ANNUAL REPORT
2018
Brief Profile of Steamships Group . . . . . . . . . . . . . 2
Financial Highlights . . . . . . . . . . . . . . . . . . . . 4
Chairman’s Report . . . . . . . . . . . . . . . . . . . . . 6
Directors’ Review . . . . . . . . . . . . . . . . . . . . . 8
Review of Operations - LOGISTICS . . . . . . . . . . . 10
Consort Express Lines . . . . . . . . . . . . . . . 10
Pacific Towing . . . . . . . . . . . . . . . . . . . 12
Joint Venture Port Services . . . . . . . . . . . . . 13
East West Transport . . . . . . . . . . . . . . . . 14
Review of Operations - PROPERTY . . . . . . . . . . . 15
Coral Sea Hotels . . . . . . . . . . . . . . . . . . 15
Pacific Palms Property . . . . . . . . . . . . . . . 16
Sustainability . . . . . . . . . . . . . . . . . . . . . . . 18
Corporate Governance . . . . . . . . . . . . . . . . . . 19
Financial Section . . . . . . . . . . . . . . . . . . . . . 20
Statements of Comprehensive Income . . . . . . . 20
Statement of Changes in Equity . . . . . . . . . . 21
Statements of Financial Position . . . . . . . . . . 22
Statements of Cash Flows . . . . . . . . . . . . . 23
Notes to the Financial Statements . . . . . . . . . 24
Independent Auditor’s Report . . . . . . . . . . . 58
Directors’ Report . . . . . . . . . . . . . . . . . . 64
Stock Exchange Information . . . . . . . . . . . . 68
Company Directory . . . . . . . . . . . . . . . . . . . IBC
CONTENTS
Steamships Annual Report 2018 1
BRIEF PROFILE OF THE STEAMSHIPS GROUP
Steamships Trading Company (Steamships) is a committed investor in Papua New Guinea
and celebrated its 100 year anniversary 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 2,600 PNG citizens and non-
citizens in diverse divisions grouped under the operating
categories of Logistics, Property and Commercial &
Investments.
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 2018
BRIEF PROFILE OF STEAMSHIPS GROUP
STEAMSHIPS’ ORGANISATIONAL STRUCTURE
STEAMSHIPS TRADING COMPANY
LOGISTICS
PROPERTY
COMMERCIAL &
INVESTMENTS
Consort Express
Lines
Pacific
Towing
EastWest
Transport
Port
Services
Pacific Palms
Property
Coral Sea
Hotels
Colgate
Palmolive JV
X5 Associate Port
Services Co’s
JV Port Services
(x9 JV LO Entities)
Harbourside
Development JV
Croesus
(x3 entities)
Pacific
Rumana JV
Wonye JV
Viva No 31 JV
Steamships Annual Report 2018 3
FINANCIAL HIGHLIGHTS
FINANCIAL HIGHLIGHTS
2018 FINANCIAL HIGHLIGHTS (including discontinued operations)
2018
K’000
2017
K’000
Change
%
Revenue
Profit attributable to shareholders
Cash generated from operations
Net cash inflow/(outflow) before financing
Shareholders’ funds
External Borrowings
Earnings per share (toea)
Dividends per share (toea)
Shareholders’ funds per share (kina)
Underlying profit attributable to shareholders
Underlying earnings per share (toea)
Gearing ratio
Interest cover
Dividend cover
627,108
69,529
116,682
278,817
920,305
373,579
705,687
41,516
102,029
84,390
841,964
441,020
224
165
29.68
43,304
140
134
110
27.15
61,775
199
16%
33.1%
9.0 5.5
2.6 1.3
-11%
67%
14%
230%
9%
-14%
67%
50%
9%
-30%
-30%
-14%
65%
107%
4 Steamships Annual Report 2018
FINANCIAL HIGHLIGHTS
SUMMARY OF PAST PEFORMANCE
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
2018
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
-
-
(45,272)
51,288
986,310 930,934 941,708 773,535 732,701
495,976 789,918 920,357
79,747 134,789 136,042 118,686
265,574
120,602 180,834 233,967
5,865
14,188
3,843 3,062
9,697
13,859
11,416
16,732
(37,710) (35,677)
(81,414) (14,042)
(67,727)
(53,935)
(34,637)
(4,664)
(2,415)
(20,648) 38,609
(21,838)
(21,870)
(6,137)
84,210
98,979
96,560 116,445 158,261 177,700 114,011
(38,487)
(11,490)
88,655
705,687 627,108
62,686 112,493
7,525
5,628
(32,621) (54,420)
5,828
69,529
3,926
41,516
-
-
(31,008)
85,437
(1,061)
-
(58,916)
98,284
-
-
-
(8,994)
(88,373) (57,365)
47,652
89,327
-
-
- 2,206
(43,411)
45,244
(48,062) (40,291)
43,919
53,123
-
-
- -
-
-
(32,558) (26,357)
43,172
8,958
Underlying profit attributable to shareholders
(adjusted for significant items)
85,120 113,597 153,566 156,213 128,367 108,808
80,651
71,721
61,775
43,304
BALANCE SHEET
SHARE CAPITAL & RESERVES
Issued Capital
Retained Earnings
Shareholders’ funds
Non-Controlling Interests
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
652,978 689,777 711,764 764,887 808,806 817,764 896,105
353,883 428,157 554,349
378,083 452,357 578,549 677,178 713,977 735,964 789,087 833,006 841,964 920,305
24,200 24,200
24,200
24,200
24,200
43,854
19,723
421,937 515,208 653,914 761,500 736,884 766,737 836,602 881,837 878,154 940,028
30,773 47,515
48,831 36,190
62,851
84,322
75,365
22,907
664,196 786,510 938,709 1,023,861 1,066,393 1,115,123 1,072,955 1,068,892 997,125 890,576
28,445
15,416
65,276
17,939
38,687
1,683
-
9,282
7,305
-
76,433
17,183
17,183
17,183
17,183
411,920 352,549 366,479 400,480 284,200 294,800 470,810
203,480 294,203 299,634
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 1,504,778
33,193 36,458
33,521 36,914
80,491 80,491
67,196
30,250
80,002
66,445
36,680
80,491
31,471
21,081
93,617
Current Liabilities
Non-Current Liabilities
TOTAL LIABILITIES
236,847 273,055 283,445
370,396 230,390 190,621 541,292 184,646 221,560 352,541
359,755 597,837 671,449 249,404 470,225 369,659 212,209
251,319 334,331 346,612
488,166 607,386 630,057 730,151 828,227 862,070 790,696 654,871 591,219 564,750
NET ASSETS
421,937 515,208 653,914 761,500 736,884 766,737 836,602 881,837 878,154 940,028
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 %
89.7%
44.0%
16.06
14.7%
25.7%
25.1%
70.1%
38.3%
20.53
17.2%
27.4%
26.5%
89.1%
44.4%
13.05
19.5%
25.5%
22.5%
0.86 1.08 1.06 1.11 1.53 1.92
95.2%
47.8%
22.13
9.4%
12.0%
14.8%
140
286
351
51.0%
72.6%
39.2%
24.00
18.0%
26.2%
23.1%
146 100 190 285
311 376 510 573
275 366 495 504
50.3%
89.7%
46.5%
20.75
12.2%
16.0%
18.0%
185
368
414
41.8%
53.1%
73.4%
62.1%
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
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%
1.15
39.7%
16%
27.85
11.1%
7.6%
4.7%
165
224
140
62.1%
Steamships Annual Report 2018 5
CHAIRMAN’S REPORT
Steamships celebrated 100 years in PNG since our incorporation in 1918. There was much to
be proud of in 2018 as Port Moresby successfully hosted the APEC Leader’s Summit, as well
as numerous related events leading up to the summit itself, and issued its first USD 500million
sovereign bond which was well oversubscribed. However, 2018 was another challenging year
for the economy and few business sectors, outside of resource extraction, were unaffected by
the continuing weakness in demand. The country, economy and resource sector were also
rocked by an earthquake affecting the Highlands and Western Province early in the year, but
all have since recovered well.
The lack of foreign currency continued to limit business
activity and the Kina softened against the US Dollar as a
result. Fortunately, foreign currency flows into PNG have
improved recently and the backlog for currency orders have
reduced. Government expenditure remained constrained
by the ongoing national budget deficit and focus on APEC
related expenditure. The recent report from the World
Bank (January 2019) and the ratings upgrade to B2 stable
from Moody’s in February 2019 point to a more promising
future. However, much of the renewed optimism relies on
the launch of the long awaited resource extraction projects
at Wafi Golpu, Papua LNG and related extension to the
existing PNG LNG infrastructure which will bring a much
needed boost to the economy.
Other infrastructure investments, particularly road, port
and airport facilities, much of which is supported by the
Asian Development Bank are also most welcome as this
infrastructure is much needed if the Governments’ drive to
promote agriculture and tourism is to succeed. Steamships
looks forward to being at the forefront of opportunities that
these investments will bring.
Notwithstanding the pro-business and foreign investment
rhetoric of Government the private sector is alarmed at
the breadth and extent of restrictions contained in the
draft Foreign Investment Review Authority Bill recently
introduced. It is hoped that sensible dialogue will result in
appropriate revision and that the final legislation will attract
and promote foreign and private sector investment whilst
providing a framework to allow local small enterprises to be
created and thrive.
The on-going national budget deficit creates short term
pressure for the economy, which, combined with uncertainty
arising from the proposed legislation on foreign businesses
and the current lacklustre investment, will likely see another
difficult year for business in 2019, although there is broad
cautious optimism for an improved economic environment
later in the year.
The most significant event of the year was the sale of Laga
Industries in July to Paradise Foods, Laga being the core
business in the Group’s commercial division, as a result of
a decision to focus on the property and logistics activities
of the Group. Although a successful transaction, it was sad
to bid farewell to our friends and colleagues at Laga but
we know that the strong culture and ambition of Paradise
will take the company to greater heights. The commercial
division continues with our joint venture with Colgate
Palmolive that continues to benefit from the growing
demand for high quality consumer household and personal
care products in the range.
Also significant but less satisfactory, the Groups’ joint
venture port services businesses suffered the loss of the
international ports concessions in Port Moresby and Lae
early in the year when PNG Ports Corporation awarded a 25
year concession to a new operator. Despite costs associated
with a large number of redundancies and impairment on
sale of equipment, the division has recovered well and is
operating in six regional ports, delivering returns to our
partners in those ports and with exciting growth plans.
Coastal shipping suffered from the continuing economic
weakness, Consort Express Lines experienced a highly
competitive coastal liner and projects shipping market.
Disappointingly, fleet reliability and schedule integrity
fell short of expectations this year. Charter vessels were
deployed from overseas to meet the needs of customers.
New systems and expertise introduced in 2018 positions
the business for an improved performance in 2019. Whilst
investment in the resource sector was relatively weak, the
market is expected to recover in the medium term which
bodes better for projects work.
Pacific Towing enjoyed a fruitful year of salvage and
emergency tows to supplement its core harbour towage
work. The ancillary diving and life raft servicing activities
also made a good contribution
6 Steamships Annual Report 2018
CHAIRMAN’S REPORT
Steamships Annual Report 2018 7
East West Transport performed satisfactorily. The Company
remains committed to the logistics sector and its customers.
in strategic
Pacific Palms Property’s performance improved year on
year reflecting a focus on tenant management and higher
occupancies. PPP continues to maintain high quality
investments
locations. There remains an
oversupply in all sectors as demand remains soft, with
both rents and occupancy levels under pressure. Market
conditions have led to a cautious approach to new
development in recent years but many exciting prospects
are now in the design phase.
Coral Sea Hotels’ performance stabilised in 2018 and the
Company played a major role in the APEC Leaders summit
but failed to benefit as hoped from the other APEC events
throughout the year. The relatively low number of visitor
arrivals and new capacity in the Port Moresby market poses
a challenge to the division in 2019. Investment is being
maintained in upgrading product and service standards
to better attract and retain customers in the increasingly
competitive market.
Steamships is confident in the medium term prospects
for the PNG economy, whilst remaining cautious and
disciplined in facing the short term challenges. Beyond our
centenary celebrations, Steamships aspires 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 2019
DIRECTORS’ REVIEW
2018 was a year of exceptional events. The country was rocked by a devastating earthquake early
in the year, but successfully hosted world leaders at APEC 2018 and launched its first sovereign
bond during the second half. The company saw the unfortunate closure of its international
Port Services business after award of terminal concessions to a foreign operator, but successfully
divested Laga Industries. The performance of the group reflects these exceptional events,
revenues in the first half were negatively impacted by the earthquake, but were boosted
in the second half of the year due to APEC related activity. As a result of the business sales
and closures full year underlying profit was reduced and large exceptionals were recorded in
the accounts.
The underlying profit shows the impact of a continuation of
the difficult economic conditions experienced over the past
few years. The moderate increases in some key commodity
prices earlier in the year did not have a noticeable positive
impact on the wider economy. Furthermore, the ongoing
shortage of foreign currency in PNG has suppressed
economic activity. The forex situation does appear to be
alleviating, helped somewhat by the USD bond issue.
Although there was a modest boost to the Port Moresby
economy from the APEC Leaders’ summit, the growth in
hotel and property capacity has increased competitive
pressure in an otherwise weak demand environment.
Steamships’ sales revenue increased 0.5% to K561 million
against last year’s K558 million, on a continuing basis, after
the sale of Laga Industries and the loss of the stevedoring
businesses in Port Moresby and Lae.
(excluding
Depreciation
impairments) against K94.6 million in 2017, and net interest
in 2018 was K83 million
on borrowings (excluding capitalised interest) was K10.3
million against K13.5 million in 2017. Capital expenditure
for the year was K56.1 million (with capitalised interest of
K1.7 million) against K54.1 million (with capitalised interest
of K1.4 million) in 2017 reflecting a continuation of the
cautious investment programme in the current economic
climate. The group’s net operating cash flow generation
improved 14.3% to K116.7 million against K102 million in
2017. The cash balance at year end is K193.5m.
A final dividend of 120 toea per share has been proposed
and will be paid following approval at the company’s
annual general meeting on the 7th of June 2019, subject
to Steamships’ ability to secure foreign exchange for non
PNG shareholders. This brings the total dividend for the
year to 165 toea per share (2017 = 110 toea per share).
The dividend is unfranked and there is no conduit foreign
income.
2018
K000’s
2017
K000’s
Change
Net Profit attributable to shareholders
69,529
41,516
67.5%
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 Laga Industries
Loss on Disposal of Vessels
Gain on Sale of Properties
Salvage Profit
Total impact of significant items
-
7,854
-
-
21,469
1,498
(48,584)
687
(984)
(8,165)
(26,225)
(12,541)
8,306
1,012
10,640
11,108
5,965
(1,586)
814
-
(3,459)
20,258
Underlying profit attributable to shareholders
43,304
61,775
-29.9%
8 Steamships Annual Report 2018
Significant items
As disclosed at the half year, the company sold its 100%
shareholding in Laga Industries Ltd in July 2018 and
recognised a gain on the sale.
Also as initially disclosed at the half year, the cessation of
operations of the joint venture stevedoring companies in
Port Moresby and Lae has resulted in a further impairment
of assets at year end as the residual fixed assets in these
companies have now been sold. In addition, 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. An
impairment of K7.9m (net) has been recognised for all the
above.
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 tax
liability. Management have re-assesed the recoverability of
tax losses at 31 December 2018 in light of current trading
conditions and determined that it is prudent that the tax
loss is no longer carried forward as a deferred tax asset,
notwithstanding management’s efforts to utilise value for
these tax losses in the future.
Pacific Towing successfully completed numerous salvage
operations in 2018. Such operations are unpredictable
and as such they are accounted for as significant items as
distinct from the on-going operations, the results of which
are described below.
Logistics
The Joint Venture Port Services businesses had a steady
performance in 2018, notwithstanding the loss of Port
Moresby and Lae operations on the award by the PNG
International Terminal Operator
Government of
concession to a foreign enterprise early in the year. JVPS
continues to enjoy strong business in ports outside these
centres and is optimistic of continuing to provide high
quality services to its customers in regional locations.
the
East West transport continues to grow profitably across the
country due to a strong customer and fleet reliability focus.
integrity
Consort Express Lines experienced a highly competitive
coastal liner and projects shipping market. Disappointingly,
fleet reliability and schedule
fell short of
expectations this year. Charter vessels were deployed from
overseas to meet the needs of customers. New systems
and expertise introduced in 2018 positions Consort for an
improved performance in 2019. Whilst investment in the
resource sector was relatively weak, the market is expected
to recover in the medium term which bodes better for
projects work.
DIRECTORS’ REVIEW
raft activity, were steady. The company was engaged in a
number of successful salvage operations in 2018.
Property & Hotels
Pacific Palms Property experienced a reduction in yields in
2018 but an increase in occupancy delivered a profit in line
with expectations. Numerous projects were completed in
the year. The Harbourside Development in Port Moresby
reached full occupancy and construction of the second
phase residential, commercial and retail development will
commence shortly.
Coral Sea Hotels did not experience the anticipated boost
from the APEC related events held through 2018 although
it performed well during the APEC Leaders’ summit. The
increase in competitive supply of hotel rooms in Port
Moresby may prove challenging for the industry to absorb
until growth returns for business and tourist arrivals.
Nevertheless, CSH is committed to remain competitive
through a sustained focus on investment in the training and
development of its staff as well as the quality of its product.
Commercial and Investments
Laga Industries generated satisfactory sales growth in 2018
and was successfully divested in July 2018.
Colgate-Palmolive, (PNG) Limited a PNG incorporated joint
venture, saw volume and sales revenue growth across both
the Oral Care & Home Care categories, however Personal
Care, whilst delivering sales revenue growth, suffered some
volume decline as a result of increased tariffs pushing prices
up. Overall margin for the business improved and costs were
prudently managed to finish below prior year and budget.
During the year the Company acquired the Croesus group
of companies. This group has been providing insurance
services to Steamships for over a decade. Although the
Croesus group is no longer the provider of primary insurance
cover since 2016, the acquisition allows Steamships to
better manage the run-off of historic remaining claims.
Trading Outlook
2019 is expected to be another challenging year for the
PNG economy. With APEC behind us, the Government will
be focused on reducing the fiscal deficit and alleviating
the foreign currency shortage. The recently introduced
requires
Investment Review Authority bill
Foreign
constructive dialogue between all stakeholders to achieve
the aim of promoting local business development without
inadvertently destabilising the economy and discouraging
foreign investment.
The resource extraction sector is expected to expand in
2019. The recently signed MoU’s for both the Papua LNG
(natural gas) and Wafi Golpu (copper) projects should
progress to binding agreements and subsequent significant
investment.
Pacific Towing experienced a satisfactory year in its principal
harbour towage work across ports in PNG. It has relocated
its main base to the new Motukea port in Port Moresby.
Other activities, being non-harbour towage, diving and life
We do not dwell in the past in recognising our centenary
year in 2018, rather we remain firmly focused on the future
and our commitment to the development of the country and
people of PNG and the exciting opportunities that lie ahead.
Steamships Annual Report 2018 9
REVIEW OF OPERATIONS - LOGISTICS
CONSORT EXPRESS LINES
Consort operates a fleet of 13 coastal vessels (4 geared,
Consort operates a fleet of 13 coastal vessels (4 geared,
multi-purpose deep-water vessels and 9 shallow
multi-purpose deep-water vessels and 9 shallow
water landing craft and bulk carriers). All are PNG
water landing craft and bulk carriers). All are PNG
flagged and manned and all safety and technical
flagged and manned and all safety and technical
specifications are maintained in accordance with
specifications are maintained in accordance with
Lloyds Registry international standards.
Lloyds Registry international standards.
LINER SERVICES
LINER SERVICES
Consort connects 17 ports around PNG. The
Consort connects 17 ports around PNG. The
Company has scheduled services to the North Coast,
Company has scheduled services to the North Coast,
South Coast, New Guinea Islands, Bougainville
South Coast, New Guinea Islands, Bougainville
and Western Province. Consort proudly serves the
and Western Province. Consort proudly serves the
people of PNG by providing an important supply
people of PNG by providing an important supply
link to many of the communities on its routes.
link to many of the communities on its routes.
The Company carries a range of cargoes including
The Company carries a range of cargoes including
containerised, break-bulk, reefer, LCL and project
containerised, break-bulk, reefer, LCL and project
cargo. Consort transports cargo for a diverse customer
cargo. Consort transports cargo for a diverse customer
base from domestic manufacturers and wholesalers
base from domestic manufacturers and wholesalers
to international liner carriers transhipping cargos to
to international liner carriers transhipping cargos to
outports.
outports.
In addition to owning and operating ships, Consort
In addition to owning and operating ships, Consort
provides complementary depot services to customers
provides complementary depot services to customers
at its Lae hub and is a shareholder and managers of
at its Lae hub and is a shareholder and managers of
a number of stevedoring operations around PNG.
a number of stevedoring operations around PNG.
These stevedoring companies are partnerships
These stevedoring companies are partnerships
between Consort and local landowner companies
between Consort and local landowner companies
and provide significant employment opportunities
and provide significant employment opportunities
for the nearby communities.
for the nearby communities.
PROJECT CHARTERS
PROJECT CHARTERS
Consort provides short and long-term vessel charters
Consort provides short and long-term vessel charters
specialising in shallow water river shipping, and
specialising in shallow water river shipping, and
intermodal
implements and supports
develops,
intermodal
implements and supports
develops,
logistics solutions linked to land based services such
logistics solutions linked to land based services such
as road transport, cargo handling, storage, agency,
as road transport, cargo handling, storage, agency,
customs clearance, lay down areas and warehousing.
customs clearance, lay down areas and warehousing.
Consort experienced a highly competitive coastal liner
and projects shipping market in 2018. Due to an absence
of resource projects and a lack of foreign exchange, the
general economy remained subdued causing cargo volumes
to remain static year-on-year. Liner operations performed
below expectations, with the projects fleet enjoying a better
year due to unbudgeted charters in the Gulf as exploration
companies scaled down operations and required support
demobilising equipment. This short-term boost was
welcome, but the reduction of activity does not auger well
for the project fleet, which is expected to be underutilised
in 2019 as a result.
10 Steamships Annual Report 2018
in
To match current demand and reposition for the expected
upswing
to streamline
future, Consort continued
operations and the fleet throughout the year. In April,
Consort delivered the landing craft ‘Kerema Chief’ to
Australian buyers and in November delivered the tug ‘Ok
Ma’ to domestic buyers.
During the third quarter, Consort experienced a number of
technical failures, the most significant being a main engine
failure on the ‘Niugini Coast’. These technical failures led
to disappointing schedule integrity and frustrated important
customers. The unfortunate coincidence of lower reliability
and the introduction of new systems compounded the
impact on customers, and Consort lost considerable
customer goodwill. However, the new systems and expertise
introduced in 2018 positions Consort for an improved
performance in 2019. The new manifest system, Cargowise,
introduces greater visibility over cargo flows and for the first
time allows customers to interact with the booking system
via a web portal.
The planned periodic dockings of the larger vessels
commenced in September with the first vessel, Bougainville
Coast, going to a dockyard in Southern China. It returned in
early December whereupon the Gazelle Coast took its place
in the same dockyard. A third-party vessel was chartered
REVIEW OF OPERATIONS - LOGISTICS
CONSORT EXPRESS LINES
from the market and entered service in October in order
to maintain the service levels while these dockings were
completed.
The ongoing weakness in the oil and gas market, the
subdued domestic manufacturing sector and increasing
concerns about a global trade war affected vessel values
throughout the world, particularly those of the smaller sized
coastal vessels. The softer vessel values were reflected in
the annual external valuation of the fleet, with the carrying
values of Consort vessels negatively impacted. Accordingly,
Consort recorded a gross impairment of approximately
K7.5m.
Because of the tough trading conditions, Consort has
recorded tax losses for the past few years and such
cumulative losses are available to offset future taxable profits
in computation of Consort’s tax liability. Management have
re-assessed the recoverability of tax losses at 31 December
2018 in light of current trading conditions and determined
that it is prudent that the tax loss is no longer carried forward
as a deferred tax asset. Therefore Consort recorded an
impairment of K30.6m though the value of these tax losses
remain available.
The outlook for 2019 is marginally more positive than 2018.
The hard work of reshaping the fleet and introducing modern
systems, combined with a slow resurgence of the domestic
liner market is expected to deliver a stronger performance.
Delivery of consistent, cost-effective and reliable services to
customers remains the management’s goal.
Steamships Annual Report 2018 11
REVIEW OF OPERATIONS - LOGISTICS
PACIFIC TOWING
Pacific Towing is the leading provider of harbour
Pacific Towing is the leading provider of harbour
towage and mooring services in PNG and offers
towage and mooring services in PNG and offers
coastal and ocean towage services. It enjoys a
coastal and ocean towage services. It enjoys a
reputation for excellence and reliability in marine
reputation for excellence and reliability in marine
services throughout PNG and the broader Pacific
services throughout PNG and the broader Pacific
Region. A full member of the International Salvage
Region. A full member of the International Salvage
Union, Pacific Towing retains a fast responder salvage
Union, Pacific Towing retains a fast responder salvage
capability complemented by a comprehensive range
capability complemented by a comprehensive range
of ancillary marine services. These include life
of ancillary marine services. These include life
raft sales, rental and servicing, commercial diving,
raft sales, rental and servicing, commercial diving,
subsea pipeline inspections, PLEM hook up and
subsea pipeline inspections, PLEM hook up and
release services, and pollution prevention and oil
release services, and pollution prevention and oil
spill response services.
spill response services.
Pacific Towing is headquartered in Port Moresby and
Pacific Towing is headquartered in Port Moresby and
operates 13 tugs and 10 associated support vessels
operates 13 tugs and 10 associated support vessels
in five ports across PNG (Port Moresby, Lae, Rabaul,
in five ports across PNG (Port Moresby, Lae, Rabaul,
Kimbe and Madang). Dedicated harbour towage
Kimbe and Madang). Dedicated harbour towage
services extend to the Solomon Islands through a
services extend to the Solomon Islands through a
subsidiary company operating in Honiara.
subsidiary company operating in Honiara.
Pacific Towing experienced a steady year in harbour towing
jobs undertaken in 2018 compared to 2017, though revenue
from routine non-harbour related jobs rose primarily due to
an increase in external towage operations. These included
support services for APEC and a number of ocean tows.
The annual performance of the company was enhanced
by performance of three salvage operations during 2018.
Payment for all three was received within the year, along
with payment for two operations that occurred the previous
year (2017).
focus on
localisation and people development
The
continues successfully, with expatriate numbers continuing
to decrease. The work experience programme with Hong
Kong Salvage & Towage continues, and the company has
expanded its relationship with Swire Pacific Offshore to
include sending seven Pacific Towing cadets for international
seatime on their (SPO) oil & gas standard anchor handlers
and supply vessels. A partnership with Australia Awards and
China Navigation Company saw the successful introduction
of a female cadet programme compromising of five deck &
five engine cadets being selected to undergo training at the
Madang Maritime College followed by seatime on China
Navigation Company & Pacific Towing vessels. Pacific
Towing divers continue attending the Professional Diving
Academy in Sydney and life raft technicians undergo regular
& ongoing training in Australia, China & Singapore.
The purchase of a pre-owned, fixed nozzle, 50tbp shallow
water tug at the end of 2018, to be renamed Tuluman, has
increased Pacific Towing’s capacity to provide coastal towage
solutions. At the end of 2018, the company relocated to its
purpose built towage and salvage base at Motukea.
Operating to international standards, and well positioned
with additional tonnage and a new operating base, Pacific
Towing expect a solid underlying performance in 2019.
Photo courtesy of Australia Awards
12 Steamships Annual Report 2018
REVIEW OF OPERATIONS - LOGISTICS
JOINT VENTURE PORT SERVICES
The group’s six Joint Venture Port Services (JVPS)
The group’s six Joint Venture Port Services (JVPS)
businesses offer a full range of stevedoring and
businesses offer a full range of stevedoring and
handling facilities in the ports of Alotau, Oro,
handling facilities in the ports of Alotau, Oro,
Madang, Kimbe, Kaviang and Kiunga. In addition,
Madang, Kimbe, Kaviang and Kiunga. In addition,
JVPS manages a seventh stevedoring company on
JVPS manages a seventh stevedoring company on
behalf of Consort Express Lines in Port Moresby.
behalf of Consort Express Lines in Port Moresby.
With a fleet of specialist equipment, the businesses
With a fleet of specialist equipment, the businesses
handle all types of containers, as well as project
handle all types of containers, as well as project
cargo, break-bulk, RO-RO, LO-LO and grains. The
cargo, break-bulk, RO-RO, LO-LO and grains. The
stevedoring companies are joint ventures between
stevedoring companies are joint ventures between
Steamships and local landowner groups at the
Steamships and local landowner groups at the
respective ports. Each joint venture employs a local
respective ports. Each joint venture employs a local
workforce and is structured in a manner so that a
workforce and is structured in a manner so that a
share of earnings is returned to the community in
share of earnings is returned to the community in
which the joint-venture operates.
which the joint-venture operates.
In 2018, JVPS experienced the cessation of both Port Moresby
and Lae terminal operations due the award of a long-term
concession for both ports to a foreign company, resulting
in several hundred redundancies. The three majority PNG
owned companies, Lae Port Services, Port Moresby Ports
Services and Morobe Terminals Ltd ceased trading and will
be liquidated in early 2019.
The remaining JVPS operations around PNG responded
to the changed landscape by becoming the first group of
stevedoring and handling companies in PNG to be ISO
accredited for both Safety and Environment. This safety and
governance focus, coupled with high levels of productivity
and professionalism, provides a point of difference between
JVPS and its competitors. Ever dependent for volumes on
the PNG macroeconomic environment, the remaining
businesses performed
though Kiunga
Port Services suffered towards the end of the year from
lower water levels in the Fly River. The APEC Summit
in November provided additional revenue from support
activities including VIP baggage handling, stevedoring and
customs clearance.
to expectation;
In 2019, JVPS set up a machinery and equipment rental
company having purchased residual assets from the former
LPS, MTL and PSL. It is anticipated that this business line
will build slowly over 2019, and if successful, will look to
acquire additional rental assets.
JVPS seeks now to form part of a seamless logistics solution
for customers in PNG drawing on the combined strengths of
Consort and East West Transport.
The stevedoring businesses expect 2019 to start slowly,
and anticipate slow growth towards the end of the year
as activity increases in line with the anticipated ramp up
associated with the resource projects.
Steamships Annual Report 2018 13
REVIEW OF OPERATIONS - LOGISTICS
EAST WEST TRANSPORT
EWT team of 380 are more than 99% Papua New Guinean,
and the company is proud of the investment in training and
development that it makes in its workforce. As the business
continues to grow, the financial and commercial functions
will be strengthened.
With the anticipated increases in activity flowing through
the economy from the major resource projects, 2019
is expected to be another year of consistent growth.
Additional prime movers and rolling stock will be added
consistent with conservative growth predictions.
East West Transport (EWT) is one of the country’s
largest multifaceted transport and logistics companies,
with ISO accreditation of 14001, Environmental
Management, & 18001, Occupational Health &
Safety. Based in Port Moresby with a presence in
Lae, Kimbe, Rabaul, Madang, Wewak, Alotau and
Kavieng. The company has a sizable fleet of prime
movers, heavy and light trucks, forklifts and reach
stackers ranging from 2.5 to 80 tons in capacity.
All equipment is supported by localised workshop
facilities, safety teams and emergency vehicles.
EWT operates across a wide spectrum of transport
related activities including bulk fuel, containerised
cargo, sawdust and break-bulk cargo, and provides
depot services such as equipment hire, warehousing
and yard storage. EWT also offers a licensed customs
cargo clearance service in Lae and Port Moresby
with the ability to clear cargo in any location where
EWT has a presence. The division capitalises on its
close relationships with sister companies in shipping
and stevedoring by offering specialised end-to-end
project solutions for the mining, oil and gas sectors
and now commercial sectors.
Although competition remains intense in the transport sector,
EWT continues to grow market share and revenue through
a continued focus on customer service and fleet reliability.
Significant new contracts for both haulage and storage were
secured from blue chip customers in Port Moresby and Lae.
There were no major contract losses in 2018.
14 Steamships Annual Report 2018
REVIEW OF OPERATIONS - PROPERTY
CORAL SEA HOTELS
Coral Sea Hotels
(CSH) operates nine hotel,
residence and apartment properties offering full-
serviced hotel rooms and apartments as well as
extensive food & beverage outlets, recreation and
meeting, conference and banqueting facilities. The
two additions in 2018 were the 138 unit Air Niugini
Residence in Port Moresby (April 2018) which
is operated for Air Niugini under a management
agreement, and the 43 rooms Cassowary Hotel in
Kiunga (July 2018) which has been developed in
partnership with local landowners representative
CMCA.
CSH is the largest hotel group in PNG, offering 592
hotel rooms, 127 apartments and 138 residences.
The group comprises the Grand Papua Hotel, the
Gateway Hotel and Apartments, the Ela Beach Hotel
and Apartments, Whittaker Apartments and the Air
Niugini Residence in Port Moresby; the Huon Gulf
Hotel in Lae; the Highlander Hotel and Apartments
in Mount Hagen; the Bird of Paradise Hotel in
Goroka and the Cassowary Hotel in Kiunga.
CSH did not experience the anticipated boost from APEC
related events held through 2018 although it performed well
during the APEC Leader’s meeting. Underlying performance
was slightly above 2017, which was respectable given the
additional inventory that came onto the market in 2018.
improved marginally year-on-year thanks to the impact of
peak rates during APEC.
As with all hotels, CSH expected an increase in international
arrivals due to the year-round APEC events, and the high
profile APEC Economies Leadership Week in November.
However, the actual number of delegates was significantly
down on expectations. The location of the earlier meetings
in Waigani benefited CSH’ competitors, but the Grand
Papua Hotel successfully hosted the prime ministers of
Singapore, Australia and New Zealand during the Leaders
Week. Additional catering and facilities management at
both the International Convention Centre and APEC Haus
provided a welcome boost to revenue, partially offsetting
lower room occupancy.
The significant investment in training and development
for management, supervisors and rank & file levels that
commenced in 2017 continues. Additional front-of-house
and customer service training was conducted during 2018
and the focus on food safety led CSH to be certified as
compliant to Australian Food Safety Standards. The Grand
Papua Hotel was again the recipient of the World Luxury
Hotel Award in the Australasia and Oceania category.
With the anticipated increase in resource based activity,
the upgrades and extensions to both the Gateway and
Highlander Hotel are timely. The Highlander’s bar &
restaurant, Poinsettias and Orchid Wing rooms were
completed in 2018, and the new conference facilities
will be completed in the first half of 2019. The Gateway is
continuing its room upgrade programme and is refurbishing
the Wild Orchid Restaurant and Departure Bar.
Compared to 2017, revenue increased 5% and underlying
profitability by a slightly lower 4% reflecting pressure
on revenue per available room. Room and apartment
occupancy in the major hotels improved marginally on the
prior year and the food and beverage outlets performed
satisfactorily. The slow ramp up of the Cassowary hotel and
the distraction of APEC pulled down group wide occupancy
as the regional hotels experienced lower occupancy. Rates
travel,
CSH expects market demand to remain soft in the first
quarter of 2019. The continuing impact of a slower economy
on business
lower government departmental
expenditure and stagnant consumer discretionary spend
coupled with increased supply with a newly opened Hilton
Hotel & Conference Centre in Waigani, continue to make
the hospitality industry in Papua New Guinea a challenging
sector in which to operate.
Steamships Annual Report 2018 15
REVIEW OF OPERATIONS - PROPERTY
PACIFIC PALMS PROPERTY
Pacific Palms Property (PPP) is one of the largest and
most dynamic property developers and managers in
PNG. The division continues to develop and hold
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 continues in Port Moresby within a
contracted economy nationwide.
The larger Port Moresby market in which PPP operates
remains competitive, but stable, with product offering and
importantly service offering driving loyalty of tenants across
all categories. The market for resale was slow in 2019,
and this saw PPP withdraw from several planned disposals,
particularly in Port Moresby, preferring to hold and upgrade
at this juncture.
The performance of the Commercial portfolio in Port Moresby
saw steady year-on-year gains, ending the year with solid
occupancy levels. Rental reversion in Port Moresby was
stable. Outer regions of the country performed less well,
with a reduction in revenue due to lower rental reversion
and a number of large tenants moving out in Madang and
Lae.
There was a similar story with the Industrial portfolio which
remained steady in Port Moresby but saw some contraction
in outer regions reflective of a generally weak performance
of the non-extractive economy.
Residential remains strong across all locations. However,
the continuing growth of supply in Port Moresby has put
pressure on rates. This is something that PPP continues
to manage with a robust service offering and a particular
focus on effective and efficient repairs and maintenance.
Improving the tenant experience is a central part of
management’s 2019 business plan.
Hagen Central, the PPP managed joint venture precinct,
pictured below is expected to be full by mid-year with a
wide range of tenants completing fit out in the latter part of
2018 and first quarter 2019. The precinct has proven to be a
16 Steamships Annual Report 2018
REVIEW OF OPERATIONS - PROPERTY
PACIFIC PALMS PROPERTY
significant and exciting change for Mt Hagen, providing as
it does the first safe, one-stop, shopping experience. PPP’s
other joint venture projects are preforming to expectation.
PPP’s flagship development Harbourside East and West
precinct in Port Moresby remains at 100% occupancy
with the construction of the mixed use Harbourside South
project due to commence in the first half of 2019. This will
culminate in a fully integrated precinct offering a wide
range of commercial, retail and residential services along
with a vibrant food and beverage waterfront location with
harbour access.
The focus in 2019 for PPP will be to continue to meet
customer service expectations, maintain high maintenance
standards and manage its portfolio of leases to maximise
occupancy. Fire risk compliance is an increasing area of
focus for PPP with a dedicated team formed in 2018 to
manage all aspect of this ongoing initiative.
The outlook for 2019 remains stable, however, with the
continued increase of supply in Port Moresby in particular,
rates will come under pressure if the anticipated economic
improvement does not materialise. PPP is well positioned
to benefit from the next resources cycle with high quality
properties across all categories and is confident of its future
prospects.
Steamships Annual Report 2018 17
SUSTAINABILITY
The principles of Sustainable Development continue to underpin how Steamships conducts
its business, and are key to delivering long term value to its customers and shareholders.
Steamships’ understands that a clear commitment to the three Sustainability pillars of People,
Community, and the Environment, will ensure it is always well placed to make a valuable and
lasting economic and social contribution to Papua New Guinea.
At Steamships the focus is to ensure that employees are
afforded every opportunity to build strong, rewarding and
successful careers in an environment of safety, trust, fairness
and respect. In 2018, Coral Sea Hotels commenced a
specialist Hospitality Management training programme, and
our Port Services Division continued work on developing
in-house training capabilities for Group wide application.
This has complemented the streamlining of the leadership
skills training modules conducted through Head Office by
a third party specialist.
Environmental Sustainability continues to be a priority
area for Steamships. Responsible and sustainable energy
consumption is done through the regular monitoring and
reporting of energy use, water use and environmental
emissions at operational
level. Company staff again
participated
in World Environment Day, delivering
to selected school children, and
awareness
coordinating a number of educational activities to highlight
the importance of environmental sustainability.
lectures
Steamships has a considerable presence in PNG and it
is considered essential to have a positive impact on the
various communities in which it operates. Engagement
with the community is facilitated through an involvement
in social programs that prioritize four key areas; health,
social welfare, education, sports and culture. The aim is to
identify projects and partnerships that bring measurable,
meaningful, and positive impact to those in most need.
The company committed over K2.0 million to various
community based initiatives in 2018.
Steamships continues to grow future leaders through its
successful Graduate Development Programme. Each year
high potential graduates enter the programme and spend 4
years being trained, coached and mentored before joining
Steamships wider management pool.
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.
18 Steamships Annual Report 2018
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 2018 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
2018, except where noted in the Corporate Governance
Report.
Photo courtesy of KTF
Steamships’
found
be
corporategoverance
Corporate Governance
can
at http://www.steamships.com.pg/aboutus/
Report
Steamships Annual Report 2018 19
STATEMENTS OF COMPREHENSIVE INCOME
Steamships Trading Company Limited Year Ended 31 December 2018 (Amounts in Kina 000’s)
Consolidated
Parent Entity
Note
2018
2017
(Restated)
2018
2017
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
Profit after tax from discontinued operations
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
Attributable to:
Non-controlling interests
Shareholders
Basic and Diluted Earnings per share
Continuing & discontinued (toea)
Continuing (toea)
3(a)
3(a)
3(b)
3(e)
4(b)
560,817
-
558,037
15,244
(488,395)
(507,250)
72,422
(10,293)
5,628
67,757
66,031
(13,469)
7,525
60,087
5(a)
(53,886)
(29,733)
13,871
49,830
63,701
(5,828)
69,529
63,701
30,354
7,236
37,590
(3,926)
41,516
37,590
3(f)
3(f)
224t
64t
134t
111t
59,634
37,609
(2,364)
94,879
72
-
94,951
(83)
94,868
-
13,051
2,828
(2,031)
13,848
72
-
13,920
(205)
13,715
-
94,868
13,715
-
94,868
94,868
-
13,715
13,715
These Statements of Comprehensive Income are to be read in conjunction with the accompanying notes.
20 Steamships Annual Report 2018
STATEMENT OF CHANGES IN EQUITY
Steamships Trading Company Limited Year Ended 31 December 2018 (Amounts in Kina 000’s)
Non-
Share
Capital
Retained Total Capital Controlling
Earnings
& Reserves
Interest
Total
Equity
BALANCE AT 1 JANUARY 2017
24,200
808,806
833,006
48,831
881,837
Profit for the year
Dividends paid 2017
-
-
41,516
41,516
(3,926)
37,590
(32,558)
(32,558)
(8,715)
(41,273)
BALANCE AT 31 DECEMBER 2017
24,200
817,764
841,964
36,190
878,154
Adjustments to opening retained earnings on adoption of IFRS 15 (Note 1)
Profit for the year
Equity adjustment on acquisition of new entity (Note 23)
-
-
-
1,740
69,529
33,429
1,740
69,529
33,429
-
(5,828)
-
1,740
63,701
33,429
Dividends paid 2018
-
(26,357)
(26,357)
(10,639)
(36,996)
BALANCE AT 31 DECEMBER 2018
24,200
896,105
920,305
19,723
940,028
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 2018 21
STATEMENTS OF FINANCIAL POSITION
Steamships Trading Company Limited As At 31 December 2018 (Amounts in Kina 000’s)
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Income tax receivable
Assets held for sale
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
2018
2017
2018
2017
6
7
8
5(e)
10
10
11
4(a)
9
12
5(c)
13
14
9
15
15
5(e)
5(c)
14
15
16
193,521
191,778
16,063
355
3,363
405,080
492,402
398,173
65,276
65,731
76,433
1,683
1,099,698
1,504,778
104,277
56,685
47,394
19,503
124,682
-
352,541
18,729
11,480
182,000
212,209
564,750
940,028
24,200
896,105
920,305
19,723
940,028
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
-
446
-
45
-
491
24,554
-
164,037
5,712
-
436
194,739
195,230
10
-
105,775
-
-
-
105,785
-
-
-
-
105,785
89,445
24,200
65,245
89,445
-
89,445
-
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
These Statements of Financial Position are to be read in conjunction with the accompanying notes.
For and on behalf of the Board:
29 March 2019
G.L. Cundle
Chairman
M.R. Scantlebury
Managing Director
22 Steamships Annual Report 2018
STATEMENTS OF CASH FLOWS
Steamships Trading Company Limited Year Ended 31 December 2018 (Amounts in Kina 000’s)
Consolidated
Parent Entity
Note
2018
2017
2018
2017
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
566,983
721,778
5,019
Payments to suppliers and employees
(409,788)
(573,454)
(2,290)
Interest received
Interest and other finance costs paid
Income tax paid
5,199
(15,492)
(30,220)
4,639
(18,109)
(32,825)
Net cash provided by operating activities
18
116,682
102,029
72
-
(211)
2,590
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant & equipment
(56,114)
(54,098)
(2,139)
Proceeds from sales of property, plant & equipment
Proceeds on sale of investment
Loans repaid by associated companies
Cash balance received in acquiring Croesus entities
23
Dividends received
14,662
147,464
944
47,632
7,548
Net cash (used in)/provided by investing activities
162,136
(17,639)
10,608
15,716
-
78,770
3,361
(112,499)
17,870
-
6,774
-
59,634
23,766
-
13,051
30,921
5,029
(3,551)
72
-
(317)
1,233
-
-
-
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of borrowings
Dividends paid
(41,627)
(36,995)
(84,373)
-
-
(41,273)
(26,356)
(32,558)
Net cash used in by financing activities
(78,622)
(125,646)
(26,356)
(32,558)
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
200,196
(11,357)
188,839
193,521
(4,682)
188,839
(41,256)
29,899
(11,357)
12,021
(23,378)
(11,357)
-
-
-
-
-
-
(404)
404
-
-
-
-
These Statements of Cash Flows are to be read in conjunction with the accompanying notes.
Steamships Annual Report 2018 23
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2018 (Amounts in Kina 000’s unless otherwise stated)
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 2019.
-
-
allocate the transaction price to each of
the separate performance obligations, and
recognise the revenue as each performance
obligation is satisfied.
Refer to notes 1 (iii) and 1 (e) for further details of
the impact of IFRS 15 on the Group’s accounting
policies and 2018 financial statements.
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.
Amendments to IFRS 2 ‘Share based payments’
on clarifying how to account for certain
types of share-based payment transactions.
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.
•
Amendments to IFRS 4, ‘Insurance contracts’
regarding implementation of IFRS 9. These
amendments introduce two 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’
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 on first-time adoption
of IFRS and IAS 28 regarding measuring an
associate or joint venture at fair value.
IFRIC 22, ‘Foreign currency transactions and
foreign
advance consideration’ addresses
currency transactions or parts of transactions
•
•
•
(i)
Standards,
effective in the year ended 31 December 2018
amendment
interpretations
and
following
standards, amendments and
The
interpretations
to existing standards became
applicable for the first time during the accounting
period beginning 1 January 2018.
•
IFRS 9, ‘Financial Instruments’ replaced 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. IFRS 9’s
new impairment model is a move away from
IAS 39’s incurred credit loss approach to an
expected credit loss model.
Refer to notes 1 (iii) and 1 (k) for further
details of the impact of IFRS 9 on the Group’s
accounting policies and 2018 financial
statements.
•
‘Revenue
IFRS 15
from contracts with
customers’ 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.
The entity now adopts a new 5-step process
for the recognition of revenue:
-
-
-
identify contracts with customers
identify the separate performance
obligations
determine the transaction price of the
contract
24 Steamships Annual Report 2018
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2018 (Amounts in Kina 000’s unless otherwise stated)
that
there
is consideration
where
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.
•
(ii) Standards, amendments and
interpretations
issued but not yet effective for the year ended 31
December 2018 or adopted early
following
The
standards, amendments and
interpretations to existing standards have been
published and are mandatory for the entity’s
accounting periods beginning on or after 1 January
2019 or later periods, but the entity has not early
adopted them:
•
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 entity expects that certain leases of
property and equipment that are currently
accounted for as operating leases will, from
January 2019, be required to be recognised
as right-of-use assets and depreciated, with a
corresponding lease liability. Management is
in the process of assessing impact of IFRS 16
on the Group. The Group has not adopted the
standard before its effective date. The Group
intends to apply the simplified transition
approach and will not restate comparative
amounts for the year prior to first adoption.
•
Amendment to IFRS 9 on prepayment features
with negative compensation
(effective 1
January 2019). This amendment confirms
that when a financial liability measured at
amortised cost is modified without this resulting
in de-recognition, a gain or loss should be
recognised immediately in profit or loss. The
gain or loss is calculated as the difference
between the original contractual cash flows
and the modified cash flows discounted at the
original effective interest rate.
the
income
IFRIC 23,
tax
‘Uncertainty over
treatments’ (effective 1 January 2019) clarifies
how
recognition and measurement
requirements of IAS 12 ‘Income Taxes’ are
applied where
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.
there
•
Annual improvements 2015 – 2017 (effective
1 January 2019). These amendments include
minor changes to:
-
-
-
-
‘Business combination’ – a
IFRS 3
company remeasures its previously held
interest in a joint operation when it
obtains control of the business.
IFRS 11 ‘Joint arrangements’ – a company
does not remeasure its previously held
interest in a joint operation when it
obtains control of the business.
IAS 12 ‘Income taxes’ – a company
accounts for all income tax consequences
of dividend payments in the same way.
IAS 23 “Borrowing costs’ – a company
treats as part of general borrowings any
borrowings originally made to develop
an asset when the asset is ready for its
intended use or sale.
•
to
‘Investments
Amendments
in
IAS 28
associates’ on long term interests in associates
and joint ventures (effective 1 January 2019).
These amendments clarify that long-term
interests in an associate or joint venture to
which the equity method is not applied should
be accounted for using IFRS 9. This includes
the impairment requirements in IFRS 9.
•
Amendments to IAS 19, ‘Employee benefits’
on plan amendment, curtailment or settlement
(effective 1 January 2019). These amendments
require an entity to:
-
-
use updated assumptions to determine
current service cost and net interest for
the remainder of the period after a plan
amendment, curtailment or settlement,
and
recognise in profit or loss as part of
past service cost, or a gain or loss on
settlement, any reduction in a surplus,
even if that surplus was not previously
recognised because of the impact of the
asset ceiling.
Steamships Annual Report 2018 25
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2018 (Amounts in Kina 000’s unless otherwise stated)
•
•
revises
Amendments to IFRS 3 – definition of a
business (effective 1 January 2020). This
amendment
the definition of a
business. According to feedback received by
the IASB, application of the current guidance
is commonly thought to be too complex, and
it results in too many transactions qualifying
as business combinations.
Amendments to IAS 1 and IAS 8 on the
definition of ‘material’ (effective 1 January
2020). These amendments
IAS 1,
‘Presentation of financial statements’, and IAS
8, ‘Accounting policies, changes in accounting
estimates and errors’, and consequential
amendments to other IFRSs:
to
i)
use a consistent definition of materiality
throughout IFRSs and the Conceptual
Framework for Financial Reporting
resulted in changes in accounting policies and
adjustments to the amounts recognised in the
financial statements. The new accounting policies
are set out below (Note 1 e)). The Group has
adopted IFRS 15 using the modified restrospective
method. Comparative figures have not been
restated and the cumulative adjustments arising on
adoption have been adjusted against the opening
balance of retained earnings as at 1 January 2018.
The primary impact of adoption of IFRS 15 has
been a change in the timing of recognition of
freight and salvage revenue within the Group’s
logistics segment to align revenue recognition
with satisfaction of the performance obligations in
the contractual arrangements.
The total impact of adjustments made at the date
of initial application (1 January 2018) is presented
below.
ii) clarify the explanation of the definition of
K’000
material; and
31 December
2017
IFRS 15
adjustment
1 January
2018
iii) incorporate some of the guidance in IAS 1
about immaterial information.
•
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.
The Group does not consider that there are any
measurement or recognition issues arising from
the release of these new pronouncements that will
have a significant impact on the reported financial
position or financial performance of the Group.
(iii) Changes in accounting policies
The Group has adopted the following standards
from 1 January 2018: IFRS 15 ‘Revenue from
Contracts with Customers’ and IFRS 9 ‘Financial
its
Instruments’. The Group has changed
accounting policies following the adoption of IFRS
9 and IFRS 15. This note explains the impact of the
adoption of IFRS 15 ‘Revenue from Contracts with
Customers’ and IFRS 9 ‘Financial instruments’ on
the Group’s financial statements.
IFRS 15 ‘Revenue from Contracts with Customers’
replaces IAS 18 ‘Revenue’ and IAS 11 ‘Construction
Contracts’. IFRS 15 shifts revenue recognition from
a risk and rewards model to a control model, with
revenue recognized as performance obligations
are met.
The adoption of IFRS 15 from 1 January 2018
Receivables and
prepayments
Deferred tax liability
Retained earnings
161,655
22,332
817,764
2,485
745
1,740
164,140
23,077
819,504
IFRS 9 replaces the provisions of IAS 39 that
relate
to classification and measurement of
financial instruments and impairment of financial
instruments, refer to Note 1 k. The adoption of
IFRS 9 from 1 January 2018 resulted in changes
in accounting policies in the financial statements.
The new accounting policies are set out below.
The Group has adopted IFRS 9 using the modified
restrospective method.
In terms of classification and measurement of
financial instruments, IFRS 9 did not impact
the amounts reported in the Group’s financial
statements, as there were no changes under IFRS
9 in the measurement category of financial assets
and liabilities measured at amortized cost (cash
and cash equivalents, trade and other receivables,
and loans to related companies).
The primary change for the Group on adoption of
IFRS 9 from 1 January 2018 has been the assessment
of impairment of financial assets at amortised cost
using an expected credit loss model. Previously
impairment of financial assets was assessed using
an incurred credit loss model. From 1 January
2018 the Group has to assess on a forward-looking
basis the expected credit losses associated with its
financial assets instruments carried at amortised
cost. For financial assets carried at amortised cost,
the Group applies the IFRS 9 simplified approach
26 Steamships Annual Report 2018
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2018 (Amounts in Kina 000’s unless otherwise stated)
to measuring expected credit losses, which uses
a lifetime expected impairment provision for all
trade receivables, other receivables and loans to
related companies. The change in impairment
methodology did not have a material impact on
the Group’s financial statements.
(b) Foreign currency
is
functional and presentation
The Company’s
the Papua New Guinea Kina.
currency
Transactions in foreign currencies have been
translated into the functional currency at rates
ruling at the date of the transaction. Amounts
payable to and by the Group in foreign currencies
have been translated to the functional currency
at rates of exchange ruling at the year end. Gains
and losses arising from movements in foreign
exchange rates are recognised in the statement of
comprehensive income when they arise.
(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 2018 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).
balances
transactions,
Intercompany
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.
interests
Non-controlling
the results and
equity of subsidiaries are shown separately in the
consolidated statement of comprehensive income,
in
statement of changes in equity and balance sheet
respectively.
(ii) Associates
Associates are all entities over which the Group
has significant influence but not control generally
accompanying a shareholding of between 20% and
50% of the voting rights. Investments in associates
are accounted for using the equity method of
accounting, after initially being recognised at cost.
The Group’s investment in associates includes
goodwill identified on acquisition (refer to note
12).
The Group’s share of its associates’ post-acquisition
profits or losses is recognised in profit or loss, and
its share of post-acquisition other comprehensive
income is recognised in other comprehensive
post-acquisition
cumulative
income.
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.
The
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.
Steamships Annual Report 2018 27
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2018 (Amounts in Kina 000’s unless otherwise stated)
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 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
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.
in
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
28 Steamships Annual Report 2018
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.
Predecessor accounting is applied for business
combinations among entities under common
control,
including acquisitions of entities.
Assets and liabilities of the acquired entity are
stated at predecessor carrying values. Fair value
measurement is not required and no new goodwill
arises in predecessor accounting. Any difference
between
the
aggregate book value of the assets and liabilities
of the acquired entity at the date of the transaction
is included in equity in retained earnings.
the consideration given and
(e) Revenue recognition
Accounting policies applied from 1 January 2018
Revenue which represents income arising in
the course of the Group’s ordinary activities
to each distinct
is recognised by reference
performance obligation promised in the contract
with the customer when or as the Group transfers
the control of the goods or services promised in
a contract to the customer. Depending on the
substance of the respective contract with the
customer, the control of the promised goods or
services may transfer over time or at a point in
time. A contract with a customer exists when the
contract has commercial substance, the Group
and its customer have approved the contract and
intend to perform their respective obligations, the
Group’s and the customer’s rights regarding the
goods or services to be transferred and the payment
terms can be identified, and it is probable that the
Group will collect the consideration to which it
will be entitled to in exchange of those goods or
services. At the inception of each contract with
a customer, the Group assesses the contract to
identify distinct performance obligations, being
the units of account that determine when and how
revenue from the contract with the customer is
recognised. A performance obligation is a promise
to transfer a distinct good or service (or a series of
distinct goods or services that are substantially the
same and that have the same pattern of transfer)
to the customer that is explicitly stated in the
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2018 (Amounts in Kina 000’s unless otherwise stated)
contract and implied in the Group’s customary
business practices. A good or service is distinct if:
Dividend income - Dividends are recognised
when the right to receive payment is established.
-
-
the customer can either benefit from the good
or service on its own or together with other
readily available resources; and
the good or service is separately identifiable
from other promises in the contract (e.g.
the good or service is not integrated with,
or highly interrelated with, other goods or
services promised in the contract)
If a good or service is not distinct, the Group
combines it with other promised goods or services
until the Group identifies a distinct performance
obligation consisting of a distinct bundle of goods
or services.
As disclosed in Note 25, revenue from external
customers comes from the logistics business, hotels
& property business, and commercial business.
Revenue from the logistics business includes revenue
from providing the following services: freight and
shipping activities, land transport activities, towage
and salvage activities, and sale of goods.
Revenue from freight and shipping services, land
transport services and towage services is recognised
over time as the performance obligation (in this
case transport or towage activity) is performed. In
case of sale of goods (such as containers), revenue
is recognized at a point of time.
Salvage revenue is recognised over time as the
performance obligation (in this case salvaging
activity) is performed or at a point of time (upon
completion of the salvage job), depending on the
nature of the salvage activity and the contractual
terms. The Group typically has a right to payment
based on work performed until the reporting date.
Where salvage work is completed but proceeds are
not finalized and received, revenue is determined
on the basis of expected proceeds taking into
account estimation uncertainty.
Revenue from the hotels business from provision
of services is recognised over time, while revenue
from sale of goods is recognized at a point in time.
Revenue from the property business is recognized
on a straight line basis over the term of the lease.
Revenue from the commercial business relates to
sale of goods and is recognized at a point of time
in the period in which the customer accepts the
delivery of the goods.
The following other income is recognized across
the Group as follows:
Rental income - Rental income is recognised on a
straight line basis over the term of the lease.
Accounting policy applied until 31 December
2017
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.
(g) Cash and cash equivalents
Interest income - Interest income is recognised
using the effective interest method.
For the purpose of the statement of cash flows,
cash and cash equivalents includes cash on hand,
Steamships Annual Report 2018 29
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2018 (Amounts in Kina 000’s unless otherwise stated)
deposits held at call with banks and Treasury Bills
with a maturity less than 90 days. Bank overdrafts
are shown in current liabilities in the statement of
financial position.
(h) Receivables
Trade receivables are amounts due from customers
for merchandise sold or services provided in the
ordinary course of business. There are classified
as current assets if collection is expected within
one year. Receivables are recognised initially
at fair value and subsequently measured at
amortised cost using the effective interest method,
less provision for impairment. A provision is
established when there is objective evidence that
the Group will not be able to collect all amounts
due according to the original terms of receivables.
(i)
Inventories
Inventories are valued at the lower of cost and net
realisable value. In general, cost is determined
on
the weighted average basis and, where
appropriate, includes a proportion of variable
overhead expenditure. Net realisable value is the
estimated selling price in the ordinary course of
business, less applicable variable selling costs.
(j) Non-current assets held for resale
Non-current assets
(or disposal groups) are
classified as held for sale if their carrying amount
will be recovered principally through a sale
transaction rather than through continuing use
and a sale is considered highly probable. They are
measured at the lower of their carrying amount and
fair value less costs to sell, except for assets such
as deferred tax assets, assets arising from employee
benefits, financial assets and contractual rights
under insurance contracts, which are specifically
exempt from this requirement.
An impairment loss is recognised for any initial or
subsequent write down of the asset (or disposal
group) to fair value less costs to sell. A gain is
recognised for any subsequent increases in fair
value less costs to sell of an asset (or disposal
group), but not in excess of any cumulative
impairment loss previously recognised. A gain or
loss not previously recognised by the date of the
sale of the non-current asset (or disposal group) is
recognised at the date of derecognition.
Non-current assets (including those that are part of
a disposal group) are not depreciated or amortised
while they are classified as held for sale. Interest
and other expenses attributable to the liabilities
of a disposal group classified as held for sale
continue to be recognised.
Non-current assets classified as held for sale and
30 Steamships Annual Report 2018
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
Accounting policies applied from 1 January 2018
From 1 January 2018, the Group classifies all of
its financial assets in the measurement category
‘Financial assets at amortised cost’ (previously
classified as loans and receivables).
The Group classifies
its financial assets at
amortised cost when the asset is held within a
business model whose objective is to collect the
contractual cash flows and the contractual terms
give rise to cash flows that are solely payments of
principal and interest (“SPPI”). Financial assets of
the Group that fall under this category are trade
and other receivables, bank balances, deposits
and cash, and loans to related companies.
At initial recognition, the Group measures a
financial asset at its fair value plus transaction costs
that are directly attributable to the acquisition
of the financial asset. Interest income from these
financial assets is included in finance income
using the effective interest rate method. Any gain
or loss arising on derecognition is recognised
directly in profit or loss and presented in other
gains and losses together with foreign exchange
gains and losses.
As of 31 December 2018, the Group had no
financial
instruments classified as financial
assets at fair value through other comprehensive
income (“FVOCI”) - Equity instruments (previously
classified as available-for-sale financial assets) or
financial assets at fair value through profit or loss
(“FVTPL”).
Regular way purchases and sales of financial
assets are recognised on trade-date, the date on
which the Group commits to purchase or sell the
asset. Financial assets are derecognised when the
rights to receive cash flows from the financial
assets have expired or have been transferred and
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2018 (Amounts in Kina 000’s unless otherwise stated)
the Group has transferred substantially all the risks
and rewards of ownership.
receivables have been grouped based on shared
credit risk characteristics, such as days past due.
Financial assets are classified as current assets for
those having maturity dates of not more than 12
months after the end of the reporting period, and
the balance is classified as non-current.
Impairment of financial assets
The Group recognises an allowance for expected
credit losses (“ECLs”) for all debt instruments and
financial guarantee contracts issued. ECLs are
based on the difference between the contractual
cash flows due in accordance with the contract
and all the cash flows that the Group expects to
receive, discounted at an approximation of the
original effective interest rate. The expected cash
flows will include cash flows from the sale of
collateral held or other credit enhancements that
are integral to the contractual terms. For financial
guarantee contracts, the ECL is the difference
between expected payments to reimburse the
holder of the guarantee debt instruments less any
amounts the company expects to recover from the
other party.
is measured based on general 3-stage
ECL
approach and simplified approach.
General 3-stage approach for loans to related
parties and financial guarantee contracts issued.
ECLs are recognised in two stages. For credit
exposures for which there has not been a
significant increase in credit risk since initial
recognition, ECLs are provided for credit losses
that result from default events that are possible
within the next 12-months (a 12-month ECL). For
those credit exposures for which there has been
a significant increase in credit risk since initial
recognition, a loss allowance is required for credit
losses expected over the remaining life of the
exposure, irrespective of the timing of the default
(a lifetime ECL).
Simplified approach for trade receivables and other
receivables, including inter-company balances.
trade receivables,
For
the Group applies a
simplified approach in calculating ECLs. Therefore,
the Group does not track changes in credit risk,
but instead recognises a loss allowance based on
lifetime ECLs at each reporting date. The Group
has established a provision matrix that is based on
its historical credit loss experience, adjusted for
forward-looking factors specific to the debtors and
the economic environment.
Collective assessment
To measure ECL, trade receivables and other
Individual assessment
Trade receivables, other receivables and amounts
due from related parties which are in default or
credit-impaired are assessed individually.
Accounting policies applied until 31 December
2017
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 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.
Steamships Annual Report 2018 31
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2018 (Amounts in Kina 000’s unless otherwise stated)
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.
there
is objective evidence
The Group assesses at each balance sheet date
whether
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
32 Steamships Annual Report 2018
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.
is capitalised and assessed
for
Goodwill
impairment annually or more frequently if events
or changes in circumstances indicate a potential for
impairment and is carried at cost less impairment
losses. Any impairment is recognised immediately
as an expense and is not subsequently reversed.
Gains and losses on the disposal of an entity
include the carrying amount of goodwill relating
to the entity sold. Goodwill is allocated to cash-
generating units for the purpose of impairment
testing.
(o) Trade and other payables
These amounts represent obligations to pay for
goods and services that have been acquired in the
ordinary course of business from suppliers. They
are 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.
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2018 (Amounts in Kina 000’s unless otherwise stated)
A liability for annual leave is recognised and
measured at the amount of unpaid leave at
amounts expected to be paid to settle the present
entitlements. A liability for long service leave is
recognised taking into consideration expected
future wage and salary levels, experience of
employee departures and periods of service,
discounted to present values.
A provision for estimated ship dry docking costs is
only recognised where the Group has a contractual
obligation under a Bare Boat charter agreement
from a third party. Dry docking costs relating
to ships not under third party long term charter
agreements are only recognised as incurred, and
are capitalised to the extent that the previously
assessed economic benefits associated with the
asset are restored.
(q) Employee benefits
(i) Short term obligations
Liabilities for wages and salaries, including non-
monetary benefits, annual leave and accumulating
sick leave expected to be settled within 12 months
after the end of the period in which the employees
render the related service are recognised in
respect of employees’ services up to the end of the
reporting period and are measured at the amounts
expected to be paid when the liabilities are settled.
The liability for annual leave and accumulating
sick leave is recognised in the provision for
employee benefits. All other short term employee
benefit obligations are presented as payables.
(ii) Other long-term employee benefit obligations
The liability for long service leave and annual
leave which is not expected to be settled within
12 months after the end of period in which the
employees render the related service is recognised
in the provision for the employee benefits and
measured as the present value of expected future
payments to be made in respect of services
provided by employees up to the end of the
reporting period using the projected unit credit
method. Consideration is given to expected future
wage and salary levels, experience of employee
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.
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, assets are
grouped at the lowest levels for which there are
separately identifiable cash flows (cash generating
units).
(t) Borrowing costs
Borrowing costs incurred for the construction
of qualifying assets, which are assets that take a
substantial period of time to get ready for their
intended use or sale, are capitalised during the
period of time that is required to complete and
prepare the asset for its intended use or sale.
Other borrowing costs are expensed.
The capitalisation rate used to determine the
amount of borrowing costs to be capitalised is the
weighted average interest rate applicable to the
entity’s outstanding borrowings during the year, in
this case 4.5% (2017 – 4.6%).
(iii) Termination benefits
(u) Segment reporting
benefits
Termination
payable when
employment is terminated by the Group before the
normal retirement date, or whenever an employee
are
Operating segments are reported in a manner
consistent with the internal reporting provided
to the chief operating decision maker. The chief
Steamships Annual Report 2018 33
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2018 (Amounts in Kina 000’s unless otherwise stated)
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
losses
The analysis of the recognition and recoverability
of the deferred tax assets relating to carry forward
tax
judgmental and
estimating future taxable income is based on
assumptions that are affected by expected future
market or economic conditions.
is complex and
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.
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
including residual
minimum
values.
lease payments
The finance cost is charged to the profit or loss
over the lease period so as to produce a constant
periodic rate of interest on the remaining balance
of the liability for each period.
Capitalised leased assets are depreciated over
their expected lives in accordance with rates
established for other similar assets.
Operating lease payments are representative of the
pattern of benefits derived from the leased assets
and accordingly are charged to the profit and loss
account in the periods in which they are incurred.
(y) Rounding of amounts
Amounts in the financial statements have been
rounded off to the nearest thousand Kina.
(z) Critical accounting estimates and judgments
34 Steamships Annual Report 2018
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2018 (Amounts in Kina 000’s unless otherwise stated)
(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 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 2018, 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 K2,192,000
(2017: K2,569,000) 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.
The Group has the following types of financial assets
that are subject to the expected credit loss model:
trade receivables, other receivables (including inter-
company receivables) and loans to related parties.
While cash and cash equivalents are also subject to
the impairment requirements of IFRS 9, impairment
loss is immaterial.
losses,
The Group applies the IFRS 9 simplified approach
for all
to measuring expected credit
financial assets, other than loans to related parties.
To measure the expected credit losses, trade
receivables have been grouped based on shared
credit risk characteristics and the days past due.
The expected loss rates are based on the payment
profiles of sales over a period of 36 months before
31 December 2018 or 1 January 2018 respectively
and the corresponding historical credit losses
experienced within this period. The historical loss
rates are adjusted to reflect current and forward-
looking information on macroeconomic factors
affecting the ability of the customers to settle the
receivables. The Group has analyzed GDP and
employment rate of PNG to be the most relevant
factors, and accordingly adjusts the historical loss
rates based on expected changes in these factors.
Management concluded that impairment provision
for trade receivables is not materially affected by
changes in GDP and employment rate.
(c) Liquidity risk
liquidity
risk management
Prudent
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:
2018
K’000
2017
K’000
Undrawn Facilities
255,000
194,000
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.
Steamships Annual Report 2018 35
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2018 (Amounts in Kina 000’s)
At 31 December 2018
Borrowings
Borrowings from minority shareholders
Borrowings from related parties
Trade and other payables
At 31 December 2017
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
(124,682)
(19,503)
(47,394)
(104,277)
(295,856)
(31,718)
(19,503)
(54,512)
(108,170)
(213,903)
-
-
-
-
-
(182,000)
-
-
-
(182,000)
(8,340)
(326,947)
-
-
-
-
-
-
(8,340)
(326,947)
-
-
-
-
-
-
-
-
-
-
Total
K’000
(306,682)
(19,503)
(47,394)
(104,277)
(477,856)
(367,005)
(19,503)
(54,512)
(108,170)
(549,190)
The Group does not hold derivative financial instruments.
All loan covenants associated with borrowing arrangements have been met.
(d) Capital risk management
(e) Fair value estimation
The Group’s objectives when managing capital
are to safeguard the Group’s ability to continue
as a going concern in order to provide returns to
shareholders and 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.
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 gearing ratios at each balance date were as follows:
2018
K’000
2017
K’000
373,579
193,521
180,058
940,028
1,120,086
16%
441,020
12,021
428,999
878,154
1,307,153
33%
Total external borrowing &
unsecured loans
Less: Cash & Cash equivalents
Net debt
Total equity
Total capital
Gearing ratio
36 Steamships Annual Report 2018
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2018 (Amounts in Kina 000’s)
3. Operating results
(a) Revenue and other income comprises:
Revenue from contracts with customers
- Revenue from sale of goods
- Revenue from provision of services
Lease income
Dividend income
Total Revenue
Consolidated
Parent Entity
2018
2017
2018
2017
36,726
415,907
108,184
-
39,224
408,292
110,521
-
560,817
558,037
-
-
-
-
59,634
59,634
13,051
13,051
* Other income (net)
-
15,244
37,609
2,828
* Other income principally represents a nil gain in 2018 (2017: gain of K15.7M on sale of shares).
The Group’s revenue from contracts with customers are recognized at a point in time and over time. Most of revenue from provision
of services is recognized over time, while revenue from sale of goods is recognized at a point in time. Further disaggregation of
revenue by segment is provided at Note 25.
(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
81,225
122,217
82,974
11,710
-
1,498
48,772
139,999
488,395
101,116
5,235
15,866
122,217
71,452
131,820
94,616
12,261
1,445
6,742
45,976
142,938
507,250
112,562
5,461
13,797
131,820
Number of staff employed by the Group at year end:
Full Time
2,685
3,165
-
-
-
-
2,064
2,229
-
-
-
-
-
-
-
-
300
2,364
(198)
2,031
-
-
-
-
-
-
-
-
-
-
Steamships Annual Report 2018 37
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2018 (Amounts in Kina 000’s unless otherwise stated)
3. Operating results (continued)
Consolidated
Parent Entity
2018
2017
2018
2017
(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
Bad debt recovery
(e) Cost of financing – net:
Expense*
Income
Net finance costs
10
10
1,050
708
943
2,206
11,710
-
390
-
1,373
2,550
1,050
710
2,964
2,343
12,261
1,445
851
1,586
413
-
-
-
-
-
-
-
-
-
-
15,492
(5,199)
10,293
18,109
(4,640)
13,469
-
(72)
(72)
-
-
-
-
-
-
-
-
-
-
(72)
(72)
*The interest expense excludes capitalised interest of K1.7M (2017 - K1.4M).
(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 & discontinued)
Basic earnings per share (continuing)
69,529
31,008
224t
64t
41,516
31,008
134t
111t
38 Steamships Annual Report 2018
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2018 (Amounts in Kina 000’s unless otherwise stated)
4.
Investments in subsidiaries, associates and joint ventures
Consolidated
Parent Entity
2018
2017
2018
2017
(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
-
34,359
30,917
65,276
119
5,509
5,628
-
127,454
171,537
38,287
28,909
67,196
-
36,583
164,037
-
36,626
208,163
3,296
4,229
7,525
-
-
-
-
-
-
Consolidated
Parent Entity
2018
2017
2018
2017
31,703
24,964
(2,781)
53,886
37,137
(4,642)
(2,761)
29,733
270
(168)
(19)
83
298
(23)
(70)
205
(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
20,327
18,025
Tax effect of rebateable dividends
Expenses not deductible for tax
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
-
2,831
35,921
(2,412)
(2,781)
53,886
9,917
171
(3,851)
(23,283)
(17,046)
1,683
(18,729)
(17,046)
-
6,353
15,814
(7,698)
(2,761)
29,733
10,364
30,565
(9,750)
(23,261)
7,918
30,250
(22,332)
7,918
28,485
(17,890)
4,176
(3,915)
-
-
(10,493)
(19)
83
-
-
-
436
436
436
-
436
14
-
-
(70)
205
-
-
-
268
268
268
-
268
The group has not recognised deferred tax asset amounting to K51.7M related to carried forward tax losses.
Steamships Annual Report 2018 39
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2018 (Amounts in Kina 000’s unless otherwise stated)
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 provided
Disposal of subsidiary
Others
Acquiring new subsidiary
Tax payments made
At 31 December
6. Cash and cash equivalents
Cash and short term deposits
Beginning
Balance
Charge to
profit
Ending
Balance
10,364
30,565
(9,750)
(23,261)
7,918
(447)
(30,394)
5,899
(22)
(24,964)
9,917
171
(3,851)
(23,283)
(17,046)
268
268
168
168
436
436
Consolidated
Parent Entity
2018
2017
2018
2017
1,407
31,703
(2,781)
289
(1,325)
572
(30,220)
(355)
(716)
37,602
(2,761)
-
107
-
(32,825)
1,407
(85)
270
(19)
-
-
-
(211)
(45)
4
298
(70)
-
-
-
(317)
(85)
Consolidated
Parent Entity
2018
2017
2018
2017
193,521
193,521
12,021
12,021
-
-
-
-
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 receivables
Provision for impairment
Other receivables & prepayments
40 Steamships Annual Report 2018
Consolidated
Parent Entity
2018
2017
2018
2017
89,849
(2,379)
87,470
104,308
191,778
102,209
(6,186)
96,023
65,632
161,655
-
-
-
445
445
-
-
-
435
435
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2018 (Amounts in Kina 000’s unless otherwise stated)
7. Trade and other receivables (continued)
Consolidated
Parent Entity
2018
2017
2018
2017
Movement in the provision for impairment of trade receivables is as follows:
Opening balance
Impairments recognised during the year
Provision released
Total
6,186
2,279
(6,086)
2,379
3,440
2,964
(218)
6,186
-
-
-
-
-
-
-
-
The creation and release of the provision for receivables is included in operating expenses in the statement of comprehensive
income.
The ageing of receivables overdue more than 3 months is as follows:
3 to 6 months
Over 6 months
Consolidated
Parent Entity
2018
2017
2018
2017
1,055
4,076
5,131
1,780
10,432
12,212
-
-
-
-
-
-
Individually impaired receivables are included in the above amounts and amount to K2M (2017: K6M).
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.
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 2018 41
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2018 (Amounts in Kina 000’s unless otherwise stated)
8.
Inventories
Raw materials
Finished goods
Provision for obsolescence
Consolidated
Parent Entity
2018
2017
2018
2017
-
16,180
(117)
16,063
17,175
32,980
(2,822)
47,333
-
-
-
-
-
-
-
-
Inventories recognised as an expense during the year ended 31 December 2018 and included in cost of sales and cost of providing
services amounted to K56M (2017: K115M). The provision for obsolescence of inventories during the year decreased by K2.7M
(2017: by K0.6M increase).
9. Loans to/(from) related companies
Non-Current
Colgate Palmolive (PNG) Limited
Huhu Rural LLG
Pacific Rumana Limited
Harbourside Development Limited
Croesus Re PCC Limited
Loans to subsidiaries
Harbourside Development Limited
Morobe Terminals Limited
Consort Express Lines Limited’s associates
Wonye Limited
Loans from subsidiaries
Consolidated
Parent Entity
2018
2017
2018
2017
500
1,587
29,530
34,114
-
65,731
-
65,731
(7,968)
(9,543)
(29,883)
-
(47,394)
-
500
-
31,905
33,679
7,707
73,791
-
73,791
(3,083)
(9,192)
(40,291)
(1,946)
(54,512)
500
500
-
-
-
-
500
5,212
5,712
-
-
-
-
-
-
-
-
-
500
5,212
5,712
-
-
-
-
-
-
(105,775)
(218,274)
(47,394)
(54,512)
(105,775)
(218,274)
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 3-4%.
42 Steamships Annual Report 2018
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2018 (Amounts in Kina 000’s unless otherwise stated)
10. Property, plant & equipment
Property
Ships
Plant and
Vehicles
Total
Consolidated
2018
Cost
Accumulated depreciation (including impairment losses)
Net book value
Opening value
Additions
Disposals
Sale of subsidiary
Transfer to investment properties
Depreciation
Impairment
Assets held for sale
Closing value
2017
Cost
392,677
(97,952)
236,020
392,010
1,020,707
(135,831)
(294,522)
(528,305)
294,725
100,189
97,488
492,402
367,573
4,015
(131)
(17,396)
(48,658)
(10,678)
-
-
137,098
4,399
(12,583)
-
-
(21,139)
(7,586)
-
294,725
100,189
123,456
47,700
(10,486)
(24,020)
-
(31,675)
(4,124)
(3,363)
97,488
628,127
56,114
(23,200)
(41,416)
(48,658)
(63,492)
(11,710)
(3,363)
492,402
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
Parent Entity
2018
Cost
Accumulated depreciation
Net book value
Opening value
Additions
Disposals
Depreciation
Closing value
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
75,810
(51,999)
23,811
23,428
2,061
-
(1,678)
23,811
-
-
-
-
-
-
-
-
5,703
(4,959)
743
1,117
78
(65)
(387)
743
81,512
(56,958)
24,554
24,545
2,139
(65)
(2,064)
24,554
Steamships Annual Report 2018 43
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2018 (Amounts in Kina 000’s unless otherwise stated)
10. Property, plant & equipment (continued)
Property
Ships
Plant and
Vehicles
Total
Parent Entity
2017
Cost
Accumulated depreciation
Net book value
Opening value
Additions
Disposals
Depreciation
Closing value
73,755
(50,327)
23,428
24,550
583
-
(1,705)
23,428
-
-
-
-
-
-
-
-
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
(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
2018
2017
2018
2017
Property (classified as investment properties in note 11)
Plant and vehicles
Total assets in the course of construction
34,015
19,118
53,133
53,270
15,483
68,753
-
-
-
-
-
-
The cost of additions in 2018 includes capitalised borrowing costs of K1.7M (2017: K1.4M) 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 K11.7M (2017: K12.3M) 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 2018.
44 Steamships Annual Report 2018
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2018 (Amounts in Kina 000’s unless otherwise stated)
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
2018
2017
2018
2017
596,542
(198,369)
398,173
368,998
-
-
48,658
(19,483)
398,173
516,759
(147,761)
368,998
385,974
4,599
(789)
-
(20,786)
368,998
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Consolidated
Parent Entity
2018
2017
2018
2017
104,985
120,145
(5,068)
(4,438)
(13,203)
(12,076)
-
-
-
-
-
-
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 2018 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
Lower
Higher
Valuation Range
398,173
294,725
692,898
1,065,552
737,187
1,802,739
1,331,939
921,485
2,253,424
The management has utilised certain historical facts and available relevant market data 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
2018
2017
2018
2017
63,428
150,673
154,574
368,675
120,308
114,045
127,799
362,152
-
-
-
-
-
-
-
-
Steamships Annual Report 2018 45
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2018 (Amounts in Kina 000’s unless otherwise stated)
12. Intangible assets
Opening balance
Disposal of Subsidiary
Goodwill impairment during the year
Closing balance
Consolidated
Parent Entity
2018
2017
2018
2017
80,002
(3,569)
-
76,433
80,491
-
(489)
80,002
-
-
-
-
-
-
-
-
Goodwill is allocated to the Group’s cash-generating units (CGUs) identified according to operating segment. The goodwill balance
of K76M (2017: K80M) is attributable to various business acquisitions in the logistics segments including Pacific Towing (K67.4M) and
New Britain Shipping (K9M). The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations
use pre-tax cash flow projections based on financial budgets approved by management covering a three year period. Growth beyond
year three for the purpose of the impairment testing is set at 5%-8%. A post-tax discount rate of 12.5% per annum has been used
and reflects specific risks relating to the operating segment.
13. Trade and other payables
Trade Payables
Accruals
Other payables
Consolidated
Parent Entity
2018
2017
2018
2017
24,938
77,851
1,488
38,589
67,410
2,171
104,277
108,170
-
-
10
10
-
-
-
-
All trade and other payables are due and payable within 12 months and are recorded at their fair value.
14. Provisions for other liabilities and charges
Opening value
Charged to profit & loss
Disposal of subsidiary
Acquisition of subsidiary
Utilised during year
Closing value
Current
Non-current
Employee
Dry
Dock
Insurance
Claims
2018
Total
2017
Total
18,290
6,466
(963)
-
(6,778)
17,015
5,535
11,480
17,015
-
615
-
-
(115)
500
500
-
500
-
-
-
50,650
-
50,650
50,650
-
50,650
18,290
7,081
(963)
50,650
(6,893)
68,165
56,685
11,480
68,165
22,753
6,821
-
-
(11,284)
18,290
6,250
12,040
18,290
A description of employee and dry dock provisions is disclosed in note 1p.
46 Steamships Annual Report 2018
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2018 (Amounts in Kina 000’s unless otherwise stated)
15. Borrowings
Current:
Bank overdrafts (secured)
Bank loans
Other loans (unsecured)
Non-current:
Bank loans (secured)
Total Borrowings
Consolidated
Parent Entity
2018
2017
2018
2017
4,682
120,000
19,503
144,185
182,000
182,000
326,185
23,378
8,340
19,503
51,221
335,287
335,287
386,508
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Mortgages over certain of the Group’s properties and a registered equitable charge over the remainder of the Group’s assets,
undertakings and uncalled capital are held by the Group’s bankers as security for the bank overdrafts and secured loans.
Interest is paid on all loans at commercial rates at a discount to Indicator Lending Rates. The effective interest rate on bank facilities
at the balance sheet date was 4.5% (2017: 4.6%). 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% (2017: 7.83%).
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
2018
2017
2018
2017
(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 120 toea per share will be paid immediately after the Annual General Meeting on 7 June
2019. This brings the total dividend declared for the year to 165 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 totaling 85 toea per share which includes the final dividend of 2017 and totaled K26,356,800.
Steamships Annual Report 2018 47
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2018 (Amounts in Kina 000’s unless otherwise stated)
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, M.R. Scantlebury and R.P.N Bray are directors of John Swire & Sons (PNG) Limited.
(d) Remuneration:
Income received or due and receivable both by Directors and general managers in connection with the management of the
Group companies is shown in the Directors’ Report.
Consolidated
Parent Entity
2018
2017
2018
2017
Key management personnel disclosure
Wages and salaries
Other short term benefits
13,584
1,340
13,347
1,375
(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
Management fee received
- Associates & joint venture
Container & charter hire
- Associates & joint venture
- Shareholders & associate companies
Purchase of goods and services
- Associates & joint ventures
- Associated groups
- Shareholders of associated companies
Purchase of assets
- 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
48 Steamships Annual Report 2018
451
62
15,712
2,271
-
-
133
1,001
1,590
(408)
(9,937)
-
1,622
59
21,732
-
585
4,080
-
-
-
(801)
(21,986)
(47)
-
(1,064)
(1,236)
(2,733)
(891)
(1,516)
(10,639)
(19,008)
(7,349)
(1,100)
(1,795)
(8,715)
(23,482)
(9,077)
(19,503)
(19,503)
-
-
(9,809)
12,717
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(19,008)
(7,349)
(23,482)
(9,077)
-
-
-
-
-
-
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2018 (Amounts in Kina 000’s unless otherwise stated)
17. Related party disclosures (continued)
Consolidated
Parent Entity
2018
2017
2018
2017
All transactions with related parties are made on normal commercial terms and conditions.
Balances with related companies:
Associates and joint ventures:
Consort associates (note 9)
Harbourside Development Limited (note 9)
Morobe Terminals Limited (note 9)
Consort shareholders (note 15)
Basilok 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)
Huhu Rural LLG (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
Gain on sale of subsidiary
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
Decrease in operating assets
(Decrease)/increase in trade creditors
Increase/(decrease) in other operating liabilities
(Decrease)/increase in income tax payable
(Decrease) in deferred tax liability
(29,883)
(7,968)
(9,543)
(19,343)
(160)
-
500
34,114
-
29,530
1,587
-
(40,291)
(3,083)
(9,192)
(19,343)
(160)
(1,946)
500
33,679
-
31,905
-
7,707
-
-
-
-
-
-
500
-
5,212
-
-
-
-
-
-
-
-
-
500
-
5,212
-
-
-
Consolidated
Parent Entity
2018
2017
2018
2017
63,701
82,973
-
390
(48,583)
(5,628)
(62,092)
(4,288)
27,588
(2,747)
18,278
52,099
(1,407)
(3,602)
37,590
112,078
-
(735)
-
(7,525)
(26,846)
(6,205)
6,431
(10,966)
12,430
(7,379)
(2,858)
(3,986)
94,868
2,064
13,715
2,229
(59,634)
(13,051)
-
(34,644)
-
-
-
(104)
(9)
-
9
40
-
-
-
-
(869)
-
71
-
(680)
-
(182)
-
Net cash inflow from operating activities
116,682
102,029
2,590
1,233
Steamships Annual Report 2018 49
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2018 (Amounts in Kina 000’s unless otherwise stated)
18. Reconciliation of cash flows (continued)
(b) Net loan reconciliation
Net debt as at 31 December 2017
Borrowing from related parties
Repayments
Net debt as at 31 December 2018
19. Retirement benefit plans
Bank
Loans
Other loans
Total
(343,627)
(74,015)
(417,642)
-
41,627
(5,236)
12,354
(5,236)
53,981
(302,000)
(66,897)
(368,897)
The total cost of retirement benefits of the Group in 2018 was K6M (2017: K6M). 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.
50 Steamships Annual Report 2018
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2018 (Amounts in Kina 000’s unless otherwise stated)
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
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
Croesus Holdings Limited
Isle of Man
Croesus Limited
Papua New Guinea
Croesus Re PCC Limited
Isle of Man
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Equity
Holdings*
2018
Equity
Holdings*
2017
70.2
70.2
60
100
51
-
60
50
100
100
60
100
51
100
60
50
100
100
56.7
56.7
54
100
100
54
100
100
50.9
50.9
100
100
100
-
-
-
*The portion of ownership is equal to the proportion of voting power held.
** Consolidated by virtue of control over the operating decisions and returns. As at 31 December 2018, Steamships Trading
Company Limited still has control over this entity.
*** Laga Industries limited was sold on 3 July 2018.
Shares in subsidiary companies have been stated at cost or fair value on acquisition less dividends received from pre-acquisition
profits.
Steamships Trading Company Limited has granted a call option to a minority shareholder of Consort Express Lines in the event of
any recovery under a charter performance guarantee to enforce a proportional equity capital buy back. At 31 December 2018, the
performance guarantee obligations are being met.
Steamships Annual Report 2018 51
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2018 (Amounts in Kina 000’s unless otherwise stated)
21. Investment in associates
(a) Movement in carrying amounts
Opening value
Share of profits before tax
Income tax expense
Dividends received
Closing value
Consolidated
Parent Entity
2018
2017
2018
2017
38,287
170
(51)
(4,047)
34,359
35,813
4,709
(1,413)
(822)
38,287
-
-
-
-
-
-
-
-
-
-
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:
2018
Makerio Stevedoring Limited
Nikana Stevedoring Limited
Riback Stevedoring Limited
United Stevedoring Limited
Morobe Terminal Limited
2017
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
1,687
1,888
26,860
602
9,163
40,200
340
305
5,582
601
(987)
5,841
Assets
Liabilities
1,211
1,489
28,287
337
11,350
42,674
21
76
3,608
271
411
4,387
Carrying
Value
1,347
1,583
21,278
1
10,150
34,359
Carrying
Value
1,190
1,413
24,679
66
10,939
38,287
Revenue
Profit
217
136
7,971
539
3,242
12,105
99
158
649
3
(790)
119
Revenue
Profit
722
489
10,924
4,099
1,008
17,242
50
181
2,738
3
324
3,296
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.
52 Steamships Annual Report 2018
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2018 (Amounts in Kina 000’s unless otherwise stated)
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
2018
2017
2018
2017
28,909
7,870
(2,362)
(3,500)
-
30,917
30,632
6,041
(1,812)
(5,952)
-
28,909
36,583
-
-
-
-
36,583
23,823
-
-
-
12,760
36,583
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.
2018
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
13,254
89,287
4,112
10,026
28,424
4,168
86,675
751
6,679
15,913
Carrying
Value
9,086
2,612
3,361
3,346
12,512
Revenue
Profit
40,309
5,464
9,974
2,871
574
1,440
26
566
(299)
(248)
145,103
114,186
30,917
55,168
5,509
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
The Group’s share of the capital commitments of joint ventures at 31 December 2018 is K4M (2017: K13.6M).
There are no contingent liabilities arising from the Group’s interests in the joint ventures.
Steamships Annual Report 2018 53
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2018 (Amounts in Kina 000’s unless otherwise stated)
23. Business Combinations
Details of Entities over which control has been gained
On 10th July 2018, the group bought all shares of Croesus RE PCC Limited from an entity under common control for no consideration
which resulted in unrealized gain to equity of the Group to extent of value equivalent to net assets of acquired entities. As the
transactions was between entities under common control, assets and liabilities have been recorded at existing book values at the
date of acquisition, with a corresponding adjustment recorded in retained earnings.
The assets and liabilities recognised as a result of the acquisition are as follows:
Cash and term deposits
Receivables
Other assets
Insurance reserves
Other payables
Net assets acquired
24. Discontinuing Activities
47,632
63,956
190
(64,467)
(13,882)
33,429
On the 3rd of July 2018, the Group disposed of its 100% interest in Laga Industries Ltd. The 31st December 2018 results (K’000)
from the discontinued activities are derived from:
(a) Profit & Loss for the period:
Revenue
Operating expenses
Profit before tax
Profit after tax
2018
2017
66,291
(64,510)
1,781
1,247
147,650
(137,526)
10,124
7,236
(b) The Group has two subsidiaries pending liquidation and their assests and liabilities are disclosed as Assets & Liabilities
held for Sale.
Assets held for sale
Lae Port
Services Limited
Port Services
Limited
636
2,727
(c) An analysis of the cash flows of discontinued operations is as follows:
Operating cash flows
Investing cash flows
Financing cash flows
Net cash flows
Opening balance
Cash disposed on sale of Laga Industries
Closing cash flow balance
54 Steamships Annual Report 2018
2018
(6,459)
(8,593)
16,487
1,435
204
1,639
-
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2018 (Amounts in Kina 000’s unless otherwise stated)
24. Discontinuing Activities (continued)
The sale has resulted in an approximate gain of K48.6M profit for the group.
(d) Restatement of previous year (2017) figures
The 2017 comparative results have been restated to present the results of Laga Industries Limited as discontinued operations.
Statement of comprehensive income – including discontinued operations
31st December Discontinued
Operations
2017
31st
December
2017 (Restated)
705,687
147,650
(635,476)
(137,526)
(32,621)
37,592
(2,888)
7,236
558,037
(497,950)
(29,733)
30,354
Revenue (after reclassifications)
Operating expenses
Income tax
Net profit
25. Segmental reporting
(a) Description of segments
The Board monitors the business from a product perspective and have identified three reportable segments. A brief description of
each segment is outlined below:
•
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.
• Commercial and investment – consists of the commercial, head office administration function and insurance activities.
(b) Segment information
The segment information provided to the Board for the reportable segments for the year ended 31 December 2018 is as follows:
2018
External revenue
Interest revenue
Interest expense
Segment results
Share of joint ventures and associates profit
Total tax expense
Profit from continuing operations
Hotel
and Property
Logistics
Commercial &
Investments
(and eliminations)
230,935
323,640
-
11,837
65,509
45
(18,431)
47,123
1,268
13,201
2,630
119
(38,289)
(35,540)
6,242
3,931
(9,564)
(6,010)
5,464
2,834
2,288
Total
560,817
5,199
15,492
62,129
5,628
(53,886)
13,871
Segment assets
Segment liabilities
Net assets
703,784
394,852
406,142
1,504,778
(253,291)
(240,412)
(71,047)
(564,750)
450,493
154,440
335,095
940,028
Total assets includes investment in joint ventures
and associates
Capital expenditure
Depreciation
21,836
25,918
42,078
34,359
19,918
37,239
9,086
10,478
3,657
65,276
56,114
82,974
Steamships Annual Report 2018 55
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2018 (Amounts in Kina 000’s unless otherwise stated)
25. Segmental reporting (continued)
2017
External revenue
Interest revenue
Interest expense
Segment results
Share of joint ventures and associates profit
Total tax expense
Profit from continuing operations
Segment assets
Segment liabilities
Net assets
Total assets includes investment in joint ventures
and associates
Hotels &
Property
Logistics
Commercial &
Investments
(and eliminations)
Total
227,408
-
(17,533)
59,478
905
(20,688)
39,696
324,548
1,383
(12,570)
(5,757)
3,296
(13,724)
(16,186)
6,081
3,257
11,995
(1,159)
-
3,324
6,844
558,037
4,640
(18,109)
52,562
7,525
(29,733)
30,354
733,408
410,348
215,490
1,469,373
(300,991)
(226,179)
432,417
184,168
13,942
229,432
(591,219)
878,154
21,786
38,287
7,123
67,196
Capital expenditure
Depreciation
25,775
43,048
22,084
47,772
6,239
3,796
54,098
94,616
These figures include non-controlling interests share of operating profits and assets.
Revenue from hotels & property business mostly relates to provision of services and is recognized over time. Minor portion
represents revenue from sale of goods and is recognized at a point in time. Similarly, revenue from logistics business mostly relates
to provision of services and is recognised over time. Revenue from commercial segment relates to sale of goods and is recognized
at a point in time.
(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 insignificant business operations in the Solomon Islands and in Isle of Man.
56 Steamships Annual Report 2018
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2018 (Amounts in Kina 000’s unless otherwise stated)
26. 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.
27. 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.
28. Subsequent events
Consolidated
Parent Entity
2018
2017
2018
2017
4,589
48,532
53,121
7,194
60,758
67,952
-
-
-
-
-
-
In March 2019 the Directors declared a final dividend of 120 toea per share payable immediately after the Annual General
Meeting on 7 June 2019 amounting to K37.2M.
Steamships Annual Report 2018 57
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 2018, 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 2018 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 2018, 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
58 Steamships Annual Report 2018
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 K4.0 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
•
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 and two subsidiaries
incorporated in The Isle of Man.
All significant associates of the
Group are incorporated and
operating in Papua New Guinea
and audited by PwC Papua New
Guinea.
Our audit focused on where
the directors made subjective
judgements; for example,
significant accounting estimates
involving assumptions and
inherently uncertain future events.
Steamships Annual Report 2018 59
INDEPENDENT AUDITOR’S REPORT
to the Shareholders of Steamships Trading Company Limited
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements for the current period. The key audit matters were addressed in the context of our audit of the financial statements
as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have
determined the matters described below to be key matters to be communicated in our report.
Further, commentary on the outcomes of the particular audit procedures is made in that context.
Key audit matter
How our audit addressed the key matter
Non-current asset impairment assessment
(Refer to note 10 of the financial statements)
As there was an indicator of potential impairment we
have considered and tested the Group’s assessment of the
estimated sale value of the ships.
Included within property, plant and equipment are Ships
with an aggregate net book value of K100.2 million as at
31 December 2018, after an impairment charge of K7.6
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 value 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 2018 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.
60 Steamships Annual Report 2018
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 K76.4 million at 31
December 2018. 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 2018.
The prolonged weakness in economic conditions in a
number of the markets in which the Group operates in
Papua New Guinea has increased the risk that the carrying
values of the components of goodwill may be impaired.
We have considered and tested the financial models used
by the Group to determine the value of the cash generating
units. We compared the models with the previous year’s
models and found them to be consistently structured
and consistent with the basis of preparation required by
accounting standards.
We compared the forecast revenues and expenditures to
approved budgets and obtained an understanding and
evaluated the Group’s budgeting procedures, upon which
forecasts are based. We also evaluated the reliability of
estimates made by comparing forecasts made in prior years
to actual outcomes.
The Group has calculated the value of the respective cash
generating units containing goodwill balances based on
financial models comprising cash flow projections. The
cash flow projections use a number of forward looking
assumptions, including revenue and cost growth, and the
value calculation is sensitive to these.
We benchmarked the assumptions used around revenue
and cost inflation with external forecasts, and the discount
rates with our expectation based on the overall Weighted
Average Cost of Capital (WACC) of the Group. Together
with our valuation expert we reviewed the methodology
used in determining the discount rate applied.
We considered this a key audit matter because of the
significant judgements around future revenues and costs,
and the discount rate to be applied in determining the value
of the cash generating units.
We performed sensitivity analysis on assumptions to
ascertain the extent of change that would be required in
key assumptions for the respective goodwill balances to be
impaired. We determined that the calculations were more
sensitive to inflation assumptions and discount rates and
focused our testing on these assumptions.
Information other than the financial statements and auditor’s report
The directors are responsible for the annual report which includes other information. Our opinion on the financial statements
does not cover the other information included in the annual report and we do not express any form of assurance conclusion
on the other information.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in
the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information
that we obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Steamships Annual Report 2018 61
INDEPENDENT AUDITOR’S REPORT
to the Shareholders of Steamships Trading Company Limited
Responsibilities of the directors for the financial statements
The directors are responsible, on behalf of the company for the preparation of financial statements that give a true and fair view
in accordance with International Financial Reporting Standards and other generally accepted accounting practice in Papua
New Guinea and the Companies Act 1997 and for such internal control as the directors determine is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the ability of the Group 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 Group 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 judgement and maintain
professional scepticism throughout the audit. We also:
•
•
•
•
•
•
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide
a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one
resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt
on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required
to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditor’s report. However future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether
the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
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.
62 Steamships Annual Report 2018
INDEPENDENT AUDITOR’S REPORT
to the Shareholders of Steamships Trading Company Limited
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 2018:
• 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 2019
Steamships Annual Report 2018 63
DIRECTORS’ REPORT
Steamships Trading Company Limited Year ended 31 December 2018
Steamships Trading Company Limited and Subsidiary Companies
The Directors submit their Annual Report for the year ended 31 December 2018 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 8. The Group continues to operate in the
segments of Hotels and Property, Logistics and Commercial & Investments.
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 K69,529,000 (2017: K41,516,000).
Dividend
The Directors advise that a final dividend of 120 toea per share will be paid after the Annual General Meeting on 07th June
2019. This brings the total dividend declared for the year to 165 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.
64 Steamships Annual Report 2018
DIRECTORS’ REPORT
Steamships Trading Company Limited Year ended 31 December 2018
Experience & Interests Register
Directors serving at the date of this report have disclosed the following experience and interests in shares in the Company
and provided general disclosure of companies in which the Director is to be regarded as interested as set out below:
G.L. Cundle
Chairman since 28th February 2015
Managing Director from 1st January 2013 to 12th January 2015
Member of the Remuneration Committee
Member of the Strategic Planning Committee
Director since 2013
Mr Cundle joined the Swire Group in 1979 and has extensive corporate experience having worked with the Group in
various divisions in Hong Kong, Australia, Korea, Japan and Papua New Guinea. He was a Non-Executive Director of
Steamships in 2006-2007 and General Manager of Steamships Shipping 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.
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 PNG Country
Chairman 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 Marsh Limited and is
involved in a number of other private sector and charitable organizations in Papua New Guinea.
R.P.N. Bray
Director since 27th August 2018
Appointed Chief Operating Officer on 27th August 2018, Mr Bray was previously Marine Services Director of Singapore
based Swire Pacific Offshore Pte Ltd. He was responsible for Swire Pacific Off shore’s ‘subsea, renewables, logistics,
seismic, salvage and oil spill divisions. He was formally Chief Operating Officer of Swire Oilfield Services and held various
senior operational and commercial positions in Cathay Pacific Airways Ltd in his earlier career. He is a Director of John
Swire & Sons (PNG) Ltd and various Steamships Trading Company subsidiaries, joint ventures and associated companies.
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 Baht Fung Limited, Allway Logistics Limited,
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%.
Steamships Annual Report 2018 65
DIRECTORS’ REPORT
Steamships Trading Company Limited Year ended 31 December 2018
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 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, Mainland Holdings Ltd, and Croesus Re PCC Limited.
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 Director of Bunowen Services Ltd, Kamchild Limited, Dentons Administration Services Ltd, Post
Courier Limited and its subsidiaries, and Chairman of ANZ Banking Group (PNG) Ltd. Lady Kamit also serves on a number
of private sector and charitable organisations, including as member of Board of Trustees of the Institute of National Affairs,
Anglicare PNG and Patron of Business Coalition for Women.
M.R. Scantlebury
Managing Director since 27th August 2018
Finance Director & Company Secretary since June 2016
Mr Scantlebury is a chartered accountant and was previously Director of the Office for Financial Planning at Swire Pacific
Ltd in Hong Kong and he has held various senior finance and commercial positions in the Swire group in his career. He
is a Director of John Swire & Sons (PNG) Ltd and various Steamships Trading Company subsidiaries, joint ventures and
associated companies.
B.N. Swire
Director from 1 January 2015
Mr. Swire joined John Swire & Sons, Ltd., 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. Additionally, he was until the end of 2018 the non-Executive Chairman of the China
Navigation Co. Ltd., and remains a non-Executive Director of Swire Pacific Offshore Holdings Ltd. and of John Swire & Sons
(Green Investments) Ltd. Mr Swire has 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 Ltd 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.
66 Steamships Annual Report 2018
DIRECTORS’ REPORT
Steamships Trading Company Limited Year ended 31 December 2018
Remuneration of Directors
Directors remuneration received or receivable from the Company as directors during the year, is as follows:
P. Aitsi (retired)
G. Aopi
Sir M.R. Bromley
D.H Cox
G.L Cundle (Chairman)
G.J. Dunlop
Lady W.T. Kamit
B.N. Swire
J.H Woodrow
P.W. Langslow* (retired)
M.R. Scantlebury*
R.P.N Bray* (appointed)
2018
K’000
106
124
223
223
223
247
135
124
124
-
-
-
1,529
2017
K’000
124
124
223
223
223
247
135
124
124
-
-
-
1,547
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
2018
No.
2017
No.
Remuneration
K’000
2018
No.
2017
No.
Remuneration
K’000
2018
No.
2017
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
5
2
3
5
3
2
3
2
4
2
3
-
1
1
2
1
1
3
-
-
-
2
2
-
1
7
6
4
4
3
1
2
1
2
5
1
2
-
-
1
3
2
3
2
1
2
2
2
3
4
360-370
370-380
380-390
390-400
400-410
410-420
420-430
430-440
440-450
450-460
460-470
470-480
480-490
500-510
510-520
520-530
550-560
560-570
570-580
580-590
600-610
610-620
620-630
630-640
640-650
3
-
1
2
2
1
1
1
2
1
2
1
-
1
-
-
2
-
1
-
1
-
2
1
1
1
2
2
-
2
1
1
2
1
1
-
1
2
1
2
1
1
2
1
1
1
1
1
3
-
650-660
660-670
670-680
680-690
690-700
700-710
730-740
740-750
750-760
770-780
780-790
800-810
830-840
870-880
890-900
910-920
920-930
990-1000
1,000-1,010
1,010-1,020
1,050-1,060
1,800-1,900
2,100-2,300
2,500-2,600
2,600-2,700
1
2
-
-
1
1
-
-
-
2
1
1
-
1
1
1
1
-
1
-
-
1
-
-
1
-
-
1
2
-
-
1
2
2
-
1
1
1
1
-
2
-
2
1
2
1
-
1
1
-
For and on behalf of the Board:
Port Moresby
29 March 2019
G.L. Cundle
Chairman
M.R. Scantlebury
Managing Director
Steamships Annual Report 2018 67
STOCK EXCHANGE INFORMATION
Steamships Trading Company Limited Year ended 31 December 2018
Shares are listed on the Australian Securities Exchange and the Port Moresby Stock Exchange.
All shares carry equal voting rights.
Shareholdings
At 28 February 2019, there were 365 shareholders.
265 Holding
Holding
71
Holding
15
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
Kelvinside Pty Ltd
Citicorp Nominees Pty Limited
Bond Street Custodian Limited
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
National Nominess Limited
Mrs Judith Scottholland
Mrs Mary Patricia Haughton
22,362,651
5,760,000
1,859,446
446,494
54,727
32,500
25,000
23,263
23,067
21,700
20,767
15,000
11,078
10,348
10,000
10,000
8,768
8,688
8,161
8,161
30,719,819
%
72.12
18.58
6.00
1.44
0.18
0.10
0.09
0.09
0.07
0.07
0.07
0.05
0.04
0.03
0.03
0.03
0.03
0.03
0.03
0.03
99.07
Applicable Legislation
The Company is incorporated in Papua New Guinea and is not generally subject to Australian Corporations Law including,
in particular, Chapter 6 of the Australian Corporations Law dealing with the acquisition of shares (including substantial
shareholdings and takeovers). The Company is subject to the requirements of the Papua New Guinea Companies Act 1997,
Securities Act 1997 and the Takeovers Code. The Companies Act and the Securities Act regulate the issue and buy-back of
shares and contain provisions as to the trading in securities, provisions as to financial benefits to related parties, substantial
shareholders provisions, remedies in cases of oppression or injustice and actions by, and access to, records by shareholders.
The Takeovers Code regulates offers where a person already holds more than 20% of the voting rights in a company or
where a person becomes the holder of more than 20% of the voting rights in a manner permitted by the Code.
A code offer, which can either be a full offer or a partial offer, must be extended to all holders of voting securities in the
Company. The Code also contains compulsory purchase and sale provisions if more than 90% of the shares are acquired
under an offer.
68 Steamships Annual Report 2018
Steamships Annual Report
COMPANY DIRECTORY
CHAIRMAN
G. L. Cundle §&
MANAGING DIRECTOR & FINANCE DIRECTOR
M. R. Scantlebury
EXECUTIVE DIRECTOR
R.P.N. Bray
NON-EXECUTIVE DIRECTORS
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