ANNUAL REPORT
2017
CONTENTS
Brief Profile of Steamships Group . . . . . . . . . . . . . 2
Financial Highlights . . . . . . . . . . . . . . . . . . . . 4
Chairman’s Report . . . . . . . . . . . . . . . . . . . . . 6
Directors’ Review . . . . . . . . . . . . . . . . . . . . . 7
Review of Operations - LOGISTICS . . . . . . . . . . . . 9
Consort Express Lines . . . . . . . . . . . . . . . . 9
Pacific Towing . . . . . . . . . . . . . . . . . . . 10
Transport & Port Services . . . . . . . . . . . . . 11
Review of Operations - PROPERTY . . . . . . . . . . . 12
Coral Sea Hotels . . . . . . . . . . . . . . . . . . 12
Pacific Palms Property . . . . . . . . . . . . . . . 13
Review of Operations - COMMERCIAL . . . . . . . . . 14
Laga Industries . . . . . . . . . . . . . . . . . . . 14
Colgate Palmolive . . . . . . . . . . . . . . . . . 15
Sustainability . . . . . . . . . . . . . . . . . . . . . . . 16
Corporate Governance . . . . . . . . . . . . . . . . . . 17
Financial Section . . . . . . . . . . . . . . . . . . . . . 18
Statements of Comprehensive Income . . . . . . . 18
Statement of Changes in Equity . . . . . . . . . . 19
Statements of Financial Position . . . . . . . . . . 20
Statements of Cash Flows . . . . . . . . . . . . . 21
Notes to the Financial Statements . . . . . . . . . 22
Independent Auditor’s Report . . . . . . . . . . . 53
Directors’ Report . . . . . . . . . . . . . . . . . . 59
Stock Exchange Information . . . . . . . . . . . . 63
Company Directory . . . . . . . . . . . . . . . . . . .
IBC
Steamships Annual Report 2017 1
BRIEF PROFILE OF STEAMSHIPS GROUP
Steamships Trading Company (Steamships) is a committed investor in Papua New
Guinea celebrating its 100 year history in 2018. 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 .
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 3,100 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 2017
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
(x9 JV Entities)
Pacific
Rumana JV
Wonye JV
Viva No 31 JV
Steamships Annual Report 2017 3
FINANCIAL HIGHLIGHTS
FINANCIAL HIGHLIGHTS
2017 FINANCIAL HIGHLIGHTS
Revenue
Profit attributable to shareholders
Cash generated from operations
Net cash inflow/(outflow) before financing
Shareholders’ funds
External Borrowings
Earnings per share (toea)
Dividends Declared per share (toea)
Shareholders’ funds per share (kina)
Underlying profit attributable to shareholders
Underlying earnings per share (toea)
Gearing ratio
Interest cover
Dividend cover
2017
K’000
2016
K’000
Change
%
705,687
41,516
102,029
84,390
841,964
441,020
732,701
84,210
191,061
229,044
833,006
502,497
134
110
27.15
61,775
199
272
130
26.86
71,721
231
33.1%
6.2
1.3
34.6%
6.7
2.1
-4%
-51%
-47%
-63%
1%
-12%
-51%
-15%
1%
-14%
-14%
-4%
-7%
-39%
4 Steamships Annual Report 2017
FINANCIAL HIGHLIGHTS
SUMMARY OF PAST PEFORMANCE
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
2017
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
159
-
(45,272)
45,113
920,357 986,310 930,934 941,708 773,535 732,701 705,687
462,972 495,976 789,918
79,747 134,789 136,042 118,686 62,686
233,967 265,574
111,615 120,602 180,834
3,843 3,062 5,865 7,525
9,697
13,859
14,188
11,416
16,732
16,837
(35,677) (32,621)
(14,042)
(67,727) (81,414)
(53,935)
(34,637)
(32,808)
3,926
(4,664)
(6,137)
38,609
(21,838) (20,648)
(21,870)
(5,418)
41,516
84,210
96,560 116,445 158,261 177,700 114,011
90,226
(38,487) (37,710)
(2,415)
(11,490)
98,979
88,655
-
-
(45,272)
51,288
-
-
(31,008)
85,437
(1,061)
-
-
-
(58,916) (88,373)
89,327
98,284
-
(8,994)
(57,365)
47,652
-
-
- 2,206
(43,411) (48,062)
53,123
45,244
-
-
- -
(40,291) (32,558)
8,958
43,919
Underlying profit attributable to shareholders
(adjusted for significant items)
67,770
85,120 113,597 153,566 156,213 128,367 108,808
80,651
71,721
61,775
BALANCE SHEET
SHARE CAPITAL & RESERVES
Issued Capital
Retained Earnings
Shareholders’ funds
EQUITY
Fixed Assets / Investment Properties
Investments in Associated Companies
Future Income Tax Benefit
Goodwill
Other assets
TOTAL ASSETS
24,200
24,200 24,200 24,200 24,200
24,200
24,200
24,200
554,349 652,978 689,777 711,764 764,887 808,806 817,764
302,595 353,883 428,157
326,795 378,083 452,357 578,549 677,178 713,977 735,964 789,087 833,006 841,964
24,200
24,200
18,336
48,831 36,190
345,131 421,937 515,208 653,914 761,500 736,884 766,737 836,602 881,837 878,154
30,773 47,515
84,322
62,851
22,907
43,854
75,365
353,261 664,196 786,510
938,709 1,023,861 1,066,393 1,115,123 1,072,955 1,068,892 997,125
15,416
17,939
33,337
33,193 36,458 66,445 67,196
28,445
9,282
7,305
4,150
33,521 36,914 36,680 30,250
-
17,183
17,183
7,578
17,183
80,491 80,491 80,491 80,002
299,634 411,920 352,549 366,479 400,480 284,200 294,800
154,508 203,480 294,203
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 1,469,373
31,471
21,081
93,617
38,687
-
17,183
Current Liabilities
Non-Current Liabilities
TOTAL LIABILITIES
122,562 236,847 273,055
85,141 251,319 334,331
283,445 370,396 230,390 190,621 541,292 184,646 221,560
346,612 359,755 597,837 671,449 249,404 470,225 369,659
207,703 488,166 607,386 630,057 730,151 828,227 862,070 790,696 654,871 591,219
NET ASSETS
345,131 421,937 515,208 653,914 761,500 736,884 766,737 836,602 881,837 878,154
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 %
1.26 0.86 1.08 1.06 1.11 1.53 1.92
95.2%
47.8%
22.13
9.4%
12.0%
14.8%
34.8%
24.8%
10.89
19.5%
27.6%
20.7%
89.1%
44.4%
13.05
19.5%
25.5%
22.5%
89.7%
44.0%
16.06
14.7%
25.7%
25.1%
89.7%
46.5%
20.75
12.2%
16.0%
18.0%
70.1%
38.3%
20.53
17.2%
27.4%
26.5%
72.6%
39.2%
24.00
18.0%
26.2%
23.1%
146 146 100 190 285 185 140
291 311 376 510 573 368 286
219 275 366 495 504 414 351
50.0%
53.1%
73.4%
62.1%
50.3%
41.8%
51.0%
0.74
81.7%
43.1%
24.38
12.8%
12.5%
10.2%
155
319
260
53.7%
1.16
57.0%
34.6%
25.84
11.5%
10.1%
8.6%
130
272
231
52.2%
1.00
50.2%
33.1%
25.74
5.9%
4.9%
7.3%
110
134
199
21.6%
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 2017 5
CHAIRMAN’S REPORT
2017 was another challenging year for Papua New Guinea and few business sectors
were unaffected by the weak economy. The lack of foreign currency continued to restrict
business activity and the Kina remained under pressure. Government expenditure remained
constrained by the national budget deficit although recent support from the multilateral
development banks should reduce default risk .
Economic indicators show a stable but weak environment
and although commodity prices, upon which the economy
is heavily dependent, generally increased during the year,
this did not result in any noticeable increase in economic
activity. The continuing low oil and gas prices and delays
to announcements on anticipated development projects
have not helped the cautious sentiment, but the quality and
extent of PNG resources are such that development should
commence in the foreseeable future and bring a much
needed boost to the economy.
The 2017 National Elections returned substantially the
same Government and the stability is welcome. The new
Government increased its dialogue with the private sector
to address issues facing the country, which is encouraging.
It is hoped that such dialogue will result in policy revision
and new legislation which attracts and promotes foreign
and private sector investment which has hitherto been
discouraged by suggested reforms to the Land Act, Mining
Act and SME policy.
The on-going national budget deficit creates short term
pressure for the economic outlook, which, combined with
lacklustre private sector investment, will likely see another
difficult year for business in 2018.
More positively, Port Moresby will host the APEC economic
leaders meeting in November 2018 and there are many
related events throughout the year, which will generate
business activity in some sectors. Construction of the
conference centre and other infrastructure developments
are well advanced and Steamships welcomes this landmark
event that will promote PNG globally.
During 2017, PNG Ports Corporation announced its
decision to award the International Terminal Concession in
Port Moresby and Lae to a new operator. Steamships’ Joint
Venture Port Services business, one of the Group’s logistics
businesses including shipping, towing, stevedoring and
transport, will be significantly affected in 2018 and three
joint venture companies will cease operations as a result .
Appropriate consideration has been made for possible loss
on sale of assets and inventory. Shipping suffered from
the continuing economic weakness, whilst Pacific Towing
and East West Transport performed satisfactorily. The
Company remains committed to the logistics sector and its
customers .
6 Steamships Annual Report 2017
Pacific Palms Property’s performance was acceptable in
light of the frail economy and continues to maintain high
quality investments in strategic locations. There was over-
supply in all sectors as demand fell further from 2016,
with both rents and occupancy levels under pressure.
Market conditions have led to a cautious approach to
new development but some exciting prospects are in the
design phase. The reconstruction of Waigani Central was
completed after the 2015 fire, as well as the joint venture
mixed commercial and retail developments in Mt . Hagen
and Madang, which completed at the year end.
Coral Sea Hotels’ performance stabilised in 2017 after
declining the prior year due to the economic slowdown
and new capacity entering the Port Moresby market.
Investment was maintained in upgrading product and
service standards in 2017 to better attract and retain
customers in the increasingly competitive market.
Laga industries produced a good result, with strong
revenue growth and a recovery in profit. This resulted
from improved manufacturing, sales and distribution
effectiveness, in both the ice cream and cooking oils sector
and the division continues to invest in modern equipment
to enhance product quality and consumer experience.
Capital investment was again constrained in 2017 in light
of the continuing economic downturn. The balance sheet
is strong and Steamships is well positioned to capitalise on
opportunities as they arise. Steamships remains confident
in the medium term prospects for the PNG economy,
whilst remaining cautious and disciplined in facing the
short term challenges . In 2018, Steamships will recognise
100 years of operation and we aspire to contribute and
participate in PNG’s economic and social development for
many years to come.
Steamships has maintained its investment in the training
and development of its employees despite the economic
slowdown. We will be at the head of the recovery of
economic growth and our team will 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
29 March 2018
DIRECTORS’ REVIEW
The result reflects a continuation of the protracted weakness in economic conditions that
began in 2015. Modest recent increases in some commodity prices, which significantly
impact the national economy, have not yet filtered through the economy. Demand is also
constrained by the ongoing shortage of foreign currency in PNG. The property and hotel
markets also saw an increase in capacity and consequently competition which compounded
this weak demand environment . As a consequence 2017 has seen pressure across the
economy and Steamships’ sales revenue has declined 3.7% to K705.7 million against last
year’s K732.7 million, on a continuing basis.
2017
K000’s
2016
K000’s
Change
Net profit attributable to shareholders
41,516
84,210
-50.7%
Add back/(less) impact of significant items (post tax and minority interests)
Reversal of Impairment of Convertible Notes
Impairment of Fixed Assets, Goodwill (incl Vessels)
Impairment of Inventory
Disputed IRC Assessment
Tax Loss Write Off
Hotel & Property Development Cost Write Off
Gain on Sale of Trade Winds
Loss on Disposal of Vessels
Gain on Sale of Properties
Salvage Profit
Total impact of significant items
(12,541)
8,306
1,012
10,640
11,108
5,965
(1,586)
814
-
(3,459)
20,258
-
2,276
433
-
-
5,574
-
-
(19,207)
(1,565)
(12,489)
Underlying profit attributable to shareholders
61,775
71,721
-13.9%
Depreciation in 2017 was K99.8 million (excluding
impairments) against K106.7 million in 2016, and interest
on borrowings (excluding capitalised interest) was K13.5
million against K22.0 million in 2016. Capital expenditure
for the 12 months was K54.0 million (with capitalised
interest of K1.4 million) against K109.7 million (with
capitalised interest of K1.7 million) in 2016 reflecting a
planned reduction in project activity given the economic
climate. The group’s net operating cash flow generation
declined 47% to K102.0 million against K191.1 million in
2016 as a result of reduced profits as noted above and a
higher amount retained in working capital .
A final dividend of 40 toea per share has been proposed
and will be paid following approval at the company’s
annual general meeting on the 8th of June 2018, subject
to Steamships’ ability to secure foreign exchange for non
PNG shareholders. This brings the total dividend for the
year to 110 toea per share (2016 = 130 toea per share).
The dividend is unfranked and there is no conduit foreign
income .
Significant items
As disclosed at the half year the reversal of impairment of
convertible notes arising from the sale of the company’s
investment in BMobile, impaired in 2013, gave rise to a net
gain of K12.5m.
Included in the impairment figure above are two items.
Firstly, the award of the exclusive international terminal
concession to ICTSI in late 2017 will result in the cessation
of operations of the joint venture companies in Port
Moresby and Lae. A gross impairment provision of K4.1m
has been made on possible loss on sale of fixed assets,
inventory and employee redundancy costs. Secondly, the
soft international market for coastal vessels and oversupply
of such vessels in PNG, has resulted in an impairment of
some of the vessels in the Consort Express Lines fleet and a
gross impairment of K10m has been recognised.
Consort Express Lines has recorded a tax loss for the past
few years and such cumulative losses are available to offset
future taxable profits in computation of the company’s
Steamships Annual Report 2017 7
DIRECTORS’ REVIEW
tax liability and hence is recorded as a deferred tax asset.
The value of this asset at the end of 2016 was K30.5m.
Management have considered the recoverability of tax
losses beyond this amount to be not sufficiently probable
in light of current trading conditions and it is prudent that
the tax loss in 2017 is not carried forward as a deferred tax
asset .
The Company received a salaries and wages tax default
assessment, including penalties and interest, from the
Inland Revenue Commission of PNG (“IRC”) for the
periods from 2006 to 2016. The Company has paid
the assessment and lodged the appropriate objections
as required by the IRC and will vigorously pursue the
process of objection and recovery. Although management
are confident of a successful outcome, the application
of IAS37 requires such recovery to be considered as a
contingent asset and not carried in the balance sheet. The
payment is therefore expensed in the current year.
Trading Outlook
2018 is expected to be another difficult year for the PNG
economy as the Government attempts to manage its
growing fiscal deficit and the foreign currency shortage.
The resource extraction sector upon which much of the
economy depends is expected to remain quiet although
on-going feasibility studies and recent announcements
have been encouraging for the medium term .
Port Moresby will host the APEC leaders meeting in
November 2018 and there are numerous senior meetings
ahead of this which should provide a modest economic
stimulus .
Steamships celebrates 100 years of business in PNG in
2018 and this provides an opportunity to restate our
commitment to the future development of the country and
people of PNG.
8 Steamships Annual Report 2017
REVIEW OF OPERATIONS - LOGISTICS
CONSORT EXPRESS LINES
Consort operates a fleet of 16 coastal vessels (5
geared, multi-purpose deep water vessels and 11
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.
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
containerized, 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
specializing 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, as expected, saw a continuation of the challenges
faced in 2016. Volumes remained largely static as the
lack of foreign currency exacerbated a weak demand
environment . Much of the freight is consumer staple goods
and needs to be competitively priced to win and retain
customers .
As planned in 2016, Consort sold three vessels in 2017,
being the Madang Coast, Nakanai Coast, Goada Chief. In
addition, the Papuan Coast charter expired and the vessel
was sold on behalf of its owner. This fleet reduction was
partially a result of the decision in 2016 to withdraw from
international services to Australia and partially in response
to a need to better match capacity with demand and
reduce the inherent cost of excess capacity.
As a consequence of the on-going weakness in the Oil &
Gas market, the Projects Charters fleet was under-utilised
with the long term charter of the Kiunga Chief to OK Tedi
being the main activity. A portion of the Project Charters
fleet was deployed with the liner trades, with surplus
vessels remaining idle .
A significant loss of revenue was experienced in the first
quarter of the year with the ‘Kiunga Chief’ off hire as a
consequence of her grounding in 2016 and the need for
major repairs. Over K4m in lost hire was a consequence.
The weak Oil & Gas market negatively impacted project
vessel demand globally and resulted in a glut of project
charter vessels internationally. This reduced demand
was reflected in the annual external valuation of the
fleet, with the carrying values of Consort project vessels
negatively impacted. Accordingly, Consort has recorded an
impairment of approximately K10m across the fleet.
It is the Company’s preference for vessels to visit Singapore
for docking and, despite the time needed to get to and
from the dock, this gives a noticeable improvement in both
out-of-service time and docking expense . However, the
lack of foreign currency will affect this strategy in 2018.
Despite the challenges of 2017, the underlying
performance, particularly in the second half of the year,
was encouraging. The economic environment going into
2018 is expected to be just as difficult as 2017, Consort
is committed to the continuing transition of tonnage and
a schedule that will allow management to concentrate on
delivering a consistent and reliable service to customers,
resulting in greater market support .
Steamships Annual Report 2017 9
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 complemented
by a comprehensive range of commercial dive
services. As an ancillary service the company also
provides life raft leasing and servicing and in 2017
commenced the provision of oil spill response
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 extend to the Solomon
Islands through a subsidiary company operating in
Honiara .
Pacific Towing experienced a 16% increase in the number
of harbour towing jobs undertaken in 2017 compared to
2016 . However, revenue from routine non-harbour related
jobs fell 9% this year. The combination of work gave rise to
an overall increase in profits for the division enhanced by
the settlement of receivables for non-routine salvage work .
In 2017 five salvages were responded to with three being
settled during the year and one early in 2018. During
2017 income due on earlier salvages also settled .
In 2017 Pacific Towing, in conjunction with sister company
Swire Pacific Offshore, developed an oil spill response
capability which was deployed in Jacksons Harbour soon
after introduction .
People development remains a focus and work experience
for Pacific Towing seafarers continues with Hong Kong
Salvage & Towage and, more recently, with the Singapore
based China Navigation Company Ltd.
Pacific Towing is committed to localising key positions
currently conducted by foreign crew. To this end, nine
cadets are attending training at the Madang Maritime
College with the intention of replacing all foreign crews
starting in 2018. 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.
The purchase of a pre-owned 50tbp tug, renamed Langila
was completed in early 2017. This allowed the company
to manage a series of dry-dockings required on the existing
fleet whilst maintaining its fleet availability to support
customer needs throughout the country.
Pacific Towing is in a strong position entering 2018. A
relocation of the main Port Moresby base to the new wharf
at Motukea is being planned to better serve its customers .
10 Steamships Annual Report 2017
REVIEW OF OPERATIONS - LOGISTICS
TRANSPORT & PORT SERVICES
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, Alotau 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
programmes .
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.
The Transport and Port Services division showed resilience
in the face of continuing soft operating conditions in 2017
to meet expected financial performance.
Although competition remains intense in the transport
sector, EWT was able to grow market share and revenue
through a continued focus on customers who value
safe and reliable operations . New business was won in
Port Moresby, Rabaul, Kimbe and Alotau. Material fuel
contracts have also been renewed or extended in 2017 .
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 Motukea domestic wharf facilities, but
Lae stevedoring operations remained stable .
The announcement in September that PNG Ports
Corporation had awarded the concession to operate
the international terminals in Port Moresby and Lae to a
new overseas operator from early 2018 will result in the
cessation of business for three joint venture companies
and the exit of JVPS from these ports. Staff redundancies
will result and assets will be disposed of . Appropriate
provisions have been made at the year end. Whilst
disappointed, the division will focus on its regional
operations and remain dedicated to serving its customers .
The division moves into 2018 with a degree of confidence
in the EWT transport business but some trepidation for
the future prospects of JVPS. However, with a strong, well
trained employee base and with a significant range of fit
for purpose equipment, it remains highly compliant with
industry best practice standards and is well placed to meet
the challenges ahead .
Steamships Annual Report 2017 11
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
546 hotel rooms and 129 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.
CSH recovered from a disappointing 2016 with a solid
performance this year, despite the continuing economic
weakness affecting demand . Prudent cost management on
soft revenue contributed to a satisfactory profit.
Room and apartments occupancy and revenue fell
year on year as rates remained under pressure and F&B
revenues declined slightly 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 challenging environment . Social unrest in Mt .
Hagen during and after the national elections mid-year
unfortunately impacted the Highlander Hotel.
Towards year end Port Moresby hotels benefited from pre
APEC 2018 meetings as well as the Rugby League World
Cup, held in November 2017. The opening of three new
F&B outlets at the Gateway Hotel increased its profile and
is providing a new destination for dining and entertainment
near the airport .
Investment was maintained with the commencement of
upgrading rooms at the Gateway and the Highlander.
Bar & restaurant upgrades commenced at the Highlander
and these will continue into 2018 and include new
conference facilities. The upgrade of the Ela Beach Hotel
was also completed .
Significant investment continues in training and staff
development in order to maintain a high quality of service
offering for customers and CSH is shortly expected to
receive a certificate of compliance to ASNZ Food Standards
Code ( Australia & New Zealand) Australian Food Safety
Standards. In addition, a number of World Luxury Hotel
Awards in the Australasia and Oceania category were once
again achieved in 2017 .
Plans for 2018 include the opening of the 40-bed
Cassowary Hotel in Kiunga and completion of the
extensions for the Highlander Hotel in Mt . Hagen and,
beyond 2018, includes redevelopment of the Melanesian
Hotel in Lae. The market is expected to remain competitive
in 2018 but Port Moresby is expected to benefit from the
run up to APEC in November .
12 Steamships Annual Report 2017
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 a current over-supply
of property is evident in Port Moresby. PPP will
continue its selective disposal of less strategic
properties in 2018 .
The Port Moresby residential market has been affected by
continuation of falling demand as the economy remains
weak. There was also more over-supply delivered to the
market . AS a retailer PPP rental rates however remained
stable although overall occupancy declined slightly year
on year in the older properties.
The commercial category has seen occupancy drop
and rates have fallen due to weakness in the market .
The Harbourside East & West Development however
remains at 100% occupancy and this supported the
decision to approve work to design the complementary
mixed-use Harbourside South Development .
The retail category experienced a reduced occupancy
from the prior year. The two joint venture mixed retail
and commercial centre in Madang and Mt . Hagen both
completed in 2017 and have been well received by
prospective tenants. The rebuild of the fire damaged
Waigani Central supermarket has recently been completed
and is expected to reopen around Easter 2018. The
Downtown Plaza in Port Moresby is undergoing renovation
which has unfortunately resulted in increased vacancies
but the finished product in early 2018 will be attractive.
PPP remains a strong player in the industrial category.
As with other categories, general market rates and
occupancies have weakened in 2017 . PPP’s development
of warehouses in the Baruni area continues to show
vacancies but the market will inevitably pick up as
various developments around the new international port
at Motukea continue and the road development is now
completed .
The focus in 2018 for PPP will be to continue its efforts
to meet customer service expectations, maintain high
maintenance standards and manage its portfolio of leases
to maximize revenue.
Steamships Annual Report 2017 13
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 .
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. Laga
Industries also manufactures the iconic LagaStik
and 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
featuring the largest capacity state of the art Ice
Cream production plant in the Pacific.
Laga Industries built on its 2016 growth with sales
improvements in all segments as well as operational
improvements across all aspects of the business .
The Ice Cream plant continued to generate high product
quality and pleasing production efficiencies, yielding solid
margins. The new product range, Hamamas, performed
strongly and the rationalisation of existing ice cream ranges
combined with new product development will bolster
performance in this sector. The business continued to invest
in the iconic Gala brand, rolling out several new Gala
Palas .
Cooking Oil volumes continued to be strong and
margins increased during the year as Laga improved its
procurement practices and took strategic price increases .
Specialty Lines sales were improved in 2017 and capital
investment continues in this sector in order to drive
improvements in production capacity and efficiency.
The alcoholic beverages business, Trade Winds, was
divested at the end of the year and focus now shifts to
LagaStik and bottled water . Manufacturing and sale of
a new LagaStik pouch format commenced in the fourth
quarter with the intent of improving production volumes
and margins .
Operating profit improved in 2017, continuing the major
turnaround since 2013 . 2018 is expected to see further
improvement as Laga continues to grow its ice cream,
beverages and specialty lines and to make improvements
to its manufacturing practices .
14 Steamships Annual Report 2017
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 and sales revenue in Oral and Personal
Care categories this year, although Home Care volume
sales have slipped behind last year as some customers
faced operational challenges and imported soap chip costs
increased. Various initiatives are underway to bring Home
Care volume sales back up in 2018 . Margins have held up
well although 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 400,000
consumers (the majority being school children) across
PNG, up from 305,000 in 2016.
2018 is expected to see a continuing tight consumer
market, however, based on excellent sales execution,
modest growth in sales and profit is anticipated.
Steamships Annual Report 2017 15
SUSTAINABILITY
Steamships remains committed to the principles of Sustainable Development. We will
continue to conduct our activities in a manner that protects the environment, health, security
and safety of our employees, contractors, and customers. We wish to excel as corporate
citizens.
Staff remain the most valuable asset at Steamships . In 2017
Steamships HR and Training commenced a journey of
revision, with a clear focus on fairness and consistency in
people management across all divisions as well as a focus
on heightening the professional development of employees
at all levels with a “Growth from Within” vision. To
support this vision, a Learning and Talent Development
Manager was sourced and commenced at the later stage
of 2017. Safety also remains as a priority and 2017 saw
the introduction of an annual Steamships safety forum.
Behavioural safety and its contribution to a strong safety
culture was a focus .
Responsible and sustainable energy consumption remains
an area of focus and work has commenced in 2017 to
improve the monitoring and reporting of energy and water
use, waste management, and environmental emissions
at operational level. This work will result in a new and
comprehensive reporting of environmental performance in
2018 .
Steamships considers it essential to have a positive impact
on the various communities in which it operates. This is
done through an involvement in community engagement
initiatives that prioritize four key areas: health, social
welfare, education, sports and culture. These priority
areas align with the development aspirations of Papua
New Guinea with specific focus on; good health and
wellbeing, quality education, reduced inequalities, and
gender equality. The focus in 2017 was the newly launched
Community Grant Programme.
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 .
16 Steamships Annual Report 2017
CORPORATE GOVERNANCE
Steamships and its Board are committed to achieving and demonstrating the highest
standards of corporate governance and ethical behaviour, and they expect these standards
from all employees. The Group believes that the maximisation of long term returns to
shareholders is best achieved by acting in a socially responsible manner that recognises the
interests of community stakeholders.
Steamships is committed to:
•
•
•
Providing high-quality products and services to meet
customers’ needs;
Maintaining high standards of business ethics and
corporate governance;
Ensuring the safety and wellbeing of employees and
others with whom the Group has contact; and
•
Promoting sustainable business practice .
Steamships reports against the Australian Stock Exchange
(ASX) 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 2017 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
2017, except where noted in the Corporate Governance
Report .
Steamships’ Corporate Governance Report can be
found at http://www.steamships.com.pg/aboutus/
corporategoverance
Steamships Annual Report 2017 17
STATEMENTS OF COMPREHENSIVE INCOME
Steamships Trading Company Limited Year Ended 31 December 2017 (Amounts in Kina 000’s)
Consolidated
Parent Entity
Note
2017
2016
2017
2016
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
705,687
732,701
15,244
19,766
(644,776)
(611,794)
3(a)
3(a)
3(b)
3(e)
4(b)
76,155
(13,469)
7,525
70,211
5(a)
(32,621)
37,590
-
140,673
(21,987)
5,865
124,551
(35,677)
88,874
-
13,051
2,828
(2,031)
13,848
72
-
13,920
(205)
13,715
-
31,691
2,726
(1,805)
32,612
72
-
32,684
(801)
31,883
-
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
37,590
88,874
13,715
31,883
Attributable to:
Non-controlling interests
Shareholders
(3,926)
41,516
37,590
4,664
84,210
88,874
-
13,715
13,715
-
31,883
31,883
Basic and Diluted Earnings per share continuing (toea)
3(f)
134t
272t
These Statements of Comprehensive Income are to be read in conjunction with the accompanying notes.
18 Steamships Annual Report 2017
STATEMENT OF CHANGES IN EQUITY
Steamships Trading Company Limited Year Ended 31 December 2017 (Amounts in Kina 000’s)
Share
Capital
Retained
Earnings
Other
Total Capital Controlling
Reserves & Reserves
Interest
Total
Equity
Non-
BALANCE AT 1 JANUARY 2016
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
Profit for the year
Dividends paid 2017
-
-
41,516
(32,558)
-
-
41,516
(3,926)
37,590
(32,558)
(8,715)
(41,273)
BALANCE AT 31 DECEMBER 2017
24,200
826,758
(8,994)
841,964
36,190
878,154
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.
Steamships Annual Report 2017 19
STATEMENTS OF FINANCIAL POSITION
Steamships Trading Company Limited As At 31 December 2017 (Amounts in Kina 000’s)
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
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
2017
2016
2017
2016
6
7
8
5(e)
10
11
4(a)
9
12
5(c)
13
14
9
15
15
5(e)
5(c)
14
15
16
12,021
161,655
47,333
-
221,009
628,127
368,998
67,196
73,791
80,002
30,250
1,248,364
1,469,373
108,170
6,250
54,512
19,503
31,718
1,407
221,560
22,332
12,040
335,287
369,659
591,219
878,154
24,200
817,764
841,964
36,190
878,154
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
-
435
-
85
520
24,545
-
208,163
5,712
-
268
238,688
239,208
-
-
218,274
-
-
-
218,274
-
-
-
-
218,274
20,934
24,200
(3,266)
20,934
-
20,934
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
These Statements of Financial Position are to be read in conjunction with the accompanying notes.
For and on behalf of the Board:
29 March 2018
G.L. Cundle
Chairman
P.W. Langslow
Managing Director
20 Steamships Annual Report 2017
3,421
(590)
72
-
(256)
2,647
(311)
-
-
STATEMENTS OF CASH FLOWS
Steamships Trading Company Limited Year Ended 31 December 2017 (Amounts in Kina 000’s)
Consolidated
Parent Entity
Note
2017
2016
2017
2016
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
721,778
783,668
5,029
Payments to suppliers and employees
(573,454)
(531,244)
(3,551)
Interest received
Interest and other finance costs paid
Income tax paid
Net cash provided by operating activities
4,639
(18,109)
(32,825)
12,248
(34,235)
(39,376)
102,029
191,061
5(e)
18
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant & equipment
(54,098)
(109,478)
Proceeds from sales of property, plant & equipment
Proceeds on sale of investment
Loans repaid by associated companies
10,608
15,716
3,361
24,241
-
72
-
(317)
1,233
-
-
-
147,343
17,870
17,812
Investment in associates & joint ventures
-
(24,143)
-
(12,803)
Dividends received
6,774
20
Net cash (used in)/provided by investing activities
(17,639)
37,983
13,051
30,921
31,691
36,389
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings
Repayments of borrowings
Dividends paid
-
38,000
(84,373)
(186,903)
-
-
-
-
(41,273)
(43,639)
(32,558)
(40,291)
Net cash used in financing activities
(125,646)
(192,542)
(32,558)
(40,291)
NET (DECREASE)/INCREASE IN CASH HELD
NET CASH AT BEGINNING OF THE YEAR
NET CASH AT END OF THE YEAR
CASH COMPRISES:
Cash and cash equivalents
Bank overdrafts
6
15
(41,256)
29,899
(11,357)
12,021
(23,378)
(11,357)
36,502
(6,603)
29,899
36,685
(6,786)
29,899
(404)
404
-
-
-
-
(1,256)
1,660
404
404
-
404
These Statements of Cash Flows are to be read in conjunction with the accompanying notes.
Steamships Annual Report 2017 21
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2017 (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
29 March 2018 .
The Board of Directors has the power to amend the
financial statements after their issue.
(a) Basis of preparation
The consolidated financial statements of the
Group have been prepared in accordance with
International Financial Reporting Standards
(IFRS). The consolidated financial statements
have been prepared under the historical cost
convention as modified by certain financial assets
and liabilities at fair value through profit and loss,
and assets held for sale measured at fair value
less costs of disposal .
(i)
Standards, amendment and interpretations
effective in the year ended 31 December 2017
The following standards, amendments and
interpretations to existing standards became
applicable for the first time during the accounting
period beginning 1 January 2017.
•
•
•
Amendments to IAS 7 ‘Statement of Cash
Flows’ on disclosure initiative. 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. 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 .
Annual improvements 2014 – 2016 - IFRS
12. This amendment clarifies that the
disclosure requirements of IFRS 12 are
applicable to interests in entities classified as
held for sale except for summarised financial
information .
(ii) Standards, amendments and interpretations
issued but not yet effective for the year ended 31
December 2017 or adopted early
The following standards, amendments and
interpretations to existing standards have been
published and are mandatory for the entity’s
accounting periods beginning on or after 1
22 Steamships Annual Report 2017
January 2018 or later periods, but the entity has
not early adopted them:
•
•
•
Amendments to IFRS 2 ‘Share based
payments’ on clarifying how to account
for certain types of share-based payment
transactions (effective 1 January 2018).
This amendment clarifies the measurement
basis for cash-settled, share-based payments
and the accounting for modifications that
change an award from cash-settled to equity-
settled . It also introduces an exception to
the principles in IFRS 2 that will require
an award to be treated as if it was wholly
equity-settled, where an employer is obliged
to withhold an amount for the employee’s
tax obligation associated with a share-based
payment and pay that amount to the tax
authority.
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. The Group does
not expect IFRS 9 to have a significant impact
on current financial instrument classification
and measurement practice .
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
- identify the separate performance
obligations
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2017 (Amounts in Kina 000’s)
•
•
- 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.
Areas expected to be impacted by the change
in accounting standard include the Group’s
recognition of cargo shipments .
Amendments to IFRS 15 (effective 1 January
2018). These amendments comprise
clarifications of the guidance on identifying
performance obligations, accounting for
licenses 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 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. The Group does not expect
IFRS 16 to have a significant impact.
•
Amendments to IFRS 4, ‘Insurance contracts’
(effective 1 January 2018) regarding
implementation of IFRS 9. These amendments
introduce tw0 approaches: an overlay
approach and a deferral approach. The
amended standard will:
- give all companies that issue insurance
contracts the option to recognise in OCI,
rather than profit or loss, the volatility that
could arise when IFRS 9 is applied before
the new insurance contracts standard is
issued; and
- give companies whose activities are
predominantly connected with insurance
an optional temporary exemption from
applying IFRS 9 until 2021, in which case
they will continue to apply IAS 39.
•
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 and IAS 28 (effective
1 January 2018).
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 .
IFRS 17 ‘Insurance contracts” (effective 1
January 2021) replaces IFRS 4. IFRS 17 will
fundamentally change the accounting by
all entities that issue insurance contracts
and investment contacts with discretionary
participation features .
IFRIC 23, ‘Uncertainty over income tax
treatments’ (effective 1 January 2019) clarifies
how the recognition and measurement
requirements of IAS 12 ‘Income Taxes’ are
applied where there is uncertainty over
income tax positions . IFRIC 23 explains
how to recognise and measure deferred
and current income tax assets and liabilities
where there is uncertainty over a tax
treatment .
•
Annual improvements 2015 – 2017 makes
minor changes to IFRS 3, IFRS 11, IAS 12 and
IAS 23 (effective 1 January 2019).
There are no other standards that are not yet
effective and that would be expected to have a
material impact on the Group in the current or
future reporting periods and on foreseeable future
transactions .
(b) Foreign currency
The Company’s functional and presentation
currency is the Papua New Guinea Kina.
Transactions in foreign currencies have been
translated into the functional currency at rates
ruling at the date of the transaction . Amounts
payable to and by the Group in foreign currencies
have been translated to the functional currency
Steamships Annual Report 2017 23
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2017 (Amounts in Kina 000’s)
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 2017 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).
24 Steamships Annual Report 2017
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
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
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2017 (Amounts in Kina 000’s)
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
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
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.
Steamships Annual Report 2017 25
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2017 (Amounts in Kina 000’s)
(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 .
26 Steamships Annual Report 2017
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.
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
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2017 (Amounts in Kina 000’s)
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
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.
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 .
Steamships Annual Report 2017 27
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2017 (Amounts in Kina 000’s)
(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
28 Steamships Annual Report 2017
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 departures 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
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,
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2017 (Amounts in Kina 000’s)
assets are grouped at the lowest levels for which
there are separately identifiable cash flows (cash
generating units).
over the lease period so as to produce a constant
periodic rate of interest on the remaining balance
of the liability for each period.
(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 4.6% (2016 – 4.5%).
(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,
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
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%.
(iii) Deferred tax assets relating to carry forward
tax losses
The analysis of the recognition and recoverability
of the deferred tax assets relating to carry forward
tax losses is complex and judgmental and
Steamships Annual Report 2017 29
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2017 (Amounts in Kina 000’s)
estimating future taxable income is based on
assumptions that are affected by expected future
market or economic conditions .
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 2017, 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 K2,569,000 (2016: K3,044,000) 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:
2017
K’000
2016
K’000
Undrawn Facilities
194,000
126,000
30 Steamships Annual Report 2017
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2017 (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.
At 31 December 2017
Borrowings
Borrowings from minority shareholders
Borrowings from related parties
Trade and other payables
At 31 December 2016
Borrowings
Borrowings from minority shareholders
Borrowings from related parties
Trade and other payables
Less than
1 year
K’000
Between 1
& 2 years
K’000
Between 2
& 5 years
K’000
Over 5
years
K’000
(31,718)
(19,503)
(54,512)
(108,170)
(213,903)
(6,786)
(32,259)
(35,452)
(98,639)
(173,136)
(8,340)
(326,947)
-
-
-
-
-
-
(8,340)
(326,947)
-
-
-
-
-
(428,000)
-
-
-
(428,000)
-
-
-
-
-
-
-
-
-
-
Total
K’000
(367,005)
(19,503)
(54,512)
(108,170)
(549,190)
(434,786)
(32,259)
(35,452)
(98,639)
(601,136)
The Group does not hold derivative financial instruments.
All loan covenants associated with borrowing arrangements have been met .
Steamships Annual Report 2017 31
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2017 (Amounts in Kina 000’s)
(d) Capital risk management
(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 .
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
2017
K’000
2016
K’000
441,020
502,497
12,021
428,999
878,154
36,685
465,812
881,837
1,307,153
1,347,649
33%
35%
32 Steamships Annual Report 2017
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2017 (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
Consolidated
Parent Entity
2017
2016
2017
2016
161,378
544,309
-
135,448
597,253
-
705,687
732,701
-
-
13,051
13,051
-
-
31,691
31,691
* Other income (net)
15,244
19,766
2,828
2,726
* Other income principally represents a gain of K15.7M on sale of shares (2016: gain on sale of Coastwatchers Hotel of K14M).
(b) Expenses comprise:
Cost of sales
Staff costs (note 3c)
Depreciation and amortisation
Impairment of fixed assets
Impairment of other assets
Hotel & property development cost write off
Electricity and fuel
Other operating expenses
Total operating expense
(c) Staff costs:
Wages and salaries
Retirement benefit contributions
Accommodation and other benefits
165,616
142,266
99,817
12,261
1,445
6,742
50,546
166,083
644,776
122,091
6,028
14,147
142,266
143,240
148,611
106,715
2,276
-
5,574
50,787
154,591
611,794
122,658
6,380
19,573
148,611
Number of staff employed by the Group at year end:
Full Time
3,165
3,569
-
-
-
-
2,229
2,261
-
-
-
-
-
-
-
-
(198)
2,031
(456)
1,805
-
-
-
-
-
-
-
-
-
-
Steamships Annual Report 2017 33
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2017 (Amounts in Kina 000’s)
3. Operating results (continued)
Consolidated
Parent Entity
2017
2016
2017
2016
(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 property, plant & equipment
Impairment of other assets
Loss on sale of fixed assets
After crediting:
Gain on sale of property, plant and equipment
Net foreign exchange transaction gains
(e) Cost of financing – net:
Expense*
Income
Net finance costs
10
10
1,050
710
2,964
2,343
12,261
1,445
851
1,586
413
1,050
814
1,645
1,278
2,276
-
-
19,766
530
-
-
-
-
-
-
-
-
18,109
(4,640)
13,469
34,235
(12,248)
21,987
-
(72)
(72)
-
-
-
-
-
-
-
-
-
(72)
(72)
*The interest expense excludes capitalised interest of K1.4M (2016 - 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)
41,516
31,008
134t
84,210
31,008
272t
34 Steamships Annual Report 2017
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2017 (Amounts in Kina 000’s)
4.
Investments in subsidiaries, associates and joint ventures
Consolidated
Parent Entity
2017
2016
2017
2016
(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
Prior period (over)/under provided
-
38,287
28,909
67,196
3,296
4,229
7,525
-
171,537
171,537
35,813
30,632
66,445
-
36,626
208,163
-
36,626
208,163
3,886
1,979
5,865
-
-
-
-
-
-
Consolidated
Parent Entity
2017
2016
2017
2016
37,602
(2,220)
(2,761)
32,621
36,325
(2,210)
1,562
35,677
298
(23)
(70)
205
389
(64)
476
801
(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
Tax loss not recognised
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
Deferred tax asset
Deferred tax liability
21,063
-
6,445
-
15,814
(7,940)
(2,761)
32,621
10,364
30,565
(9,750)
(23,261)
7,918
30,250
(22,332)
7,918
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
4,176
(3,915)
9,805
(9,507)
14
-
-
-
(70)
205
-
-
-
268
268
268
-
268
27
-
-
-
476
801
-
-
-
245
245
245
-
245
The group has not recognised deferred tax asset amounting to K15.8m related to carried forward tax losses.
Steamships Annual Report 2017 35
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2017 (Amounts in Kina 000’s)
5.
Income tax (continued)
(d) The gross movement on the deferred tax account is as follows:
Consolidated
Provisions & accruals
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 (over)/under provided
Others
Tax payments made
At 31 December
6. Cash and cash equivalents
Cash and short term deposits
Beginning
Balance
Charge to
profit
Ending
Balance
9,987
32,799
(16,837)
(20,251)
5,698
377
(2,234)
7,087
(3,010)
2,220
10,364
30,565
(9,750)
(23,261)
7,918
245
245
23
23
268
268
Consolidated
Parent Entity
2017
2016
2017
2016
(716)
37,602
(2,761)
107
(32,825)
1,407
1,407
36,325
1,562
(634)
(39,376)
(716)
4
298
(70)
-
(317)
(85)
(604)
389
476
-
(256)
4
Consolidated
Parent Entity
2017
2016
2017
2016
12,021
12,021
36,685
36,685
-
-
404
404
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
36 Steamships Annual Report 2017
Consolidated
Parent Entity
2017
2016
2017
2016
102,209
(6,186)
96,023
65,632
161,655
96,927
(3,440)
93,487
41,335
134,822
-
-
-
435
435
-
-
-
407
407
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2017 (Amounts in Kina 000’s)
7. Trade and other receivables (continued)
Consolidated
Parent Entity
2017
2016
2017
2016
(i) Impaired trade receivables
As at 31 December 2017, trade receivables of K6.1M (2016: K3.4M) relating to trade debtors were considered impaired and were
provided for by management. The ageing of these receivables is as follows:
3 to 6 months
Over 6 months
628
5,558
6,186
Movement in the provision for impairment of trade receivables is as follows:
Opening balance
Impairments recognised during the year
Provision released
Total
3,440
2,964
(218)
6,186
762
2,678
3,440
6,082
1,645
(4,287)
3,440
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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 2017, trade receivables of K6M (2016: K4.9M) 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
1,152
4,874
6,026
928
3,924
4,852
-
-
-
-
-
-
The other classes within trade and other receivables do not contain impaired assets and are not past due. The maximum exposure
to credit risk at the reporting date is the fair value of each class of receivable mentioned above. The Group does not hold any
collateral as security in relation to these receivables.
(iii) Other receivables and prepayments
Other receivables generally arise from transactions outside the usual operating activities of the Group. Interest may be charged at
commercial rates where the terms of repayment exceed three months. Collateral is not normally obtained.
Prepayments relate to advance payments for expenses not yet incurred.
Steamships Annual Report 2017 37
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2017 (Amounts in Kina 000’s)
8.
Inventories
Raw materials
Finished goods
Provision for obsolescence
Consolidated
Parent Entity
2017
2016
2017
2016
17,175
32,980
(2,822)
47,333
10,024
33,326
(2,222)
41,128
-
-
-
-
-
-
-
-
Inventories recognised as an expense during the year ended 31 December 2017 and included in cost of sales and cost of
providing services amounted to K115M (2016: K90.6M). The provision for obsolescence of inventories during the year increased
by K0.6M (2016: by K1.1M decrease).
9. Loans to/(from) related companies
Non-Current
Colgate Palmolive (PNG) Limited
Wonye Limited
Morobe Terminals Limited
Labu Holdings Limited
Pacific Rumana Limited
Harbourside Development Limited
Croesus Re SPC Limited
Loans to subsidiaries
Loans from associates and joint ventures:
Harbourside Development Limited
Morobe Terminals Limited
Consort Express Lines Limited’s associates
Wonye Limited
Loans from subsidiaries
Consolidated
Parent Entity
2017
2016
2017
2016
500
-
-
-
31,905
33,679
7,707
73,791
-
73,791
(3,083)
(9,192)
(40,291)
(1,946)
(54,512)
-
500
275
60
100
36,800
33,115
-
70, 850
-
70,850
(1,111)
(3,150)
(31,191)
-
(35,452)
500
500
-
-
-
-
-
-
-
-
-
-
-
-
500
5,212
5,712
500
5,212
5,712
-
-
-
-
-
-
-
-
-
-
-
(218,274)
(200,404)
(54,512)
(35,452)
(218,274)
(200,404)
The 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%.
38 Steamships Annual Report 2017
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2017 (Amounts in Kina 000’s)
10. Property, plant & equipment
Consolidated
2017
Cost
Property
Ships
Plant and
Vehicles
Total
524,216
250,352
441,026
1,215,594
Accumulated depreciation (including impairment losses)
(156,643)
(113,254)
(317,570)
(587,467)
Net book value
367,573
137,098
123,456
628,127
Opening value
Additions
Disposals
Depreciation
Impairment
Closing value
2016
Cost
370,391
10,694
(3,176)
(10,336)
-
164,387
148,139
16,093
(6,486)
(26,829)
(10,067)
22,713
(3,336)
(41,866)
(2,194)
682,917
49,500
(12,998)
(79,031)
(12,261)
367,573
137,098
123,456
628,127
513,002
325,149
435,279
1,273,430
Accumulated depreciation (including impairment losses)
(142,611)
(160,762)
(287,140)
(590,513)
Net book value
Opening value
Additions
Disposals
Depreciation
Impairment
Transfers to investment properties
Closing value
Parent Entity
2017
Cost
Accumulated depreciation
Net book value
Opening value
Additions
Disposals
Depreciation
Closing value
370,391
164,387
148,139
682,917
393,606
24,734
-
(7,775)
-
(40,174)
370,391
73,755
(50,327)
23,428
24,550
583
-
(1,705)
23,428
169,319
26,118
(4,004)
(27,046)
-
-
168,671
44,477
(12,639)
(50,094)
(2,276)
-
731,596
95,329
(16,643)
(84,915)
(2,276)
(40,174)
164,387
148,139
682,917
-
-
-
-
-
-
-
-
5,689
(4,572)
1,117
79,444
(54,899)
24,545
1,384
25,934
338
(81)
(524)
1,117
921
(81)
(2,229)
24,545
Steamships Annual Report 2017 39
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2017 (Amounts in Kina 000’s)
10. Property, plant & equipment (continued)
Property
Ships
Plant and
Vehicles
Total
Parent Entity
2016
Cost
Accumulated depreciation
Net book value
Opening value
Additions
Transfers
Depreciation
Closing value
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
(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
2017
2016
2017
2016
Property (classified as investment properties in note 11)
Ships
Plant and vehicles
Total assets in the course of construction
53,270
-
15,483
68,753
45,502
1,239
16,300
63,041
-
-
-
-
-
-
-
-
The cost of additions in 2017 includes capitalised borrowing costs of K1.4M (2016: K1.7M) 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 K12.3M (2016: K2.3M) was recorded on ships and equipment, plant and vehicles.
There are no other further conditions that indicate impairment of property, plant and equipment as at 31 December 2017.
40 Steamships Annual Report 2017
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2017 (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
Disposals
Transfers from property, plant & equipment
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
2017
2016
2017
2016
516,759
(147,761)
368,998
385,974
4,599
(789)
-
(20,786)
368,998
521,381
(135,407)
385,974
341,359
27,693
(1,453)
40,174
(21,799)
385,974
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Consolidated
Parent Entity
2017
2016
2017
2016
120,145
130,562
(4,438)
(4,654)
(12,076)
(11,483)
-
-
-
-
-
-
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 2017 for a selected sample of representative properties
and combination of independent professional valuation and discounted value in use assessments for some of the hotel properties.
Included in properties are the following:
Investment properties
Other properties (note 10)
Total
NBV
Valuation Lower
Range Higher
368,998
367,573
736,571
803,779
800,674
1,604,453
1,005,093
1,001,211
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
Consolidated
Parent Entity
2017
2016
2017
2016
120,308
114,045
127,799
362,152
129,509
128,854
151,730
410,093
-
-
-
-
-
-
-
-
Steamships Annual Report 2017 41
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2017 (Amounts in Kina 000’s)
12. Intangible assets
Opening balance
Goodwill impairment during the year
Closing balance
Consolidated
Parent Entity
2017
2016
2017
2016
80,491
(489)
80,002
80,491
-
80,491
-
-
-
-
-
-
Goodwill is allocated to the Group’s cash-generating units (CGUs) identified according to operating segment. The goodwill balance
of K80M (2016: K80.5M) is attributable to various business acquisitions in the logistics and commercial segments including Laga
Industries (K3.6M), Pacific Towing (K67.4M) and New Britain Shipping (K9M). Goodwill of K0.5M in Consort Express Lines Limited
has been written off during the year. 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
2017
2016
2017
2016
38,589
67,410
2,171
108,170
44,980
53,447
212
98,639
-
-
-
-
-
-
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
2017
Total
2016
Total
18,006
6,821
(6,537)
18,290
6,250
12,040
18,290
4,747
-
22,753
6,821
21,740
13,714
(4,747)
(11,284)
(12,701)
-
-
-
-
18,290
6,250
12,040
18,290
22,753
11,510
11,243
22,753
A description of employee and dry dock provisions is disclosed in note 1p.
42 Steamships Annual Report 2017
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2017 (Amounts in Kina 000’s)
15. Borrowings
Current:
Bank overdrafts (secured)
Bank loans (secured)
Other loans (unsecured)
Non-current:
Bank loans (secured)
Total Borrowings
Consolidated
Parent Entity
2017
2016
2017
2016
23,378
8,340
19,503
51,221
335,287
335,287
386,508
6,786
-
32,259
39,045
428,000
428,000
467,045
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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 4.6% (2016: 4.5%). Bank overdrafts are interest-only with no agreed repayment schedule.
Bank loans are secured loans with varying 2 to 4 year terms. The effective interest rate on other loans is 7.83% (2016: 7.74%).
The fair value of borrowings approximates their carrying amounts. Borrowing terms, margins and credit risk factors approximate
currently obtainable levels for similar facilities.
16. Issued capital
Consolidated
Parent Entity
2017
2016
2017
2016
(a) Issued and paid up capital
Ordinary shares
24,200
24,200
24,200
24,200
(b) Number of shares
Number of shares (000’s)
Ordinary shares
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.
(c) Dividend
The Directors advise that a final dividend of 40 toea per share will be paid immediately after the Annual General Meeting on
8 June 2018. This brings the total dividend declared for the year to 110 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.
During the year the Company paid dividends totalling 105 toea per share which includes the final dividend of 2016 and totalled
K32,558,400.
Steamships Annual Report 2017 43
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2017 (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.
Consolidated
Parent Entity
2017
2016
2017
2016
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
- Subsidiaries, associates & joint ventures
Purchase of goods and services
- Associates & joint ventures
- Associated groups
- Shareholders of associated companies
Purchase of assets
- Associates & joint ventures
- Associated groups
Lease rental expense
- Other shareholders
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
Insurance claims received
- Affiliated party
44 Steamships Annual Report 2017
13,347
1,375
-
1,622
59
21,732
-
585
4,080
6,774
(801)
(21,986)
(47)
-
(1,064)
12,488
1,293
27
1,007
355
16,645
50
-
4,743
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
20
13,051
31,691
(29)
(23,477)
(9,370)
(794)
(465)
(2,733)
(2,462)
(1,100)
(1,795)
(8,715)
(23,482)
(9,077)
(1,058)
(1,764)
(3,348)
(29,058)
(11,233)
(19,503)
(22,933)
(9,809)
(12,002)
12,717
4,995
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(23,482)
(9,077)
-
(29,058)
(11,233)
-
-
-
-
-
-
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2017 (Amounts in Kina 000’s)
17. Related party disclosures (continued)
Consolidated
Parent Entity
2017
2016
2017
2016
All transactions with related parties are made on normal commercial terms and conditions.
Balances with related companies:
Consort associates (note 9)
Harbourside Development Limited (note 9)
Morobe Terminals Limited (note 9)
Consort shareholders (note 15)
Basilok Limited (note 15)
Croesus Re SPC Limited (note 15)
Wonye Limited (note 9)
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)
Morobe Terminals Limited (note 9)
Wonye Limited (note 9)
Croesus Re SPC Limited (note 9)
18. Reconciliation of cash flows
(a) Cash generated from operations
Profit for the year after tax
Depreciation and impairment
Dividend and interest income
Net loss/(gain) on sale of fixed assets
Share of profit of associates and joint ventures
Change in operating assets and liabilities
(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 income tax payable
(Decrease)/increase in deferred tax liability
(40,291)
(3,083)
(9,192)
(19,343)
(160)
-
(1,946)
500
33,679
-
31,905
-
-
-
7,707
(31,191)
(1,111)
(3,150)
(22,733)
(160)
(9,326)
-
500
33,115
-
36,800
100
60
275
-
-
-
-
-
-
-
-
500
-
5,212
-
-
-
-
-
-
-
-
-
-
-
-
500
-
5,212
-
-
-
-
-
Consolidated
Parent Entity
2017
2016
2017
2016
37,590
112,078
-
(735)
(7,525)
(26,846)
(6,205)
6,431
(10,966)
12,430
(7,379)
(2,858)
(3,986)
88,874
108,991
13,715
2,229
31,883
2,261
-
(13,051)
(31,691)
(19,766)
(5,865)
-
-
-
-
21,079
(120)
234
(7,961)
(22,494)
32,656
(2,123)
(2,444)
(869)
-
71
-
(680)
-
(182)
-
(1,030)
-
(246)
182
680
-
608
-
Net cash inflow from operating activities
102,029
191,061
1,233
2,647
Steamships Annual Report 2017 45
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2017 (Amounts in Kina 000’s)
18. Reconciliation of cash flows (continued)
(b) Net loan reconciliation
Net loans as at 31 December 2016
Borrowing from related parties
Repayments
Net loans as at 31 December 2017
19. Retirement benefit plans
Bank loans
Other loans
Total
(428,000)
-
84,373
(67,711)
(19,059)
12,755
(495,711)
(19,059)
97,128
(343,627)
(74,015)
(417,642)
The total cost of retirement benefits of the Group in 2017 was K6M (2016: K6.4M). 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.
46 Steamships Annual Report 2017
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2017 (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
Consort Express Lines Limited
Papua New Guinea
Kavieng Port Services Limited
Papua New Guinea
Kiunga Stevedoring Company Limited
Papua New Guinea
Lae Port Services Limited
Laga Industries Limited
Madang Port Services Limited
Papua New Guinea
Papua New Guinea
Papua New Guinea
New Britain Shipping Limited**
Papua New Guinea
Oro Port Services Limited
Pacific Towing (PNG) Limited
Papua New Guinea
Papua New Guinea
Pacific Rumana Mobile Investments Limited***
Papua New Guinea
Palm Stevedoring & Transport Limited
Papua New Guinea
Port Services PNG Limited
Steamships Limited***
Papua New Guinea
Papua New Guinea
Windward Apartments Limited
Papua New Guinea
Motukea United Limited
Papua New Guinea
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Equity
Holdings*
2017
Equity
Holdings*
2016
70.2
70.2
60
100
51
100
60
50
100
100
-
56.7
54
100
100
60
100
51
100
60
50
100
100
79.8
56.7
54
100
100
50.9
50.9
*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 31 December 2017, Steamships Trading
Company Limited still has control over this entity.
*** Pacific Rumana Mobile Investments Limited was amalgamated into Steamships Limited on 29 December 2017.
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 Limited in the
event of any recovery under a charter performance guarantee to enforce a proportional equity buy back. At 31 December 2017,
the performance guarantee obligations are being met.
Steamships Annual Report 2017 47
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2017 (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
2017
2016
2017
2016
35,813
4,709
(1,413)
(822)
-
38,287
20,607
5,551
(1,665)
(20)
11,340
35,813
-
-
-
-
-
-
-
-
-
-
-
-
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:
2017
Makerio Stevedoring Limited
Nikana Stevedoring Limited
Riback Stevedoring Limited
United Stevedoring Limited
Morobe Terminal Limited
2016
Makerio Stevedoring Limited
Nikana Stevedoring Limited
Riback Stevedoring Limited
United Stevedoring Limited
Morobe Terminal Limited
Ownerships
Interest
%
31.7
31.7
34.4
16.9
43.0
Ownerships
Interest
%
31.7
31.7
34.4
16.9
43.0
Assets
Liabilities
1,211
1,489
28,287
337
11,350
42,674
21
76
3,608
271
411
4,387
Assets
Liabilities
1,620
1,440
31,106
367
13,892
48,425
480
208
9,166
304
2,454
12,612
Carrying
Value
1,190
1,413
24,679
66
10,939
38,287
Carrying
Value
1,140
1,232
21,940
63
11,438
35,813
Revenue
Profit
722
489
10,924
4,099
1,008
17,242
50
181
2,738
3
324
3,296
Revenue
Profit
722
489
10,924
4,099
1,008
17,242
235
199
3,347
7
98
3,886
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.
48 Steamships Annual Report 2017
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2017 (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
2017
2016
2017
2016
30,632
6,041
(1,812)
(5,952)
-
28,909
15,851
2,827
(848)
-
12,802
30,632
23,823
-
-
-
12,760
36,583
20,051
-
-
-
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.
2017
Colgate Palmolive (PNG) Limited
Harbourside Development Limited
Pacific Rumana Limited
Viva No. 31 Limited
Wonye Limited
Assets
Liabilities
Ownership
Interest
%
50
50
50
50
50
15,715
91,213
3,863
11,180
26,200
8,592
88,627
1,069
7,534
13,440
Carrying
Value
7,123
2,586
2,794
3,646
12,760
Revenue
Profit
38,982
9,586
3,786
-
-
3,324
(232)
1,283
(104)
(42)
148,171
119,262
28,909
52,354
4,229
2016
Colgate Palmolive (PNG) Limited
Harbourside Development Limited
Pacific Rumana Limited
Viva No. 31 Limited
Wonye Limited
Assets
Liabilities
Ownership
Interest
%
50
50
50
50
50
17,366
94,682
3,761
10,810
15,262
9,567
91,864
299
7,060
2,460
Carrying
Value
7,799
2,818
3,462
3,750
12,803
Revenue
Profit
38,099
9,025
3,836
-
-
2,605
(1,651)
1,047
(22)
-
141,881
111,250
30,632
50,960
1,979
The Group’s share of the capital commitments of joint ventures at 31 December 2017 is K4M (2016: K13.6M).
There are no contingent liabilities arising from the Group’s interests in the joint ventures.
Steamships Annual Report 2017 49
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2017 (Amounts in Kina 000’s)
23. 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 2017 is as follows:
2017
External 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
147,650
227,408
-
-
5,201
10,124
3,324
(2,888)
10,560
-
(17,533)
43,047
59,478
905
(20,688)
39,696
324,548
1,383
(12,570)
47,772
(5,757)
3,296
(13,724)
(16,186)
6,081
3,257
11,995
3,796
(1,159)
-
4,679
3,520
705,687
4,640
(18,109)
99,817
62,686
7,525
(32,621)
37,590
Segment assets
Segment liabilities
Net assets
110,127
733,408
410,348
215,503
1,469,386
(77,990)
(300,991)
(226,179)
13,928
(591,233)
32,137
432,417
184,168
229,431
878,153
Total assets includes investment in joint ventures
and associates
Capital expenditure
7,123
5,081
21,786
25,775
38,287
22,084
-
1,158
67,196
54,090
50 Steamships Annual Report 2017
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2017 (Amounts in Kina 000’s)
23. Segmental reporting (continued)
Commercial
Hotels &
Property
Logistics
Finance &
Investment
(and elimination)
Total
2016
External revenue
Interest revenue
Interest expense
115,823
253,170
355,992
-
-
-
-
-
-
Depreciation and amortisation
4,936
45,076
53,979
7,716
12,248
(34,235)
2,724
732,701
12,248
(34,235)
106,715
Segment results
Share of joint ventures and associates profit
Total tax expense
Profit from continuing operations
8,758
2,605
(3,018)
8,345
88,109
(626)
(27,923)
59,560
24,210
3,886
(11,984)
16,112
(2,391)
118,686
-
7,248
4,857
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)
27,113
403,501
212,498
27,159
238,725
(654,871)
881,837
Total assets includes investment in joint ventures
and associates
7,799
22,833
35,813
-
66,445
Capital expenditure
5,798
53,517
43,249
6,914
109,478
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.
Steamships Annual Report 2017 51
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2017 (Amounts in Kina 000’s)
24. Contingent assets and liabilities
(a) Contingent Assets
The Company received a salaries and wages tax default assessment of K15.2M, including penalties and interest, from the Internal
Revenue Commission of PNG (“IRC”) for the periods from 2006 to 2016. The Company has paid the assessment and lodged the
appropriate objections as required by the IRC. Although management are confident of a successful outcome, the application of
IAS37 requires such recovery to be considered as a contingent asset.
(a) 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.
25. Commitments
(a) Capital commitments
Contracts outstanding for capital expenditure:
- less than 12 months
- 1-5 years
(b) Lease commitments: Group as lessee
The Group does not have any non-cancellable operating leases.
26. Subsequent events
Consolidated
Parent Entity
2017
2016
2017
2016
7,194
60,758
67,952
18,621
31,303
49,924
-
-
-
-
-
-
In March 2018 the Directors declared a final dividend of 40 toea per share payable immediately after the Annual General Meeting
on 8 June 2018 amounting to K12.4M.
52 Steamships Annual Report 2017
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
statements of financial position as at 31 December 2017, and 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 which
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 2017 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 2017, 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 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 other services for the Group in the areas of taxation and other non-audit services. The provision of these
other services has 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.
PricewaterhouseCoopers
PwC Haus, Level 6, Harbour City, Konedobu. PO Box 484, PORT MORESBY, PAPUA NEW GUINEA
T: (675) 321 1500 / (675) 305 3100, F: (675) 321 1428, www.pwc.com.pg
Steamships Annual Report 2017 53
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 K4.5 million, which
represents 5% of the Group’s
profit before tax after adding back
certain non-recurring items .
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 Group profit before
tax because in our view, it is
the metric against which the
performance 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
•
Recovery of deferred tax assets
•
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.
54 Steamships Annual Report 2017
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 judgment, 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 values of the ships .
Included within property, plant and equipment are ships
with an aggregate net book value of K137.1 million as at
31 December 2017 after an impairment charge of K10.1
million recognised during the year.
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
shipping throughout the country.
We considered this a key audit matter because economic
conditions are a potential indicator of impairment in the
value of the ships. The Group has assessed impairment
by reference to estimated sales values of the ships. The
impairment assessment is sensitive to changes in key
assumptions about the estimated sales values of the ships .
The sales values have been determined by reference to
external valuations of the fleet which contain 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 evaluated the competency, qualifications and
objectivity of the experts engaged by the Group to provide
the valuations of the ships .
We discussed the valuation methodologies and assumptions
with the experts. This included understanding and
evaluating the impact of the dry docking schedules on the
determined values .
We tested, on a sample basis, the accuracy and relevance
of the input data provided by the Group to the experts.
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 2017 and subsequent to
the end of the year with the most recent valuations 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 .
Steamships Annual Report 2017 55
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 K80.0 million at 31
December 2017 after an impairment charge of K0.5
million recognised during the year. 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 2017 and has recognised an
impairment charge of K0.5 million during the year related
to the Consort Express Lines cash generating unit .
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.
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 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 .
Recovery of deferred tax assets
(Refer to note 5(c) of the financial statements)
Of total carried forward tax losses of K46.4 million at 31
December 2017 the Group has recognised a deferred tax
asset relating to tax losses of K30.6 million.
Accounting standards require deferred tax assets to be
recognised only to the extent that it is probable that
sufficient future taxable profits will be generated in order for
the benefits of the deferred tax assets to be realised. These
benefits are realised by reducing tax payable on future
taxable profits.
We identified the recoverability of deferred tax assets as a
key audit matter due to the judgement behind preparing
forecasts to demonstrate the future utilisation of these
losses in accordance with the requirements of accounting
standards .
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 .
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 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 .
We assessed the factors that led to the tax losses in previous
years.
We examined the ability to carry forward the tax losses and
the period over which the losses can be utilised against
future taxable profits prior to expiry by reference to PNG
taxation law .
We compared the forecast taxable profits 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 .
We benchmarked the assumptions used around revenue
and cost inflation with external forecasts.
56 Steamships Annual Report 2017
INDEPENDENT AUDITOR’S REPORT
to the Shareholders of Steamships Trading Company Limited
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.
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 ISAs 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 judgment and maintain
professional skepticism 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.
Steamships Annual Report 2017 57
INDEPENDENT AUDITOR’S REPORT
to the Shareholders of Steamships Trading Company Limited
•
•
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 .
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities
within the Group to express an opinion on the financial statements. 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 2017:
• 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
29 March 2018
58 Steamships Annual Report 2017
DIRECTORS’ REPORT
Steamships Trading Company Limited Year ended 31 December 2017
Steamships Trading Company Limited and Subsidiary Companies
The Directors submit their Annual Report for the year ended 31 December 2017 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 K41,516,000 (2016: K84,210,000).
Dividend
The Directors advise that a final dividend of 40 toea per share will be paid immediately after the Annual General Meeting on
08th June 2018. This brings the total dividend declared for the year to 110 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.
Steamships Annual Report 2017 59
DIRECTORS’ REPORT
Steamships Trading Company Limited Year ended 31 December 2017
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 28 February 2015
Managing Director from 1 January 2013 to 12 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 (Australia) Pty Limited.
P. Aitsi MBE
Director since 17 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 and President of Chamber of Mines and Petroleum. He
was previously the Chairman of Telikom PNG Limited and Independent Public Business Corporation (IPBC). Mr Aopi is a
Director of Oil Search Limited 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 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 a Director of Pegasus Print Group Pty Ltd, Fasteners & More
Pty Ltd, Sonway Asia Ltd, Chemica Ltd, Sig No.1 Ltd, Glock No. 1 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%
60 Steamships Annual Report 2017
DIRECTORS’ REPORT
Steamships Trading Company Limited Year ended 31 December 2017
D.H. Cox OL, OBE
Managing Director 2004 to 2012
Member of the Audit Committee
Member of the Strategic Planning Committee
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 Asia-Pacific business environment. He is also a Director of Charles Parsons (Holdings) Pty Ltd, Australia
Pacific Technical College, Croesus Re SPC Ltd and holds a MBA in International Hospitality and BSc (Hons) in Accounting
& Business Management.
G.J. Dunlop
Chairman of the Audit 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, Croesus Re SPC Ltd and Mainland Holdings Ltd.
Lady W.T. Kamit CBE
Member of the Audit 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 (retired 14.11.2017), South Pacific Post Ltd and Chairman of
ANZ Banking Group (PNG) Ltd.
P.W. Langslow
Managing Director from 12 January 2015
Mr Langslow joined the Swire group in September 1984. Prior to his present appointment, he spent 29 years with Cathay Pacific
Airways where he held a number of country and regional management roles in India, Italy, Canada and Taiwan, then various head
office department head roles responsible for inflight services, worldwide airports and cargo services. He is a director of John
Swire & Sons (PNG) Ltd and various Steamships Trading Company subsidiaries, joint ventures and associate companies.
He is a member of the PNG Institute of National Affairs Council and sits on the Salvation Army’s PNG advisory board.
M.R. Scantlebury
Finance Director & Company Secretary from 24 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, Croesus Ltd and various Steamships Trading Company subsidiaries, joint ventures
and associated companies .
B.N. Swire
Director from 1 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 7 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.
Steamships Annual Report 2017 61
DIRECTORS’ REPORT
Steamships Trading Company Limited Year ended 31 December 2017
Remuneration of Directors
Directors remuneration received or receivable from the Company as directors during the year, is as follows:
P. Aitsi,
G. Aopi
M.R. Bromley
D.H Cox
G.L Cundle (Chairman)
G.J. Dunlop
W.T. Kamit
B.N. Swire
J.H Woodrow
P.W. Langslow*
M.R. Scantlebury*
2017
K’000
124
124
223
223
223
247
135
124
124
-
-
1,547
2016
K’000
124
124
223
213
223
247
135
124
124
-
-
1,537
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
2017
No.
2016
No.
Remuneration
K’000
2017
No.
2016
No.
Remuneration
K’000
2017
No.
2016
No.
100-110
110-120
120-130
130-140
140-150
150-160
160-170
170-180
180-190
190-200
200-210
210-220
220-230
230-240
240-250
250-260
260-270
270-280
280-290
290-300
300-310
310-320
330-340
340-350
350-360
7
6
4
4
3
1
2
1
2
5
1
2
-
-
1
3
2
3
2
1
2
2
2
3
4
10
4
10
2
4
1
5
-
-
-
5
2
2
1
4
2
1
2
2
4
3
1
6
3
-
360-370
370-380
380-390
400-410
410-420
420-430
430-440
440-450
450-460
460-470
470-480
480-490
500-510
510-520
520-530
540-550
550-560
560-570
570-580
580-590
590-600
600-610
610-620
620-630
630-640
1
2
2
2
1
1
2
1
1
-
1
2
1
2
1
-
1
2
1
1
-
1
1
1
3
2
3
-
1
4
-
-
1
1
1
-
-
1
1
1
3
2
1
2
1
1
1
-
-
1
640-650
650-660
670-680
680-690
730-740
740-750
750-760
780-790
790-800
800-810
830-840
870-880
890-900
910-920
920-930
970-980
990-1000
1,000-1,010
1,010-1,020
1,050-1,060
1,070-1,080
1,490-1,500
2,270-2,280
2,340-2,350
2,520-2,530
-
-
1
2
1
2
2
1
-
1
1
1
-
2
-
-
2
1
2
1
-
-
1
-
1
2
1
-
1
-
2
2
-
1
2
-
-
2
-
1
1
-
-
-
-
1
1
-
1
-
For and on behalf of the Board:
Port Moresby
29 March 2018
G.L. Cundle
Chairman
P.W. Langslow
Managing Director
62 Steamships Annual Report 2017
STOCK EXCHANGE INFORMATION
Steamships Trading Company Limited Year ended 31 December 2017
Shares are listed on the Australian Securities Exchange and the Port Moresby Stock Exchange.
All shares carry equal voting rights.
Shareholdings
At 28 February 2018, there were 373 shareholders.
270 Holding
Holding
75
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 20.
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
Hylec Investments Pty Ltd
Citicorp Nominees Pty Limited
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
31,361
27,192
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
0.09
0.09
0.07
0.07
0.06
0.05
0.04
0.03
0.03
0.03
0.03
0.03
0.03
0.02
30,717,785
99.06
Applicable Legislation
The Company is incorporated in Papua New Guinea and is not generally subject to Australian Corporation 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 .
Steamships Annual Report 2017 63
64 Steamships Annual Report 2017
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