ANNUAL REPORT | 2019
CONTENTS
Brief Profile of Steamships Group . . . . . . . . . . . . . 2
Financial Highlights . . . . . . . . . . . . . . . . . . . . 4
Chairman’s Report . . . . . . . . . . . . . . . . . . . . . 6
Directors’ Review . . . . . . . . . . . . . . . . . . . . 10
Review of Operations - LOGISTICS . . . . . . . . . . . 12
Consort Express Lines . . . . . . . . . . . . . . . 12
Pacific Towing . . . . . . . . . . . . . . . . . . . 14
Joint Venture Port Services . . . . . . . . . . . . . 15
East West Transport . . . . . . . . . . . . . . . . 16
Review of Operations - PROPERTY . . . . . . . . . . . 17
Coral Sea Hotels . . . . . . . . . . . . . . . . . . 17
Pacific Palms Property . . . . . . . . . . . . . . . 18
Sustainability . . . . . . . . . . . . . . . . . . . . . . . 20
Corporate Governance . . . . . . . . . . . . . . . . . . 21
Financial Section . . . . . . . . . . . . . . . . . . . . . 22
Statements of Comprehensive Income . . . . . . . 22
Statements of Changes in Equity . . . . . . . . . . 23
Statements of Financial Position . . . . . . . . . . 24
Statements of Cash Flows . . . . . . . . . . . . . 25
Notes to the Financial Statements . . . . . . . . . 26
Independent Auditor’s Report . . . . . . . . . . . 64
Directors’ Report . . . . . . . . . . . . . . . . . . 70
Stock Exchange Information . . . . . . . . . . . . 75
Company Directory . . . . . . . . . . . . . . . . . . .
IBC
Steamships Annual Report 2019 1
BRIEF PROFILE OF THE STEAMSHIPS GROUP
Steamships Trading Company (Steamships) is a committed investor and is celebrating over 100
years of business operations in Papua New Guinea. The Group is a well-established business
conglomerate with diverse commercial interests and listings on both the Australian and PNG
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 2019
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 2019 3
FINANCIAL HIGHLIGHTS
2019 FINANCIAL HIGHLIGHTS (including discontinued operations)
2019
K’000
2018
K’000
Change
%
Revenue (including discontinued operations)
Profit attributable to shareholders
Cash generated from operations
Net cash inflow/(outflow) before financing
Shareholders’ funds
External Borrowings
Earnings per share (toea)
Dividends per share (toea)
Shareholders’ funds per share (kina)
Underlying profit attributable to shareholders
Underlying earnings per share (toea)
Gearing ratio
Interest cover
Dividend cover
585,168
49,995
111,855
648,106
69,529
116,682
42,656 278,817
920,305
885,043
373,579
319,565
161
80
28.54
31,505
102
224
165
29.68
43,304
140
19.5%
16%
7.7 9.0
1.1 2.6
10%
-28%
-4%
-85%
-4%
-14%
-28%
-52%
-4%
-27%
-27%
-8%
8%
-58%
4 Steamships Annual Report 2019
FINANCIAL HIGHLIGHTS
SUMMARY OF PAST PEFORMANCE
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
2019
K’000
INCOME STATEMENT (including discontinued operations)
Profit before tax
Share of associates profit
Income tax expense
Minoirty interests
Net profit attributable to shareholders
Depreciation transfer
Equity adjustment
Dividends paid or provided for the year
Earnings retained this year
-
-
(31,008)
85,437
(1,061)
-
(58,916)
98,284
180,834 233,967 265,574
3,843
14,188
13,859
11,416
(14,042) (38,487)
(81,414)
(67,727)
(53,935)
(11,490)
(21,870)
38,609
(20,648)
(21,838)
88,655
116,445 158,261 177,700 114,011
(37,710)
(2,415)
98,979
79,747 134,789 136,042 118,686
3,062 5,865
9,697
62,686
7,525
(35,677) (32,621)
3,926
(4,664)
41,516
84,210
-
-
(88,373)
89,327
-
-
(8,994)
-
(57,365) (43,411)
45,244
47,652
-
-
2,206 -
-
-
(40,291) (32,559)
8,957
43,919
(48,062)
53,123
112,493
5,628
61,284
5,010
(54,420) (18,928)
2,629
49,995
5,828
69,529
-
-
- -
(26,357) (44,962)
5,033
43,172
Underlying profit attributable to shareholders
(adjusted for significant items)
113,597 153,566 156,213 128,367 108,808
80,651
71,721
61,775
43,304
31,505
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
428,157 554,349 652,978
896,105 860,843
452,357 578,549 677,178 713,977 735,964 789,087 833,006 841,964 920,305 885,043
24,200
24,200
689,777 711,764 764,887 808,806 817,764
24,200 24,200
24,200
62,851
17,747
515,208 653,914 761,500 736,884 766,737 836,602 881,837 878,154 940,028 902,790
47,515 48,831
19,723
75,365
22,907
36,190
84,322
30,773
786,510 938,709 1,023,861 1,066,393 1,115,123 1,072,955 1,068,892 997,125
38,687
28,445
67,196
15,416
31,471
30,250
-
-
9,282
21,081
93,617
80,002
17,183
17,183
17,183
352,549 366,479 400,480 284,200 294,800
294,203 299,634 411,920
890,576 970,928
41,586
65,276
2,311
1,683
76,433
76,433
470,810 360,385
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 1,451,643
36,458 66,445
36,914 36,680
80,491 80,491
33,193
33,521
80,491
Current Liabilities
Non-Current Liabilities
TOTAL LIABILITIES
352,541 148,286
273,055 283,445 370,396
334,331 346,612 359,755
212,209 400,567
607,386 630,057 730,151 828,227 862,070 790,696 654,871 591,219 564,750 548,853
230,390 190,621 541,292 184,646 221,560
597,837 671,449 249,404 470,225 369,659
NET ASSETS
515,208 653,914 761,500 736,884 766,737 836,602 881,837 878,154 940,028 902,790
RATIOS
Current assets to current liabilities 1.08
89.7%
Borrowings to shareholders funds
44.0%
Gearing
16.06
Tangible net asset backing per share (Kina)
14.7%
Net profit to revenue %
25.7%
Net profit to shareholders’ funds %
Underlying profit to shareholders’ funds %
25.1%
100
Dividends per share (toea)
376
EPS (toea)
366
Underlying EPS (toea)
73.4%
Earnings retained %
1.06
70.1%
38.3%
20.53
17.2%
27.4%
26.5%
190
510
495
62.1%
1.11
72.6%
39.2%
24.00
18.0%
26.2%
23.1%
285
573
504
50.3%
1.53
89.7%
46.5%
20.75
12.2%
16.0%
18.0%
185
368
414
41.8%
1.92
95.2%
47.8%
22.13
9.4%
12.0%
14.8%
140
286
351
51.0%
0.74
81.7%
43.1%
24.38
12.8%
12.5%
10.2%
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%
1.83
35.4%
19.5%
26.65
8.5%
5.6%
3.6%
80
161
102
10.1%
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
Steamships Annual Report 2019 5
CHAIRMAN’S REPORT
On 22nd March 2020, the Office of the Prime Minister declared a State of Emergency in Papua
New Guinea, for a period of 14 days, as a result of the global COVID-19 virus pandemic .
Although there are no reported cases present in PNG at present, there has inevitably been
an impact on businesses operating in the country with increased regulatory restrictions and a
reduction in demand for goods and services .
Steamships is working tirelessly to continue operating essential services to customers and has
the management expertise and resources to manage through the crisis. That said, the extent of
the economic impact of the virus, globally and in PNG is unknown and will inevitably depend
on the rate of infection and the government responses thereto, both globally and in PNG, and
how and when demand returns .
Further commentary on the impact of covid-19 on each of our divisions is set out in the Review
of Operations on page 12 to 19 and in note 30 to the Accounts
I now reflect on the performance of Steamships in 2019. After the euphoria in 2018, that saw
Steamships celebrate 100 years in PNG since our incorporation and Port Moresby successfully
hosting the APEC Leader’s Summit, 2019 was a challenging year for the country, and for
Steamships, with a continuation of the weakness in demand throughout the economy.
The lack of foreign currency continued to limit business
activity and the Kina weakened further against the US
Dollar. Government expenditure also remained constrained
by the ongoing national budget deficit and debts from APEC
going unpaid. The 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 2020, although there is broad cautious
optimism for an improved economic environment in 2021 .
However, much of the economic recovery relies on the
launch of the long-awaited resource extraction projects
at Wafi-Golpu and extension to the existing PNG LNG
infrastructure . It was encouraging to see the agreement
reached over Papua LNG in 2019 but this has turned to
concern over continuing delays to an agreement for the
P’nyang gas field, which appears to be in stalemate. These
agreements, and the significant investment that results,
would bring a much-needed boost to the economy.
Steamships is also closely following the progress of other
infrastructure investments, particularly road, port and
airport facilities, as this infrastructure is much needed if the
Government’s drive to promote agriculture and tourism is to
succeed . Steamships looks forward to being at the forefront
of opportunities that these investments will bring .
6 Steamships Annual Report 2019
Notwithstanding the Government’s supportive pro-business
and foreign investment statements, the private sector
remains concerned with the progress of legislative reform
intended to balance the need to foster growth for local
business and communities whilst continuing to encourage
foreign investment .
Coastal shipping continues to be a highly competitive
market and the small improvements in volume were offset by
pressures on rates and costs leading to another challenging
year for the industry. Following the completion of the
docking of the larger vessels during 2019, Consort Express
Lines’ operational performance rebounded with vessel
reliability and on-time performance significantly improved.
Project and charter activity improved towards the end of
the year, however, the docking of an ore carrier depressed
results in the division. Of significance, in May 2019,
Steamships bought out minority interests and amalgamated
Consort Express Lines into Steamships Limited . As a result,
a new management team was installed in September 2019
and is tasked with turning around the fortunes of Consort .
Progress to date is encouraging, though prospects for 2020
and beyond are reliant on a pickup in the general economy.
Pacific Towing had a satisfactory year, which included
completing its first significant wreck removal; a container
vessel in Fiji Harbour . Deep-sea towage work helped
compensate for a softer harbour towage market, enabling
a satisfactory result. East West Transport performed
satisfactorily though prior year adjustments led to a
disappointing result. The company remains committed
to the logistics sector, and its customers, winning several
significant contracts during the year.
Pacific Palms Property continues to maintain high quality
investments in strategic locations across PNG. Upgrades
and renovation across the portfolio helped drive improved
occupancy. There remains an oversupply in all sectors as
demand remains soft, with both rents and occupancy levels
under pressure. Despite the challenging market, Pacific
Palms Property broke ground on its mixed use Harbourside
CHAIRMAN’S REPORT
Steamships Annual Report 2019 7
CHAIRMAN’S REPORT
South project. The company continues to look for attractive
investment opportunities in the property sector and eagerly
awaits the introduction of strata title legislation that could
help stimulate the market .
PNG economy, whilst cautious and disciplined in facing
the short-term challenges . As ever, Steamships aspires to
contribute and participate in PNG’s economic and social
development for many years to come.
Coral Sea Hotel’s performance reflected a slow year of
economic activity. The relatively low number of visitor
arrivals and new capacity in the Port Moresby market
continued to pose a challenge in 2019 .
The Colgate Palmolive joint venture continued to benefit
from the growing demand for high quality consumer
household and personal care products .
The recent report from Moody’s (March 2020) confirms a B2/
stable rating for PNG. Steamships welcomes this conclusion
and remains confident in the medium-term prospects for the
Steamships has maintained its investment in the training
and development of its employees despite the economic
slowdown. We strive to be well-positioned for the recovery
in 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
31 March 2020
8 Steamships Annual Report 2019
CHAIRMAN’S REPORT
Steamships Annual Report 2019 9
DIRECTORS’ REVIEW
2019 was a difficult year for PNG after the euphoria of hosting the APEC summit in late 2018.
The economy remained weak in the absence of any progress on the much-needed investment
in the resource sector and the uncertainty caused by the change of Government in May 2019
and the consequent significant readjustment of national debt further dampened sentiment. The
National Budget presented in November 2019 projects 2020 will record the largest expenditure
and budget deficit in PNG’s history. The ongoing shortage of foreign currency in PNG continues
to suppress economic activity.
Continued budget support from multilateral agencies will
be essential and likely to entail economic reforms that will
impair economic activity in the short term.
capitalised interest) was K9.8 million against K10.3 million
in 2018. Capital expenditure for the year was K93 million
(with capitalised interest of K0.06 million) against K56.1
2019 was a challenging year for the private sector as a whole
and Steamships diverse business activities being closely
integrated to the domestic economy were not immune to
the negative impacts of the slowdown .
revenue
Steamships’ sales
from ongoing operations
increased 1% to K585.1 million against last year’s K581.8
million, on a continuing basis with improved revenue for
Consort offsetting declines for Pacific Palms Property &
Coral Sea Hotels .
Depreciation in 2019 was K82.3 million against K83
million in 2018, and net interest on borrowings (excluding
million (with capitalised interest of K1.7 million) in 2018.
The group’s net operating cash flow generation declined 4%
to K111.8 million against K116.7 million in 2018. The cash
balance at year end is K100.8m.
A final dividend of 55 toea per share has been proposed
and will be paid following approval at the company’s
annual general meeting on the 17th of June 2020, subject to
Steamships’ ability to secure foreign exchange for non PNG
shareholders. This brings the total dividend for the year to 80
toea per share (2018 = 165 toea per share). The dividend is
unfranked and there is no conduit foreign income .
Net Profit attributable to shareholders
49,995
69,529
-28.1%
Add back/(less) impact of significant items (post tax and minority interests)
2019
K000’s
2018
K000’s
Change
Impairment of Fixed Assets, Goodwill (incl Vessels)
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
0
0
0
0
789
(16,910)
(2,369)
(18,490)
7,854
21,469
1,498
(48,584)
687
(984)
(8,165)
(26,225)
Underlying profit attributable to shareholders
31,505
43,304
-27.2%
10 Steamships Annual Report 2019
Significant items
The gain on sale of properties is principally attributable to
the sale of a plot of land in Port Moresby by the Company
to an associated company, Harbourside Developments
Ltd, being the site for the new mixed-use development
Harbourside South .
Logistics
Consort Express Lines embarked on a significant turnaround
programme in 2019 in the face of a highly competitive
and depressed coastal liner and projects shipping market .
This has started to show results with improved fleet and
schedule reliability and customer service. New systems and
management have been introduced and Consort’s results are
improving . While investment in the resource sector remains
weak, the focus is on the liner service with opportunities
for projects and charter work, hopefully forthcoming later
in 2020 .
The Joint Venture Port Services businesses had a steady
performance in 2019, recovering from the loss of the
International Terminal Operator concessions in Port Moresby
and Lae in 2018 . JVPS now manages stevedoring and
handling in 10 ports around PNG as well as an equipment
hire business, providing a vital, safe and efficient operation
for these communities, whilst providing an economic return
to the local community shareholders.
East West Transport continues to grow its fleet and range of
services in a steady profitable manner, winning some key
new business in 2019 and maintaining a strong customer
and fleet reliability focus.
Pacific Towing experienced a modest year in its principal
harbour towage work across ports in PNG from its main
base at the Motukea port in Port Moresby. External towage
work provided steady work in 2019 with tugs deployed
throughout the region. Diving and life raft activity were
steady. The company was engaged in a number of successful
salvage and wreck removal operations in the region in 2019
and has established a strong reputation in this area .
Property & Hotels
Pacific Palms Property experienced a reduction in rental
rates in 2019 in the face of increased competition and was
unable to achieve the occupancy levels of the prior year and
profit fell as a result. In response to growing competition, an
upgrade programme was undertaken in Port Moresby and
Lae to maintain its quality leadership position. Construction
DIRECTORS’ REVIEW
of the Harbourside second phase, Harbourside South, with
residential, commercial and retail space, commenced mid-
year and is on track for mid-2022 opening.
the reduction
Coral Sea Hotels owns and manages nine properties in PNG
and suffered from the increased capacity in Port Moresby
coupled with
international arrivals .
Nevertheless, CSH is committed to remain competitive
through a sustained focus on investment in its quality
service offering, food and beverage as well the training and
development of its staff .
in
Commercial and Investments
Colgate-Palmolive, (PNG) Limited a PNG incorporated joint
venture, saw volume and sales revenue growth across all
three categories of Oral Care, Personal Care and Home
Care. Overall margin for the business was slightly lower
than budget. Overheads were prudently managed to finish
below prior year and in line with budget.
Trading Outlook
The outlook for 2020 is obviously clouded by the impact of
the COVID-19 pandemic, which is clearly a global crisis.
Our businesses are responding well to the new environment
in the face of a general decline in demand . It is not possible
to estimate the financial impact on Steamships, as PNG
and global economies react to the virus in the weeks and
months ahead . We have enacted numerous initiatives,
across the businesses, to give us the best possible set of
outcomes in different scenarios and emerging from the
crisis in good shape on the expectation that the crisis is well
managed globally and we can consider a return to some
form of normality. The attached financial statements for the
year ended 31 December 2019 contain an independent
auditors’ report which includes an emphasis of matter in
regards to the potential impact of the COVID-19 pandemic
on the group . For further information, refer to Note 1 to the
financial statements, together with the auditors’ report.
Whether the key resource projects proceed or not, 2020
will therefore be another challenging year for the PNG
economy. We remain hopeful that the state of emergency
is short lived and the resource projects will progress to
binding agreements and subsequent significant investment
that would be beneficial to the citizens of PNG and all the
other stakeholders in the projects
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 2019 11
REVIEW OF OPERATIONS - LOGISTICS
CONSORT EXPRESS LINES
Consort operates a fleet of 11 coastal vessels (six
vessels dedicated to the liner trade and five shallow
water landing craft and bulk carriers serving the
projects market). 10 of the 11 vessels are PNG flagged
and manned and are maintained in accordance with
Lloyds Registry international standards.
LINER SERVICES
Consort consistently connects 14 ports around
PNG. The Company has scheduled services to the
North Coast, South Coast, New Guinea Islands,
Bougainville and Western Province. Consort proudly
serves the people of PNG by providing an important
supply link to many of the communities on its routes.
The Company carries a range of cargoes including
containerised, break-bulk, reefer, LCL and project
cargo . Consort transports cargo for a diverse customer
base from domestic manufacturers and wholesalers
to international liner carriers transhipping cargos to
outports . In addition to owning and operating ships,
Consort manages PNGs largest fleet of containers
offering customers easy access to a wide range of
container types.
PROJECT CHARTERS
Consort provides short and long-term vessel charters
specialising in shallow water river shipping, and
develops,
intermodal
implements and supports
logistics solutions linked to land based services such
as road transport, cargo handling, storage, agency,
customs clearance, lay down areas and warehousing.
Both the liner and the project and charters market remained
soft in 2019. The positive economic outlook that existed in
2018 for 2019 did not materialise as investment in large-
scale resource projects was pushed back . Domestic cargo
volumes remained flat.
non-core assets and functions . Management of properties
with no direct relevance to the shipping businesses was
transferred to Steamships property division, as too was the
management of Consort’s four active stevedoring businesses
transferred to Joint Venture Port Services .
In May 2019, Steamships reached agreement with minority
shareholders to acquire the outstanding shares of Consort .
Consort was formally amalgamated into Steamships Limited
at the end of the year, and is now a wholly owned division
of Steamships . Consort continues to trade under its existing
brand Consort Express Lines. This ownership change
allowed Steamships to renew the management team, and in
the third quarter, a new General Manager, a Chief Operating
Officer, additional operational and commercial resources
were brought in .
Consort management is focused on its two core businesses
of liner shipping and project shipping and has divested of
Within Consort there has been renewed focus on the core
operational pillars of liner shipping: safe operations, well-
maintained vessels and equipment, operational excellence,
on-time services, and customer-centricity. To those ends,
certain internal functions have been consolidated into Lae,
there has been a substantial re-investment in crew training
and new digital systems have been implemented. Consort
also invested in new cargo carrying equipment in Lae so
that it could continue to meet the needs of its customers .
In 2019, the Niugini Coast and Gazelle Coast followed their
sister ship, the Bougainville Coast, into and out of dockyards
in China. These ships provide the core of Consort’s liner
12 Steamships Annual Report 2019
REVIEW OF OPERATIONS - LOGISTICS
CONSORT EXPRESS LINES
network. The Kiunga Chief and Balimo Chief were also
docked in Port Moresby. New reefer containers were bought
and delivered from Northern China to help Consort meet
the demand for cold storage shipments up and down the
coast of PNG. Operational reliability is expected to remain
at Q4 2019 levels after the dockings .
The 2020 outlook is clouded by the uncertain impact
of COVID-19 . At the time of writing, the vessels are
busier than ever, helping domestic businesses stock up
in anticipation of constrictions to their supply chains.
COVID-19 notwithstanding, Consort is well-positioned
to serve its customers in the current market with both its
liner network and its project fleet substantially refreshed.
The operational synergies between Consort’s two business
divisions allow it to be operationally ready for the resource
up-turn when it does arrive and to deal with the longer-term
impacts of COVID-19 should they become severe. Consort
remains ready to capitalise when the PNG economy does
improve .
Steamships Annual Report 2019 13
REVIEW OF OPERATIONS - LOGISTICS
PACIFIC TOWING
Pacific Towing is a market leader in the provision
of a diverse range of marine services, enjoying
a reputation for excellence and reliability. The
company’s core services include towage, moorage,
salvage, commercial diving, and life rafts (sales and
servicing).
Other Pacific Towing services include emergency
response, video pipeline inspections, PLEM valve
hook up and release, pollution prevention, and oil
spill response. Pacific Towing is also increasingly
sought out for its capacity to design, engineer
and
Significantly, the company introduced Melanesia’s
only in-water hull cleaning service at the end of
2019 .
implement customised project solutions .
Pacific Towing is headquartered in Port Moresby,
PNG, and operates 14 tugs and 10 associated
support vessels and is a full member of the
International Salvage Union and has fast responder
salvage capability. Its capacity to respond and
provide a range of salvage services is complemented
via partnerships with organisations both within
the Swire Group of companies (i.e., Swire Pacific
Offshore, Swire Emergency Response Services), as
well as those external to it (e.g., Perrott Salvage Pty
Ltd).
Pacific Towing experienced a slight decrease in harbour
towing jobs undertaken in 2019 compared to 2018 owing to
the declining vessel activity within Papua New Guinea. This
was partially offset by revenue from non-harbour operations.
These included a number of ocean tows and salvage and
wreck removals, though the impact of this revenue has been
offset by high operational costs. The company continued
to expand its geographic footprint further into Oceania and
South East Asia via a number of projects including the wreck
removal of the container ship ‘Southern Phoenix’ off the
coast of Fiji, as well as the open ocean towage of a barge
from Micronesia to Indonesia .
Pacific Towing purchased another tugboat late in 2019,
increasing fleet numbers to 14 tugs and 10 associated
support vessels in five ports across PNG (Port Moresby, Lae,
Rabaul, Kimbe and Madang). An additional tug dedicated to
harbour towage services is based in Honiara at the company’s
Solomon Islands operation. Pacific Towing’s expanding
fleet increased its towage service delivery capacity and the
additional purchase of a barge (complete with a 150 tonne
crane) greatly enhanced its salvage capabilities.
The company maintained its business strategy of localisation
and people development. 94% of Pacific Towing staff are
PNG nationals and the company is led by a predominantly
Papua New Guinean management team. Pacific Towing
continued to invest in high quality staff training and
development throughout the year.
Pacific Towing expanded its relationship with Swire Pacific
Offshore (SPO) by finalising the recruitment of another nine
cadets who will commence their training at sea on SPO
vessels in late 2020. The initial seven cadets who finished
their sea training in 2019 will progress to the academic
component of their cadetships .
The Women in Maritime Scholarship Program partnership
between Pacific Towing,
the Australian Government’s
Australia Awards and the China Navigation Company
continued with great success throughout 2019 with training
of the second intake of female cadets. The end of 2019
witnessed the commencement of the selection process for
even more female cadets – a process due for completion in
early 2020. Pacific Towing also signed a contract with the
PNG Business Coalition for Women to implement ‘Gender
Smart Safety’ – a workplace safety program designed to
maximise the safety of female personnel.
Operating to international standards, and well positioned
throughout the Pacific Islands region, Pacific Towing
expects underlying performance to remain solid in 2020,
notwithstanding the uncertainty injected into the market by
COVID-19 .
14 Steamships Annual Report 2019
REVIEW OF OPERATIONS - LOGISTICS
JOINT VENTURE PORT SERVICES
The group’s 10 Joint Venture Port Services (JVPS)
businesses operate throughout the country including
in the principal ports of Port Moresby, Lae as well
as elsewhere on the mainland and on Bougainville,
New Ireland and New Britain. The group expanded
the number of local land owner joint ventures to 10
in 2019 and formed a new equipment hire company
(JVHire Co). The core port businesses offer a full range
of stevedoring and handling facilities in the major
ports of PNG. With a fleet of specialist equipment,
the businesses handle all types of containers, as well
as project cargo, break-bulk, RO-RO, LO-LO, grains
and cement. The stevedoring companies are joint
ventures between Steamships and local landowner
groups at the respective ports around the country.
Each joint venture employs a local workforce and is
structured in a manner so that a significant share of
earnings is returned to the community in which the
joint ventures operate .
During 2019, JVPS took over four port operations from
Consort, consolidating all 10 of Steamships’ stevedoring
activities under the JVPS banner. As the country’s largest
professional stevedore, JVPS brings to these operations a
renewed focus on safety, professionalism and financial
discipline .
With soft across-the-wharf volumes, the focus in 2019
has been to improve customer service standards whilst
reducing costs. Technology has been deployed including
the introduction of live cargo updates direct into customers
booking and inventory management systems, electronic
payroll and increased levels of surveillance through digital
solutions. This focus on safety and governance, coupled
with high levels of productivity and professionalisms,
continues to provide a point of difference between JVPS and
its competitors .
Individual companies mostly performed to expectations with
the exception of Kiunga Port Services that was impacted by
low water levels on the Fly River. Operations in the ports of
Buka and Kieta in Bougainville suffered from low consumer
and investor confidence brought about by the uncertainty
surrounding the third quarter referendum on Bougainville’s
future. The referendum passed peacefully, and JVPS did not
experience any untoward interruption to its services.
JVPS is the only group of stevedoring and handling
companies in PNG to be ISO accredited for both Safety
and Environment. The business continues to work hard to
provide a seamless logistics solution for customers in PNG
drawing on the combined strengths of Swire Shipping,
Consort and East West Transport.
Exclusive of the impact of COVID-19, which is far from
certain at the time of writing, the businesses expects
volumes in 2020 to be similar to last year for the outer ports
with marginal growth in volumes in Port Moresby and Lae.
Papua New Guinea remains a nation highly dependent on
imports and the domestic shipping of basic goods. These
necessitate a continued use of ports irrespective of concerns
surrounding COVID-19 . After a slow start in 2019, JVPS
expects the performance of the hire company to improve.
Steamships Annual Report 2019 15
REVIEW OF OPERATIONS - LOGISTICS
EAST WEST TRANSPORT
intense. At the time of writing, the fleet was busier than
ever helping businesses prepare for COVID-19, however, it
remains unclear what the long-term impact of the virus will
be on demand. Management have contingency plans in
place to match capacity, up or down, to demand.
East West Transport (EWT) is one of Papua New
Guinea’s largest multifaceted transport and logistics
companies, with
ISO accreditation of 14001,
Environmental Management, & 18001, Occupational
Health & Safety. Based in Port Moresby, East West
Transport has operations 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 response teams and vehicles.
EWT operates across a wide spectrum of transport
related activities including bulk fuel, containerised
cargo and break-bulk cargo, and provides depot
services such as equipment hire, warehousing and
bonded or unbonded 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 logistics and project
solutions for the mining, oil and gas sectors and new
or existing commercial sectors .
2019 proved a tough year for EWT, with the company able
to grow top line revenue strongly but producing weaker
results off the back of significant pressure on margin.
However, in the intensively competitive market that is
transport and logistics in PNG, EWT continues to grow its
market share and revenue through a continued focus on
safety, professionalism, competitiveness, customer service
and fleet reliability. New contracts for both haulage and
storage were secured in Port Moresby and Lae in 2019, with
no major contract losses .
EWT team grew by 5% in 2019 and now has a team of
400, of which more than 99% are Papua New Guineans.
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
continue to be strengthened with a new Commercial
Manager joining in 2019 and a National Operations
Manager joining early in 2020.
Despite the likely short-term impact of COVID-19, modest
growth is anticipated in 2020 off the back of new long-term
contracts . Additional prime movers and rolling stock will
be added via fleet renewal and in line with conservative
growth predictions . Pressure on rates is expected to remain
16 Steamships Annual Report 2019
REVIEW OF OPERATIONS - PROPERTY
CORAL SEA HOTELS
Coral Sea Hotels (CSH) operates nine hotels,
residence and apartment properties offering full-
service hotel rooms and apartments as well as
extensive food & beverage outlets, recreation and
meeting, conference and banqueting facilities . CSH
opened a stand-alone ‘Enzo’s Pizza and Takeaway’
outlet in Harbourside, downtown Port Moresby,
testing the food concept for the first time outside
a hotel property. The company expects further
expansion of the Enzo’s brand. CSH added a new
300 seat conference facility to its Mount Hagen
Highlander Hotel in 4Q 2019 .
CSH is the largest hotel group in PNG, offering 592
hotel rooms, 132 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.
The operating environment in 2019 continued to be very
tough for the hospitality industry with international visitors
to PNG continuing to decline, and the delays to resource
based projects causing local and international business
uncertainty. During early 2019, additional capacity was
added into the Port Moresby market which has created
additional pressure on rates and occupancy across the
city. Nevertheless, CSH continue to outperform against
competitors as demonstrated by STR comparisons. Trading
conditions in Western Province remain particularly tough,
and the Cassowary Hotel continues to disappoint.
CSH completed
significant physical and process
improvements in 2019 to enhance the guest experience .
A new property management system and electronic guest
satisfaction survey were introduced early in the year. The
latter, with its improved data analytics, allows management
to respond more rapidly to the feedback provided by guest
and restaurant customers . A state of the art 300 seat
conference facility was added to The Highlander Hotel
in Mount Hagen. This conference facility is the only one
of its kind in the rapidly expanding Highlands Region of
PNG. Guest rooms and apartments at Gateway Hotel
and Apartments were renovated, as was the Wild Orchid
Restaurant. The Departure Bar will be renovated in the first
quarter of 2020. Significant capital was spent to upgrade
fire safety systems across the hotel group, and significantly
the new Harbourside South mixed use development (which
includes 88 apartments) broke ground. This development
will be ready for handover to Coral Sea Hotels in mid-2022.
The Grand Papua Hotel was once again the recipient of
the ‘World Luxury Hotel Award’ in the Australasia and
Oceania category. Maintaining and improving the guest
experience remains central to CSH strategy, and training
and development continued with managerial and customer
service training provided by SHATEC Singapore. This focus
on people will continue in 2020, with the first batch of staff
expected to join the Pacific Labour Scheme in 2020.
The travel restrictions and reduction of visitor numbers into
PNG owing to COVID-19 are having an immediate impact
on the occupancy throughout CSH. At the time of writing,
the State of Papua New Guinea has implemented a 14 day
State of Emergency, and in response, CSH Management have
temporarily closed one of the three Port Moresby hotels,
and adjusted inventory at other hotels. It is too early to tell
what the long-term impact of COVID-19 will be, but CSH
expect 2020 to be a tough year. Nevertheless, CSH will
use the downturn restructure its operations, and to develop
initiatives and projects that will allow it to prepare for the
expected improvements associated with the long-delayed
resource projects .
Steamships Annual Report 2019 17
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 in Port Moresby continues to put pressure
on properties within the capital .
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 . With additional developments coming on
stream during the year, the market for property sales was
slow in 2019 and this saw PPP preferring to hold properties
and upgrade them in advance of an anticipated uptick
towards the middle of the next decade .
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
Popondetta . Performance in Lae was strong .
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.
The residential portfolio remains strong across all locations.
However, the continuing growth of supply in Port Moresby
continues to put pressure on rates. This is something that
PPP manages through 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 2020 - business plan .
18 Steamships Annual Report 2019
REVIEW OF OPERATIONS - PROPERTY
PACIFIC PALMS PROPERTY
PPP’s joint venture projects in Mount Hagen, Madang and
Port Moresby are performing to expectation. Occupancy in
Hagen Central continues to pick up with several significant
tenants secured on long-term contracts .
PPP’s flagship development Harbourside East and West
precinct in Port Moresby remains at full occupancy and
the mixed use Harbourside South project commenced
construction in the second half of 2019 . Construction is
progressing well with completion targeted for mid-2022 .
Once completed, the fully integrated Harbourside precinct
will offer a wide range of commercial, retail and residential
services along with a vibrant food and beverage waterfront
location with harbour access .
PPP are also managing internal renovation and improvement
development works across PNG including various projects
for Coral Sea Hotels. Notably projects include substantive
upgrades to fire safety infrastructure across the portfolio and
the new conference centre at the Highlander Hotel. This
expanded project design, construction management and
commercial development will be increasingly important
as PPP looks to develop further large scale projects in the
coming years.
Despite the immediate pressures of dealing with COVID-19,
the focus in 2020 for PPP will be to continue to meet customer
service expectations, maintain high maintenance standards
and manage its portfolio of leases to maximise occupancy.
Exclusive of the impact of COVID-19, the outlook for 2020
remains stable if unexciting, however, how the virus will
impact performance remains to be seen with the inevitable
requests for rental rebates potentially balanced by upside
later in the year should the the major resource projects be
sanctioned. Notwithstanding short-term uncertainty, should
these projects go ahead, 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 2019 19
SUSTAINABILITY
A genuine commitment to the principles of Sustainable Development has always underpinned
the way that Steamships operates, and is key to delivering lasting value to its customers and
shareholders. This commitment, articulated by a focus on Our People, Our Community, and
Our Environment, will ensure that the Company remains relevant, and continues to make a
valuable and lasting economic and social contribution to Papua New Guinea.
leadership development
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 . A successful inaugural Annual HR Conference
was held mid-year engaging HR teams in dialogue around
the development and welfare of our employees, and an
over-arching
framework was
established, linking the Team Leadership Development
and Graduate Development programmes. A new Front
Leaders Development Programme will be introduced in
2020. Promoting our value of Safety First, employees from
our Logistics and Property divisions underwent custom
designed HSSE training at basic and supervisory levels,
and a cross group emergency response drill, simulating a
major earthquake and tsunami event, was conducted by
our leadership team. Two of our Divisions continued good
progress towards ISO accreditation .
Steamships recognises that every business has to earn and
maintain its right to operate . Having a positive impact on
the various communities in which Steamships operates is
key to this. Engagement with the community is facilitated
through an involvement in social programs that prioritise
four key areas; health, social welfare, education, sports and
culture, with emphasis on women and children. 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 2019, as well as announcing a five year
K2.0m partnership with Buk bilong Pikinini to support an
additional six learning centres across the country. Projects
in 2019 included a water sanitation project in Morobe
province, a cervical cancer HPV vaccination programme in
Milne Bay, and a gender transformative Women’s Maritime
Scholarship Programme .
Environmental Sustainability continues to be a focus area
for the Company. Responsible and sustainable energy
consumption is managed through the regular monitoring
and reporting of energy use, water use and environmental
emissions at operational level . Steamships again partnered
with the Conservation and Environment Protection Authority
to sponsor World Environment Day, delivering awareness
lectures to selected school children, and coordinating a
number of educational activities to highlight the importance
of environmental sustainability. Steamships continues to
support the Wanang Conservation Project near Madang; a
project that has won many international accolades for its
20 Steamships Annual Report 2019
research and preservation of Papua New Guinea’s rich and
unique flora and fauna.
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.
Photo courtesy of Sago Network.
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 2019 Annual
Report or on the Steamships’ website .
Steamships believes it complied with the Australian Stock
Exchange Corporate Governance Principles (the fourth
edition) during the twelve months ended 31 December
2019, except where noted in the Corporate Governance
Report .
Steamships’
can
Corporate Governance
be found at http://www.steamships.com.pg/aboutus/
corporategoverance
Report
Steamships Annual Report 2019 21
STATEMENTS OF COMPREHENSIVE INCOME
Steamships Trading Company Limited Year Ended 31 December 2019 (Amounts in Kina 000’s)
Note
2019
Consolidated
2018
(restated)
Parent Entity
2019
2018
Continuing Operations
Revenue
Other income
Operating expenses
OPERATING PROFIT
Finance income
Finance costs
Share of profit of associates and joint ventures
PROFIT BEFORE INCOME TAX
Income tax expense
3(a)
3(a)
3(b)
3(e)
3(e)
4(b)
5(a)
PROFIT FROM CONTINUING OPERATIONS
Profit after tax from discontinued operations
25
PROFIT FOR THE YEAR
Attributable to:
Non-controlling interests
Shareholders
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
attributable to owners arises from:
Continuing operations
Discontinued operations
585,168
581,815
-
-
(514,038)
(509,393)
71,130
7,938
72,422
5,199
(17,784)
(15,492)
5,010
66,294
(18,928)
47,366
-
47,366
(2,629)
49,995
47,366
5,628
67,757
(53,886)
13,871
49,830
63,701
(5,828)
69,529
63,701
48,000
3,021
(1,870)
49,151
72
-
-
49,223
(307)
48,916
-
59,634
37,609
(2,364)
94,879
72
-
-
94,951
(83)
94,868
-
48,916
94,868
-
48,916
48,916
-
94,868
94,868
49,995
-
49,995
19,699
49,830
69,529
48,916
94,868
-
-
48,916
94,868
Basic and Diluted Earnings per share
Continuing & discontinued (toea)
Continuing (toea)
3(f)
3(f)
161t
161t
224t
64t
These Statements of Comprehensive Income are to be read in conjunction with the accompanying notes.
22 Steamships Annual Report 2019
STATEMENTS OF CHANGES IN EQUITY
Steamships Trading Company Limited Year Ended 31 December 2019 (Amounts in Kina 000’s)
Consolidated
Share
Capital
Retained
Earnings
Other
Total Capital Controlling
Reserves & Reserves
Interest
Total
Equity
Non-
BALANCE AT 1 JANUARY 2018
24,200
826,758
(8,994)
841,964
36,190
878,154
Adjustments to opening retained earnings on
adoption of IFRS15
Profit for the year
Equity adjustment on acquisition of new
entity (Note 24)
Adjustment on disposal of subsidiary
Dividends paid 2018
-
-
-
-
BALANCE AT 31 DECEMBER 2018
24,200
896,105
Profit for the year
Adjustment on acquisition of minority interest
in subsidiary (Note 24)
Dividends paid 2019
-
-
-
1,740
69,529
33,429
49,995
(8,994)
8,994
(26,357)
-
-
1,740
-
1,740
69,529
(5,828)
63,701
33,429
-
-
-
33,429
-
(26,357)
(10,639)
(36,996)
920,305
19,723
940,028
49,995
(2,629)
47,366
-
-
-
-
(40,295)
(40,295)
10,738
(29,557)
(44,962)
-
(44,962)
(10,085)
(55,047)
BALANCE AT 31 DECEMBER 2019
24,200
901,138
(40,295)
885,043
17,747
902,790
Parent Entity
Share
Capital
Retained
Earnings
Total
Equity
BALANCE AT 1 JANUARY 2018
24,200
(3,266)
20,934
Profit for the year
Dividends paid 2018
-
-
94,868
94,868
(26,357)
(26,357)
BALANCE AT 31 DECEMBER 2018
24,200
65,245
89,445
Profit for the year
Dividends paid 2019
-
-
48,916
48,916
(44,962)
(44,962)
BALANCE AT 31 DECEMBER 2019
24,200
69,199
93,399
This Statement of Changes in Equity is to be read in conjunction with the accompanying notes.
There is no other comprehensive income.
Steamships Annual Report 2019 23
STATEMENTS OF FINANCIAL POSITION
Steamships Trading Company Limited As At 31 December 2019 (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
Lease liabilities
Provisions for other liabilities and charges
Loans from related companies
Loan from minority shareholder
Borrowings
Income tax payable
Non-current liabilities
Lease 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
2019
2018
2019
2018
6
7
8
5(e)
10
10
11
4(a)
9
12
5(c)
13
14
15
9
16
16
5(e)
14
5(c)
15
16
17
100,832
148,118
13,351
9,507
-
271,808
610,646
360,282
41,586
88,577
76,433
2,311
1,179,835
1,451,643
75,407
3,772
51,542
15,662
160
1,743
-
148,286
68,464
18,866
11,237
302,000
400,567
548,853
902,790
24,200
860,843
885,043
17,747
902,790
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
-
471
-
-
-
471
23,396
-
195,887
5,635
-
485
225,403
225,874
-
-
-
132,415
-
-
60
132,475
-
-
-
-
-
132,475
93,399
24,200
69,199
93,399
-
93,399
-
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
These Statements of Financial Position are to be read in conjunction with the accompanying notes.
For and on behalf of the Board:
31 March 2020
G.L. Cundle
Chairman
M.R. Scantlebury
Managing Director
24 Steamships Annual Report 2019
STATEMENTS OF CASH FLOWS
Steamships Trading Company Limited Year Ended 31 December 2019 (Amounts in Kina 000’s)
Consolidated
Parent Entity
Note
2019
2018
2019
2018
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers and employees
Interest received
Interest and other finance costs paid
Income tax paid
595,374
587,981
(451,452)
(430,786)
7,938
(14,502)
(25,503)
5,199
(15,492)
(30,220)
Net cash provided by operating activities
19
111,855
116,682
5,023
(1,967)
72
-
(250)
2,877
5,019
(2,290)
72
-
(211)
2,590
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant & equipment
Proceeds from sales of property, plant & equipment
Proceeds on sale of investment
Cash balance received in acquiring Croesus entities
24
Loans issued to associated companies
Loans repaid by associated companies
Dividends received
(94,250)
24,409
-
-
(22,846)
-
23,488
(56,114)
(783)
(2,139)
14,662
147,464
47,632
(2,022)
10,084
7,548
-
-
-
-
-
-
78,770
-
-
-
48,000
47,217
59,634
136,265
Net cash (used in)/provided by investing activities
(69,199)
161,192
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of borrowings
Proceeds from borrowings
Loans received from subsidiaries
Loans repaid to subsidiaries
Loans received from associated companies
Loans repaid to associated companies
Purchase of additional shares in subsidiary
Lease repayments
Dividends paid
(10,000)
10,000
-
-
-
(31,732)
(40,379)
(5,248)
(55,047)
(41,627)
-
-
-
5,236
(12,354)
-
-
26,717
-
-
-
-
-
(31,850)
-
-
-
-
(112,499)
-
-
-
-
(36,995)
(44,961)
(26,356)
Net cash used in by financing activities
(132,406)
(85,740)
(50,094)
(138,855)
NET (DECREASE)/INCREASE IN CASH HELD
(89,750)
200,196
NET CASH AT BEGINNING OF THE YEAR
NET CASH AT END OF THE YEAR
188,839
99,089
(11,357)
188,839
CASH COMPRISES:
Cash and cash equivalents
Bank overdrafts
6
16
100,832
193,521
(1,743)
99,089
(4,682)
188,839
-
-
-
-
-
-
-
-
-
-
-
-
These Statements of Cash Flows are to be read in conjunction with the accompanying notes.
Steamships Annual Report 2019 25
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2019 (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
31 March 2020 .
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 .
Going concern
The financial statements for the year ended 31
December 2019 have been prepared on a going
concern basis which contemplates the realisation of
assets and settlement of liabilities in the normal course
of business as they become due.
As at 31 December 2019, the Group had cash reserves
of K100.8m and net current assets of K123.5m. During
the year ended 31 December 2019 the Group reported
a profit after tax of K47.4m and a net cash inflow from
operating activities of K111.9m. At 31 December 2019
the Group had K263.0m in committed, undrawn bank
facilities, with financial institutions. The Group has
bank borrowings of K303.7m, including K182.0m that
is due for repayment in April 2021.
Since 31 December 2019, the global COVID-19
pandemic has had a significant adverse impact on the
global economy and, at the date of reporting, Papua
New Guinea is in a State of Emergency (“SOE”). The
slowing of the global economy and travel restrictions
have reduced demand
for goods and services
generally. Since the announcement of the SOE, each
of the businesses operated by the Group has been
significantly affected.
Whilst the outbreak did not have a significant impact
on PNG and the Group’ business for almost all of the
first quarter of 2020, immediately prior to and since
the announcement of the SOE, each of the businesses
operated by the Group has been affected. Each
has a business continuity plan which is now active.
Management is operating effectively, and in dialogue
with customers, suppliers, bankers and regulators, to
address the challenges that are presented .
26 Steamships Annual Report 2019
Under the SOE, there are restrictions on incoming travel
and this has resulted in a reduction in occupancy in
our hotels and bookings being cancelled . Management
have already taken action to respond and have ceased
operation of certain hotels to preserve cash in the event
that the situation continues or worsens .
The property business benefits from the majority of its
portfolio committed on leases which extend beyond the
current period of the operation of the SOE . However,
if the period is extended for a considerable period and
the situation, both globally and in PNG, worsens then
renewal of these leases or the ability of tenants to meet
their rent obligations will be at risk .
The logistics business has so far been largely unaffected.
All announcements from the governing National
Operations Committee have been supportive of the
need to keep essential services going and the four
businesses in this sector have continued to operate .
A reduction in economic activity resulting from the
pandemic has the potential to reduce demand for the
Group’s logistics services with an adverse consequence
on cash flows.
It is anticipated that the COVID-19 pandemic is likely
to have an adverse impact on the Group’s business,
results of operations and cash flows in 2020. At the
date of these financial statements it is not possible to
reliably estimate the financial impact on the Group.
Management will continue to monitor the impact
of COVID-19 on the financial performance of the
business and further measures may be required.
As a result of these matters there exists a material
uncertainty that may cast significant doubt on the
Group’s ability to continue as a going concern, and
therefore it may be unable to realise its assets and settle
its liabilities and commitments in the normal course
of business and at the amounts stated in the financial
report .
The economic uncertainty associated with the COVID-19
outbreak has been considered by the Board in assessing
the potential financial impact on the Group’s ability
to continue to generate positive cash flows, to comply
with financial covenants and to meet debts as and
when they fall due. At the date of this report, the Board
are of the opinion that the Group will be successful
in managing the impacts of the COVID-19 pandemic
and will continue to realise its assets and discharge its
liabilities in the normal course of business and at the
amounts stated in the financial report. Accordingly, no
adjustments have been made to the financial report
relating to the recoverability and classification of the
asset carrying amounts or the amounts and classification
of liabilities that might be necessary should the Group
not continue as a going concern .
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2019 (Amounts in Kina 000’s unless otherwise stated)
(i)
Standards,
effective in the year ended 31 December 2019
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 2019.
•
•
•
IFRS 16, ‘Leases’ removes the previous IAS
17 distinction between finance leases and
operating leases and 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 .
Amendment to IFRS 9 on prepayment features
with negative compensation. This amendment
liability
that when a financial
confirms
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 original
contractual cash flows and the modified cash
flows discounted at the original effective
interest rate .
the difference between
‘Uncertainty over
income
tax
IFRIC 23,
treatments’ clarifies how
the recognition
and measurement requirements of IAS 12
‘Income Taxes’ are applied where there is
uncertainty over income tax positions. The
IFRS IC had clarified previously that IAS 12,
not IAS 37 ‘Provisions, contingent liabilities
and contingent assets’, applies to accounting
for uncertain income tax treatments . IFRIC
23 explains how to recognise and measure
deferred and current income tax assets and
liabilities where there is uncertainty over a tax
treatment . A subsequent IC agenda decision
also provided guidance on the presentation of
uncertain tax positions .
•
Annual improvements 2015 – 2017. These
amendments include minor changes to:
-
-
-
IFRS 3
‘Business combination’ – a
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 joint control of the business .
IAS 12 ‘Income taxes’ – a company
accounts for all income tax consequences
of dividend payments according
to
where the past transactions or events
that generated distributable profits were
recognised .
-
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. 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 before applying the loss allocation
and impairment requirements in AASB 128
Investments in Associates and Joint Ventures .
•
Amendments to IAS 19, ‘Employee benefits’ on
plan amendment, curtailment or settlement .
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 .
The implementation of IFRS 16 Leases required
the Group to change its accounting policy as a
lessee under lease contracts as set out in Notes
1(a) (iii) and 1 (x). The other changes did not have
any material impact on the Group.
(ii) Standards, amendments and
interpretations
issued but not yet effective for the year ended 31
December 2019 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
2020 or later periods, but the entity has not early
adopted them:
•
Amendments to IFRS 3 – definition of a
business (effective 1 January 2020). This
the definition of a
amendment
business. According to feedback received by
revises
Steamships Annual Report 2019 27
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2019 (Amounts in Kina 000’s unless otherwise stated)
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
-
-
-
use a consistent definition of materiality
throughout IFRSs and the Conceptual
Framework for Financial Reporting
clarify the explanation of the definition of
material; and
incorporate some of the guidance in IAS 1
about immaterial information .
• Amendments to IFRS 9, IAS 39 and IFRS 7 –
interest rate benchmark reform (effective 1
January 2020). Following the financial crisis,
the replacement of benchmark interest rates
such as LIBOR and other inter-bank offered
rates (‘IBORs’) has become a priority for
global regulators. These amendments relate
to hedge accounting and have the effect
that IBOR reform should not generally cause
hedge accounting to terminate . However,
any hedge ineffectiveness should continue to
be recorded in the income statement under
both IAS 39 and IFRS 9 . Furthermore, the
amendments set out triggers for when the
reliefs will end, which include the uncertainty
arising from interest rate benchmark reform
no longer being present .
• 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
This note explains the impact of the adoption
of IFRS 16 ‘Leases’ on the Group’s financial
statements .
28 Steamships Annual Report 2019
IFRIC 4:
IFRS 16 replaces the guidance in IAS 17
‘Determining whether
‘Leases’,
an Arrangement contains a Lease’, SIC 15
‘Operating Leases – Incentives’ and SIC 27
‘Evaluating the Substance of Transactions
Involving the Legal Form of a Lease’ .
The adoption of IFRS 16 from 1 January 2019
resulted in changes in accounting policies
and adjustments to the amounts recognized in
the financial statements. The new accounting
policies are set out below. The Group
has adopted IFRS 16 using the modified
retrospective method. Comparative figures
have not been restated and the cumulative
adjustments arising on adoption have no
impact on the opening balance of retained
earnings brought forward as at 1 January
2019 .
IFRS 16 introduces a single, on-balance
sheet lease accounting model for lessees . A
lessee recognises a right-of-use (“ROU”) asset
representing its right to use the underlying
asset and a lease liability representing its
obligations to make lease payments. The ROU
asset is depreciated throughout the lease
period in accordance with the depreciation
requirements of IAS 16 ‘Property, Plant and
Equipment’ whereas the lease liability is
accreted to reflect interest and is reduced
to reflect
lease payments made. Lessor
accounting remains similar to the current
standard . As a result of adaptation of IFRS 16
the Group recognised ROU assets of K41.3M
on 1 January 2019 together with an equivalent
lease liability. The detailed impact of the
change in accounting policies are set out in
Note 29 .
As permitted by the transitional provision
of IFRS 16, the Group has elected to adopt
the simplified
transition approach where
the cumulative effects of initial application
are recognised on 1 January 2019 as an
adjustment to the opening balance of retained
earnings. The Group has also applied the
following practical expedients under IFRS 16:
• No adjustments are made on transition for
leases for which the underlying asset is of
low value .
• Single discount
to
rate
portfolio of leases with reasonably similar
characteristics .
is applied
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2019 (Amounts in Kina 000’s unless otherwise stated)
• The Group does not apply the standard to
leases which the lease term ends within
12 months from 1 January 2019.
• The Group uses hindsight in determining
lease term for contracts that contain
options for extension or termination .
The Group has also elected not to apply IFRS 16
to contracts that were not identified as containing
a lease under IAS 17 and IFRIC 4 ‘Determining
whether an Arrangement contains a Lease’ .
(iv) Comparative information
Comparative figures have been adjusted to
conform to changes in presentation in the
current year. Accordingly, operating expenses
of K20,998,000 were netted off against
revenue in the Group’s financial statements
for the year ended 31 December 2018. As
related revenue and expenses for year ended
31 December 2019 are presented on gross
basis, to ensure comparability, the Group
has restated comparative amounts of revenue
and operating expenses in these financial
statements .
(b) Foreign currency
is
The Company’s
functional and presentation
currency
the Papua New Guinea Kina.
Transactions in foreign currencies have been
translated into the functional currency at rates
ruling at the date of the transaction . Amounts
payable to and by the Group in foreign currencies
have been translated to the functional currency
at rates of exchange ruling at the year end. Gains
and losses arising from movements in foreign
exchange rates are recognised in the statement of
comprehensive income when they arise.
(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 2019 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 1(d).
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.
in
interests
the results and
Non-controlling
equity of subsidiaries are shown separately in the
consolidated statement of comprehensive income,
statement of changes in equity and balance sheet
respectively.
(ii) Associates
Associates are all entities over which the Group
has significant influence but not control generally
accompanying a shareholding of between 20% and
50% of the voting rights . Investments in associates
are accounted for using the equity method of
accounting, after initially being recognised at cost.
The Group’s investment in associates includes
goodwill identified on acquisition.
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,
long-term
including any other unsecured
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
Steamships Annual Report 2019 29
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2019 (Amounts in Kina 000’s unless otherwise stated)
associates have been changed where necessary to
ensure consistency with the policies adopted by
the Group.
(iii) Joint ventures
Joint venture entities
Interests in joint ventures are accounted for using
the equity method after initially being recognised
at cost as for associates .
(iv) Changes in ownership interests
The Group treats transactions with non-controlling
interests that do not result in a loss of control as
transactions with equity owners of the Group.
A change in ownership interest results in an
adjustment between the carrying amounts of
the controlling and non-controlling interests to
reflect their relative interests in the subsidiary. Any
difference between the amount of the adjustment
to non-controlling interests and any consideration
paid or received is recognised in a separate reserve
within equity attributable to shareholders.
When the Group ceases to have control or
significant influence, any retained interest in
the entity is re-measured to its fair value with
the change in carrying amount recognised in
profit or loss. This fair value becomes the initial
carrying amount for the purposes of subsequently
accounting for the retained interest as an associate
or financial asset. In addition, any amounts
previously recognised in other comprehensive
income in respect of that entity 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
30 Steamships Annual Report 2019
in
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.
The excess of the consideration transferred, the
amount of any non-controlling interest in the
acquiree and the acquisition date fair value of any
previous equity interest in the acquiree over the fair
value of the Group’s share of the net identifiable
assets acquired is recorded as goodwill . If those
amounts are less than the fair value of the net
identifiable assets of the subsidiary acquired
and the measurement of all amounts has been
reviewed, the difference is recognised directly in
determining profit or loss as a bargain purchase.
Where settlement of any part of cash consideration
is deferred, the amounts payable in the future are
discounted to their present value as at the date of
exchange. The discount rate used is the entity’s
incremental borrowing rate, being the rate at
which a similar borrowing could be obtained from
an independent financier under comparable terms
and conditions .
Contingent consideration is classified either as
equity or a financial liability. Amounts classified as
a financial liability are subsequently re-measured
to fair value with changes in fair value recognised
in profit or loss.
Predecessor accounting is applied for business
combinations among entities under common
including acquisitions of entities .
control,
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
Revenue which represents income arising in
the course of the Group’s ordinary activities
to each distinct
is recognised by reference
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2019 (Amounts in Kina 000’s unless otherwise stated)
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
contract and implied in the Group’s customary
business practices . A good or service is distinct if:
-
-
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 26, 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
taking into consideration the days of shipment. In
case of sale of goods (such as containers), revenue
is recognized at a point of time. Payment terms
for freight and shipping services and land transport
services are typically 30 days; payment terms for
towage services are typically within 30 days after
completion of service delivery.
Salvage revenue is recognised over time as the
performance obligation (in this case salvaging
activity) is performed, based on the days of
provision of service, 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 recognises salvage revenue over
time if the customer simultaneously receive and
consume the benefits provided by the Group’s
performance as the Group performs. In such cases,
the Group typically has a right to payment based
on work performed until the reporting date. The
Group recognises salvage revenue at a point in
time when the customer does not simultaneously
receive and consume the benefits provided by
the Group’s performance as the Group performs
and has no enforceable right to payment for
performance completed to date .
Payment terms for salvage work vary between
one and three months . Where salvage work
is completed but the amount of proceeds is
not known at the reporting date, revenue is
determined on the basis of expected proceeds
taking
into account estimation uncertainty.
The estimated amount of consideration will be
recognised as revenue only to the extent that it is
highly probable that a significant reversal in the
amount of cumulative revenue recognised will not
occur when the uncertainty associated with the
consideration is subsequently resolved.
to
incurs costs needed
fulfil
The Company
salvage contracts and defers these costs incurred
directly related to salvage work, if their recovery
is considered probable based on management’s
assessment . If management’s assessment suggests
the expenses is not expected to be recovered, the
estimated unrecoverable portion is expensed when
incurred. Probability of recoverability of initially
recognised deferred salvage costs is assessed at
the end of each reporting period . In the reporting
period when management’s assessment suggests
that these expenses will not likely be recovered by
revenues i .e . the related contract asset is deemed
impaired, the estimated unrecoverable portion is
Steamships Annual Report 2019 31
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2019 (Amounts in Kina 000’s unless otherwise stated)
expensed . Deferred salvage costs are amortised
in profit or loss on a systematic basis consistent
with the pattern of recognition of the associated
revenue .
Revenue from the hotels business from provision
of services is recognised over time based on the
days of provision of service; payments for provided
services are made upon service delivery. Revenue
from sale of goods in hotels business is recognized
at a point in time upon delivery of goods under
typical credit term of 30 days or in cash. Lease
income 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 when the goods
are accepted by the customers, under typical
payment terms of 30 days after the delivery of
goods .
The following other income is recognized across
the Group as follows:
Interest income - Interest income is recognised
using the effective interest method .
Dividend income - Dividends are recognized
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 on temporary
differences arising between the tax bases of
assets and liabilities and their carrying amounts
in the financial statements. Deferred tax is not
recognized if it arises from the initial recognition
of goodwill or the initial recognition of an asset or
liability in a transaction which is not a business
combination and at the time of the transaction,
affects neither accounting profit nor taxable profit
(tax loss). 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 .
32 Steamships Annual Report 2019
(g) Cash and cash equivalents
For the purpose of the statement of cash flows,
cash and cash equivalents includes cash on hand,
deposits held at call with banks and Treasury Bills
with an original maturity of up to 3 months. 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 .
(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
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2019 (Amounts in Kina 000’s unless otherwise stated)
of a disposal group classified as held for sale
continue to be recognised .
Non-current assets classified as held for sale and
the assets of a disposal group classified as held for
sale are presented separately from the other assets
in the balance sheet. The liabilities of a disposal
group classified as held for sale are presented
separately from other liabilities in the balance
sheet .
A discontinued operation is a component of the
entity that has been disposed of or is classified as
held for sale and that represents a separate major
line of business or geographical area of operations,
is part of a single coordinated plan to dispose of
such a line of business or area of operations, or is
a subsidiary acquired exclusively with a view to
resale. The results of discontinued operations are
presented separately in the income statement.
(k) Financial assets
The Group classifies all of its financial assets in
the measurement category ‘Financial assets at
amortised cost’ .
its financial assets at
The Group classifies
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 2019 and 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
the Group has transferred substantially all the risks
and rewards of ownership .
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.
ECL is measured based on either the general
3-stage approach or the simplified approach.
The general 3-stage approach is applied 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).
The simplified approach is applied for trade
receivables and other receivables, including inter-
company balances.
trade receivables,
For
the Group applies a
simplified approach in calculating ECLs. The
Group does not track changes in credit risk, but
instead recognises a loss allowance based on
Steamships Annual Report 2019 33
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2019 (Amounts in Kina 000’s unless otherwise stated)
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
receivables have been grouped based on shared
credit risk characteristics, such as days past due.
Individual assessment
Trade receivables, other receivables and amounts
due from related parties which are in default or
credit-impaired are assessed individually.
(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 . Land is not depreciated . Depreciation on
other items of property, plant and equipment 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:
Buildings
Ships
Plant and fittings
Motor vehicles
2 – 4%
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
34 Steamships Annual Report 2019
under operating leases . Properties that comprise
a portion held to earn rentals and a portion for
own use or occupation will only be classified as
investment property if an insignificant portion
is held for own use of occupation . Investment
properties are recognised when it is probable
that future economic benefits associated with
the property will flow to the Group and the
cost of the investment property can be reliably
measured . Investment properties are stated at cost
less accumulated depreciation and accumulated
impairment losses. Transaction costs are included
on initial measurement. Borrowing costs directly
attributable to the acquisition or construction of
qualifying assets are added to the cost of those
assets until the assets are ready for their intended
use. The fair values of investment properties are
disclosed in the Note 11. These are assessed
using internationally accepted valuation methods,
such as taking comparable properties as a guide
to current market prices or by applying the
discounted cash flow method. Like property,
plant and equipment,
investment properties
are normally depreciated using the straight-line
method over similar useful lives .
(n) Goodwill
Goodwill represents the excess of the cost of
an acquisition over the fair value of the Group’s
share of the net identifiable assets of the acquired
business at the date of acquisition .
is capitalised and assessed
Goodwill
for
impairment annually or more frequently if events
or changes in circumstances indicate a potential for
impairment and is carried at cost less impairment
losses. Any impairment is recognised immediately
as an expense and is not subsequently reversed.
Gains and losses on the disposal of an entity
include the carrying amount of goodwill relating
to the entity sold. Goodwill is allocated to cash-
generating units for the purpose of impairment
testing .
(o) Trade and other payables
These amounts represent obligations to pay for
goods and services that have been acquired in the
ordinary course of business from suppliers. They
are 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.
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2019 (Amounts in Kina 000’s unless otherwise stated)
(p) Provisions
Provisions are recognised when the Group has a
present legal or constructive obligation as a result
of past events; it is probable that an outflow of
resource embodying economic benefits will be
required to settle the obligation; and a reliable
estimate of the amount of the obligation can be
made .
A liability for annual leave is recognised and
measured at the amount of unpaid leave at
amounts expected to be paid to settle the present
entitlements. A liability for long service leave is
recognised taking into consideration expected
future wage and salary levels, experience of
employee departures and periods of service,
discounted to present values .
A provision for estimated ship dry docking costs is
only recognised where the Group has a contractual
obligation under a Bare Boat charter agreement
from a third party. Dry docking costs relating
to ships not under third party long term charter
agreements are only recognised as incurred, and
are capitalised to the extent that the previously
assessed economic benefits associated with the
asset are restored .
(q) Employee benefits
(i) Short term obligations
Liabilities for wages and salaries, including non-
monetary benefits, annual leave and accumulating
sick leave expected to be settled within 12 months
after the end of the period in which the employees
render the related service are recognised in
respect of employees’ services up to the end of the
reporting period and are measured at the amounts
expected to be paid when the liabilities are settled .
The liability for annual leave and accumulating
sick leave is recognised in the provision for
employee benefits. All other short term employee
benefit obligations are presented as payables.
(ii) Other long-term employee benefit obligations
The liability for long service leave and annual
leave which is not expected to be settled within
12 months after the end of period in which the
employees render the related service is recognised
in the provision for the employee benefits and
measured as the present value of expected future
payments to be made in respect of services
provided by employees up to the end of the
reporting period using the projected unit credit
method . Consideration is given to expected future
wage and salary levels, experience of employee
departures and periods of service . Expected future
payments are discounted using the market yields
at the end of the reporting period on national
government bonds with terms to maturity and
currency that match, as closely as possible, the
estimated future cash outflows.
(iii) Termination benefits
are
benefits
payable when
Termination
employment is terminated by the Group before the
normal retirement date, or whenever an employee
accepts voluntary redundancy in exchange for
these benefits. The Group recognises termination
benefits at the earlier of the following dates: (a)
when the Group can no longer withdraw the offer
of those benefits; and (b) when the entity recognises
costs for a restructuring that is within the scope of
IAS 37 and involves the payment of termination
benefits. In the case of an offer made to encourage
voluntary redundancy, the termination benefits
are measured based on the number of employees
expected to accept the offer. Benefits falling due
more than 12 months after the end of the reporting
period are discounted to their present value .
(r) Borrowings
Borrowings are recognised initially at fair value,
net of any transaction costs incurred, and are
subsequently measured at amortised cost using
the effective interest method . Borrowings are
classified as current liabilities unless the Group
has an unconditional right to defer settlement of
the liability for at least 12 months after the end of
the reporting period .
(s)
Impairment of assets
Assets that have an indefinite useful life are not
subject to amortisation and are tested annually for
impairment . Assets that are subject to depreciation
or amortisation are reviewed for impairment
whenever events or changes in circumstances
indicate that the carrying amount may not be
recoverable . An impairment loss is recognised
for the amount by which the asset’s carrying
value exceeds its recoverable amount, which
is determined as the higher of an asset’s fair
value less costs to sell and its value in use . 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
Steamships Annual Report 2019 35
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2019 (Amounts in Kina 000’s unless otherwise stated)
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%(2018 – 4.5%).
(u) Segment reporting
Operating segments are reported in a manner
consistent with the internal reporting provided
to the chief operating decision maker. The chief
operating decision maker, who is responsible for
allocating resources and assessing performance of
the operating segments, has been identified as the
Strategic Steering Committee .
(v) Earnings per share
Basic earnings per share is calculated by dividing
the profit attributable to equity holders of the
Group, by the weighted average number of
ordinary shares outstanding during the financial
year. There are no potential ordinary shares on
issue and hence the diluted earnings per share is
equal to the basic earnings per share .
(w) Goods and services tax (GST)
Revenues, expenses and assets are recognised net
of the amount of associated GST. Receivables and
payables are stated inclusive of GST. The amount of
GST recoverable from, or payable to, the Taxation
authority is included with other receivables or
payables in the balance sheet.
(x) Leases
Accounting policies applied from 1 January 2019
Leases are recognised as a right-of-use asset and
a corresponding liability at the date at which the
leased asset is available for use by the Group or
on the date of adoption of IFRS 16 (refer to Note
1(a)). Each lease payment is allocated between
the liability and finance cost. The finance cost is
charged to 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. The right-of-use asset is depreciated over
the shorter of the asset’s useful life and the lease
term on a straight-line basis .
36 Steamships Annual Report 2019
Assets and liabilities arising from a lease are
initially measured on a present value basis. Lease
liabilities include the net present value of the
following lease payments:
• fixed payments
in-substance
fixed payments), less any lease incentives
receivable;
(including
• variable lease payments that are based on an
index or a rate;
• amounts expected to be payable by the lessee
under residual value guarantees;
• the exercise price of a purchase option if the
lessee is reasonably certain to exercise that
option, and
• payments of penalties for terminating the
lease, if the lease term reflects the lessee
exercising that option .
The lease payments are discounted using the
interest rate implicit in the lease, if that rate can be
determined, or the group’s incremental borrowing
rate .
Right-of-use assets are measured at cost comprising
the following:
• the amount of the initial measurement of lease
liability;
• any lease payments made at or before the
commencement date less any lease incentives
received;
• any initial direct costs, and
• restoration costs .
Payments associated with short-term leases and
leases of low-value assets are recognised on a
straight-line basis as an expense in profit or loss.
Short-term leases are leases with a lease term of
12 months or less. Low-value assets comprise IT-
equipment and small items of office furniture.
Extension and termination options are included
in a number of property and equipment leases
across the Group. These terms are used to
maximise operational flexibility
terms of
managing contracts. The majority of extension and
termination options held are exercisable only by
the Group and not by the respective lessor.
in
In determining the lease term, management
considers all facts and circumstances that create
an economic incentive to exercise an extension
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2019 (Amounts in Kina 000’s unless otherwise stated)
option, or not exercise a termination option .
Extension options (or periods after termination
options) are only included in the lease term if
the lease is reasonably certain to be extended
(or not terminated). The assessment is reviewed
if a significant event or a significant change in
circumstances occurs which affects this assessment
and that is within the control of the lessee .
Accounting policies applied until 31 December
2018
Leases, where
the Group does not assume
substantially all the risks and rewards of the
ownership are classified as operating leases. The
leased assets are not recognised on the statements
of financial position. Payments made under
operating leases are recognised in the statements of
profit or loss on a straight-line basis over the term of
lease . Lease incentives received are recognised in
the statements of profit or loss as an integral part of
the total lease expense, over the term of the lease .
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.
Leases under which the Group assumes substantially
all the risks and rewards incidental to ownership
have been classified as finance leases and are
capitalised. The asset and corresponding liability
are recorded at inception of the lease at the fair
value of the leased asset, at amounts equivalent
to the discounted present value of minimum lease
payments including residual values. The finance
cost is charged to the profit or loss 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. The
Group had no leases classified as finance leases in
2018 .
(y) Rounding of amounts
Amounts in the financial statements have been
rounded off to the nearest thousand Kina.
(z) Critical accounting estimates and judgments
Estimates and judgments are continually evaluated
and are based on historical experience and other
factors, including expectations of future events
that may have a financial impact on the entity
and that are believed to be reasonable under the
circumstances .
The Group makes estimates and assumptions
concerning the future. The resulting accounting
estimates will, by definition, seldom equal
the related actual results. The estimates and
assumptions that have a significant risk of causing
a material adjustment to the carrying amounts of
assets and liabilities within the next financial year
are discussed below:
(i) Estimated impairment of goodwill
The Group tests annually whether goodwill has
suffered any impairment. The recoverable amounts
of cash-generating units have been determined
calculations. These
based on
calculations require the use of estimates as further
detailed in Note 12 .
value-in-use
(ii) Estimated impairment of ships and other plant
and equipment
The Group tests the recoverable amount of ships
and other plant and equipment when impairment
indicators are identified. 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 pre-tax
discount rate of 12 .5% . Refer to Note 10 .
(iii) Deferred tax assets relating to carry forward tax
losses
The analysis of the recognition and recoverability of
the deferred tax assets relating to carry forward tax
losses is complex and judgmental and estimating
future taxable income is based on assumptions that
are affected by expected future market or economic
conditions . For management’s judgments in relation
to recoverability of deferred tax assets, refer to Note
5 .
(iv) Incremental borrowing rate relating to lease
liabilities
interest
the weighted average
As disclosed in Note 14, management assessed
that
rate on
collateralized borrowings obtained from financial
institutions during 2019 and previous years of
4 .5% approximates the incremental borrowing
rate at the date of initial adoption of IFRS 16 and
at 31 December 2019. Therefore, this rate has been
used for discounting lease payments arising from
state land leases and property leases. In making
this judgment, management considered the period
of leases (including extension and termination
options), the quality of leased assets compared to
assets used as collateral for relevant borrowings,
and made an assessment whether any adjustments
Steamships Annual Report 2019 37
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2019 (Amounts in Kina 000’s)
the
factors affecting
to the weighted average rate on borrowings are
needed to reflect differences in secured assets,
lease periods compared to maturity of borrowings,
and other
incremental
borrowing rate . Based on assessment performed,
management concluded that the average weighted
interest rate on borrowings of approximately
4.5% p.a. approximates the rate that the Group
would expect to borrow to acquire the right-of-
use assets in relation to land leases and property
leases . If the incremental borrowing rate were 1 .0%
higher/(lower), lease liabilities as of 31 December
2019 would be K7.2M lower and K9.2M higher,
respectively (1 January 2019: K4.8M lower and
K5.8M higher).
2. Financial risk management
The Group’s activities expose it to a variety of financial
risks including market risk (including currency, and
interest rate risk), credit risk, liquidity risk and capital
risk. The Group’s overall risk management program
focuses on the unpredictability of financial markets
and seeks to minimise potential adverse effects on the
financial performance of the Group. Risk management
is carried out under policies approved by the Board of
Directors .
(a) Market risk
(i) Foreign exchange risk
The Group engages in international purchase
transactions and is exposed to foreign exchange risk
arising from various currency exposures, primarily
with respect to the Australian dollar . Foreign
exchange risk arises from recognised assets and
liabilities .
The Group’s foreign currency purchases do not
represent a significant proportion of the Group’s
costs and as such exposure to foreign currency risk
is minimal. It is not the Group’s policy to hedge
foreign currency risk. As the foreign currency
exposure is minimal no sensitivity analysis is
provided .
(ii) Price risk
The Group is not significantly exposed to equity
securities or commodities price risk .
(iii) Cash flow interest rate risk
The Group’s interest rate risk arises from long-term
borrowings . Borrowings issued at variable rates
expose the Group to cash flow interest rate risk.
Borrowings issued at fixed rates expose the Group
to fair value interest rate risk . Long term borrowings
38 Steamships Annual Report 2019
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 2019, if interest rates on PNG
Kina-denominated borrowings had been 1% higher/
lower with all other variables held constant, post-
tax profit for the year would have been K3,058,000
(2018: K2,192,000) 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 .
The Group applies the IFRS 9 simplified approach
to measuring expected credit losses, for all financial
assets, other than loans to related parties and
other receivables. 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 2019 or 31 December 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
impairment
provision for trade receivables is not materially
affected by changes in GDP and employment rate.
that
the
For loans to related parties and other receivables, the
Group applies a ‘three-stage’ model for impairment
based on changes in credit quality since initial
recognition, as summarised below:
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2019 (Amounts in Kina 000’s)
• A financial instrument that is not credit-
impaired on initial recognition is classified in
‘Stage 1’ and has its credit risk continuously
monitored by the Group.
• If a significant increase in credit risk (‘SICR’)
since
the
financial instrument is moved to ‘Stage 2’ but is
not yet deemed to be credit-impaired.
initial recognition
identified,
is
• If the financial instrument is credit-impaired,
the financial instrument is then moved to
‘Stage 3’ .
• Financial instrument in Stage 1 have their ECL
measured at an amount equal to the portion
of lifetime expected credit losses that result
from default events possible within the next 12
months . Loans in Stages 2 or 3 have their ECL
measured based on expected credit losses on a
lifetime basis .
Forward- looking information incorporated in the
model includes GDP Growth (%) of Papua New
Guinea economy.
The Group considers a loan or other receivable to
have experienced a significant increase in credit
risk when one or more of the following quantitative
and qualitative criteria have been met: delay in
payment of over 30 days, early signs of cash flow/
liquidity problems, significant adverse changes in
business, financial and/or economic conditions in
which related party operates, actual or expected
forbearance or restructuring, significant change in
collateral value (for collateralised loans).
The Group defines a financial instrument as in
default, which is fully aligned with the definition of
credit- impaired, when it meets one or more of the
following criteria: delay in payment of over 90 days,
significant financial difficulty of related party (such
as long-term forbearance, insolvency, or probability
of bankruptcy). A loan or other receivable is
considered to no longer be in default (i.e. to have
cured) when it no longer meets any of the default
criteria at the reporting date .
The Expected Credit Loss (ECL) is measured on either
a 12-month (12M) or Lifetime basis depending on
whether a significant increase in credit risk has
occurred since initial recognition or whether an
asset is considered to be credit-impaired .
All of the Group’s loans to related parties as at
31 December 2019 and 31 December 2018 are
classified in ‘Stage 1’. Further, management assessed
that no material impairment provision on loans to
related parties is necessary given the following:
• Loans to related parties are repayable on
demand and the Group expects to be able to
recover the outstanding balance of related
loans, if demanded;
• Loans to related parties have not had significant
increase in credit risk since the loans were first
recognized;
• There are no historic losses or write offs on
these loans;
• As a result, impairment provision is based on
12-month expected credit losses, which results
in immaterial impairment provision .
Similarly, the Group’s other receivables as at 31
December 2019 and 31 December 2018 are
classified in ‘Stage 1’, as they are either current or
overdue up to 30 days, and the Group has not noted
a significant increase in credit risk.
(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:
2019
K’000
2018
K’000
Undrawn Facilities
263,000
255,000
The table at the top of page 40 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.
(d) Capital risk management
The Group’s objectives when managing capital
are to safeguard the Group’s ability to continue
as a going concern in order to provide returns to
shareholders and benefits for other stakeholders
and to maintain an optimal capital structure to
reduce the cost of capital .
Steamships Annual Report 2019 39
At 31 December 2019
Borrowings
Borrowings from minority shareholders
Borrowings from related parties
Trade and other payables
Lease liabilities
At 31 December 2018
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
(1,873)
(160)
(15,975)
(75,407)
(5,246)
(98,661)
(131,191)
(21,018)
(48,342)
(104,277)
(304,828)
(294,014)
(23,510)
-
-
-
-
-
-
-
-
-
-
(5,246)
(299,260)
(15,741)
(115,330)
(39,251)
(115,330)
(6,509)
(207,935)
-
-
-
-
-
-
(6,509)
(207,935)
-
-
-
-
-
Total
K’000
(319,317)
(160)
(15,975)
(75,407)
(141,563)
(552,422)
(345,635)
(21,018)
(48,342)
(104,277)
(519,272)
The Group does not hold derivative financial instruments.
All loan covenants associated with borrowing arrangements have been met .
In order to maintain or adjust the capital structure,
the Group may adjust the amount of dividends paid
to shareholders, return capital to shareholders,
issue new shares or sell assets to reduce debt .
The Group monitors capital on the basis of the
gearing ratio. This ratio is calculated as net debt
divided by total capital. Net debt is calculated as
external borrowings and unsecured loans less cash
and cash equivalents. Total capital is calculated as
capital and reserves attributable to the Company’s
shareholders plus net debt. The gearing ratios at
each balance date were as follows:
2019
K’000
2018
K’000
Total external borrowing &
unsecured loans
319,565
373,579
Less: Cash & Cash
equivalents
Net debt
Total equity
Total capital
100,832
193,521
218,733
180,058
902,790
940,028
1,121,523
1,120,086
Gearing ratio
20%
16%
is subject
The Group
to certain covenants
related primarily to its external borrowings. Non-
compliance with such covenants may result in
negative consequences for the Group including
declaration of default. The Group was in compliance
with covenants as at 31 December 2019 and 31
December 2018, as well as during respective years.
(e) Fair value estimation
IFRS 7 ”Financial Instruments: Disclosures” requires
disclosure of fair value measurements by level of
the following fair value measurement hierarchy:
Quoted prices (unadjusted) in active markets for
identical assets or liabilities (level 1).
Inputs other than quoted prices included within
level 1 that are observable for the asset or liability,
either directly (that is, as prices) or indirectly (that
is, derived from prices) (level 2).
Inputs for the asset or liability that are not based
on observable market data (that is, unobservable
inputs) (level 3).
If one or more of the significant inputs is not based
on observable market data, the instrument is
included in level 3 .
The Group does not hold any financial assets at fair
value .
40 Steamships Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTSSteamships Trading Company Limited Year Ended 31 December 2019 (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
2019
2018
2019
2018
37,684
440,609
106,875
-
36,726
436,905
108,184
-
585,168
581,815
-
-
-
-
-
-
48,000
48,000
59,634
59,634
* Other income (net)
-
-
3,021
37,609
* Other income in 2019 includes royalties and management fees. Other income in 2018 of K37.6M mostly relates to gain on sale of
Laga Industries (Note 25), while the remaining amount includes royalties and management fees.
The Group’s revenue from contracts with customers are recognized at a point in time and over time. Most of the revenue from the
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 26.
The aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied (or partially unsatisfied)
as of 31 December 2019 amounts to K0.3 million and relates mostly to towage work which commenced in late 2019 and will be
finalised within January 2020.
(b) Expenses comprise:
Cost of sales
Staff costs (note 3c)
Depreciation and amortisation
Impairment of fixed 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
111,552
119,712
82,268
-
-
46,314
154,192
514,038
101,683
5,516
12,513
119,712
102,223
122,217
82,974
11,710
1,498
48,772
139,999
509,393
101,116
5,235
15,866
122,217
Number of staff employed by the Group at year end:
Full Time
2,637
2,685
-
-
-
-
2,029
2,065
-
-
-
(159)
1,870
-
-
-
299
2,364
-
-
-
-
-
-
-
-
-
-
Steamships Annual Report 2019 41
NOTES TO THE FINANCIAL STATEMENTSSteamships Trading Company Limited Year Ended 31 December 2019 (Amounts in Kina 000’s) NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2019 (Amounts in Kina 000’s unless otherwise stated)
3. Operating results (continued)
Consolidated
Parent Entity
2019
2018
2019
2018
(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
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:
Interest expense*
Interest income
Net finance costs
10
10
1,045
1,406
4,880
1,817
-
1,127
16,910
640
-
1,050
708
943
2,206
11,710
390
-
1,373
2,550
-
-
-
-
-
-
-
-
17,784
(7,938)
9,846
15,492
(5,199)
10,293
-
(72)
(72)
-
-
-
-
-
-
-
-
-
(72)
(72)
*The interest expense excludes capitalised interest of K0.06m (2018 - K1.7M).
(f) Earnings per share
Basic earnings per share are calculated by dividing the net profit attributable to shareholders by the average number of ordinary
shares on issue during the year. There is no difference between the basic and diluted earnings per share.
Net profit attributable to shareholders
Average number of ordinary shares on issue (thousands)
Basic earnings per share (continuing & discontinued)
Basic earnings per share (continuing)
49,995
31,008
161t
161t
69,529
31,008
224t
64t
42 Steamships Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2019 (Amounts in Kina 000’s unless otherwise stated)
4.
Investments in subsidiaries, associates and joint ventures
Consolidated
Parent Entity
2019
2018
2019
2018
(a) Investments are accounted for in accordance with the policy set out in Note 1(c) and relate to:
Investments in subsidiary companies (note 21)
Investments in associates (note 22)
Investments in joint ventures (note 23)
(b) Share of 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
-
11,373
30,213
41,586
393
4,617
5,010
-
159,261
127,454
34,359
30,917
65,276
119
5,509
5,628
-
36,626
195,887
-
36,583
164,037
-
-
-
-
-
-
Consolidated
Parent Entity
2019
2018
2019
2018
20,657
(489)
(1,240)
18,928
31,703
24,964
(2,781)
53,886
355
(49)
1
307
270
(168)
(19)
83
(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
Non-taxable income - 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
Lease liabilities
Prepayments & consumables
Property, plant and equipment
Right-of-use assets
Deferred tax asset
Deferred tax liability
19,888
-
579
6,659
(6,958)
(1,240)
18,928
7,419
182
21,671
(5,452)
(18,706)
(21,671)
(16,556)
2,311
(18,866)
(16,555)
20,327
-
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)
14,767
(14,400)
-
-
(60)
-
307
28,485
(17,890)
-
-
(10,493)
(19)
83
-
-
-
-
485
-
485
485
-
485
-
-
-
-
436
-
436
436
-
436
As at 31 December 2019, the group has not recognised deferred tax asset amounting to K58.4M (2018 - K51.7M) related to
carried forward tax losses, as they relate to Consort Express Lines Limited and their recoverability as at 31 December 2019 and 31
December 2018 were considered uncertain.
Steamships Annual Report 2019 43
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2019 (Amounts in Kina 000’s unless otherwise stated)
5.
Income tax (continued)
Beginning
Balance
IFRS 16
adoption
Charge to
profit
Ending
Balance
(d) The gross movement on the deferred tax account is as follows:
Consolidated
Provisions & accruals
Tax losses
Lease liabilities
Prepayments & consumables
Property, plant and equipment
Right-of-use assets
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
Use of tax credit
Others
Acquiring new subsidiary
Tax payments made
At 31 December
6. Cash and cash equivalents
Cash and short term deposits
9,917
171
-
(3,851)
(23,283)
-
(17,046)
-
-
12,401
-
-
(12,401)
(2,498)
11
9,270
(1,601)
4,579
(9,270)
491
7,419
182
21,671
(5,452)
(18,704)
(21,671)
(16,555)
436
436
49
49
485
485
Consolidated
Parent Entity
2019
2018
2019
2018
(355)
20,657
(1,240)
-
(2,632)
(434)
-
(25,503)
(9,507)
1,407
31,703
(2,781)
289
-
(1,325)
572
(30,220)
(355)
(45)
355
-
-
-
-
-
(250)
60
(85)
270
(19)
-
-
-
-
(211)
(45)
Consolidated
Parent Entity
2019
2018
2019
2018
100,832
100,832
193,521
193,521
-
-
-
-
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
44 Steamships Annual Report 2019
Consolidated
Parent Entity
2019
2018
2019
2018
84,372
(7,108)
77,264
60,844
10,010
148,118
89,849
(2,379)
87,470
86,244
18,064
191,778
-
-
-
471
-
471
-
-
-
445
-
445
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2019 (Amounts in Kina 000’s unless otherwise stated)
7. Trade and other receivables (continued)
(i) Credit losses
As at 31 December 2019 and 31 December 2018, loss allowance was determined as follows for trade receivables:
31 December 2019
Current
More than 30 More than 60 More than 90
days past due
days past due
days past due
Total
Expected credit loss rate
0.2%-2%
2%-5%
5%-8%
8% - 30%
8.4%
Gross carrying amount - trade receivables
Loss allowance
33,619
1,429
22,327
714
8,235
494
20,191
4,471
84,372
7,108
31 December 2018
Current
More than 30 More than 60 More than 90
days past due
days past due
days past due
Total
Expected credit loss rate
0.2%-2%
2%-5%
5%-8%
8% - 30%
2.7%
Gross carrying amount - trade receivables
Loss allowance
49,136
147
22,168
554
6,101
366
12,444
1,312
89,849
2,379
Movement in the provision for impairment of trade receivables is as follows:
Opening balance
Impairments recognised during the year
Provision released
Total
2,379
4,880
(151)
7,108
19,030
6,186
2,279
(6,086)
2,379
5,131
-
-
-
-
-
-
-
-
-
-
The creation and release of the provision for impaired receivables is included in operating expenses in the statement of comprehensive
income. Amounts charged to the provision account are generally written off when there is no expectation of recovering the balance
outstanding.
The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable mentioned above. The Group
does not hold any collateral as security in relation to these receivables.
(iii) Other receivables and prepayments
Other receivables generally arise from transactions outside the usual operating activities of the Group. These mostly include
receivables for rental bonds, income tax and other tax receivables (such as GST receivables) and other non-financial assets. These
receivables are not interest bearing. Collateral is not normally obtained.
As at 31 December 2019 and 31 December 2018, most of the Group’s other receivables are current and classified as Stage 1 for
impairment provisioning purposes. The amount of other receivables overdue more than 30 days is not material, and the impairment
provision based on expected loss model is immaterial.
Prepayments relate to advance payments for expenses not yet incurred.
Steamships Annual Report 2019 45
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2019 (Amounts in Kina 000’s unless otherwise stated)
8.
Inventories
Finished goods
Provision for obsolescence
Consolidated
Parent Entity
2019
2018
2019
2018
14,781
(1,430)
13,351
16,180
(117)
16,063
-
-
-
-
-
-
Inventories recognised as an expense during the year ended 31 December 2019 and included in cost of sales and cost of providing
services amounted to K11M (2018: K19M). The provision for obsolescence of inventories during the year increased by K1.3M
(2018: by K2.7M decrease).
9. Loans to/(from) related companies
Non-Current
Colgate Palmolive (PNG) Limited
Huhu Rural LLG
Pacific Rumana Limited
Harbourside Development Limited
Viva No.31 Limited
Wonye Limited
Nikana Stevedoring Limited
Loans to subsidiaries
Loans from associates and joint ventures:
Harbourside Development Limited
Morobe Terminals Limited
Consort Express Lines Limited’s associates
Loans from subsidiaries
Consolidated
Parent Entity
2019
2018
2019
2018
500
1,640
28,930
55,330
2,000
27
150
88,577
-
88,577
-
-
(15,662)
(15,662)
-
500
1,587
29,530
34,114
-
-
-
65,731
-
65,731
(7,968)
(9,543)
(29,883)
(47,394)
500
500
-
-
-
-
-
-
-
-
-
-
-
-
500
5,135
5,635
500
5,212
5,712
-
-
-
-
-
-
-
-
-
(132,415)
(105,775)
(15,662)
(47,394)
(132,415)
(105,775)
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 is unsecured and incurs interest at 2%.
46 Steamships Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2019 (Amounts in Kina 000’s unless otherwise stated)
10. Property, plant & equipment
Consolidated
2019
Cost
Accumulated depreciation
(including impairment losses)
Net book value
Property
Ships
Plant and
Vehicles
Right-of-use
Assets
Total
656,517
231,030
435,220
47,812
1,370,579
(291,676)
364,841
(118,369)
112,661
(347,392)
(2,496)
(759,933)
87,828
45,316
610,646
Opening value
Impact of IFRS 16 adoption on 1 January 2019
Additions
Lease agreements made during the year
Disposals
Transfer from investment properties
Depreciation
294,725
-
37,411
-
-
45,142
(12,437)
364,841
100,189
-
36,574
-
(4,506)
-
(19,596)
112,661
97,488
-
20,265
-
(837)
-
(29,088)
87,828
-
14,945
20,265
32,867
-
-
(2,496)
45,316
Closing value
2018
Cost
392,677
236,020
392,010
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
(97,952)
294,725
367,573
4,015
(131)
(17,396)
(48,658)
(10,678)
-
-
294,725
(135,831)
100,189
(294,522)
97,488
137,098
4,399
(12,583)
-
-
(21,139)
(7,586)
-
100,189
123,456
47,700
(10,486)
(24,020)
-
(31,675)
(4,124)
(3,363)
97,488
492,402
14,945
94,250
32,867
(5,343)
45,142
(63,617)
610,646
1,020,707
(528,305)
492,402
628,127
56,114
(23,200)
(41,416)
(48,658)
(62,188)
(11,710)
(3,363)
492,402
-
-
-
-
-
-
-
-
-
-
-
-
The premises used by the Group of K45.1 million, classified as investment properties as at 31 December 2018, were transferred
to properties within line ‘Property, plant and equipment’ during 2019 due to change in primary use of property. Refer to the Note
1(m).
Parent Entity
2019
Cost
Accumulated depreciation
Net book value
Opening value
Impairment
Disposals
Additions
Depreciation
Closing value
76,488
(54,004)
22,484
23,811
-
406
(1,733)
22,484
-
-
-
-
-
-
-
-
5,534
(4,622)
912
743
(338)
803
(296)
912
-
-
-
-
-
-
-
-
82,022
(58,626)
23,396
24,554
(338)
1,209
(2,029)
23,396
Steamships Annual Report 2019 47
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2019 (Amounts in Kina 000’s unless otherwise stated)
10. Property, plant & equipment (continued)
Parent Entity
2018
Cost
Accumulated depreciation
Net book value
Opening value
Impairment
Disposals
Depreciation
Closing value
Property
Ships
Plant and
Vehicles
Total
75,810
(51,999)
23,811
23,428
2,061
-
(1,678)
23,811
-
-
-
-
-
-
-
-
5,702
(4,959)
743
1,117
78
(65)
(387)
743
81,513
(56,958)
24,554
24,545
2,139
(65)
(2,065)
24,554
(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
2019
2018
2019
2018
Property (classified as investment properties in note 11)
Plant and vehicles
Total assets in the course of construction
12,243
22,377
34,620
34,015
19,118
53,133
-
-
-
-
-
-
The cost of additions in 2019 includes capitalised borrowing costs of K0.06M (2018: K1.7M) in relation to qualifying assets. The
Group used capitalisation rate of 5.85% p.a. to determine the amount of borrowing costs eligible for capitalisation.
(b) Impairment losses
During the year the Directors performed an impairment review on certain assets with impairment indicators. As a result of this
assessment, there is no further impairment required (2018: K11.7M). For 2018 impairment was recorded on property, plant and
equipment, out of which K7.7M relates to ships in Consort business and K4M to equipment and vehicles in port services entities
within the logistic business.
Recoverable amount of ships is based on market valuations. Ships have been assessed against market value on an annual basis using
a valuation technique of market comparable prices. The valuation as at 31 December 2019 was carried out by two independent
firms of valuators, Australian Independent Shipbrokers and GPA Maritime & Engineering Consultants Pty Ltd, who both hold a
recognised and relevant professional qualification and who have recent experience in valuation of assets of similar location and
category. The assessed average market value of ships is K82.2M. If market price of ships had been 10% lower, recoverable amount
would be K75.3M (2018:K80.9M) resulting in an additional impairment charge of K3.7M (K6.7M).
There are no other further conditions that indicate impairment of property, plant and equipment as at 31 December 2019 in
other businesses of the Group.
In 2018 recoverable amount of equity and vehicles in port services entities (for which decision on their voluntary liquidation was made
by directors in 2018) was based on fair value less costs to sell, which is determined based on sales agreements made in early 2019.
(c) Right-of-use assets
The recognised right-of-use assets relate to properties leased by the Group for its use (i.e. leased buildings). The movement of
right-of-use assets classified under property, plant and equipement is provided below:
Opening net book amount
Effect on adoption of IFRS 16
Balance at 1 January 2019
Lease agreements made during the year
Depreciation
Closing net book amount
At cost
Accumulated depreciation
48 Steamships Annual Report 2019
Properties
PGK’000
Total
PGK’000
-
14,945
14,945
32,867
(2,496)
45,316
47,812
(2,496)
45,316
-
14,945
14,945
32,867
(2,496)
45,316
47,812
(2,496)
45,316
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2019 (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
Transfers (to)/from property, plant & equipment
Right of use assets
Depreciation
Closing value
(a) Right-of-use assets
As at 31 December 2019
Opening net book amount
Effect on adoption of IFRS 16
Balance at 1 January 2019
Depreciation
Closing net book amount
At cost
Accumulated depreciation
Consolidated
Parent Entity
2019
2018
2019
2018
542,874
(182,592)
360,282
398,173
(45,142)
25,902
(18,651)
360,282
596,542
(198,369)
398,173
368,998
48,658
-
(19,483)
398,173
-
-
-
-
-
-
-
-
-
-
-
-
-
-
State Land
Leases
PGK’000
-
26,390
26,390
(488)
25,902
26,390
(488)
25,902
Total
PGK’000
-
26,390
26,390
(488)
25,902
26,390
(488)
25,902
104,985
(5,068)
(13,203)
(b) 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
110,664
(6,753)
(21,088)
(c) Valuation basis
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 2019 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
360,282
364,841
725,123
1,330,321
460,271
1,790,592
1,662,901
575,339
2,238,240
The management has utilised certain historical facts and available relevant market data in reaching their opinion as to the valuation
of the properties up to the date of valuation, including use of comparable sales and capitalisation rates.
(d) Non-current assets pledged as security
Refer to note 16 for information on non-current assets pledged as security by the Group.
Steamships Annual Report 2019 49
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2019 (Amounts in Kina 000’s unless otherwise stated)
11. Investment properties (continued)
(e) 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
12. Intangible assets
Opening balance
Disposal of Subsidiary
Closing balance
Consolidated
Parent Entity
2019
2018
2019
2018
48,921
113,546
254,361
416,828
63,428
150,673
154,574
368,675
-
-
-
-
-
-
-
-
Consolidated
Parent Entity
2019
2018
2019
2018
76,433
-
76,433
80,002
(3,569)
76,433
-
-
-
-
-
-
Goodwill is allocated to the Group’s cash-generating units (CGUs) identified according to operating segment. The goodwill balance of
K76.4M (2018: K76.4M) 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% for New Britain Shipping and Pacific Towing (2018: 5% for New
Britain Shipping and 8% for Pacific Towing). A pre-tax discount rate of 12.5% per annum (2018: 12.5% per annum) has been used and
reflects specific risks relating to the operating segment. The recoverable amount of the Pacific Towing CGU and New Britain Shipping
CGU exceed their carrying amounts by K1.3M (2018: K43.5M) and K10.9M (2018: K37.7M), respectively. Revenue forecasts used in
impairment assessment of Pacific Towing CGU do not include salvage revenue due to its fluctuations from year to year.
Management determined the budgeted gross margin based on past performance and its market expectations. If the revised growth
rate beyond three years had been 3% lower than management’s estimates the Group would need to reduce the carrying value of
goodwill of Pacific Towing by K23.4M and the carrying value goodwill of New Britain Shipping by KNil. The CGUs’ carrying amount
would exceed the value in use at a growth rate lower than 4% p.a. for Pacific Towing and negative growth (contraction) rate higher
than 2.1%p.a. for New Britain Shipping.
The discount rates used are pre-tax, and reflect specific risks relating to the relevant CGUs. If the revised estimated pre-tax discount rate
applied to the discounted cash flows of the Pacific Towing CGU and New Britain Shipping CGU had been 2% higher than management’s
estimates, the carrying value of goodwill of Pacific Towing and New Britain Shipping would be reduced by K20.3 million and KNil. The
CGUs’ carrying amount would be equal to value in use at a discount rate of approximately 12.6% p.a and 18.0% p.a. respectively.
13. Trade and other payables
Trade payables
Accruals
Other payables
Consolidated
Parent Entity
2019
2018
2019
2018
32,584
36,384
6,439
75,407
24,938
77,851
1,488
104,277
-
-
-
-
-
-
10
10
All trade and other payables are due and payable within 12 months and are recorded at their fair value.
14. Lease Liabilities
As disclosed in Note 10, the right-of-use assets and related lease liabilities are recognised in relation to the following types of
assets: state land leases related to properties owned by the Group (including its investment properties) and properties (i.e.
buildings leased by the Group for its use).
On implementation at 1 January 2019 right-of use assets were measured at the amount equal to the lease liabilities. Lease liabilities
are measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate as of
1 January 2019.
50 Steamships Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2019 (Amounts in Kina 000’s unless otherwise stated)
14. Lease Liabilities (continued)
State land leases
Properties
Total lease liabilities
31 December
2019
PGK’000
26,198
46,038
72,236
1 January
2019
PGK’000
29,654
11,681
41,335
Total lease liabilities as of 31 December 2019 include current liabilities of K3,772,000 (1 January 2019: K2,832,000) and non-current
liabilities of K68,464,000 (1 January 2019: K38,503,000).
Minimum lease payments:
Not later than 1 year
Later than 1 year and not later than 5 years
Later than 5 years
Total
Less: Unexpired finance charges
Present value of lease liabilities:
Not later than 1 year
Later than 1 year and not later than 5 years
Later than 5 years
Total
Interest on lease liabilities recognized in profit or loss by the Group amounts to PGK 3.3M.
Movement in net lease liabilities as per below:
Opening
Effect on adoption of IFRS 16 (Refer note 29)
Lease agreements made during the year
Finance costs
Repayment
5,246
20,987
115,330
141,563
(69,327)
72,236
3,772
17,895
50,569
72,236
-
41,335
32,867
3,282
(5,248)
72,236
2,832
11,327
84,429
98,588
(57,253)
41,335
2,692
9,627
29,016
41,335
-
-
-
-
The weighted average lessee’s incremental borrowing rate applied to the lease liabilities on 1 January 2019 was 4.5% p.a.
Management assessed that weighted average interest rate on borrowings obtained from financial institutions during 2019 and
previous years approximates incremental borrowing rate at the date of initial adoption of IFRS 16 and at 31 December 2019. For
related management’s judgments refer to Note 1(z). For adjustments recognized on adoption of IFRS 16 on 1 January 2019, refer to
Note 29.
The Group recognized expenses relating to short-term leases and expenses relating to leases of low-value assets that are not short-
term leases of K15.8M and K1.7M for the year ended 31 December 2019, respectively. These expense are included in operating
expenses.
The Group’s leases have no variable payments.
15. 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
2019
Total
17,015
7,909
-
-
(8,402)
16,522
5,285
11,237
16,522
500
-
-
-
(500)
-
-
-
-
50,650
-
-
-
(4,393)
46,257
46,257
-
46,257
68,165
7,909
-
-
(13,295)
62,779
51,542
11,237
62,779
2018
Total
18,290
7,081
(963)
50,650
(6,893)
68,165
56,685
11,480
68,165
A description of employee and dry dock provisions is disclosed in note 1p. Provision for insurance claims mostly relates to
provision for disputed insurance claim, as criteria for recognition of provision were met. Refer to Note 1(p).
Steamships Annual Report 2019 51
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2019 (Amounts in Kina 000’s unless otherwise stated)
16. Borrowings
Current:
Bank overdrafts (secured)
Bank loans
Other loans (unsecured)
Non-current:
Bank loans (secured)
Total Borrowings
Consolidated
Parent Entity
2019
2018
2019
2018
1,743
-
160
1,903
302,000
302,000
303,903
4,682
120,000
19,503
144,185
182,000
182,000
326,185
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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% (2018: 4.5%). Bank overdrafts are interest-only with no agreed repayment schedule. Bank loans
are secured loans with varying 1 to 4 year terms. The effective interest rate on other loans is 2% (2018: 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.
17. Issued capital
(a) Issued and paid up capital
Consolidated
Parent Entity
2019
2018
2019
2018
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 55 toea per share will be paid immediately after the Annual General Meeting on
17th June 2020. This brings the total dividend declared for the year to 80 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 145 toea per share which includes the final dividend of 2018 and totaled K
44.9M
52 Steamships Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2019 (Amounts in Kina 000’s unless otherwise stated)
18. Related party disclosures
(a) Parent entity
Until 3 September 2019, the Group was controlled by John Swire & Sons (PNG) Limited, which owned 72.12% of the
Company’s shares. John Swire & Sons (PNG) Limited sold its shares in Steamships Trading Company Limited to JS & S (PNG)
Ltd, incorporated in England on 3 September 2019. The ultimate holding company as at 31 December 2019 is John Swire &
Sons Ltd, incorporated in England.
(b) Interest in subsidiaries, associates and joint ventures:
These are set out in notes 21, 22 and 23 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
2019
2018
2019
2018
Key management personnel disclosure
Wages and salaries
Other short term benefits
12,118
1,249
13,584
1,340
(e) Material transactions:
Sales of goods and services
- Associates & joint ventures
- Key management
- Associated Groups
Lease and rental income
- Associates & joint ventures
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
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
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
454
56
14,037
1,717
771
216
374
(46)
(9,558)
(140)
451
62
15,712
2,271
133
1,001
1,590
(408)
(9,937)
-
-
(1,236)
(482)
-
(891)
(1,516)
(10,085)
(32,427)
(10,639)
(19,008)
-
(32,427)
-
(19,008)
Steamships Annual Report 2019 53
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2019 (Amounts in Kina 000’s unless otherwise stated)
18. Related party disclosures (continued)
- Significant shareholder
Loans to/(from) related companies
- Other shareholders
Consolidated
Parent Entity
2019
2018
2019
2018
(12,535)
(7,349)
(12,535)
(7,349)
(160)
(19,503)
-
-
-
-
-
-
500
-
5,135
-
-
-
-
-
-
-
-
-
-
-
500
-
5,212
-
-
-
-
-
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 16)
Basilok Limited (note 16)
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)
Viva No. 31 Limited (note 9)
Wonye Limited (note 9)
Nikana Stevedoring Limited (note 9)
(15,662)
-
-
-
(160)
500
55,330
-
28,930
1,640
2,000
27
150
(29,883)
(7,968)
(9,543)
(19,343)
(160)
500
34,114
-
29,530
1,587
-
-
-
54 Steamships Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2019 (Amounts in Kina 000’s unless otherwise stated)
19. 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 and other receivables
(Increase)/decrease in inventory
(Increase)/decrease in deferred tax asset
Increase /(decrease) in operating assets
(Decrease)/increase in trade creditors and other payables
(Decrease)/increase in other operating liabilities
(Decrease)/increase in income tax payable
(Decrease)/increase in deferred tax liability
Consolidated
Parent Entity
2019
2018
2019
2018
47,366
82,268
-
(15,783)
-
(5,010)
40,838
2,712
(628)
3,363
(28,870)
(5,386)
(9,152)
137
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)
48,916
2,029
94,868
2,064
(48,000)
(59,634)
-
-
-
-
-
(49)
(36)
-
(127)
144
-
-
(34,644)
-
-
-
(104)
(9)
-
9
40
-
Net cash inflow from operating activities
111,855
116,682
2,877
2,590
(b) Net loan reconciliation
Net debt as at 31 December 2017
Borrowing from related parties
Repayments
Net debt as at 31 December 2018
Adoption of IFRS 16
Borrowings
Repayments
Repayment of minority shareholder loan - purchase of
additional shares in subsidiary (Note 24)
Lease liability-2019 agreement and finance costs
Payment of lease liabilities
Net debt as at 31 December 2019
20. Retirement benefit plans
Lease
liabilities
Bank
Loans
Other
Loans
Total
-
-
-
-
(41,335)
-
-
-
(36,148)
5,247
(72,236)
(343,627)
(74,015)
(417,642)
-
41,627
(5,236)
12,354
(5,236)
53,981
(302,000)
(66,897)
(368,897)
-
(10,000)
10,000
-
-
-
-
-
31,732
19,343
-
-
(41,335)
(10,000)
41,732
19,343
(36,148)
5,247
(302,000)
(15,822)
(390,058)
The total cost of retirement benefits of the Group in 2019 was K5.5M (2018: 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 parent entity does not employ staff directly; consequently there was no charge during the year.
Steamships Annual Report 2019 55
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2019 (Amounts in Kina 000’s unless otherwise stated)
21. 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):
Equity Holdings* Equity Holdings*
Name of Entity
Country of Incorporation
Class of Shares
2019
2018
Consort Express Lines Limited******
Kavieng Port Services Limited
Kiunga Stevedoring Company Limited
Lae Port Services Limited*****
Madang Port Services Limited
New Britain Shipping Limited**
Oro Port Services Limited
Pacific Towing (PNG) Limited
Palm Stevedoring & Transport Limited
Port Services PNG Limited*****
Steamships Limited
Windward Apartments Limited
Motukea United Limited
United Stevedoring Limited***
Morobe Terminals Limited****
Croesus Holdings Limited
Croesus Limited
Croesus Re PCC Limited
Papua New Guinea
Papua New Guinea
Papua New Guinea
Papua New Guinea
Papua New Guinea
Papua New Guinea
Papua New Guinea
Papua New Guinea
Papua New Guinea
Papua New Guinea
Papua New Guinea
Papua New Guinea
Papua New Guinea
Papua New Guinea
Papua New Guinea
Isle of Man
Papua New Guinea
Isle of Man
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
60
100
51
60
50
100
100
66.7
54
100
100
64.1
100
50.5
100
100
100
70.2
60
100
51
60
50
100
100
56.7
54
100
100
50.9
16.9
42.9
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 2019, Steamships Trading
Company Limited still has control over this entity.
*** United Stevedoring Limited became subsidiary in May 2019
****Morobe Terminals Limited became subsidiary in May 2019 and is in liquidation
*****Lae Port Services and Port Services Limited are in liquidation
******As disclosed in Note 24, Steamships Trading Company Limited acquired the minority shareholding (29.76%) of Consort
Express Lines Limited in May 2019 to increase its shareholding to a fully owned subsidiary.
Shares in subsidiary companies have been stated at cost or fair value on acquisition less dividends received from pre-acquisition
profits.
The summarized financial information of the Group’s subsidiaries with non-controlling interest that are material to the Group as at
31 December 2019 and 31 December 2018 is as follows:
2019
Ownerships
Interest %
Assets
Liabilities
Madang Port Services Limited
New Britain Shipping Limited
Motukea United Limited
60
50
64.1
5,711
19,189
3,452
(1,149)
(1,753)
(1,160)
2018
Consort Express Lines Limited
Lae Port Services Limited
Madang Port Services Limited
New Britain Shipping Limited
Port Services PNG Limited
Motukea United Limited
Ownerships
Interest %
Assets
Liabilities
70.2
51
60
50
54
50.9
219,553
19,494
5,721
17,745
9,756
3,407
(231,770)
(494)
(535)
(1,468)
(990)
(1,193)
Carrying
Value
4,562
17,436
2,292
Carrying
Value
(12,217)
19,000
5,186
16,277
8,766
2,214
Revenue
Profit
5,383
11,134
6,824
(28)
1,572
214
Revenue
Profit
162,854
1,997
5,131
13,072
4,473
16,266
(23,288)
(1,862)
1,032
4,721
(2,610)
2,000
56 Steamships Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2019 (Amounts in Kina 000’s unless otherwise stated)
22. Investment in associates
(a) Movement in carrying amounts
Consolidated
Parent Entity
2019
2018
2019
2018
Opening value
Share of profits before tax
Income tax expense
Change in control of associate companies to subsidiaries
Dividends received
Closing value
34,359
561
(168)
(1,681)
(21,698)
11,373
38,287
170
(51)
-
(4,047)
34,359
-
-
-
-
-
-
-
-
-
-
-
-
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
2019
Makerio Stevedoring Limited
Nikana Stevedoring Limited
Riback Stevedoring Limited
Morobe Terminals Limited
2018
Makerio Stevedoring Limited
Nikana Stevedoring Limited
Riback Stevedoring Limited
United Stevedoring Limited
Morobe Terminals Limited
Ownerships
Interest
%
45.0
45.0
49.0
43.0
Ownerships
Interest
%
31.7
31.7
34.4
16.9
43.0
Assets
Liabilities
1,317
1,356
8,830
-
11,503
(57)
(239)
426
-
130
Assets
Liabilities
1,687
1,888
26,860
602
9,163
40,200
340
305
5,582
601
(987)
5,841
Revenue
Profit
Carrying
Value
1,374
1,595
8,404
-
540
414
378
-
28
11
559
(205)
393
11,373
1,332
Carrying
Value
1,347
1,583
21,278
1
10,150
34,359
Revenue
Profit
217
136
7,971
539
3,242
12,105
99
158
649
3
(790)
119
The associates provide stevedoring services to various external and Group shipping entities.
All associated companies are incorporated and operate in Papua New Guinea.
There are no contingent liabilities relating to the Group’s interest in the associates.
Steamships Annual Report 2019 57
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2019 (Amounts in Kina 000’s unless otherwise stated)
23. Investment in joint ventures
(a) Movement in carrying amounts
Consolidated
Parent Entity
2019
2018
2019
2018
Opening value
Share of profits before tax
Income tax expense
Elimination of gain on sale of land to associate company
Dividends received
Closing value
30,917
6,633
(2,016)
(2,821)
(2,500)
30,213
28,909
7,870
(2,362)
-
(3,500)
30,917
36,583
43
-
-
-
36,626
36,583
-
-
-
-
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.
2019
Ownership
Interest
%
Assets
Liabilities
Carrying
Value
Revenue
Profit
Colgate Palmolive (PNG) Limited
Harbourside Development Limited
Pacific Rumana Limited
Viva No. 31 Limited
Wonye Limited
50
50
50
50
50
15,173
105,204
3,588
13,122
27,279
4,502
105,204
228
9,390
14,829
10,671
44,714
4,084
-
3,360
3,733
12,450
9,838
1,921
1,744
2,422
210
(1)
385
(61)
164,366
134,153
30,213
60,639
4,617
2018
Assets
Liabilities
Ownership
Interest
%
Colgate Palmolive (PNG) Limited
Harbourside Development Limited
Pacific Rumana Limited
Viva No. 31 Limited
Wonye Limited
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
2,872
574
1,440
26
566
(299)
(248)
145,103
114,186
30,917
55,168
5,509
The Group’s share of the capital commitments of joint ventures at 31 December 2019 is K98.5M (2018: K4M).
There are no contingent liabilities arising from the Group’s interests in the joint ventures.
58 Steamships Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2019 (Amounts in Kina 000’s unless otherwise stated)
24. Business Combinations
Steamships Trading Company Limited acquired the minority shareholding (29.76%) of Consort Express Lines Limited in May 2019
to increase its shareholding to a fully owned subsidiary.
Purchase consideration paid for acquisition of minority
shares in subsidiary
Repayment of minority shareholder loan
Add/(less): acquisition of minority interest
Equity adjustment on gain in control of subsidiaries
2019
K’000
51,202
(19,343)
10,738
(2,302)
40,295
During 2019 the directors made the decision to amalgamate Consort Express Lines Limited into Steamships Limited.
The amalgamation is effective as at 31 December 2019.
Last Period
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 the value equivalent to net assets of acquired
entities. As the transaction was between entities under common control, assets and liabilities were recorded at existing book values
at the date of acquisition, with a corresponding adjustment recorded in retained earnings.
The assets and liabilities recognized as a result of the acquisition are as follows:
Cash and term deposits
Receivables
Other assets
Insurance reserves
Other payables
Net assets acquired
25. Discontinuing Activities
Last Period
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
Gain on disposal of subsidiary
2018
66,291
(64,510)
1,781
1,247
48,583
(b) The Group has two subsidiaries in liquidation and their assets and liabilities are disclosed as Assets & Liabilities held for
Sale.
Balance sheet as at 31st December 2019 and 31st December 2018:
31 December 2019
31 December 2018
Lae Port
Services Limited
Port
Services Limited
Lae Port
Services Limited
Port
Services Limited
Assets held for sale
-
-
636
2,727
Steamships Annual Report 2019 59
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2019 (Amounts in Kina 000’s unless otherwise stated)
25. Discontinuing Activities (continued)
(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
2018
(6,459)
(8,593)
16,487
1,435
204
1,639
-
The subsequent sale has resulted in an approximate gain of K48.6M profit for the group in 2018.
26. 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 2019 is as follows::
2019
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
Hotels &
Property
Logistics
Commercial &
Investments
(and eliminations)
Total
222,621
358,507
994
(14,421)
68,701
532
(18,310)
50,923
1,506
(3,644)
5,592
393
(2,994)
2,991
4,040
5,437
282
(13,009)
4,085
2,376
585,168
7,937
(17,783)
61,284
5,010
(18,928)
(6,548)
47,366
741,088
401,809
308,746
1,451,643
(259,406)
(282,185)
(7,262)
(548,853)
481,682
119,624
301,484
902,790
Total assets includes investment in joint ventures
and associates
Capital expenditure
Depreciation
19,542
25,190
44,756
11,373
66,220
34,552
10,671
1,637
2,960
41,586
93,047
82,268
60 Steamships Annual Report 2019
26. Segmental reporting (continued)
2018
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
Hotels &
Property
Logistics
Commercial &
Investments
(and eliminations)
Total
230,935
344,638
-
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
581,815
5,199
15,492
62,129
5,628
(53,886)
13,871
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
These figures include non-controlling interests share of operating profits and assets.
Revenue from the hotels & property business mostly relates to the provision of services and is recognized over time. A minor
portion represents revenue from the sale of goods and is recognized at a point in time. Similarly, revenue from the logistics
business mostly relates to the provision of services and is recognised over time. Revenue from the commercial segment relates to
sale of goods and is recognised 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 two insignificant business operation’s in the Solomon Islands and Isle of Man.
27. Contingent assets and liabilities
(a) Contingent Assets
During 2017 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 recognised related expenses in the
2017 financial statements. During 2017, the Company 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.
(b) 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.
Steamships Annual Report 2019 61
NOTES TO THE FINANCIAL STATEMENTS
Steamships Trading Company Limited Year Ended 31 December 2019 (Amounts in Kina 000’s unless otherwise stated)
28. Commitments
(a) Capital commitments
Contracts outstanding for capital expenditure:
- less than 12 months
- 1-5 years
Consolidated
Parent Entity
2019
2018
2019
2018
8,883
-
8,883
8,289
-
8,289
-
-
-
-
-
-
(b) Lease commitments: Group as lessee
Operating lease commitments in respect of state land leases and leased premises are as follows:
- less than 12 months
- 1-5 years
- over 5 years
29. Effect on adoption of IFRS 16
State land
leases
2018
1,534
6,137
75,175
82,846
Property
2018
1,298
1,298
-
2,596
The adoption of IFRS 16 ‘Leases’ has resulted in changes in the Group’s accounting policies, refer to Note 1(a) (iii) and 1(x). The
effect arising from these changes on the statement of financial position of the Group are as follow:
Non-current assets
Property, plant and equipment
Investment properties
Total non-current assets
Total assets
Non-current liabilities
Lease liabilities
Total non-current liabilities
Current liabilities
Lease liabilities
Total current liabilities
Total liabilities
Net assets
Operating lease commitments at 31 December 2018
Effects from discounting using the incremental borrowing rate of 4.5%
Add/(less): adjustments as a result of a different treatment of extension options
Add/(less): adjustments relating to changes in payments
Lease liabilities recognised as at 1 January 2019
62 Steamships Annual Report 2019
As at 31
Effect of adoption As at 1 January
December 2018
PGK’000
of IFRS16
PGK’000
2019
PGK’000
492,402
398,173
1,099,698
1,504,778
14,945
26,390
41,335
41,335
507,347
424,563
1,141,033
1,546,113
-
212,209
38,503
38,503
38,503
250,712
2,832
2,832
41,335
2,832
355,373
567,582
-
940,028
-
352,541
564,750
940,028
PGK’000
85,612
32,084
8,637
614
41,335
30. Subsequent events
Subsequent to 31 December 2019, the global COVID-19 pandemic has had a significant adverse impact on the global economy
and, at the date of reporting, Papua New Guinea is in a State of Emergency (“SOE”). The impact on the Group of the global
COVID-19 pandemic is set out in Note 1 to the financial statements.
In March 2020 the Directors declared a final dividend of 55 toea per share payable immediately after the Annual General Meeting
on 17th June 2020 amounting to K17M.
No other matter or circumstance has occurred subsequent to the end of the reporting period that has significantly affected,
or may significantly affect, the operations of the Group, the results of those operations or the state of affairs of the Group in
subsequent financial years.
Steamships Annual Report 2019 63
NOTES TO THE FINANCIAL STATEMENTSSteamships Trading Company Limited Year Ended 31 December 2019 (Amounts in Kina 000’s)
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 2019, and the statements of comprehensive income, statements 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 2019 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 2019, 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.
Material uncertainty related to going concern
Without modifying our audit report, we draw attention to note 1 in the financial statements, which indicates that the Group’s
operations have been significantly impacted by the global COVID-19 pandemic in an adverse manner. These conditions, along
with other matters set forth in Note 1, indicate the existence of a material uncertainty that may cast significant doubt about the
Group’s ability to continue as a going concern and therefore, the Group may be unable to realise its assets and discharge its
liabilities in the normal course of business and at the amounts stated in the financial statements.
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
64 Steamships Annual Report 2019
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 5% of the Group’s
average annual profit before tax
for the three year period ended 31
December 2019 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.
•
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.
Amongst other relevant topics, we
communicated the matter referred
to in the Material uncertainty
related to going concern section
and 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 .
Steamships Annual Report 2019 65
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 . In addition to
the matter described in the Material uncertainty related to going concern section, 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 K112.7 million as at 31
December 2019 .
We evaluated the competency, qualifications and
objectivity of the experts engaged by the Group to provide
the valuations of the ships .
The Group’s financial performance has been impacted by
a prolonged weakness in economic conditions in Papua
New Guinea. These conditions adversely impacted levels of
shipping throughout the country.
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 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 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 2019 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 .
66 Steamships Annual Report 2019
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 2019 . 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 2019 .
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 2019 67
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 give a true and fair view and 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.
68 Steamships Annual Report 2019
INDEPENDENT AUDITOR’S REPORT
to the Shareholders of Steamships Trading Company Limited
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements
regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to
bear on our independence, and where applicable, related safeguards .
From the matters communicated with those charged with governance, we determine those matters that were of most significance
in the audit of the financial statements for the current period and are therefore the key audit matters. We describe these matters
in our auditor’s report unless law or regulations preclude public disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Report on other legal and regulatory requirements
The Companies Act 1997 requires that in carrying out our audit we consider and report on the following matters. We confirm
in relation to our audit of the financial statements for the year ended 31 December 2019:
• We have obtained all the information and explanations that we have required;
•
In our opinion, proper accounting records have been kept by the Company as far as appears from an examination of those
records .
Who we report to
This report is made solely to the Company’s shareholders, as a body, in accordance with the Companies Act 1997. Our audit
work has been undertaken so that we might state to the Company’s shareholders those matters which we are required to state
to them in an auditor’s report and for no other purpose. We do not accept or assume responsibility to anyone other than the
Company and the Company’s shareholders, as a body, for our audit work, for this report or for the opinions we have formed.
PricewaterhouseCoopers
Christopher Hansor
Partner
Registered under the Accountants Act 1996
Port Moresby
31 March 2020
Steamships Annual Report 2019 69
DIRECTORS’ REPORT
Steamships Trading Company Limited Year ended 31 December 2019
Steamships Trading Company Limited and Subsidiary Companies
The Directors submit their Annual Report for the year ended 31 December 2019 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 K49,995,000 (2017: K69,529,000).
Dividend
The Directors advise that a final dividend of 55 toea per share will be paid after the Annual General Meeting on 17th June
2020. This brings the total dividend declared for the year to 80 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.
70 Steamships Annual Report 2019
DIRECTORS’ REPORT
Steamships Trading Company Limited Year ended 31 December 2019
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. He 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). He 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.
L.M. Bromley
Director since 1st August 2019
Senior Executive of the Bromley Group of Companies for over 11 years. Ms Bromley is currently a Director of the Bromley
Group’s various commercial operating companies which include Heli Niugini Limited in Papua New Guinea, PT Sayap
Garuda Indah and PT Air Bali in Indonesia, Allway Logistics Limited and Merit Logistic Services Limited in Hong Kong and
responsible for the aviation operation, logistics support and group investment functions .
She is the Managing Director of Merit Finance Limited which serves as the Bromley Group’s investment arm and also
consults for the Bromley Group’s property development and property management.
She has previously held position on the Divisional Boards of East West Transport and Steamships Shipping.
She graduated from Bond University in Australia and holds both a Bachelor of Commerce and a Bachelor of Laws
Steamships Annual Report 2019 71
DIRECTORS’ REPORT
Steamships Trading Company Limited Year ended 31 December 2019
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% .
D.H. Cox OL, OBE
Member of the Audit Committee
Member of the Strategic Planning Committee
Managing Director 2004 to 2012
Director since 2003
Mr Cox joined Steamships as a Manager in 1992 for the Hotels Division.He has extensive experience in Property and Hotel
Development within the Asia-Pacific Region. He holds a MBA in International Hospitality and BSc (Hons) in Accounting &
Business Management. Mr Cox is also a member of the Steamships Hotels and Properties Advisory Boards.
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 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, Brian Bell Group and Chairman of ANZ Banking Group (PNG) Ltd.
Lady Kamit also serves on a number of non-government and charitable organisations, including Anglicare PNG and as
Patron of Business Coalition for Women Inc .
72 Steamships Annual Report 2019
DIRECTORS’ REPORT
Steamships Trading Company Limited Year ended 31 December 2019
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 .
J.B. Rae-Smith
Director since 12th August 2019
Mr Rae-Smith joined the Board of United States Cold Storage, Inc in June 2008 and has been its Chairman since January
2017 .
Mr Rae-Smith joined the Swire Group in 1985 and has worked with the Group in Australia, Papua New Guinea, Japan,
Taiwan, Hong Kong, the United States, Singapore and the United Kingdom.
He was a Director of Swire Pacific Limited, a company listed in Hong Kong, from January 2013 to August 2016 and was
the Executive Director of the Marine Services Division from 2005 to 2016, the Trading & Industrial Division between 2008
and 2016 and Chairman of the Swire Group Charitable Trust. He has led or has been involved with many Swire Group
businesses over the years and was most recently the Chief Executive Officer of Swire Oilfield Services. He is also a Director
of the Argent Energy Group, a sustainable producer of biofuel based in the United Kingdom and the Netherlands and Green
Biologics a biochemical start up .
In addition he has also been a Director of the Standard P&I Club, Deputy Chairman of the Hong Kong Ship Owners
Association, Chairman of the Lloyds Asian Ship Owners Committee and a Director of the Singapore Environmental Council.
J.H. Woodrow
Director since 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.
Steamships Annual Report 2019 73
DIRECTORS’ REPORT
Steamships Trading Company Limited Year ended 31 December 2019
Remuneration of Directors
Directors remuneration received or receivable from the Company as directors during the year, is as follows:
P. Aitsi (retired)
G. Aopi
L.M. Bromley (appointed)
Sir M.R. Bromley
D.H Cox
G.L Cundle (Chairman)
G.J. Dunlop
Lady W.T. Kamit
B.N. Swire (retired)
J.B Rae Smith (appointed)
J.H Woodrow
M.R. Scantlebury*
R.P.N Bray*
2019
K’000
-
121
61
218
218
218
243
170
61
61
121
-
-
1,492
2018
K’000
106
124
-
223
223
223
247
135
124
-
124
-
-
1,529
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
2019
No.
2018
No.
Remuneration
K’000
2019
No.
2018
No.
Remuneration
K’000
2019
No.
2018
No.
100-110
110-120
120-130
130-140
140-150
150-160
160-170
170-180
180-190
190-200
200-210
220-230
230-240
240-250
250-260
260-270
270-280
280-290
290-300
300-310
310-320
330-340
5
4
7
3
7
2
2
1
3
-
3
2
-
1
-
-
3
1
2
1
-
2
7
6
3
5
3
2
3
2
4
2
3
1
1
2
1
1
3
-
-
-
2
2
350-360
360-370
380-390
390-400
400-410
410-420
420-430
430-440
440-450
450-460
460-470
470-480
500-510
520-530
530-540
550-560
560-570
570-580
600-610
620-630
630-640
640-650
5
1
1
-
-
-
1
1
-
-
1
1
1
2
1
1
-
1
-
1
1
1
1
3
1
2
2
1
1
1
2
1
2
1
1
-
-
2
-
1
1
2
1
1
650-660
660-670
680-690
690-700
700-710
720-730
730-740
770-780
780-790
790-800
800-810
830-840
870-880
890-900
900-1000
1,000-1,010
1,300-1,400
1,800-1,900
2,600-2,700
2,700-2,800
1
1
1
-
-
1
1
2
-
1
1
1
-
1
1
1
1
1
1
1
1
2
-
1
1
-
-
2
1
-
1
-
1
1
2
1
-
1
1
-
For and on behalf of the Board:
Port Moresby
31 March 2020
74 Steamships Annual Report 2019
G.L. Cundle
Chairman
M.R. Scantlebury
Managing Director
STOCK EXCHANGE INFORMATION
Steamships Trading Company Limited Year ended 31 December 2019
Shares are listed on the Australian Securities Exchange and the Port Moresby Stock Exchange.
All shares carry equal voting rights.
Shareholdings
At 28 February 2020, there were 361 shareholders.
262 Holding
Holding
69
16
Holding
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
JS & S(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
HSBC Custody Nominees (Australia) Limited
Kelvinside Pty Ltd
Bond Street Custodian Limited
Mr Ramesh Mahtani
Citicorp Nominees Pty Limited
Intercontinental Assets Pty Ltd
Engoordina Pty Ltd
Derrick Charles Whitaker
Jennifer May Forbes
Miss Shirin Moayyad
National Nominess Limited
Custodial Services Limited
Mrs Judith Scottholland
Mrs Mary Patricia Haughton
22,362,651
5,760,000
1,859,446
446,494
54,727
32,500
26,200
25,000
23,067
21,700
17,467
15,000
11,078
10,348
10,000
10,000
9,457
8,768
8,161
8,161
30,720,225
%
72.12
18.58
6.00
1.44
0.18
0.10
0.08
0.08
0.07
0.07
0.06
0.05
0.04
0.03
0.03
0.03
0.03
0.03
0.03
0.03
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 .
Steamships Annual Report 2019 75
76 Steamships Annual Report 2019
Steamships Annual Report
Steamships Annual Report
COMPANY DIRECTORY
COMPANY DIRECTORY
CHAIRMAN
CHAIRMAN
G. L. Cundle §&
G. L. Cundle §&
MANAGING DIRECTOR & FINANCE DIRECTOR
MANAGING DIRECTOR & FINANCE DIRECTOR
M. R. Scantlebury
M. R. Scantlebury
EXECUTIVE DIRECTOR
EXECUTIVE DIRECTOR
R.P.N. Bray
R.P.N. Bray
NON-EXECUTIVE DIRECTORS
NON-EXECUTIVE DIRECTORS
G. Aopi CBE
G. Aopi CBE
L.M. Bromley
L.M. Bromley
Sir M.R. Bromley KBE §+&
Sir M.R. Bromley KBE §+&
D. Cox OL, OBE +&
D. Cox OL, OBE +&
G.J. Dunlop +&
G.J. Dunlop +&
Lady W.T. Kamit, CBE +
Lady W.T. Kamit, CBE +
J .B . Rae Smith
J .B . Rae Smith
J . H Woodrow
J . H Woodrow
+ Member of the Audit and Risk Committee
+ Member of the Audit and Risk Committee
§ Member of the Remuneration Committee
§ Member of the Remuneration Committee
& Member of the Strategic Planning Committee
& Member of the Strategic Planning Committee
SECRETARY
SECRETARY
M.R. Scantlebury
M.R. Scantlebury
REGISTERED OFFICE
REGISTERED OFFICE
Level 5, Harbourside West, Stanley Esplanade
Level 5, Harbourside West, Stanley Esplanade
Telephone: +675 313 7400
Telephone: +675 313 7400
P .O . Box 1
P .O . Box 1
Port Moresby, NCD
Port Moresby, NCD
Papua New Guinea
Papua New Guinea
AUDITORS
AUDITORS
PricewaterhouseCoopers
PricewaterhouseCoopers
P .O . Box 484
P .O . Box 484
Port Moresby, NCD
Port Moresby, NCD
Papua New Guinea
Papua New Guinea
SHARE REGISTRARS
SHARE REGISTRARS
Computershare Investor Services Pty Limited
Computershare Investor Services Pty Limited
GPO Box 2975
GPO Box 2975
Melbourne VIC 3001
Melbourne VIC 3001
AUSTRALIA
AUSTRALIA
Telephone: (Aus) 1300 85 05 05
Telephone: (Aus) 1300 85 05 05
(Overseas)
(Overseas)
Fax:
Fax:
+61 (0)3 9415 4000
+61 (0)3 9415 4000
+61 3 9473 2500
+61 3 9473 2500
STOCK EXCHANGE
STOCK EXCHANGE
Shares are listed on both the Port Moresby Stock Exchange
Shares are listed on both the Port Moresby Stock Exchange
Limited and the Australian Securities Exchange Limited .
Limited and the Australian Securities Exchange Limited .
A. R. B. N.
A. R. B. N.
055 836 952
055 836 952
Level 5 Harbourside West
Stanley Esplanade | NCD 121 | Papua New Guinea
P: +675 313 7429 / 79987000
steamships.com.pg