A N N U A L
R E P O R T
2016
CONTENTS
Brief Profile of Steamships Trading Company Limited . . . 2
Financial Highlights . . . . . . . . . . . . . . . . . . . . 4
Chairman’s Report . . . . . . . . . . . . . . . . . . . . . 6
Directors’ Review . . . . . . . . . . . . . . . . . . . . . 7
Review of Operations - LOGISTICS . . . . . . . . . . . . 8
Consort Express Lines . . . . . . . . . . . . . . . . 8
Pacific Towing . . . . . . . . . . . . . . . . . . . . 9
Transport & Port Services . . . . . . . . . . . . . 10
Review of Operations - PROPERTY . . . . . . . . . . . 11
Coral Sea Hotels . . . . . . . . . . . . . . . . . . 11
Pacific Palms Property . . . . . . . . . . . . . . . 12
Review of Operations - COMMERCIAL . . . . . . . . . 13
Laga Industries . . . . . . . . . . . . . . . . . . . 13
Colgate Palmolive . . . . . . . . . . . . . . . . . 14
Sustainability . . . . . . . . . . . . . . . . . . . . . . . 15
Corporate Governance . . . . . . . . . . . . . . . . . . 16
Financial Section . . . . . . . . . . . . . . . . . . . . . 17
Statements of Comprehensive Income . . . . . . . 17
Statement of Changes in Equity . . . . . . . . . . 18
Balance Sheets . . . . . . . . . . . . . . . . . . . 19
Statements of Cash Flows . . . . . . . . . . . . . 20
Notes to the Financial Statements . . . . . . . . . 21
Independent Auditor’s Report . . . . . . . . . . . 52
Directors’ Report . . . . . . . . . . . . . . . . . . 58
Stock Exchange Information . . . . . . . . . . . . 62
Company Directory . . . . . . . . . . . . . . . . . . .
IBC
Steamships Annual Report 2016 1
Contents
BRIEF PROFILE OF STEAMSHIPS GROUP
Steamships Trading Company (Steamships) is a committed investor in Papua New Guinea
with a near 100 year history. The group 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 profitable business that is widely respected as
being the best group to work for and with which to do business.
Customer Focus – Our customers are the final judges
of our success or failure. We understand and respond
to the needs of our customers.
•
•
•
People Development – We value a working
environment that fosters innovation and encourages
personal development and learning.
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.
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.
Steamships is aware of its prominent 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 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 and satisfaction of its
customers, the local communities and the environment in
which it operates.
Ninety-eight years on, Steamships is still showing it has the
resources and capacity, vision and capability to meet the
dynamic needs of a growing country.
Integral to this vision are the following business strategies:
•
•
•
The long-term development of a diversified 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 over 3,500 PNG citizens and
non-citizens in 6 diverse divisions grouped under
the 3 operating categories of Logistics, Property and
Commercial.
Steamships core values include the following:
•
•
•
Safety – We prioritise safety awareness and
compliance to ensure our business operations are
conducted safely.
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.
2 Steamships Annual Report 2016
BRIEF PROFILE OF STEAMSHIPS GROUP
STEAMSHIPS’ ORGANISATIONAL STRUCTURE
STEAMSHIPS TRADING COMPANY
LOGISTICS
PROPERTY
COMMERCIAL
Consort Express
Lines
Pacific Towing
Transport &
Port Services
Pacific Palms
Property
Coral Sea
Hotels
Laga
Industries
X5 Associate Port
Service Co’s
East West
Transport
Harbourside
Development JV
Colgate
Palmolive JV
JV Port Services
(x10 JV Entities)
Pacific
Rumana JV
Wonye JV
Viva No 31 JV
Steamships Annual Report 2016 3
Brief Profile of Steamships Group
FINANCIAL HIGHLIGHTS
FINANCIAL HIGHLIGHTS
2016 FINANCIAL HIGHLIGHTS
Revenue (including discontinued operations)
Profit attributable to shareholders
Cash generated from operations
Net cash inflow/(outflow) before financing
Shareholders’ funds
External Borrowings
Earnings per share (toea)
Dividends per share (toea)
Shareholders’ funds per share (toea)
Underlying profit attributable to shareholders
Underlying earnings per share (toea)
Gearing ratio
Interest cover
Dividend cover
2016
K’000
732,701
84,210
191,061
229,044
833,006
502,497
272
130
2,686
71,721
231
35%
6.5
2.1
2015
K’000
773,535
98,979
202,821
121,601
789,087
644,667
319
130
2,545
80,651
260
43%
6.3
2.5
Change
%
-5%
-15%
-6%
87%
6%
-22%
-15%
0%
6%
-11%
-11%
-1%
3%
-15%
4 Steamships Annual Report 2016
FINANCIAL HIGHLIGHTS
SUMMARY OF PAST PEFORMANCE
2007
K’000
2008
K’000
2009
K’000
2010
K’000
2011
K’000
2012
K’000
2013
K’000
2014
K’000
2015
K’000
2016
K’000
INCOME STATEMENT (including discontinued operations)
Revenue
Profit before tax
Share of associates profit
Income tax expense
Minority interests
Net profit attributable to shareholders
Depreciation transfer
Equity adjustment
Dividends paid or provided for the year
Earnings retained this year
1,467
0
(38,760)
36,864
789,918 920,357 986,310 930,934 941,708
404,592 462,972 495,976
79,747 134,789
180,834 233,967 265,574
91,208 111,615 120,602
3,843
14,188
11,416
9,697
13,859
16,732
16,837
15,029
(14,042) (38,487)
(81,414)
(53,935) (67,727)
(34,637)
(32,808)
(27,869)
(11,490)
(6,137)
(5,418)
38,609
(20,648)
(21,870) (21,838)
(4,211)
88,655
96,560 116,445 158,261 177,700 114,011
90,226
74,157
3,062
773,535 732,701
136,042 118,686
5,865
(37,710) (35,677)
(4,664)
(2,415)
84,210
98,979
159
0
(45,272)
45,113
0
0
(45,272)
51,288
0
0
(1,061)
0
(31,008) (58,916)
98,284
85,437
0
0
(88,373)
89,327
0
0
(8,994)
0
(57,365) (43,411)
45,244
47,652
0
2,206
0
0
(48,062) (40,291)
43,919
53,123
Underlying profit attributable to shareholders
(adjusted for significant items)
49,926
67,770
85,120 113,597 153,566 156,213 128,367 108,808
80,651
71,721
BALANCE SHEET
SHARE CAPITAL & RESERVES
Issued Capital
Retained Earnings
Shareholders’ funds
EQUITY
24,200
24,200
24,200
24,200
24,200
764,887 808,806
254,230 302,595 353,883
278,430 326,795 378,083 452,357 578,549 677,178 713,977 735,964 789,087 833,006
24,200
24,200
24,200
428,157 554,349 652,978 689,777 711,764
24,200
24,200
13,684
48,831
292,114 345,131 421,937 515,208 653,914 761,500 736,884 766,737 836,602 881,837
47,515
43,854
18,336
62,851
75,365
84,322
22,907
30,773
Fixed Assets / Investment Properties
Investments in Associated Companies
Future Income Tax Benefit
Goodwill
Other assets
TOTAL ASSETS
263,276 353,261 664,196
786,510 938,709 1,023,861 1,066,393 1,115,123 1,072,955 1,068,892
17,939
33,337
22,225
33,193
38,687
66,445
31,471
15,416
36,458
7,305
4,150
5,358
36,680
33,521
21,081
0
9,282
36,914
17,183
7,578
3,568
80,491
17,183
80,491
80,491
93,617
17,183
400,480 284,200
137,623 154,508 203,480
294,203 299,634 411,920 352,549 366,479
432,050 552,834 910,103 1,122,595 1,283,971 1,491,651 1,565,111 1,628,807 1,627,298 1,536,708
28,445
0
17,183
Current Liabilities
Non-Current Liabilities
TOTAL LIABILITIES
134,941 122,562 236,847
85,141 251,319
541,292 184,646
249,404 470,225
139,936 207,703 488,166 607,386 630,057 730,151 828,227 862,070 790,696 654,871
273,055 283,445 370,396 230,390 190,621
334,331 346,612 359,755 597,837 671,449
4,995
NET ASSETS
292,114 345,131 421,937 515,208 653,914 761,500 736,884 766,737 836,602 881,837
RATIOS
Current assets to current liabilities
Borrowings to shareholders funds
Gearing
Tangible net asset backing per share (kina)
Net profit to revenue %
Net profit to shareholders’ funds %
Underlying profit to shareholders’ funds %
Dividends per share (toea)
EPS (toea)
Underlying EPS (toea)
Earnings retained %
1.02
13.6%
11.5%
9.31
18.3%
26.6%
17.9%
125
239
161
49.7%
1.26
34.8%
24.8%
10.89
19.5%
27.6%
20.7%
146
291
219
50.0%
0.86
89.1%
44.4%
13.05
19.5%
25.5%
22.5%
146
311
275
53.1%
1.08
89.7%
44.0%
16.06
14.7%
25.7%
25.1%
100
376
366
73.4%
1.06
70.1%
38.3%
20.53
17.2%
27.4%
26.5%
190
510
495
62.1%
1.11
72.6%
39.2%
24.00
18.0%
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%
0.74
81.7%
43.1%
24.38
12.8%
12.5%
10.2%
130
319
260
61.5%
1.12
57%
34.6%
25.84
11.5%
10.1%
8.6%
130
272
231
52.2%
Notes
Earnings per share = profit attributable to shareholders / average shares in issue
Gearing = debt / debt plus equity
Interest cover = earnings before interest and tax / net finance charge
Dividend cover = profit attributable to shareholders / total dividend paid and provided
Steamships Annual Report 2016 5
Financial Highlights
CHAIRMAN’S REPORT
The economic environment in 2016 was weaker than had been anticipated across all sectors.
Although commodity prices, upon which the economy is heavily dependent, generally
increased during 2016 the benefit has yet to be felt in the broader economy. The lack of
foreign currency hampered business activity and maintained pressure for a devaluation of the
Kina. Government expenditure was constrained by the continuing national budget deficit and
there is a lack of international investor appetite for the much discussed sovereign bond issue
The introduction of legislation with proposed reforms
to the Land Act, the Mining Act and the SME policy has
caused concern for the private sector and may lead to a
reduction in foreign direct investment in PNG whilst there
is uncertainty over the scope of these reforms.
Continuing low oil and gas prices bring uncertainty to
anticipated development projects, but the quality and
extent of PNG resources should mean that development
will commence in the foreseeable future. The reopening of
the Ok Tedi copper mine in early 2016 and the increased
price of copper provided an encouraging boost for the
economy.
The predicted national budget deficit and a mid-year
election creates uncertainty for the 2017 economic
outlook, which combined with subdued private sector
investment, will likely see another difficult year for
business in 2017 .
Port Moresby will host the APEC economic leaders meeting
in November 2018 and there will be many related events
that should generate business activity. Construction of
the conference centre is underway and Steamships is
supportive of efforts to create a landmark event to promote
PNG to a global audience.
In 2016 the logistics businesses, including shipping,
towing, stevedoring and transport benefitted from the
corporate restructurings of 2015 as well as new investment
in vessels and equipment. The International Terminal
Concession award remained open and the Steamships’
stevedoring and handling businesses remain well
positioned to work with whoever is finally selected.
Pacific Palms Property’s performance was satisfactory
and remained largely static by virtue of its high quality
investments in strategic locations. Despite over-supply in
some sectors as demand fell in 2016, rents and occupancy
rates remained resilient. Market conditions have led to a
cautious approach to new development but some exciting
prospects are in the design phase to take advantage of any
market recovery. Significant progress has been made on the
reconstruction of Waigani Central, as well as joint venture
mixed commercial and retail developments in Mt. Hagen
and Madang.
Coral Sea Hotels was affected by the economic slowdown
and new capacity entering the Port Moresby market.
Investment was maintained in the upgrade of product and
service standards to better attract and retain customers in
the increasingly competitive market. New dining facilities
were launched at The Gateway Hotel in Port Moresby
and compensated for a reduction in room revenue.
The Coastwatchers Hotel in Madang was sold and The
Melanesian Hotel in Lae was closed pending construction
of a new and larger hotel.
The transformation of Laga through focus on enhanced
manufacturing, sales and distribution capacities, especially
in the ice cream sector, continued to reap rewards and
its sharper focus on quality and customer service is being
recognised in the market.
Capital investment was constrained in 2016 in light of the
economic downturn. The balance sheet remains strong and
positions Steamships well to capitalise on opportunities
when they arise. Steamships remains confident in the
longer term prospects for the PNG economy whilst
remaining disciplined in tackling short-term challenges.
This approach has enabled Steamships over its 98 years of
operations to contribute and participate in PNG’s journey
of development.
Steamships will continue to invest in the training and
development of all employees despite the economic
slowdown. We intend to be at the forefront of the recovery
of economic growth and for our team to continue to grow
Steamships and its contribution to PNG. 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
31 March 2017
6 Steamships Annual Report 2016
Chairman’s Report DIRECTORS’ REVIEW
The Directors of Steamships Trading Company Limited advise a profit after tax and minority
interests of K84.2 million for the 12 months to December 2016, compared to a profit of
K99.0 million for the same period in 2015, a 14.9% decrease. Adjusting for significant items
the underlying profit attributable to shareholders decreased by 11.1% from K80.7 million in
2015 to K71.7 million in 2016 as shown below:
Net profit attributable to shareholders
Add back/(less) impact of significant items (post tax and minority interests)
Unrealised gain on change in control of Pacific Rumana
Impairment of coastal slipway due to Paga Hill ring road
Gain on sale of fleet and equipment (post highway closure impairment)
Gain on sale of properties
Trade Winds impairment
Laga office and amenities impairment
Impairment of fixed assests
Hotel and Property development cost write off
Other
Total impact of significant items
2016
Km’s
84.2
-
-
-
(19.2)
-
-
2.2
5.6
(1.1)
(12.5)
2015
Km’s
Change
99.0
-14.9%
(18.9)
1.3
(0.7)
-
0.9
(1.0)
-
-
-
(18.3)
Underlying profit attributable to shareholders
71.7
80.7
-11.1%
The result reflects the prolonged weakness in economic
conditions that was evident throughout much of last year.
Demand for goods and services was adversely impacted in
the second half of the year not only by the continuation of
low commodity prices (which did see a late recovery that is
encouraging for the future) but also by a shortage of foreign
currency. The market also saw an increase in capacity and
consequently competition which compounded this weak
demand picture. As a consequence 2016 saw notable
pressure across the economy and Steamships’ sales
revenue declined 5% to K732.7 million against last year’s
K773.5 million, on a continuing basis.
Depreciation in 2016 was K106.7 million (excluding
impairments) against K102.1 million in 2015, and net
interest on borrowings (excluding capitalised interest)
was K22.0 million against K26.0 million in 2015. Capital
expenditure for the 12 months was K109.5 million (with
capitalised interest of K1.7 million) against K108.1
million (with capitalised interest of K1.5 million) in 2015
reflecting a deliberate slow down in project activity given
the economic climate. The group’s net operating cash flow
generation declined 6% to K191.1 million against K202.8
million in 2015 .
A final dividend of 35 toea per share has been proposed
and will be paid following approval at the company’s
annual general meeting on the 19th of May 2017, subject
to Steamships’ ability to secure foreign exchange for non
PNG shareholders. This brings the total dividend for the
year to 130 toea per share (2015 = 130 toea per share).
The dividend is unfranked and there is no conduit foreign
income .
Steamships Annual Report 2016 7
Directors’ Review
REVIEW OF OPERATIONS - LOGISTICS
CONSORT EXPRESS LINES
At 31 December 2016, Consort operated a fleet
of 19 coastal vessels (7 geared, multi-purpose
deep water vessels and 12 shallow water landing
craft, bulk carriers, tugs and barges). All are PNG
flagged and manned and all safety and technical
specifications are maintained in accordance with
Lloyds international standards.
As a consequence of the weakness in the Oil & Gas
market, planned deployments of the Projects Charters fleet
failed to eventuate but the first quarter of the year was
buoyed by activity associated with the demobilisation of
rig sites remaining from 2015. Thereafter a portion of the
Project Charters fleet was deployed with the liner trades,
with surplus vessels remaining idle.
LINER SERVICES
Consort connects 17 ports around PNG. The
Division has scheduled services to the North Coast,
South Coast, New Guinea Islands, Bougainville
and Western Province. Consort proudly serves the
people of PNG by providing the sole supply link to
many of the communities on its routes.
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
transshipping cargoes to outports.
In addition to owning and operating ships,
Consort provides complementary depot services
to customers at its Lae hub and is a shareholder
and manager of stevedoring operations at five PNG
ports. These stevedoring companies are partnerships
between Consort and local landowner companies
and provide significant employment opportunities
for the nearby communities.
PROJECT CHARTERS
Consort provides short and long term vessel charters
specialising in shallow water river shipping, and
together with the Transport & Port Services Division
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.
The year started with the virtual collapse in the oil and gas
exploration markets as a function of the sharp drop in the
price of oil in Q4 2015 and continuation of the El Nino
drought from the end of 2015.
8 Steamships Annual Report 2016
The El Nino drought lasted until April and curtailed both
demand as well as the ability to supply the Fly River
ports. Frosts in the highlands as well as the shortage of
rain severely hampered the local production of food and
damaged the cash economy leading to generally low levels
of shipping throughout the country for the first half of the
year. Volumes improved with the breaking of the drought
and a very good coffee crop and high prices for cocoa
meant that shipping levels increased in the second half of
the year.
Consort’s planned fleet renewal programme continued
with the disposal of one of its older liner vessels in July and
the arrival of a replacement, Niugini Coast, in November.
Niugini Coast is a sister to the two larger capacity vessels
in the fleet and introduces efficiency and capacity that
will support the division into the future. The landing craft
‘Lahara Chief’ was sold at the end of the year, having been
superseded by the new shallow draft and double bottomed
landing craft purchased in 2014.
2016 also saw a number of liner vessels requiring
extensive scheduled periods in dock to revalidate their
certificates. In the fourth quarter a decision was taken to
start sending vessels to Singapore for docking and, despite
the time needed to get to and from the dock, a noticeable
improvement has been observed in both out-of-service
time and docking expense.
At the close of 2016 Consort withdrew from the
international liner market due to declining freight volumes
and as a consequence the decision was taken to sell the
two vessels which had serviced this trade lane in 2017.
Despite the challenges of 2016, the underlying
performance was positive with tonnages up 4% on
2015 and a significant year-on-year improvement in the
underlying result. While the 2017 economic environment
is expected to be just as tough as 2016, Consort believes
the recent transition of tonnage will allow them to
concentrate on delivering a consistent and reliable service
to their customers, resulting in greater market support.
Review of Operations - Logistics REVIEW OF OPERATIONS - LOGISTICS
PACIFIC TOWING
Pacific Towing is the leading provider of harbour
towage and mooring services in PNG and offers
coastal and ocean towage services. A full member
of the International Salvage Union, it also retains
a fast responder salvage capability complimented
by a comprehensive range of commercial dive
services. As an ancillary service the company also
provides life raft leasing & servicing and in 2017
will commence with the provision of oil spill
response and fire services.
Pacific Towing is headquartered in Port Moresby
and operates 11 tugs and 10 associated support
vessels in five ports across PNG (Port Moresby, Lae,
Rabaul, Kimbe and Madang). Dedicated harbour
towage services were extended to the Solomon
Islands in 2013 through a subsidiary company
operating in Honiara
Pacific Towing experienced a 7% decline in its principal
harbour towage jobs, but positive non-harbour towage,
salvage and diving activity meant that the division posted a
respectable result .
In 2016 two salvages were responded to (Swift 8 & Kiunga
Chief) with the latter being settled during the year. During
2016 the Helene Rickmers salvage was also settled and
a conclusion to negotiations for the Foxhound and Tao
Mariner salvages are expected in 2017.
People development remains a focus and work experience
for Pacific Towing seafarers continues with Hong Kong
Salvage & Towage, with two employees expected to travel
to Hong Kong for a month’s work in 2017. Nine new
cadets have been selected for training at the Madang
Maritime College and training of the existing cadre of deck
and engine officers continues with the college. Pacific
Towing’s divers likewise continue to attend the Professional
Diving Academy in Sydney.
At the end of 2016 Pacific Towing secured the purchase of
a 50tbp tug, Turner, which will allow for the location of an
ASD tug in Kimbe, increasing tug capacity in that port in
response to growing tanker needs.
Steamships Annual Report 2016 9
REVIEW OF OPERATIONS - LOGISTICS
TRANSPORT & PORT SERVICES
The Transport and Port Services division showed resilience
in the face of soft operating conditions in 2016 to meet
projected financial performance, and continues to unlock
synergies from the 2015 merger of land based logistics
operations .
Competition remains fierce in the transport industry
however with the exit of a number of smaller operators and
with customers looking for safety and reliability, transport
has been able to maintain its market share with respect
to general transport and has seen an increase in depot
services. Material fuel contracts have also been renewed
or extended in 2016. The reduction in PNG imports has
impacted top-line revenue however cost controls and
synergies from the merger of EWT with JV Port Services
have maintained a sustainable bottom line.
Joint Venture Port Services (JVPS) regional operations
produced a slightly improved consolidated result. Port
Services Ltd in Port Moresby was negatively impacted
by lines calling at the new Motukea facilities, but Lae
stevedoring operations remain strong. Morobe Terminals
Limited was established in Q4 2016 as a joint venture
between Riback and Lae Port Services to provide handling
operations in Lae port and position the merged entity as
a strong partner for the eventual awardee of the Lae Tidal
Basin terminal operating concession.
The division moves into 2017 with a formidable array of
experience through a strong, well trained employee base
of 1,300 staff and with a significant range of fit for purpose
equipment. It remains highly compliant with industry best
practice standards and thus is well placed to meet the
challenges head on.
Transport & Port Services completed its first full year
of operations in 2016 after the management of the
group’s transport and port services interests were
combined in 2015.
EAST WEST TRANSPORT (EWT)
EWT is one of the country’s main multifaceted
transport and logistics companies with a presence
in Lae, Port Moresby, Kimbe, Rabaul, Madang,
Wewak and Kavieng. The division has a sizable
fleet 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 programs.
EWT operates across a wide spectrum of transport-
related activities including bulk fuel, containerised
cargoes, 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. The Division capitalises on its
close relationship with its sister shipping company
by offering specialised project solutions for the
mining, oil and gas sectors.
JV PORT SERVICES (JVPS)
The group’s eight JVPS businesses offer a full range
of stevedoring and handling facilities in the ports
of Port Moresby, Lae, Alotau, Oro, Madang, Kimbe,
Kavieng and Kiunga. With a fleet of specialist
equipment the businesses handle all types of
containers, as well as project cargo, break-bulk,
RO-RO, LO-LO and grains. The stevedoring
companies are joint ventures between Steamships
and local landowner groups at the respective ports.
Each joint venture employs a local workforce and is
structured in a manner so that a share of earnings is
able to filter back into the community.
10 Steamships Annual Report 2016
REVIEW OF OPERATIONS - PROPERTY
CORAL SEA HOTELS
Coral Sea Hotels (CSH) operates seven hotel and
apartment complexes offering full hotel facilities
and serviced apartments as well as extensive
meeting, conference and banqueting facilities.
CSH is the largest hotel group in PNG, offering
549 hotel rooms and 125 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 in Lae; the Highlander Hotel and
Apartments in Mount Hagen and the Bird of
Paradise Hotel in Goroka. During the year the
Coastwatchers Hotel in Madang was sold and
the Melanesian Hotel in Lae was demolished in
preparation for a new hotel to be constructed.
The CSH profit margin declined further in 2016 as
revenue per available asset for both rooms and apartments
declined 13% and 32% respectively and F&B revenues
declined 15% on the prior year. The continuing impact
of a slower economy on business travel, budget
constraints on government department expenditure and
reduced consumer discretionary spend all contributed
to this decline but 2016 also saw a significant increase
in competition in Port Moresby. The hotel sector was
impacted by the opening of the Stanley Hotel in Waigani
and in the restaurant space by the commencement of
operations of 5 new restaurants and cafés at Harbourside.
The Port Moresby hotels benefited from pre APEC 2018
meetings as well as the FIFA women’s under 20’s world cup
Championships held in November 2016. The opening of
three new F&B outlets at the Gateway Hotel increased the
profile of that property and is providing a new destination
for dining and entertainment near the airport.
Investment was maintained in the completion of the
upgrade of the Ela Beach Hotel and the progression of
the refurbishment plans for the Highlander Hotel, which
will commence in the first quarter of 2017. 2017 will
also see soft upgrades performed on the room inventory
at the Gateway Hotel and Whittaker Apartments. Coral
Sea Hotels is partnering with the Ok Tedi Development
Foundation to build and operate a new 45 bed hotel (the
Cassowary) in Kiunga, which is due to open in 2017.
Significant investment continues in training and staff
development in order to maintain a high quality of service
offering for customers and a number of World Luxury Hotel
Awards in the Australasia and Oceania category were once
again achieved in 2016.
Plans for 2017 onwards include redevelopment of the
Melanesian Hotel in Lae, extensions for the Highlander
Hotel in Mt Hagen and a re-invigorated restaurant concept
for the Grand Papua Hotel. The market is expected to
remain competitive as new Hotels commence operations
in the run up to APEC in 2018.
Steamships Annual Report 2016 11
Review of Operations - Property REVIEW OF OPERATIONS - PROPERTY
PACIFIC PALMS PROPERTY
Pacific Palms Property (PPP) is one of the largest
and most dynamic property developers in PNG. The
division currently holds property in the Residential,
Commercial, Retail and Industrial sectors with
building and land assets located in Port Moresby,
Lae, Madang, Wewak, Goroka, Mt. Hagen,
Popondetta and Rabaul.
PPP’s strategy of making investments of scale and
quality in good locations continues to support
stable revenues even though over-supply of
property is growing in Port Moresby. PPP continued
its selective disposal of less strategic properties over
2016 .
The Port Moresby residential market has been hit by
falling demand as the economy continues to decline and
over-supply to the market continues. PPP rates however
remained stable and overall occupancy increased year on
year, reflecting the quality of its product. The refurbishment
of Windward West apartments completed during the year
and the building was fully tenanted at year end.
The commercial category has seen occupancy drop amidst
signs of weakness in the market. The Harbourside East
& West Development remains at 100% occupancy and
this supported the decision to approve work to design the
complimentary Harbourside South Development .
The retail category maintained strong occupancy, although
this is reduced from prior year. The joint venture to develop
a mixed retail & commercial centre in Madang will see this
property complete construction in early 2017. The joint
venture to develop a mixed retail & commercial centre in
Mt. Hagen will see the construction of Mt. Hagen’s largest
supermarket and a modern retail/commercial facility
complete in 2017. The rebuild of the fire damaged Waigani
Central supermarket has recently been completed and
operations to commence tenant fitout will follow.
PPP remains the dominant player in the industrial category.
General market rates and occupancies have held steady
through 2016. PPP’s recent development of warehouses
in the Baruni area continues to experience vacancies
however PPP remain positive that the market will pick up
as various developments around the new international
berth at Motukea continue and the road development is
completed in 2017.
The focus in 2017 for PPP will be to renew expiring leases
in all sectors and maintain high maintenance standards to
sustain high occupancy rates.
12 Steamships Annual Report 2016
REVIEW OF OPERATIONS - COMMERCIAL
LAGA INDUSTRIES
Headquartered in Lae, Laga Industries is one
of PNG’s largest consumer goods businesses
manufacturing and distributing ice cream, vegetable
oils, condiments, powdered drinks, snack foods and
beverages.
segments solid growth was achieved, particularly in the
second half of the year. Specialty Lines sales were flat
and Beverage sales declined as focus shifted away from
alcoholic lines, under the Trade Winds banner, to non-
alcoholic products.
Brands include Gala Ice Cream, distributed from
the “Gala Pala’s” found in most leading retail
supermarkets; Highland Meadows and Laga
Cooking Oils; Kools powdered drinks, Star of India
Curry Powder, 111 Baking Powder and Instant
Yeast and various other branded Specialty lines;
and Trade Winds spirits including popular ready-to-
drink (RTD) premixed beverages. Laga Industries
also bottles pure drinking water under the Tropical
Oasis brand and various private labels.
Operationally, the Division has a fully integrated
production facility in Lae, a freezer and dry goods
distribution centre and sales office in Port Moresby
and sales offices in Madang, Wewak, Goroka, Mt
Hagen, Kimbe, Kavieng, Kokopo/Rabaul and Buka.
The Lae production facility is a large industrial
site which features a state of the art Ice Cream
production plant which is the largest capacity plant
in the Pacific.
Laga Industries continued its significant turnaround in
fortunes in 2016 with sales growth in key segments,
including Ice Cream and Cooking Oil as well as
operational improvements across all aspects of the
business .
Despite challenging market conditions overall sales saw
modest growth. In the core Ice Cream and Cooking Oil
Ice Cream was buoyed by the introduction of a new
product Hamamas, which contributed to a much improved
product range. The new Ice Cream plant continued to
generate high product quality and pleasing production
efficiencies, yielding improved margins. The business
continued to invest in the iconic Gala brand.
Cooking Oil margins reduced during the year as the
impact of rising commodity prices and the declining Kina
impacted. Paradoxically, these same forces, combined
with the lack of liquidity in the Kina, pushed many
competitors out of the market in 2016, driving strong
growth in the second half for the Highland Meadows
range.
Specialty Lines sales were flat in 2016 after strong growth
in the prior year. After many years of underinvestment,
significant capital was invested in this business segment in
2016 to lift production capacity and efficiency.
The Beverages business declined sharply in 2016 as the
alcoholic beverages business, Trade Winds, was being
scaled down in anticipation of divestment. This process is
expected to conclude early 2017. As a result of the exit
of the alcoholic beverages business, sales will decline in
2017 .
Operating profit improved in 2016 but 2017 is expected to
see a small reduction due to the loss of Beverage revenue.
Overhead costs have been significantly reduced during
2015 and 2016. The forward focus is now on growth of
the core business segments.
Steamships Annual Report 2016 13
Review of Operations - Commercial REVIEW OF OPERATIONS - COMMERCIAL
COLGATE PALMOLIVE
Steamships holds a 50 per cent beneficial 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, a PNG joint venture, saw improved
trade volumes in Oral, Personal Care and Home Care
categories, the latter being driven by a record year in
Laundry Bar sales. Margins improved but soap chip input
costs will continue to be a challenge.
Continued improvement in 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 benefits 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 305,000
consumers (the majority being school children) across
PNG, up from 245,000 in 2015.
2017 is expected to see a continuing tight consumer
market, however, based on excellent sales execution,
modest growth in sales and profit is anticipated.
14 Steamships Annual Report 2016
Review of Operations - Commercial SUSTAINABILITY
The principles of Sustainable Development remain core to how Steamships conducts its
business and are key to delivering long term value to its customers and shareholders.
The three pillars of Our People, Our Environment and Our Community, underpin the
Sustainability strategy of the company. Steamships’ understands that a clear commitment
to these three pillars will ensure it is always well placed to make a valuable and lasting
economic and social contribution to Papua New Guinea.
Steamships people are its most critical asset . At Steamships
the focus is to ensure that employees are afforded every
opportunity to build strong, rewarding and successful
careers in an environment of safety, trust, fairness and
respect. Recognising this fact, the company recruited a
specialist General Manager for Human Resources in 2016
to drive the necessary changes required for superior people
development. The transition of the company’s two original
GDP (Graduate Development Programme) trainees into
fulltime roles within the business marked a significant
milestone for its graduate development pathways, and
focus will continue to develop programmes for the future
leaders of the business. The results of the 2016 People
Pulse staff survey confirm that there is an overriding
satisfaction with the opportunities and rewards offered at
Steamships, as well as highlighting areas for improvement.
Environmental Sustainability continues to be a priority
area for Steamships. Responsible and sustainable energy
consumption is an area of increased focus and this is
done through the regular monitoring and reporting of
energy use, water use and environmental emissions at
operational level. There is an intention to further enhance
reporting to align with internationally recognised reporting
standards. Company staff again participated in World
Environment Day, delivering awareness lectures to selected
school children, and coordinating a number of educational
activities to highlight the importance of environmental
sustainability.
Steamships has a considerable presence in PNG and it
is considered essential to have a positive impact on the
various communities in which it operates. Engagement
with the community is facilitated through an involvement
in social programs that prioritize four key areas; health,
social welfare, education, sports and culture. The aim is to
identify projects and partnerships that bring measurable,
meaningful, and positive impact to those in most need.
The company committed over K1.2 million to various
community based initiatives in 2016.
Steamships’ sustainability performance aligns with the
requirements of the Global Reporting Initiative (GRI),
a worldwide corporate transparency initiative that
Steamships has followed since 2013. The full GRI report
and a comprehensive Sustainability Report are available on
the Steamships website at www.steamships.com.pg.
Steamships Annual Report 2016 15
Sustainability 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; and
Ensuring the safety and wellbeing of employees and
others with whom the Group has contact;
•
Promoting sustainable business practice.
Steamships reports against the Australian Stock Exchange
(ASX) recommendations by addressing each key principle
in the order it is listed in the ASX guidelines. Each section
addressing a key principle includes references to relevant
information that appears elsewhere in the 2016 Annual
Report or on the Steamships’ website.
Steamships believes it complied with the Australian Stock
Exchange Corporate Governance Principles (the third
edition) during the twelve months ended 31 December
2016, except where noted in the Corporate Governance
Report .
Steamships’ Corporate Governance Report can be
found at http://www.steamships.com.pg/aboutus/
corporategoverance
16 Steamships Annual Report 2016
Corporate Governance STATEMENTS OF COMPREHENSIVE INCOME
Steamships Trading Company Limited Year Ended 31 December 2016 (Amounts in Kina 000’s)
Continuing Operations
Revenue
Other income
Operating expenses
OPERATING PROFIT
Finance (costs)/income - net
Share of profit of associates and joint ventures
PROFIT BEFORE INCOME TAX
Income tax expense
PROFIT FROM CONTINUING OPERATIONS
Other comprehensive income
Consolidated
Parent Entity
Note
2016
2015
2016
2015
3(a)
3(a)
3(b)
3(e)
4(b)
5(a)
732,701
19,766
773,535
48,285
(611,794)
(660,082)
140,673
(21,987)
5,865
124,551
(35,677)
88,874
-
161,738
(25,696)
3,062
139,104
(37,710)
101,394
-
31,691
2,726
(1,805)
32,612
72
-
32,684
(801)
31,883
-
38,044
3,217
(1,928)
39,334
72
-
39,406
(519)
38,887
-
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
88,874
101,394
31,883
38,887
Attributable to:
Non-controlling interests
Shareholders
4,664
84,210
88,874
2,415
98,979
101,394
-
31,883
31,883
-
38,887
38,887
Basic and Diluted Earnings per share continuing (toea)
3(f)
272t
319t
These Statements of Comprehensive Income are to be read in conjunction with the accompanying notes.
Steamships Annual Report 2016 17
STATEMENT OF CHANGES IN EQUITY
Steamships Trading Company Limited Year Ended 31 December 2016 (Amounts in Kina 000’s)
Share
Capital
Retained
Earnings
Other
Total Capital Controlling
Reserves & Reserves
Interest
Total
Equity
Non-
BALANCE AT 1 JANUARY 2015
24,200
720,758
(8,994)
735,964
30,773
766,737
Profit for the year
Dividends paid 2015
Equity adjustment due to deconsolidation
-
-
-
98,979
(48,062)
2,206
-
-
-
98,979
2,415
101,394
(48,062)
(2,795)
(50,857)
2,206
17,122
19,328
BALANCE AT 31 DECEMBER 2015
24,200
773,881
(8,994)
789,087
47,515
836,602
Profit for the year
Dividends paid 2016
-
-
84,210
(40,291)
-
-
84,210
4,664
88,874
(40,291)
(3,348)
(43,639)
BALANCE AT 31 DECEMBER 2016
24,200
817,800
(8,994)
833,006
48,831
881,837
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 reflected above for the Group.
There is no other comprehensive income.
18 Steamships Annual Report 2016
BALANCE SHEETS
Steamships Trading Company Limited As At 31 December 2016 (Amounts in Kina 000’s)
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Loans to related companies
Income tax receivable
Non-current assets
Property, plant and equipment
Investment properties
Investments in related companies
Loans to related companies
Intangible assets
Deferred tax assets
TOTAL ASSETS
Current liabilities
Trade and other payables
Provisions for other liabilities and charges
Loans from related companies
Loan from minority shareholder
Borrowings
Income tax payable
Non-current liabilities
Deferred tax liabilities
Provisions for other liabilities and charges
Borrowings
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Capital and reserves attributable to the
Company’s shareholders
Non-controlling interests
TOTAL EQUITY
Consolidated
Parent Entity
Note
2016
2015
2016
6
7
8
9
5(e)
10
11
4(a)
9
12
5(c)
13
14
9
15
15
5(e)
5(c)
14
15
16
36,685
134,822
41,128
-
716
213,351
682,917
385,974
66,445
70,850
80,491
36,680
1,323,357
1,536,708
98,639
11,510
35,452
32,259
6,786
-
184,646
30,982
11,243
428,000
470,225
654,871
881,837
24,200
808,806
833,006
48,831
881,837
11,538
147,830
41,008
159,755
-
360,131
731,596
341,359
36,458
40,349
80,491
36,914
1,267,167
1,627,298
89,456
9,970
26,690
22,933
390,836
1,407
541,292
33,426
11,770
204,208
249,404
790,696
836,602
24,200
764,887
789,087
47,515
836,602
404
407
-
-
-
811
25,934
-
208,163
5,712
-
245
240,054
240,865
680
-
200,404
-
-
4
201,088
-
-
-
-
201,088
39,777
24,200
15,577
39,777
-
39,777
2015
1,660
1,101
-
-
604
3,365
26,160
-
195,360
5,712
-
182
227,414
230,779
-
-
182,592
-
-
-
182,592
-
-
-
-
182,592
48,187
24,200
23,987
48,187
-
48,187
These Balance Sheets are to be read in conjunction with the accompanying notes.
For and on behalf of the Board:
31 March 2017
G.L. Cundle
Chairman
P.W. Langslow
Managing Director
Steamships Annual Report 2016 19
3,421
(590)
72
-
(256)
2,647
-
31,691
36,389
1,966
(2,148)
72
-
-
(110)
-
-
-
38,044
49,068
STATEMENTS OF CASH FLOWS
Steamships Trading Company Limited Year Ended 31 December 2016 (Amounts in Kina 000’s)
Consolidated
Parent Entity
Note
2016
2015
2016
2015
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers and employees
Interest received
Interest and other finance costs paid
783,668
797,587
(531,244)
(525,266)
12,248
(34,235)
13,952
(41,194)
(42,258)
Income tax paid
5(e)
(39,376)
Net cash provided by/(used in) operating activities
18
191,061
202,821
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant & equipment
(109,478)
(108,116)
(311)
Proceeds from sales of property, plant & equipment
Loans repaid by/(extended to) associated companies
Investment in associates & joint ventures
Dividends received
24,241
147,343
(24,143)
8,608
13,219
20
5,067
17,812
11,024
-
(12,803)
Net cash (used in)/provided by investing activities
37,983
(81,222)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings
Repayments of borrowings
Dividends paid
38,000
9,208
(186,903)
(75,612)
-
-
-
-
(43,639)
(50,857)
(40,292)
(48,063)
Net cash (used in)/provided by financing activities
(192,542)
(117,261)
(40,292)
(48,063)
NET INCREASE/(DECREASE) IN CASH HELD
36,502
4,338
(1,256)
NET CASH AT BEGINNING OF THE YEAR
NET CASH AT END OF THE YEAR
(6,603)
(10,941)
29,899
(6,603)
1,660
404
CASH COMPRISES:
Cash and cash equivalents
Bank overdrafts
6
15
36,685
(6,786)
29,899
11,538
(18,141)
(6,603)
404
-
404
895
765
1,660
1,660
-
1,660
These Statements of Cash Flows are to be read in conjunction with the accompanying notes.
20 Steamships Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2016 (Amounts in Kina 000’s)
1.
Summary of significant accounting policies
The Company is a company limited by shares and is
incorporated and domiciled in Papua New Guinea.
These Group consolidated financial statements were
authorised for issue by the Board of Directors on
31 March 2017.
The Board of Directors has the power to amend the
financial statements after their issue.
The financial 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 2016
The following standards, amendments and
interpretations to existing standards became
applicable for the first time during the accounting
period beginning 1 January 2016.
•
•
•
•
•
Amendment to IFRS 11 ‘Joint arrangements’ on
acquisition of an interest in a joint operation.
These amendments provide new guidance on
how to account for the acquisition of an interest
in a joint operation that constitutes a business.
Amendment to IAS 16 ‘Property, plant and
equipment’ and IAS 38 ‘Intangible assets’,
on depreciation and amortisation. These
amendments clarify that the use of revenue-
based methods to calculated depreciation and
amortisation is not appropriate because revenue
generated by an activity that includes the use of
an asset generally reflects factors other than the
consumption of the economic benefits embodied
in the asset .
Amendments to IAS 27 ‘Separate financial
statements’ on the equity method. These
amendments allow entities to use the equity
method to account for investments in
subsidiaries, joint ventures and associates in their
separate financial statements.
Annual improvements 2014 makes minor
changes to IFRS 5, IFRS 7, IAS 19 and IAS 34.
Amendments to IAS 1 ‘Presentation of Financial
Statements’ form a part of the IASB’s Disclosure
Initiative and clarify guidance in IAS 1 on a
number of issues including:
-
-
Materiality – disclosures specified in IFRS
only need to be included in financial
statements if they are material to the entity
Disaggregation and subtotals – line
items specified in IAS 1 may need to be
disaggregated where this is relevant to
an understanding of the entity’s financial
position or performance. However, entities
should not aggregate or disaggregate
information in a manner that obscures useful
information. There is also new guidance on
the use of subtotals .
-
-
Notes – confirmation that the notes do not
need to be presented in a particular order
Other comprehensive income (OCI) arising
from investments accounted for under the
equity method: the share of OCI arising from
equity-accounted investments is grouped
based on whether the items will or will not
subsequently be reclassified to profit or loss.
Each group should then be presented as a
single line item in the statement of OCI.
Amendments to IFRS 10 and IAS 28 on
investment entities applying the consolidation
exemption. The amendments to IFRS 10 clarify
that the exception from preparing consolidated
financial statements is available to intermediate
parent entities which are subsidiaries of
investment entities. The exception is available
when the investment entity parent measures its
subsidiaries at fair value. The amendments to IAS
28 allow an entity which is not an investment
entity, but has an interest in an associate or joint
venture which is an investment entity, a policy
choice when applying the equity method of
accounting.
•
Standards, amendments and interpretations issued
but not yet effective for the year ended 31 December
2016 or adopted early
The following standards, amendments and
interpretations to existing standards have been
published and are mandatory for the company’s
accounting periods beginning on or after 1 January
2017 or later periods, but the company has not early
adopted them:
•
•
Amendments to IAS 7 ‘Statement of Cash Flows’
on disclosure initiative (effective 1 January
2017). These amendments to IAS 7 introduce
an additional disclosure that will enable users
of financial statements to evaluate changes in
liabilities arising from financing activities.
Amendments to IAS 12 ‘Income Taxes’ on
recognition of deferred tax assets for unrealised
losses (effective 1 January 2017). These
amendments on the recognition of deferred tax
assets for unrealised losses clarify how to account
for deferred tax assets related to debt instruments
measured at fair value.
Steamships Annual Report 2016 21
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2016 (Amounts in Kina 000’s)
•
IFRS 9, ‘Financial Instruments’ (effective 1
January 2018) replaces the guidance in IAS
39 with a standard that is less complex and
principles based. The new standard simplifies the
model for classifying and recognising financial
instruments and aligns hedge accounting more
closely with common risk management practices.
Changes in own credit risk in respect of liabilities
designated at fair value through profit or loss
shall now be presented within OCI; this change
can be adopted early without adopting IFRS 9.
IFRS 9’s new impairment model is a move away
from IAS 39’s incurred credit loss approach to an
expected credit loss model. Earlier recognition
of impairment losses is likely to result and for
entities with significant lending activities, an
overhaul of related systems and processes will be
needed.
•
IFRS 15 ‘Revenue from contracts with customers’
(effective 1 January 2018) is a converged standard
from the IASB and FASB on revenue recognition
and replaces IAS 11 and IAS 18. The new
standard is based on the principle that revenue
is recognised when control of a good or service
transfers to a customer – so the notion of control
replaces the existing notion of risks and rewards.
The entity will have to adopt a new 5-step
process for the recognition of revenue:
identify contracts with customers
-
-
-
-
-
determine the transaction price of the
contract
allocate the transaction price to each of the
separate performance obligations, and
recognise the revenue as each performance
obligation is satisfied.
•
•
Amendments to IFRS 15 (effective 1 January
2018). These amendments comprise clarifications
of the guidance on identifying performance
obligations, accounting for licences of
intellectual property and the principal versus
agent assessment (gross versus net revenue
presentation).
IFRS 16, ‘Leases’ (effective 1 January 2019)
replaces the guidance in IAS 17 and will have
a significant impact on accounting by lessees.
The previous distinction under IAS 17 between
finance leases and operating leases for lessees
has been removed. IFRS 16 now requires a lessee
to recognise a lease liability representing future
lease payments and a ‘right-of-use asset’ for
22 Steamships Annual Report 2016
•
•
•
virtually all lease contracts. There is an optional
exemption for certain short-term leases and leases
of low-value assets. Under IFRS 16, a contract is,
or contains, a lease if the contract conveys the
right to control the use of an identified asset for a
period of time in exchange for consideration.
Amendments to IAS 40, ‘Investment property’
(effective 1 January 2018) relating to transfers of
investment property. These amendments clarify
that to transfer to, or from, investment properties
there must be a change in use. To conclude if
a property has changed use there should be an
assessment of whether the property meets the
definition. This change must be supported by
evidence.
Annual improvements 2014 – 2016 makes minor
changes to IFRS 1, IFRS 12 and IAS 28.
IFRIC 22, ‘Foreign currency transactions and
advance consideration’ (effective 1 January 2018)
addresses foreign currency transactions or parts
of transactions where there is consideration that
is denominated or priced in a foreign currency.
The interpretation provides guidance for when
a single payment/receipt is made as well as for
situations where multiple payments/receipts are
made.
The company has not yet assessed the impact arising
from the release of these new pronouncements.
The consolidated financial statements of the
Group have been prepared in accordance with
International Financial Reporting Standards
(IFRS) and IFRIC interpretations. The consolidated
financial statements have been prepared under
the historical cost convention as modified by
financial assets and liabilities at fair value through
profit and loss.
The preparation of financial 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 significant to the
consolidated financial statements are disclosed in
note 1 (z).
(b) Foreign currency
The Company’s functional and presentation
currency is the Papua New Guinea Kina.
Transactions in foreign currencies have been
identify the separate performance obligations
(a) Basis of preparation
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2016 (Amounts in Kina 000’s)
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.
(c) Principles of consolidation
(i) Subsidiaries
The consolidated financial statements incorporate
the assets and liabilities of all subsidiaries of
Steamships Trading Company Limited as at 31
December 2016 and the results of all subsidiaries
for the year then ended. Steamships Trading
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 significant influence 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 identified on
acquisition (refer to note 12).
The Group’s share of its associates’ post-
acquisition profits or losses is recognised in profit
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 reflect 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
significant influence, any retained interest in
the entity is re-measured to its fair value with
the change in carrying amount recognised
in profit or loss. This fair value becomes the
Steamships Annual Report 2016 23
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2016 (Amounts in Kina 000’s)
initial carrying amount for the purposes of
subsequently accounting for the retained interest
as an associate or financial 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 reclassified to
profit or loss.
If the ownership interest in a jointly-controlled
entity or an associate is reduced but significant
influence is retained, only a proportionate share
of the amounts previously recognised in other
comprehensive income are reclassified to profit
or loss where appropriate
(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.
Identifiable 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
identifiable 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 identifiable assets acquired is recorded as
goodwill. If those amounts are less than the
fair value of the net identifiable assets of the
subsidiary acquired and the measurement of all
amounts has been reviewed, the difference is
recognised directly in determining profit 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
24 Steamships Annual Report 2016
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 financier under
comparable terms and conditions.
Contingent consideration is classified either as
equity or a financial liability. Amounts classified
as a financial liability are subsequently re-
measured to fair value with changes in fair value
recognised in profit or loss
(e) Revenue recognition
The Group recognises revenue when the amount
of revenue can be reliably measured, it is
probable that future economic benefits will flow
to the entity and specific criteria have been met
for each of the Group’s activities as described
below. The Group bases its estimates on historical
results, taking into consideration the type of
customer, the type of transaction and the specifics
of each arrangement.
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 significant 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 benefit 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 financial
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 financial statements. Currently
enacted tax rates are used in the determination
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2016 (Amounts in Kina 000’s)
of deferred income tax. Deferred tax assets are
recognised to the extent that it is probable that
future taxable profit will be available, against
which the temporary differences can be utilised.
(g) Cash and cash equivalents
For the purpose of the statement of cash flows,
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 financial position.
(h) Receivables
Trade receivables are amounts due from
customers for merchandise sold or services
provided in the ordinary course of business.
There are classified as current assets if collection
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
classified 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 benefits, financial
assets and contractual rights under insurance
contracts, which are specifically 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 classified as held for
sale. Interest and other expenses attributable to
the liabilities of a disposal group classified as
held for sale continue to be recognised.
Non-current assets classified as held for sale
and the assets of a disposal group classified as
held for sale are presented separately from the
other assets in the balance sheet. The liabilities
of a disposal group classified 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 classified
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
Classification
The Group classifies its financial assets in the
following categories: at fair value through profit
or loss and loans and receivables. The Group
does not hold any held to maturity investments
or available for sale financial assets. The
classification depends on the purpose for which
the financial assets were acquired. Management
determines the classification of its financial assets
at initial recognition.
(i) Financial assets at fair value through profit or
loss
Financial assets at fair value through profit or loss
are financial assets held for trading. A financial
asset is classified 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 classified as current
assets .
(ii) Loans and receivables
Loans and receivables are non-derivative
financial assets with fixed or determinable
payments that are not quoted in an active market.
Steamships Annual Report 2016 25
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2016 (Amounts in Kina 000’s)
They are included in current assets, except
for maturities greater than 12 months after the
balance sheet date. These are classified 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 financial 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
profit 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
flows from the investments have expired or have
been transferred and the Group has transferred
substantially all risks and rewards of ownership.
Loans and receivables are carried at amortised
cost using the effective interest method.
Gains or losses arising from changes in the fair
value of the ‘financial assets at fair value through
profit or loss’ category are presented in the
income statement within ‘other (losses)/gains –
net’ in the period in which they arise. Dividend
income from financial assets at fair value
through profit 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
financial asset or a group of financial 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 reflective of their estimated useful life as
follows:
Land and buildings
Ships
Plant and fittings
Motor vehicles
0 - 10%
5 - 10%
10 - 33%
20 - 33%
Where the carrying amount of an asset is greater
than its estimated recoverable amount, it is
written down immediately to its recoverable
26 Steamships Annual Report 2016
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 profit.
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 benefits associated with the
item will flow 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 financial
period in which they are incurred.
(m) Investment properties
Investment properties include land held for
long-term capital appreciation and buildings
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 classified as investment property if
an insignificant portion is held for own use of
occupation. Investment properties are recognised
when it is probable that future economic benefits
associated with the property will flow 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 11. 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 flow 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 identifiable 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.
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2016 (Amounts in Kina 000’s)
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 classified 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.
(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 outflow of
resource embodying economic benefits 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 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 benefits associated
with the asset are restored.
(q) Employee benefits
(i) Short term obligations
Liabilities for wages and salaries, including
non-monetary benefits, 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
benefits. All other short term employee benefit
obligations are presented as payables.
(ii) Other long-term employee benefit 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
benefits 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 outflows.
(iii) Termination benefits
Termination benefits 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 benefits. The Group
recognises termination benefits at the earlier
of the following dates: (a) when the Group can
no longer withdraw the offer of those benefits;
and (b) when the entity recognises costs for a
restructuring that is within the scope of IAS 37
and involves the payment of termination benefits.
In the case of an offer made to encourage
voluntary redundancy, the termination benefits
are measured based on the number of employees
expected to accept the offer. Benefits 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
classified 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 indefinite useful life are
not subject to amortisation and are tested
annually for impairment. Assets that are subject
to depreciation or amortisation are reviewed
for impairment whenever events or changes in
Steamships Annual Report 2016 27
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2016 (Amounts in Kina 000’s)
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 identifiable cash flows (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.
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 4.5% (2015 – 5.7%).
(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 identified as
the Strategic Steering Committee.
(v) Earnings per share
Basic earnings per share is calculated by dividing
the profit attributable to equity holders of the
Group, by the weighted average number of
ordinary shares outstanding during the financial
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 classified as finance
leases and are capitalised. The asset and
corresponding liability are recorded at inception
of the lease at the fair value of the leased asset,
28 Steamships Annual Report 2016
at amounts equivalent to the discounted present
value of minimum lease payments including
residual values.
The finance cost is charged to the profit 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 benefits derived from the leased
assets and accordingly are charged to the profit
and loss account in the periods in which they are
incurred.
(y) Rounding of amounts
Amounts in the financial statements have been
rounded off to the nearest thousand Kina.
(z) Critical accounting estimates and judgments
Estimates and judgments are continually
evaluated and are based on historical experience
and other factors, including expectations of future
events that may have a financial 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 definition, seldom equal
the related actual results. The estimates and
assumptions that have a significant risk of causing
a material adjustment to the carrying amounts of
assets and liabilities within the next financial year
are discussed below:
(i) Estimated impairment of goodwill
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 impairment of ships and other
plant and equipment
The Group tests periodically the recoverable
amount of ships and other plant and equipment.
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 12.5%.
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2016 (Amounts in Kina 000’s)
2. Financial risk management
The Group’s activities expose it to a variety of
financial risks including market risk (including
currency, and interest rate risk), credit risk, liquidity
risk and capital risk. The Group’s overall risk
management program focuses on the unpredictability
of financial markets and seeks to minimise potential
adverse effects on the financial 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 significant 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 significantly exposed to equity
securities or commodities price risk.
(iii) Cash flow interest rate risk
The Group’s interest rate risk arises from long-
term borrowings. Borrowings issued at variable
rates expose the Group to cash flow and fair
value interest rate risk. Borrowings issued at
fixed rates expose the Group to fair value interest
rate risk. Long term borrowings are a mix of fixed
and variable rate interest. It is not the Group’s
policy to hedge cash flow and interest rate risk.
At 31 December 2016, if interest rates on
PNG Kina-denominated borrowings had been
1% higher/lower with all other variables held
constant, post-tax profit for the year would have
been K3,044,000 (2015: K4,089,000) lower/
higher, mainly as a result of higher/lower interest
expense on floating rate borrowings.
(b) Credit risk
The Group has no significant 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.
(c) Liquidity risk
Prudent liquidity risk management implies
maintaining sufficient cash and the availability
of funding through an adequate amount
of committed credit facilities. The Group
manages liquidity risk by maintaining sufficient
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 flows.
Undrawn finance facilities as of 31 December
were as follows:
2016
K’000
2015
K’000
Undrawn Facilities
126,000
83,000
Steamships Annual Report 2016 29
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2016 (Amounts in Kina 000’s)
The table below analyses the Group’s financial 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 flows.
Less than
1 year
K’000
Between 1
& 2 years
K’000
Between 2
& 5 years
K’000
Over 5
years
K’000
At 31 December 2016
Borrowings
Borrowings from minority shareholders
Borrowings from related parties
Trade and other payables
(6,786)
(32,259)
(35,452)
(98,639)
(173,136)
-
-
-
-
-
(428,000)
-
-
-
(428,000)
At 31 December 2015
Borrowings
(390,836)
(84,208)
(120,000)
Borrowings from minority shareholders
Borrowings from related parties
Trade and other payables
Income tax payable
(22,933)
(26,690)
(89,456)
(1,407)
-
-
-
-
-
-
-
-
(531,322)
(84,208)
(120,000)
The Group does not hold derivative financial instruments.
All loan covenants associated with borrowing arrangements have been met.
-
-
-
-
-
-
-
-
-
-
Total
K’000
(434,786)
(32,259)
(35,452)
(98,639)
(601,136)
(595,044)
(22,933)
(26,690)
(89,456)
(1,407)
(735,530)
30 Steamships Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2016 (Amounts in Kina 000’s)
(e) Fair value estimation
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 significant inputs is not
based on observable market data, the instrument
is included in level 3.
The Group does not hold any financial assets at
fair value.
(d) Capital risk management
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 benefits 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:
Total external borrowing &
unsecured loans
Less: Cash & Cash equivalents
Net debt
Total equity
Total capital
Gearing ratio
2016
K’000
2015
K’000
502,497
644,667
36,685
465,812
881,837
11,538
633,129
836,602
1,347,649
1,469,731
35%
43%
Steamships Annual Report 2016 31
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2016 (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
2016
2015
2016
2015
135,448
597,253
-
114,754
658,781
-
732,701
773,535
-
-
31,691
31,691
-
-
38,044
38,044
19,766
48,285
2,726
3,217
* Other income principally represents a gain on sale of Coastwatchers Hotel of K14M (2015: a gain on deconsolidation of K18.8M
and insurance claim of K27.5M).
(b) Expenses comprise:
Cost of sales
Staff costs (note 3c)
Depreciation and amortisation
Impairment of fixed assets
Impairment of other assets
Electricity and fuel
Other operating expenses
Total Operating expense
(c) Staff costs:
Wages and salaries
Retirement benefit contributions
Accommodation and other benefits
143,240
148,611
106,715
2,276
-
50,787
160,165
611,794
122,658
6,380
19,573
148,611
135,708
158,760
102,142
29,441
916
57,959
175,156
660,082
115,926
7,645
35,189
158,760
Number of staff employed by the Group at year end:
Full Time
3,569
4,292
-
-
-
-
2,261
2,214
-
-
-
-
-
-
(454)
1,805
(287)
1,928
-
-
-
-
-
-
-
-
-
-
32 Steamships Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2016 (Amounts in Kina 000’s)
3. Operating results (continued)
Consolidated
Parent Entity
2016
2015
2016
2015
(d) The operating profit before income tax is arrived at after charging and crediting the following specific items:
After charging:
Audit fees
Fees for non-audit services to Auditors
Bad and doubtful debts
Donations
Impairment of fixed assets
Impairment of other assets
After crediting:
Gain on deconsolidation
Gain on sale of property, plant and equipment
Net foreign exchange transaction gains
Insurance receivable
(e) Cost of financing – net:
Expense*
Income
Net finance costs
10
10
995
814
1,645
1,278
2,276
-
-
19,766
530
-
995
675
1,099
1,618
29,441
916
18,867
1,595
38
27,500
-
-
-
-
-
-
-
-
-
34,235
(12,248)
21,987
39,648
(13,952)
25,696
-
(72)
(72)
-
-
-
-
-
-
-
-
-
-
(72)
(72)
*The interest expense excludes capitalised interest of K1.7M.
(f) Earnings per share
Basic earnings per share are calculated by dividing the net profit 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 profit attributable to shareholders
Average number of ordinary shares on issue (thousands)
Basic earnings per share (continuing operations)
84,210
31,008
272t
98,979
31,008
319t
Steamships Annual Report 2016 33
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2016 (Amounts in Kina 000’s)
4.
Investments in subsidiaries, associates and joint ventures
Consolidated
Parent Entity
2016
2015
2016
2015
(a) Investments are accounted for in accordance with the policy set out in Note 1(c) and relate to:
Investments in subsidiary companies (note 20)
Investments in associates (note 21)
Investments in joint ventures (note 22)
(b) Share of after tax profit in associates and joint ventures
Share of profit in associates
Share of profit in joint ventures
5.
Income Tax
(a) Income tax expense
Current tax
Deferred tax
-
35,813
30,632
66,445
3,886
1,979
5,865
-
171,537
171,537
20,607
15,851
36,458
-
36,626
208,163
-
23,823
195,360
3,039
23
3,062
-
-
-
-
-
-
Consolidated
Parent Entity
2016
2015
2016
2015
37,887
(2,210)
35,677
39,783
(2,073)
37,710
864
(63)
801
-
519
519
(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 profit 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
(c) The deferred tax (liability)/ asset comprises:
Provisions
Tax losses
Prepayments & consumables
Property, plant and equipment
Comprising of
Deferred tax asset
Deferred tax liability
34 Steamships Annual Report 2016
37,365
-
1,696
(2,432)
(2,514)
1,562
35,677
9,987
32,799
(16,837)
(20,251)
5,698
36,680
(30,982)
5,698
41,731
-
6,967
(1,737)
(8,665)
(586)
37,710
10,108
26,729
(8,891)
(24,458)
3,488
36,914
(33,426)
3,488
9,805
(9,507)
28
-
-
475
801
-
-
-
245
245
245
-
245
11,822
(11,413)
110
-
-
-
519
-
-
-
182
182
182
-
182
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2016 (Amounts in Kina 000’s)
5.
Income tax (continued)
(d) The gross movement on the deferred tax account is as follows:
Consolidated
Provisions
Tax losses
Prepayments & consumables
Property, plant and equipment
Total
Parent Company
Property, plant and equipment
Total
(e) Income tax (receivable)/payable is represented as by:
At 1 January
Income tax provision
Income tax under/(over) provided
De-recognition of subsidiary
Others
Tax payments made
At 31 December
6. Cash and cash equivalents
Cash and short term deposits
Beginning
Balance
Charge to
profit
Ending
Balance
10,108
26,729
(8,891)
(24,458)
3,488
(121)
6,070
(7,946)
4,207
2,210
9,987
32,799
(16,837)
(20,251)
5,698
182
182
63
63
245
245
Consolidated
Parent Entity
2016
2015
2016
2015
1,407
36,325
1,562
-
(634)
(39,376)
(716)
3,821
39,783
(586)
(610)
1,257
(42,258)
1,407
(604)
389
476
-
-
(256)
4
(604)
-
-
-
-
-
(604)
Consolidated
Parent Entity
2016
2015
2016
36,685
36,685
11,538
11,538
404
404
2015
1,660
1,660
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 banks resident in Papua New Guinea who have appropriate long term credit ratings.
7. Trade and other receivables
Trade and other receivables
Trade receivables
Provision for impairment
Other receivables & prepayments
Consolidated
Parent Entity
2016
2015
2016
2015
56,274
(3,440)
52,834
81,988
134,822
79,075
(6,082)
72,993
74,837
147,830
-
-
-
407
407
-
-
-
1,101
1,101
Steamships Annual Report 2016 35
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2016 (Amounts in Kina 000’s)
7. Trade and other receivables (continued)
Consolidated
Parent Entity
2016
2015
2016
2015
(i) Impaired trade receivables
As at 31 December 2016, trade receivables of K3.4M (2015: K6.1M) 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
762
2,678
3,440
Movement in the provision for impairment of trade receivables is as follows:
Opening balance
Impairments recognised during the year
Provision released
Total
6,082
1,645
(4,287)
3,440
777
5,305
6,082
5,305
1,099
(322)
6,082
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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 2016, trade receivables of K4.9M (2015: K3.1M) 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
928
3,924
4,852
586
2,481
3,067
-
-
-
-
-
-
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.
36 Steamships Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2016 (Amounts in Kina 000’s)
8.
Inventories
Raw materials
Work in progress
Finished goods
Provision for obsolescence
Consolidated
Parent Entity
2016
2015
2016
2015
10,024
-
33,326
(2,222)
41,128
3,650
25
40,659
(3,326)
41,008
-
-
-
-
-
-
-
-
-
-
Inventories recognised as an expense during the year ended 31 December 2016 and included in cost of sales and cost of providing
services amounted to K90.6M (2015: K80.3M). The provision for obsolescence of inventories during the year decreased by K1.1M
(2015: by K0.3M increase).
9. Loans to/(from) related companies
Current
Consolidated
Parent Entity
2016
2015
2016
2015
Harbourside Development Limited
-
159,755
-
-
Non-Current
Colgate Palmolive (PNG) Limited
Wonye Limited
Morobe Terminal Limited
Labu Holdings Limited
Pacific Rumana Limited
Harbourside Development Limited
Loans to subsidiaries
Loans from associates and joint ventures:
Harbourside Development Limited
Morobe Terminal Limited
Consort Express Lines Limited’s associates
Loans from subsidiaries
500
275
60
100
36,800
33,115
70, 850
-
70,850
(1,111)
(3,150)
(31,191)
(35,452)
-
500
500
500
-
-
-
39,849
-
40,349
-
40,349
-
-
(26,690)
(26,690)
-
-
-
-
-
500
5,212
5,712
-
-
-
-
-
-
-
-
-
500
5,212
5,712
-
-
-
-
-
(200,404)
(182,592)
(35,452)
(26,690)
(200,404)
(182,592)
During 2016, the Harbourside Development Limited loan was partially refinanced with a syndicate of commercial banks to finance
Harbourside Development Limited directly. The remaining loan to Harbourside Development Limited is secured and earns
interest at 6.5%. The loan to Pacific Rumana Limited is unsecured and earns interest at 9%. The loan from Consort Express Lines
Limited’s associates are unsecured and incur interest at 4%.
Steamships Annual Report 2016 37
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2016 (Amounts in Kina 000’s)
10. Property, plant & equipment
Consolidated
2016
Cost
Property
Ships
Plant and
Vehicles
Total
513,002
325,149
435,279
1,273,430
Accumulated depreciation (including impairment losses)
(142,612)
(160,762)
(287,140)
(590,513)
Net book value
Opening value
Additions
Disposals
Depreciation
Impairment of fixed assets
Transfers to investment properties
Closing value
2015
Cost
370,391
164,387
148,139
682,917
393,606
24,734
-
(7,775)
-
(40,174)
370,391
169,319
26,118
(4,004)
(27,046)
-
-
168,671
44,477
(12,639)
(50,094)
(2,276)
-
731,596
95,329
(16,643)
(84,916)
(2,276)
(40,174)
164,387
148,139
682,917
479,944
342,327
481,423
1,303,694
(86,338)
393,606
355,626
36,510
-
(173,008)
(312,752)
(572,098)
169,319
168,671
731,596
187,229
171,774
714,630
13,338
(6,003)
49,925
(2,777)
99,773
(8,780)
(19,369)
(25,245)
(49,641)
(94,255)
580
20,259
393,606
-
-
(611)
-
169,319
168,671
(31)
20,259
731,596
73,210
(48,660)
24,550
24,549
3
1,724
(1,726)
24,550
-
-
-
-
-
-
-
-
5,994
(4,610)
1,384
1,611
308
-
(535)
1,384
79,204
(53,270)
25,934
26,160
311
1,724
(2,261)
25,934
Accumulated depreciation (including impairment losses)
Net book value
Opening value
Additions
Disposals
Depreciation
Impairment of fixed assets
Transfers from investment properties
Closing value
Parent Entity
2016
Cost
Accumulated depreciation
Net book value
Opening value
Additions
Transfers
Depreciation
Closing value
38 Steamships Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2016 (Amounts in Kina 000’s)
10. Property, plant & equipment (continued)
Property
Ships
Plant and
Vehicles
Total
Parent Entity
2015
Cost
Accumulated depreciation
Net book value
Opening value
Additions
Transfers
Depreciation
Closing value
73,206
(48,657)
24,549
-
-
-
5,686
(4,075)
1,611
78,892
(52,732)
26,160
25,370 -
1,450
997
(147)
(1,671)
24,549
-
-
-
-
695
9
(543)
1,611
26,820
1,692
(138)
(2,214)
26,160
(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:
Consolidated
Parent Entity
2016
2015
2016
2015
Property (classified as investment properties in note 11)
Ships
Plant and vehicles
Total assets in the course of construction
45,502
1,239
16,300
63,041
52,733
6,649
20,068
79,450
-
-
-
-
-
-
-
-
The cost of additions in 2016 includes capitalised borrowing costs of K1.7M (2015: K1.5M) in relation to qualifying assets.
(b) Impairment losses
During the year the Directors performed an impairment review on all key assets of the Group. As a result of this assessment an
impairment charge of K2.3M (2015: K24.9M) was recorded on plant and vehicles.
There are no other further conditions that indicate impairment of property, plant and equipment as at 31 December 2016.
.
Steamships Annual Report 2016 39
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2016 (Amounts in Kina 000’s)
11. 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 10.
Cost
Accumulated depreciation
Net book value
Opening value
Additions
De-recognition of subsidiary
Disposals
Transfers from/(to) property, plant & equipment
Impairment
Depreciation
Closing value
(a) Amounts recognised in profit/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
2016
2015
2016
2015
521,381
(135,407)
385,974
341,359
27,693
-
(1,453)
40,174
-
(21,799)
385,974
469,342
(127,983)
341,359
400,493
9,889
(5,738)
(5,728)
(20,259)
(29,410)
(7,888)
341,359
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Consolidated
Parent Entity
2016
2015
2016
2015
130,562
125,104
(4,654)
(3,791)
(11,483)
(13,141)
-
-
-
-
-
-
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 2016 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 10)
Total
NBV
Valuation Lower
Range Higher
385,974
370,931
756,905
818,201
786,252
1,604,453
1,023,127
983,177
2,006,304
The independent valuer utilised certain historical facts and relevant market data available up to the date of valuation in reaching
their opinion as to the valuation of the properties, including use of comparable sales and capitalisation rates.
(c) Non-current assets pledged as security
Refer to note 15 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 financial
statements are receivable as follows:
Within one year
Later than one year but not later than five years
Later than five years
40 Steamships Annual Report 2016
Consolidated
Parent Entity
2016
2015
2016
2015
143,899
143,171
168,589
455,659
142,686
144,072
183,876
470,634
-
-
-
-
-
-
-
-
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2016 (Amounts in Kina 000’s)
12. Intangible assets
Consolidated
Parent Entity
2016
2015
2016
2015
Goodwill
80,491
80,491
-
-
Goodwill is allocated to the Group’s cash-generating units (CGUs) identified according to operating segment. The goodwill balance
of K80.5M (2015: K80.5M) is attributable to various business acquisitions in the logistics and commercial segments including
Consort (K.5M), Laga Industries (K3.6M), Pacific 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 flow projections based on financial
budgets approved by management covering a three year period. Growth beyond year three for the purpose of the impairment
testing is set at 5%-8%. A post-tax discount rate of 12.5% per annum has been used and reflects specific risks relating to the
operating segment.
13. Trade and other payables
Trade Payables
Accruals
Other payables
Consolidated
Parent Entity
2016
2015
2016
2015
44,980
53,447
212
98,639
48,737
38,418
2,301
89,456
-
-
680
680
-
-
-
-
All trade and other payables are due and payable within 12 months and are recorded at their carrying value.
14. Provisions for other liabilities and charges
Opening value
Charged to profit & loss
Utilised during year
Closing value
Current
Non-current
Employee
Dry
Dock
2016
Total
2015
Total
17,893
10,464
(10,351)
18,006
6,763
11,243
18,006
3,847
3,250
21,740
13,714
24,247
10,609
(2,350)
(12,701)
(13,116)
4,747
4,747
-
4,747
22,753
11,510
11,243
22,753
21,740
9,970
11,770
21,740
A description of employee and dry dock provisions is disclosed in note 1p.
Steamships Annual Report 2016 41
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2016 (Amounts in Kina 000’s)
15. Borrowings
Current:
Bank overdrafts (secured)
Bank loans (secured)
Other loans (unsecured)
Other loans (secured)
Non-current:
Bank loans (secured)
Total Borrowings
Consolidated
Parent Entity
2016
2015
2016
2015
6,786
-
32,259
-
39,045
428,000
428,000
467,045
18,141
237,695
22,933
135,000
413,769
204,208
204,208
617,977
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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 4.5% (2015: 5.7%). Bank overdrafts are interest-only with no agreed repayment schedule.
Bank loans are secured loans with varying terms. The effective interest rate on other loans is 4.5% (2015: 5.7%).
The fair value of borrowings approximates their carrying amounts. Borrowing terms, margins and credit risk factors approximate
currently obtainable levels for similar facilities.
Certain borrowing facilities matured in 2016 and the Directors have negotiated renewal terms under a Common Terms Deed
agreement with underlying bilateral facilities. The renewal is secured for a 3 to 5 year term.
16. Issued capital
Consolidated
Parent Entity
2016
2015
2016
2015
(a) Issued and paid up capital
Ordinary shares
24,200
24,200
24,200
24,200
(b) Number of shares
Number of shares
Ordinary shares
Number of shares (000’s)
31,008
31,008
31,008
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.
42 Steamships Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2016 (Amounts in Kina 000’s)
17. 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 20, 21 and 22 respectively.
(c) Directors:
G.L. Cundle, P.W. Langslow and M.R Scantlebury are directors of John Swire & Sons (PNG) Limited.
(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
Wages and salaries
Other short term benefits
Long-term benefits
(e) Material transactions:
Sales of goods and services
- Associates & joint ventures
- Key Management
- Associated Groups
Lease and rental income
- Associates & joint ventures
- Key management
- Associated Groups
Dividends received
Consolidated
Parent Entity
2016
2015
2016
2015
12,488
1,293
27
8,728
1,007
49,970
97
50
1,292
9,931
1,159
21
1,737
278
45,237
-
-
1,338
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- Subsidiaries, associates & joint ventures
20
5,067
31,691
38,044
Management fees income
- Associates & joint ventures
Purchase of goods and services
- Associates & joint ventures
- Associated groups
- Shareholders of associated companies
Management fees paid
- Associates & joint ventures
Purchase of assets
- Associates & joint ventures
- Associated groups
Lease rental expense
- Other Shareholders
Container/Charter hire fee
- Other Shareholders
1,181
(2,401)
(9,370)
(157)
(599)
(794)
(465)
-
(1,540)
(5,105)
-
(421)
(1,138)
-
(2,462)
(6,672)
(2,424)
(145)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Steamships Annual Report 2016 43
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2016 (Amounts in Kina 000’s)
17. Related party disclosures (continued)
Consolidated
Parent Entity
2016
2015
2016
2015
Finance Cost
- Associates & joint ventures
- Other shareholders
Dividends paid
- Other shareholders (minority interest)
- Controlling shareholder
- Significant shareholder
Loans to/(from) related companies
- Other shareholders
Insurance premiums
- Affiliated party
(1,058)
(1,764)
(3,349)
(29,058)
(8,755)
-
-
(2,795)
(34,605)
(9,608)
(22,733)
(106,628)
(12,002)
(11,474)
All transactions with related parties are made on normal commercial terms and conditions.
Balances with related companies:
Associates and joint ventures:
Consort associates (note 9)
Harbourside Development Limited (note 9)
Morobe Terminal Limited (note 9)
Consort shareholders (note 15)
Basilok Limited (note 15)
Croesus RE SPC Limited (note 15)
Loans to related companies:
Colgate Palmolive Limited (note 9)
Harbourside Development Limited (note 9)
Subsidiary Companies (note 9)
Pacific Rumana Limited (note 9)
Labu Holdings Limited (note 9)
Consort Associates
Morobe Terminal Limited (note 9)
Wonye Limited (note 9)
(31,191)
(1,111)
(3,150)
(22,773)
(160)
(9,326)
500
33,115
-
36,800
100
-
60
275
(26,690)
-
-
(22,773)
(160)
-
500
159,755
-
39,725
-
125
-
-
-
-
-
-
-
-
(29,058)
(34,605)
(8,755)
(9,608)
-
-
-
-
-
-
-
-
500
-
5,212
-
-
-
-
-
-
-
-
-
-
-
-
-
500
-
5,212
-
-
-
-
-
44 Steamships Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2016 (Amounts in Kina 000’s)
18. Reconciliation of profit after income tax to net cash inflow from operating activities
Profit for the year after tax
Depreciation and impairment
Dividend and interest income
Net loss (gain) on sale of fixed assets
Gain on deconsolidation
Share of profit of associates and joint ventures
Consolidated
Parent Entity
2016
2015
2016
2015
88,874
108,991
-
(19,766)
-
(5,865)
101,394
131,583
31,883
2,261
38,887
2,215
-
(31,691)
(38,044)
(1,595)
(18,867)
(3,062)
-
-
-
139
-
-
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
(Decrease)/increase in trade creditors
Increase in other operating liabilities
(Decrease)/increase in provision for income tax payable
(Decrease)/increase in deferred tax liability
21,079
(120)
234
(7,961)
(22,494)
32,656
(2,123)
(2,444)
(8,548)
(3,948)
(3,393)
(12,431)
(1,184)
23,966
(2,414)
1,320
(1,030)
(3,843)
-
(246)
182
680
-
608
-
-
519
-
17
-
-
-
Net cash inflow from operating activities
191,061
202,821
2,647
(110)
19. Retirement benefit plans
The total cost of retirement benefits of the Group in 2016 was K6.4M (2015: K7.6M). The Group participates in the National
Superannuation Fund of Papua New Guinea, a multi-employer defined contribution fund, on behalf of all citizen employees
with minimum employer and employee contribution rates established by legislation. The Group also contributes to a defined
contribution superannuation plan on behalf of expatriates. The defined contribution superannuation plan was established in 2002.
The parent entity does not employ staff directly; consequently there was no charge during the year.
Steamships Annual Report 2016 45
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2016 (Amounts in Kina 000’s)
20. Subsidiaries and transactions with non-controlling interests
Significant investments in subsidiaries
The consolidated financial 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
Equity
Holdings*
2016
Equity
Holdings*
2015
Consort Express Lines Limited
Papua New Guinea
Ordinary
70.2
70.2
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
New Britain Shipping Limited**
Papua New Guinea
Ordinary
Oro Port Services Limited
Papua New Guinea
Ordinary
Pacific Towing (PNG) Limited
Papua New Guinea
Ordinary
Pacific 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
60
100
51
100
60
50
100
100
79.8
56.7
54
100
100
60
100
51
100
60
50
100
100
79.8
56.7
54
100
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, 2016 Steamships Trading
Company still has control over this entity.
Shares in subsidiary companies have been stated at cost or fair value on acquisition less dividends received from pre-acquisition
profits.
Steamships Trading Company Limited has granted a call option to a minority shareholder of Consort Express Lines in the event of
any recovery under a charter performance guarantee to enforce a proportional equity capital buy back. At 31 December 2016 the
performance guarantee obligations are being met.
46 Steamships Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2016 (Amounts in Kina 000’s)
21. Investment in associates
(a) Movement in carrying amounts
Opening value
Share of profits before tax
Income tax expense
Dividends received
Acquisition of interest in Morobe Terminal Ltd
Closing value
Consolidated
Parent Entity
2016
2015
2016
2015
20,607
5,551
(1,665)
(20)
11,340
35,813
17,636
4,341
(1,302)
(68)
-
20,607
-
-
-
-
-
-
-
-
-
-
-
-
The equity method is used to account for all interests in associates on a consolidated basis.
(b) Summarised financial 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:
2016
Makerio Stevedoring Limited
Nikana Stevedoring Limited
Riback Stevedoring Limited
United Stevedoring Limited
Morobe Terminal Limited
2015
Makerio Stevedoring Limited
Nikana Stevedoring Limited
Riback Stevedoring Limited
United Stevedoring Limited
Ownerships
Interest
%
31.7
31.7
34.4
16.9
42.96
Ownerships
Interest
%
31.7
31.7
34.4
16.9
Assets
Liabilities
Carrying
Value
Revenue
Profit
1,620
1,440
31,106
367
13,892
48,425
480
208
9,166
304
2,454
12,612
1,140
1,232
722
489
235
199
21,940
10,924
3,347
63
11,438
35,813
4,099
1,008
7
98
17,242
3,886
Assets
Liabilities
1,374
1,230
25,597
421
28,622
469
177
7,004
365
8,015
Carrying
Value
905
1,053
18,593
56
20,607
Revenue
Profit
447
326
10,924
2,770
14,467
194
167
2,667
11
3,039
The associates 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 2016 47
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2016 (Amounts in Kina 000’s)
22. Investment in joint ventures
(a) Movement in carrying amounts
Opening value
Share of profits before tax
Income tax expense
Dividends received
Acquisition of interest in joint ventures
Closing value
Consolidated
Parent Entity
2016
2015
2016
2015
15,851
2,827
(848)
-
12,803
30,632
15,557
23,823
20,051
33
(10)
(5,000)
5,271
15,851
-
-
-
-
-
-
12,803
36,626
3,772
23,823
The interest in joint ventures is accounted for in the financial statements using the equity method of accounting.
(b) Information relating to the joint ventures is set out below.
2016
Colgate Palmolive (PNG) Limited
Harbourside Development Limited
Pacific Rumana Limited
Viva No. 31 Limited
Wonye Limited
Ownership
Interest
%
Assets
Liabilities
Carrying
Value
Revenue
Profit
50
50
50
50
50
17,366
9,567
94,682
91,864
3,761
10,810
15,262
299
7,060
2,460
7,799
2,818
3,462
3,750
12,803
38,099
2,605
9,025
3,836
-
-
(1,651)
1,047
(22)
-
141,881
111,250
30,632
50,960
1,979
Ownership
Interest
%
Assets
Liabilities
Carrying
Value
Revenue
Profit
2015
Colgate Palmolive (PNG) Limited
Harbourside Development Limited
Pacific Rumana Limited
Viva No. 31 Limited
50
50
50
50
12,391
9,596
4,220
3,772
7,196
5,127
1,805
-
5,195
4,469
2,415
3,772
37,016
2,496
3,026
7,375
-
(3,390)
917
-
23
29,979
14,128
15,851
47,417
Wonye Limited is a new joint venture company and is currently developing a commercial property in Mount Hagen.
In 2015 the Company recognised the deconsolidated related interest of Pacific Rumana Limited and instead recognised the equity
accounted investment at fair value. A gain on deconsolidation of K18.9M was recognised for which no consideration was received.
The Group’s share of the capital commitments of joint ventures at 31 December 2016 is K13.6M (2015: K2.2M).
There are no contingent liabilities arising from the Group’s interests in the joint ventures.
48 Steamships Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2016 (Amounts in Kina 000’s)
23. Business combinations
2015
Increase in shareholding in Consort Express Lines
On 1 July 2015, the Group merged Steamships Coastal Shipping (SCS), a division of Steamships Limited, with Consort Express
Lines Limited and increased its shareholding from 51 % to 70.2%.
The equity (merged assets) contributed by SCS amounted to K63.5M, with the fair value of these net assets contributed
amounting to K58.5M resulting in goodwill recorded of K5.0M. Internal goodwill was eliminated on consolidation.
24. Segmental reporting
(a) Description of segments
The Board monitors the business from a product perspective and have identified four reportable segments. A brief description of
each segment is outlined below:
•
•
•
•
Commercial – consists of 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 office administration function.
(b) Segment information
The segment information provided to the Board for the reportable segments for the year ended 31 December 2016 is as follows:
2016
External revenue
Intersegmental revenue
Interest revenue
Interest expense
Depreciation and amortisation
Segment results
Share of joint ventures and associates profit
Total tax expense
Profit from continuing operations
Commercial
Hotels &
Property
Logistics
Finance &
Investment (and
elimination)
Total
115,823
529
253,170
20,000
-
-
4,936
8,758
2,605
(3,018)
8,345
-
-
45,076
88,109
(626)
(27,923)
59,560
355,992
3,344
-
-
53,979
24,210
3,886
(11,984)
16,112
7,716
732,701
-
12,248
23,873
12,248
(34,235)
(34,235)
2,724
(2,391)
-
7,248
4,857
106,715
118,686
5,865
(35,677)
88,874
Segment assets
Segment liabilities
Net assets
92,139
768,919
464,084
211,566
1,536,708
(65,026)
(365,418)
(251,586)
27,159
(654,871)
27,113
403,501
212,498
238,725
881,837
Total assets includes investment in joint ventures
and associates
Capital expenditure
7,799
5,798
22,833
53,517
35,813
43,249
-
6,914
66,445
109,478
Steamships Annual Report 2016 49
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2016 (Amounts in Kina 000’s)
24. Segmental reporting (continued)
Commercial
Hotels &
Property
Logistics
Finance &
Investment
(and elimination)
Total
2015
External revenue
Intersegmental revenue
Interest revenue
Interest expense
114,754
822
-
(2)
273,024
31,493
-
(8)
Depreciation and amortisation
(4,834)
(43,229)
382,747
3,010
773,535
3,157
255
(9,721)
(51,596)
-
13,697
35,472
13,952
(29,917)
(39,648)
(2,483)
(102,142)
Segment results
3,086
107,838
6,594
18,524
136,042
Share of joint ventures and associates profit
Total tax expense
Profit from continuing operations
2,495
(2,015)
3,566
(2,472)
(33,864)
71,502
3,039
(20)
9,613
-
(1,811)
16,713
3,062
(37,710)
101,394
Segment assets
Segment liabilities
Net assets
96,326
730,913
507,575
292,355
1,627,298
(74,954)
(358,506)
(238,795)
(118,441)
(790,696)
21,372
372,407
268,780
173,913
836,602
Total assets includes investment in joint ventures
and associates
5,195
10,656
20,607
-
36,458
Capital expenditure
7,145
55,501
36,598
10,418
109,662
These figures include non-controlling interests share of operating profits and assets.
(c) Geography
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 insignificant business operation in the Solomon Islands.
50 Steamships Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2016 (Amounts in Kina 000’s)
25. 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 financial support in respect of certain subsidiaries, associates and joint
ventures.
No losses are anticipated in respect of these guarantees.
26. 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
2016
2015
2016
2015
18,621
31,303
49,924
8,936
-
8,936
-
-
-
-
-
-
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 five years
Later than five years
-
-
-
-
2,513
-
-
2,513
-
-
-
-
-
-
-
-
27. Subsequent events
In March 2017 the Directors declared a final dividend of 35 toea per share payable immediately after the Annual General Meeting
on 19 May 2017 amounting to K10.9M.
Steamships Annual Report 2016 51
INDEPENDENT AUDITOR’S REPORT
to the Shareholders of Steamships Trading Company Limited
Report on the audit of the financial statements of the Company and the Group
Our opinion
We have audited the financial statements of Steamships Trading Company Limited (the Company), which comprise the
balance sheets as at 31 December 2016, the statements of comprehensive income, statement of changes in equity and
statements of cash flows for the year then ended, and the notes to the financial statements that include a summary of
significant 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 2016 or from time to time during the financial year.
In our opinion the accompanying financial 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 financial position of the Company and the Group as at 31 December 2016, and their
financial performance and cash flows for the year then ended.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those
standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report .
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the Company and the Group in accordance with the International Ethics Standards Board
for Accountants’ Code of Ethics for Professional Accountants (IESBA Code), and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
Our firm carries out services for the Company and its subsidiaries in the area of tax compliance and tax advisory. These
services have not impaired our independence as auditor of the Company and the Group.
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial statements are free from material
misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial
statements .
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial
statements as a whole, taking into account the management structure of the Company and the Group, their accounting
processes and controls and the industries in which they operate.
52 Steamships Annual Report 2016
INDEPENDENT AUDITOR’S REPORT
to the Shareholders of Steamships Trading Company Limited
Materiality
Audit scope
Key audit matters
•
•
•
•
For the purpose of our audit of
the Group we used overall group
materiality of K6.2 million, which
represents approximately 5% of
the Group’s profit before tax.
We applied this threshold,
together with qualitative
considerations, to determine the
scope of our audit and the nature,
timing and extent of our audit
procedures and to evaluate the
effect of misstatements on the
financial statements as a whole.
We chose total profit before tax as,
in our view, it is the metric against
which the financial position of
the Group is most commonly
measured and is a generally
accepted benchmark.
•
•
•
•
We selected 5% based on our
professional judgement noting
that it is also within the range of
commonly acceptable related
thresholds.
We (PwC Papua New Guinea)
conducted audit work over all the
subsidiaries which comprise the
Group consolidation.
•
Amongst other relevant topics, we
communicated the following key
audit matters to the Audit and Risk
Committee:
•
Non-current asset impairment
assessment
•
Goodwill impairment
assessment
•
These matters are further described
in the Key audit matters section of
our report .
All subsidiaries of the Group
are incorporated and operating
in Papua New Guinea with the
exception of one subsidiary which
has operations in the Solomon
Islands.
All significant associates of the
Group are incorporated and
operating in Papua New Guinea
and audited by PwC Papua New
Guinea.
Our audit focused on where
the directors made subjective
judgements; for example,
significant accounting estimates
involving assumptions and
inherently uncertain future events.
Steamships Annual Report 2016 53
INDEPENDENT AUDITOR’S REPORT
to the Shareholders of Steamships Trading Company Limited
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
financial statements for the current period. The key audit matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We
have determined the matters described below to be key matters to be communicated in our report. Further, commentary on
the outcomes of the particular audit procedures is made in that context.
Key audit matter
How our audit addressed the key matter
Non-current asset impairment assessment
(Refer to note 10 of the financial statements)
As there was an indicator of potential impairment we
have considered and tested the Group’s assessment of the
estimated sale value of the ships.
Included within Property, plant and equipment are Ships
with an aggregate net book value of K164.4 million as at 31
December 2016 .
We evaluated the competency, qualifications and
objectivity of the expert engaged by the Group to provide
the valuations of the ships.
The Group’s financial performance has been impacted by
a prolonged weakness in economic conditions in Papua
New Guinea. These conditions adversely impacted levels of
cargo shipping throughout the country.
We discussed the valuation methodologies and assumptions
with the expert. This included understanding and evaluating
the impact of the dry docking schedules on the determined
values.
We considered this a key audit matter because economic
conditions are a potential indicator of impairment in
the value of the coastal ships. The Group has assessed
impairment by reference to estimated sales values of these
ships. The impairment assessment is sensitive to changes
in key assumptions about the estimated sales value of the
ships .
The sales values have been determined by reference to an
external valuation of the fleet which contains assumptions
about the global supply and demand for specific ship types
and dry docking schedules.
In applying the external valuations, the directors have used
their professional judgement to consider the impact of the
specific dry docking schedule of the individual ships.
We tested, on a sample basis, the accuracy and relevance
of the input data provided by the Group to the expert.
We compared the valuations of the individual ships with
the valuations in the previous year. We also compared the
selling prices of ships sold during 2016 and subsequent to
the end of the year with the most recent valuation for each
respective ship.
We compared the Group’s assertions and estimates
regarding estimated useful lives and residual values with the
previous year.
We also considered whether the Group’s assessment of the
condition of the ships and their future operating plans were
consistent with historical experience and our knowledge of
the business .
54 Steamships Annual Report 2016
INDEPENDENT AUDITOR’S REPORT
to the Shareholders of Steamships Trading Company Limited
Goodwill impairment assessment
(Refer to note 12 of the financial statements)
The Group has goodwill totalling K80.5 million at 31
December 2016. In accordance with the accounting
policy in note 1(n) of the financial statements, the Group
has assessed the goodwill balance for impairment at 31
December 2016 .
The prolonged weakness in economic conditions in a
number of the markets in which the Group operates in
Papua New Guinea has increased the risk that the carrying
values of the components of goodwill may be impaired.
We have considered and tested the financial models used
by the Group to determine the value of the cash generating
units. We compared the models with the previous year’s
models and found them to be consistently structured
and consistent with the basis of preparation required by
accounting standards.
We compared the forecast revenues and expenditures to
approved budgets and obtained an understanding and
evaluated the Group’s budgeting procedures, upon which
forecasts are based. We also evaluated the reliability of
estimates made by comparing forecasts made in prior years
to actual outcomes .
The Group has calculated the value of the respective cash
generating units containing goodwill balances based on
financial models comprising cash flow projections. The
cash flow projections use a number of forward looking
assumptions, including revenue and cost growth, and the
value calculation is sensitive to these.
We benchmarked the assumptions used around revenue
and cost inflation with external forecasts, and the discount
rates with our expectation based on the overall Weighted
Average Cost of Capital (WACC) of the Group. Together
with our valuation expert we reviewed the methodology
used in determining the discount rate applied.
We considered this a key audit matter because of the
significant judgements around future revenues and costs,
and the discount rate to be applied in determining the value
of the cash generating units.
We performed sensitivity analysis on assumptions to
ascertain the extent of change that would be required in
key assumptions for the respective goodwill balances to be
impaired. We determined that the calculations were more
sensitive to inflation assumptions and discount rates and
focused our testing on these assumptions.
Information other than the financial statements and auditor’s report
The directors are responsible for the annual report which includes other information. Our opinion on the financial
statements does not cover the other information included in the annual report and we do not express any form of assurance
conclusion on the other information .
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained
in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other
information that we obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of
this other information, we are required to report that fact. We have nothing to report in this regard.
Steamships Annual Report 2016 55
INDEPENDENT AUDITOR’S REPORT
to the Shareholders of Steamships Trading Company Limited
Responsibilities of the directors for the financial statements
The directors are responsible, on behalf of the Company for the preparation of financial statements that give a true and fair
view in accordance with International Financial Reporting Standards and other generally accepted accounting practice in
Papua New Guinea and the Companies Act 1997 and for such internal control as the directors determine is necessary to
enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless
the directors either intend to liquidate the Company or any of its subsidiaries or to cease operations, or have no realistic
alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements, as a whole, are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the International Standards
on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial statements.
As part of an audit in accordance with International Standards on Auditing, we exercise professional judgement and
maintain professional scepticism throughout the audit. We also:
•
•
•
•
•
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design
and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate
to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than
for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s
internal control .
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt
on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required
to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditor’s report. However future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and
whether the financial statements represent the underlying transactions and events in a manner that achieves fair
presentation .
56 Steamships Annual Report 2016
INDEPENDENT AUDITOR’S REPORT
to the Shareholders of Steamships Trading Company Limited
•
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities
within the Group to express an opinion on the consolidated financial statements of the Group. We are responsible for
the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our
audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements
regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to
bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most
significance in the audit of the financial statements for the current period and are therefore the key audit matters. We
describe these matters in our auditor’s report unless law or regulations preclude public disclosure about the matter or when,
in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Report on other legal and regulatory requirements
The Companies Act 1997 requires that in carrying out our audit we consider and report on the following matters. We
confirm in relation to our audit of the financial statements for the year ended 31 December 2016:
• 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.
Who we report to
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
Christopher Hansor
Partner
Registered under the Accountants Act 1996
Port Moresby
31 March 2017
Steamships Annual Report 2016 57
DIRECTORS’ REPORT
Steamships Trading Company Limited Year ended 31 December 2016
Steamships Trading Company Limited and Subsidiary Companies
The Directors submit their Annual Report for the year ended 31 December 2016 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 significant 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 profit for the year attributable to shareholders was K84,210,000 (2015: K98,979,000).
Dividend
The Directors advise that a final dividend of 35 toea per share will be paid immediately after the Annual General Meeting on
19 May 2017. This brings the total dividend declared for the year to 130 toea per share. Dividends payable to shareholders
resident outside of Papua New Guinea will be converted to Australian Dollars at the prevailing rate which the Company is
able to secure .
Rounding Off
Amounts in the Directors’ Report and accounts have been rounded off to the nearest thousand Kina.
58 Steamships Annual Report 2016
DIRECTORS’ REPORT
Steamships Trading Company Limited Year ended 31 December 2016
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
Chairman since 28th February 2015
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. He was the Managing Director of Steamships Trading Company Limited from 1st January 2013 to 12th January
2015. He is Chairman and Chief Executive Officer of John Swire and Sons Pty Limited.
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 firm), 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
Kumul Consolidated Holdings.
G. Aopi CBE
Director since 1997
Mr Aopi has achieved several tertiary degrees in Papua New Guinea, and a Masters of Business Administration from the
University of Queensland. Mr Aopi has substantial public service and business experience in PNG, including Secretary of
Finance and Planning and Managing Director of Telikom PNG Limited. He presently holds the position of Executive General
Manager, Stakeholder Engagement at Oil Search Limited. He was previously the Chairman of Telikom PNG Limited and
Independent Public Business Corporation (IPBC). Mr Aopi is a Director of Oil Search Limited, Steamships Trading Company
Limited, Bank of South Pacific and is involved in a number of other private sector and charitable organisations in Papua New
Guinea.
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, Venture Ltd and Viva No. 31 Limited.
Relevant Interest in Steamships shares: 19.99%
Steamships Annual Report 2016 59
DIRECTORS’ REPORT
Steamships Trading Company Limited Year ended 31 December 2016
D.H. Cox OL, OBE
Managing Director 2004 to 2012
Member of the Audit & Risk Committee (with effect 2015)
Member of the Strategic Planning Committee (with effect 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, Australia Pacific Technical College
and MBA International Hospitality.
G.J. Dunlop
Chairman of the Audit and 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 Pacific region. He is a Director of City Pharmacy
Group Ltd, Credit Corporation (PNG) 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 Dentons (formerly Gadens Lawyers) in
Port Moresby. Lady Kamit is a member of the Board of Trustee of the Papua New Guinea Institute of National Affairs,
and a director of Anglicare PNG. She is a Director & Secretary of Bunowen Services Ltd, Kamchild Limited and Gadens
Administration Services Ltd, a Director of Newcrest Mining Ltd, South Pacific Post Ltd and Chairman of ANZ Banking Group
(PNG) Ltd.
P.W. Langslow
Managing Director from 12th January 2015
Mr Langslow joined the Swire group in September 1984. Prior to his present appointment, he has held a number of positions
in Cathay Pacific, including country and regional management roles in India, Italy, Canada and Taiwan, as well General
Manager Inflight 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.
M.R. Scantlebury
Appointed Finance Director & Company Secretary on 24th June 2016
Mr Scantlebury is a chartered accountant and was previously Director of the Office for Financial Planning at Swire Pacific
Ltd in Hong Kong and he has held various senior finance and commercial positions in the Swire group in his career. 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 from 1st January 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 Office 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 a Non-
Executive Director of Swire Pacific Offshore Ltd and John Swire & Sons (Green Investments) Limited.
Direct and indirect beneficial interest 5.6%
J.H. Woodrow
Director from 7th September 2015
Mr Woodrow is Managing Director of the China Navigation Company Pte Ltd (Swire Shipping). He was formerly Director
Cargo for Cathay Pacific (2013-2015) and General Manager Cargo Sales & Marketing for Cathay Pacific (2010-2013). He
joined John Swire and Sons in September 1990 and spent 15 years in the sea freight industries in Japan and Australia. He
was also a director of various companies across Asia including Air Hong Kong Ltd, Air China Cargo Ltd, Cathay Pacific
China Cargo Holdings Ltd, Cathay Pacific Services Limited.
60 Steamships Annual Report 2016
DIRECTORS’ REPORT
Steamships Trading Company Limited Year ended 31 December 2016
Remuneration of Directors
Directors remuneration received or receivable from the Company as directors during the year, is as follows:
P. Aitsi,
G. Aopi
T.J. Blackburn (retired)
M.R. Bromley
D.H Cox
G.L Cundle (Chairman)
G.J. Dunlop
J.W. Hughes - Hallett (retired)
W.T. Kamit
B.N. Swire
J.H Woodrow
P.W. Langslow*
S.C. Pelling*(retired)
M.R. Scantlebury*
2016
K’000
124
124
-
223
213
223
247
-
135
124
124
-
-
-
1,537
2015
K’000
89
89
44
221
177
221
199
-
133
89
44
-
-
-
1,306
The directors fees vary in accordance with the required duties on various sub-committees of the board.
* Executive Directors receive no fees for their service as Directors during the year.
Remuneration of Employees
The number of employees whose remuneration and other benefits was within the specified bands are as follows:
Remuneration
K’000
2016
No.
2015
No.
Remuneration
K’000
2016
No.
2015
No.
Remuneration
K’000
2016
No.
2015
No.
100-110
110-120
120-130
130-140
140-150
150-160
160-170
170-180
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
320-330
330-340
340-350
10
4
10
2
4
1
5
-
-
5
2
2
1
4
2
1
2
2
4
3
1
-
6
3
7
12
6
2
3
4
6
4
4
2
2
3
-
1
2
5
2
1
1
1
1
3
2
-
350-360
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
-
2
3
-
-
1
4
-
-
1
1
1
-
-
1
1
1
-
3
2
1
2
1
2
1
1
2
4
2
-
4
1
1
-
1
1
2
2
-
1
2
1
1
-
-
1
590-600
600-610
610-620
620-630
630-640
640-650
650-660
680-690
730-740
740-750
750-760
790-800
800-810
820-830
890-900
920-930
950-960
970-980
990-1000
1,050-1,060
1,070-1,080
1,400-1,500
2,300-2,400
1
1
-
-
1
2
1
1
-
2
2
1
2
-
2
1
-
1
-
-
1
1
1
1
-
2
1
1
-
-
-
1
1
-
-
-
2
1
-
2
1
1
1
-
-
1
For and on behalf of the Board:
Port Moresby
31 March 2017
G.L. Cundle
Chairman
P.W. Langslow
Managing Director
Steamships Annual Report 2016 61
STOCK EXCHANGE INFORMATION
Steamships Trading Company Limited Year ended 31 December 2016
Shares are listed on the Australian Securities Exchange and the Port Moresby Stock Exchange.
All shares carry equal voting rights.
Shareholdings
At 28 February 2017, there were 369 shareholders.
262 Holding
Holding
79
Holding
14
Holding
14
1
1,001
5,001
10,001
-
-
-
-
1,000 units
5,000 units
10,000 units
and over
The number of shareholders holding less than a marketable parcel was 13.
The 20 largest shareholders were:
Number of shares
John Swire & Sons (PNG) Limited
Bell Potter Nominees Ltd
National Superannuation Fund Ltd
Berne No 132 Nominees Pty Ltd
John E Gill Operations Pty Ltd
Citicorp Nominees Pty Limited
Hylec Investments Pty Ltd
Kelvinside Pty Ltd
Mr Malcolm Burns Reid
Mr Ramesh Mahtani
HSBC Custody Nominees (Australia) Limited
Intercontinental Assets Pty Ltd
Engoordina Pty Ltd
Derrick Charles Whitaker
Jennifer May Forbes
Miss Shirin Moayyad
Custodial Services Limited
Mrs Mary Patricia Haughton
Mrs Judith Scottholland
Mrs Robin Anne Gostelow
22,362,651
5,760,000
1,859,446
446,494
54,727
31,192
25,194
25,000
23,067
21,700
17,238
15,000
11,078
10,348
10,000
10,000
8,768
8,161
8,161
7,393
%
72.12
18.58
6.00
1.44
0.18
0.10
0.08
0.08
0.07
0.07
0.06
0.05
0.04
0.03
0.03
0.03
0.03
0.03
0.03
0.02
30,715,618
99.06
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 financial benefits 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.
62 Steamships Annual Report 2016
Steamships Annual Report
COMPANY DIRECTORY
CHAIRMAN
G. L. Cundle §&
MANAGING DIRECTOR
P.W. Langslow
FINANCE DIRECTOR
M. R. Scantlebury
NON-EXECUTIVE DIRECTORS
P. Aitsi MBE
G. Aopi CBE
Sir M.R. Bromley KBE §+&
D. Cox OL, OBE +&
G.J. Dunlop +&
Lady W.T. Kamit, CBE +
B.N. Swire &
J. H Woodrow
+ Member of the Audit and Risk Committee
§ Member of the Remuneration Committee
& Member of the Strategic Planning Committee
SECRETARY
M.R. Scantlebury
REGISTERED OFFICE
Level 5, Harbourside West, Stanley Esplanade
Telephone: +675 313 7400
P.O. Box 1
Port Moresby, NCD
Papua New Guinea
AUDITORS
PricewaterhouseCoopers
P.O. Box 484
Port Moresby, NCD
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