. Aitsi MBE

Director since 17th November 2014

Mr Aitsi is currently the PNG Country Manager for Newcrest Mining Limited and serves as a Director for various Newcrest
PNG entities including the position of Chairman of Lihir Gold Limited. He was formerly the country manager for GHD
(an engineering ﬁ rm), former chairman of Transparency International PNG (currently a board member) and the founder
chairman of Digicel Foundation. He also serves on the boards of PNGFM, City Pharmacy Group, Leadership PNG and IPBC.

G. Aopi CBE

Director since 1997

Mr Aopi is an Executive Director of Oil Search Ltd, where he is also Executive General Manager of External & Government
Affairs and Sustainability. He has substantial public service and corporate experience in Papua New Guinea currently
serving as the Chairman of the PNG Chamber of Mines and Petroleum. He is a Director of Port Moresby Stock Exchange
Ltd, Marsh Ltd, Bank of South Paciﬁ c Limited, CDI Foundation, Wahinemo Ltd and various other private companies. He is a
former Chairman of Telikom PNG Ltd and Independent Public Business Corporation.

T.J. Blackburn

Director since 2011

Mr Blackburn is Managing Director of The China Navigation Company Pte Ltd (a Swire group company) and Chairman
of Mandarin Shipping Ltd and a Director of Altus Logistics Pte Ltd. He was Director & General Manager (2009-2011) of
Hong Kong Aero Engine Services, a Director of James Finlay Ltd (2005-2009) and from 1994 to 2005 worked for various
subsidiaries and associates of John Swire & Sons Ltd, including Steamships Shipping & Transport.

Sir M.R. Bromley KBE

Member of the Audit and Risk Committee

Member of the Remuneration Committee

Member of the Strategic Planning Committee

Director, 1986 to 1996

Director since 2000

Sir Michael Bromley has extensive international business experience from over 40 years of operating and advising
companies in countries including Singapore, Indonesia, Australia, Russia, China and Papua New Guinea, principally in
retail and logistics operations. He is Chairman of Heli Niugini Ltd and AAB Holdings Pty Ltd, and a Director of Pegasus Print
Group Pty Ltd, Fasteners & More Pty Ltd, New Guinea Energy Limited, Sonway Asia Ltd, Chemica Ltd, Sig No.1 Ltd, Glock
No. 1 Ltd, Broman Ltd, Maps Tuna Ltd, Sek No. 35 Ltd, Hoia Investment Ltd and Venture Ltd.

Relevant Interest in Steamships shares: 19.99%

Steamships Annual Report 2014 55

DIRECTORS’ REPORT
Steamships Trading Company Limited Year ended 31 December 2014

D.H. Cox OL, OBE

Managing Director 2004 to 2012

Member of the Audit & Risk Committee (wef 2015)

Member of the Strategic Planning Committee (wef 2015)

Director since 2003

Mr Cox joined Steamships as a Manager in 1992, rising to become Managing Director from 2004-2012. He has extensive
experience in the PNG business environment. He is also a Director of Telikom PNG Ltd.

G.J. Dunlop

Chairman of the Audit & Risk Committee

Member of the Strategic Planning Committee

Managing Director 2000 to 2003

Director since 1995

Mr Dunlop is a chartered accountant with extensive experience in the Paciﬁ c region. He is a Director of City Pharmacy
Group Ltd, Credit Corporation (PNG) Ltd, Hardware Haus Pty Ltd and Mainland Holdings Ltd.

Lady W.T. Kamit CBE

Member of the Audit and Risk Committee

Director since 2005

Lady Winifred Kamit is a former Senior Partner, and currently a consultant at Gadens Lawyers in Port Moresby. She is a
Councillor of the Papua New Guinea Institute of National Affairs and Chairperson of Coalition for Change PNG. She is a
Director & Secretary of Bunowen Services Ltd and Gadens Administration Services Ltd, and a Director of Newcrest Mining
Ltd, Nautilus Minerals Niugini Ltd, Kamchild Ltd, ANZ Banking Group (PNG) Ltd and South Paciﬁ c Post Ltd.

P.W. Langslow

Managing Director from 12th January 2015

Mr Langslow joined the Swire group in September 1984 and has been with Cathay Paciﬁ c since 1985. Prior to his present
appointment, he has held a number of positions in the airline, including country and regional management roles in India,
Italy, Canada and Taiwan, as well General Manager Inﬂ ight Services and General Manager Airports. He is a Director of John
Swire & Sons (PNG) Ltd and various Steamships Trading Company subsidiaries, joint ventures and associate companies.

S.C. Pelling

Finance Director & Company Secretary

Mr Pelling is a chartered accountant who was previously Finance Director for agricultural operations in Africa with James
Finlay Ltd, a wholly-owned subsidiary of John Swire & Sons Ltd. He is a Director of John Swire & Sons (PNG) Ltd and
various Steamships Trading Company subsidiaries, joint ventures and associated companies.

B.N. Swire

Director since 2015

Mr Swire joined John Swire & Sons in 1985 and has since worked at various times in Hong Kong, Papua New Guinea and
Japan, concentrating on the Group’s marine businesses. He returned to the London Head Ofﬁ ce in 1994 and is now the
Chairman of John Swire & Sons, Ltd., as well as the Non-Executive Chairman of the China Navigation Co., Ltd., and of Swire
Oilﬁ eld Services, Ltd., and a Non-Executive Director of Swire Paciﬁ c Offshore, Ltd.

Direct and indirect beneﬁ cial interest 4.47%

56 Steamships Annual Report 2014

DIRECTORS’ REPORT
Steamships Trading Company Limited Year ended 31 December 2014

Remuneration of Directors

Directors remuneration received or receivable from the Company as Directors during the year, is as follows:

W.L. Rothery (retired 28 February 2015)
D.H Cox OL, OBE
G. Aopi, CBE
T.J. Blackburn
Sir M.R. Bromley KBE
G.J. Dunlop
J.W.J Hughes - Hallett CMG, SBS (retired 31 December 2014)
Lady W.T. Kamit, CBE
P. Aitsi, MBE
G.L Cundle*
S. C. Pelling *

2014
K’000

246
99
99
99
152
129
99
197
11
-
-

2013
K’000

211
84
84
84
211
169
84
148
-
-
-

* Managing Director and Finance Director receive no fees for their service as Directors during the year.

Remuneration of Employees

The number of employees other than Directors, whose remuneration and other beneﬁ ts was within the speciﬁ ed bands are
as follows:

Remuneration
K’000

2014
No.

2013
No.

Remuneration
K’000

2014
No.

2013
No.

Remuneration
K’000

2014
No.

2013
No.

110-120
120-130
130-140
140-150
150-160
160-170
170-180
180-190
190-200
200-210
210-220
220-230
230-240
240-250
250-260
260-270
270-280
280-290
290-300
300-310
310-320
330-340
340-350
350-360

13
14
6
5
9
7
6
2
3
2
5
3
2
3
1
1
6
6
1
2
1
1
1
3

-
12
12
9
9
6
3
5
8
5
1
6
3
8
4
5
3
2
2
1
1
5
-
1

For and on behalf of the Board:

360-370
370-380
380-390
390-400
400-410
410-420
420-430
430-440
440-450
450-460
460-470
470-480
490-500
500-510
510-520
520-530
530-540
540-550
550-560
560-570
570-580
580-590
600-610
610-620

6
2
-
1
1
4
5
-
2
1
-
1
1
2
-
1
2
2
-
2
-
1
1
1

1
3
4
-
3
2
2
1
-
1
1
3
-
-
3
2
-
1
3
-
2
-
-
1

630-640
650-660
660-670
670-680
680-690
700-710
710-720
740-750
750-760
770-780
790-800
830-840
840-850
880-890
940-950
960-970
970-980
1,030-1,040
1,050-1,060
1,070-1,080
1,660-1670
1,700-1,800

-
1
-
1
1
2
1
-
1
-
2
-
-
-
-
1
1
1

1
1
2

2
-
1
1
3
1
-
1
1
1
1
1
1
-
1
1
1
1

Port Moresby
30 March 2015 Chairman

G.L. Cundle

P.W. Langslow
Managing Director

Steamships Annual Report 2014 57

STOCK EXCHANGE INFORMATION
Steamships Trading Company Limited Year ended 31 December 2014

Shares are listed on the Australian Securities Exchange and the Port Moresby Stock Exchange. All shares carry equal voting
rights.

Shareholdings
At 26 February 2015, there were 398 shareholders.

295 Holding
Holding
76
Holding
13
Holding
14

1
1,001
5,001
10,001

-
-
-
-

1,000 units
5,000 units
10,000 units
and over

The 20 largest shareholders were:

Number of shares

John Swire & Sons (PNG) Limited
Bell Potter Nominees Ltd
National Superannuation Fund Ltd
John E Gill Operations Pty Ltd
Citicorp Nominees Pty Limited
Kelvinside Pty Ltd
Malcolm Burns Reid
Mr Ramesh Mahtani
Hylec Investments Pty Ltd
Intercontinental Assets Pty Ltd
Capital Nominees Limited
Bryce Family Super Fund
Engoordina Pty Ltd
Derrick Charles Whitaker
Jennifer May Forbes
Miss Shirin Moayyad
Custodial Services Limited
Mary Patricia Haughton
Mrs Judith Scottholland
Mrs Robyn A Gostelow

22,362,651
6,199,586
1,859,446
54,727
27,542
25,000
22,867
21,700
20,494
15,000
12,767
12,243
11,078
10,348
10,000
10,000
8,768
8,161
8,161
7,393
30,707,932

72.12
19.99
6.00
0.18
0.09
0.08
0.07
0.07
0.07
0.05
0.04
0.04
0.04
0.03
0.03
0.03
0.03
0.03
0.03
0.02
99.03

Applicable Legislation
The Company is incorporated in Papua New Guinea and is not generally subject to Australian Corporations Law including,
in particular, Chapter 6 of the Australian Corporations Law dealing with the acquisition of shares (including substantial
shareholdings and takeovers). The Company is subject to the requirements of the Papua New Guinea Companies Act 1997,
Securities Act 1997 and the Takeovers Code. The Companies Act and the Securities Act regulate the issue and buy-back of
shares and contain provisions as to the trading in securities, provisions as to ﬁ nancial beneﬁ ts to related parties, substantial
shareholders provisions, remedies in cases of oppression or injustice and actions by, and access to, records by shareholders.

The Takeovers Code regulates offers where a person already holds more than 20% of the voting rights in a company or
where a person becomes the holder of more than 20% of the voting rights in a manner permitted by the Code.

A code offer, which can either be a full offer or a partial offer, must be extended to all holders of voting securities in the
Company. The Code also contains compulsory purchase and sale provisions if more than 90% of the shares are acquired
under an offer.

58 Steamships Annual Report 2014

Steamships Annual Report

COMPANY DIRECTORY

CHAIRMAN
G. L. Cundle §&

MANAGING DIRECTOR
P.W. Langslow

FINANCE DIRECTOR
S. C. Pelling

NON-EXECUTIVE DIRECTORS
P. Aitsi MBE
G. Aopi CBE
T.J. Blackburn
Sir M.R. Bromley KBE §+&
D. Cox OL, OBE +&
G. J. Dunlop +&
Lady W.T. Kamit CBE +
B.N. Swire

+ Member of the Audit and Risk Committee
§ Member of the Remuneration Committee
& Member of the Strategic Planning Committee

SECRETARY
S. C. Pelling

REGISTERED OFFICE
Champion Parade
Telephone: +675 322 0222
P.O. Box 1
Port Moresby
Papua New Guinea

AUDITORS
PricewaterhouseCoopers
P.O. Box 484
Port Moresby
Papua New Guinea

SHARE REGISTRARS
Computershare Investor Services Pty Limited
GPO Box 2975
Melbourne VIC 3001
AUSTRALIA
Telephone: (Aus) 1300 85 05 05
(Overseas)
Fax:

+61 (0)3 9415 4000
+61 3 9473 2500

STOCK EXCHANGE
Shares are listed on both the Port Moresby Stock Exchange
Limited and the Australian Securities Exchange Limited.

A. R. B. N.
055 836 952

Steamships Annual Report 2014 59

This page has been intentionally left blank.