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Annual Report 2023

Plain-text annual report

ANNUAL REPORT 2023 CONTENTS Brief Profile of the Steamships Group . . . . . . . . . . . . . . . . . 2 Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Chairman’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Directors’ Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Review of Operations – LOGISTICS . . . . . . . . . . . . . . . . . 11 Consort Express Lines . . . . . . . . . . . . . . . . . . . . . . . 11 Pacific Towing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Joint Venture Port Services . . . . . . . . . . . . . . . . . . . 13 EastWest Transport . . . . . . . . . . . . . . . . . . . . . . . . . 14 Review of Operations – PROPERTY AND HOSPITALITY .15 Coral Sea Hotels . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Pacific Palms Property . . . . . . . . . . . . . . . . . . . . . . 16 Sustainability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Financial Section . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Statements of Comprehensive Income . . . . . . . . . . 19 Statements of Changes in Equity . . . . . . . . . . . . . . . 20 Statements of Financial Position . . . . . . . . . . . . . . . 21 Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . 22 Notes to the Financial Statements . . . . . . . . . . . . . . 23 Independent Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . 57 Directors’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Stock Exchange Information . . . . . . . . . . . . . . . . . . . . . . . 68 Company Directory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 BRIEF PROFILE OF THE STEAMSHIPS GROUP With over 105 years of operations in Papua New Guinea, Steamships Trading Company Limited (Steamships) is a committed investor in Papua New Guinea. The Group is a well-established business conglomerate with diverse commercial interests and listings on both the Australian and PNG’s National 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. Integral to this vision are the following business strategies: • The long-term development of a diversified range of businesses in which shareholder value can be created, • Employment of staff who we believe will further our strategic objectives and will be committed to the Group for the long term and providing them with rewarding careers, • Operational excellence in the way we conduct our business, • Doing business in a sustainable manner, and • Commitment to the highest standards of corporate governance. The Group employs over 3,100 PNG citizens and non- citizens in diverse divisions grouped under the operating categories of Logistics, Property and Hospitality and Commercial and 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. • 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 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. that core Over a century after it was founded, Steamships is still showing it has the resources and capacity, vision and capability to meet the dynamic needs of a growing country. 2 Steamships Annual Report 2023 BRIEF PROFILE OF THE STEAMSHIPS GROUP STEAMSHIPS’ ORGANISATIONAL STRUCTURE STEAMSHIPS TRADING COMPANY LOGISTICS PROPERTY AND HOSPITALITY COMMERCIAL AND INVESTMENTS Colgate Palmolive JV Croesus Consort Express Lines Pacific Towing EastWest Transport Pacific Palms Property Coral Sea Hotels Harbourside Development JV Pacific Rumana JV Port Services Wonye JV JV Port Services (x16 JV LO Entities) Wonye No. 2 JV Gulf Maritime Services Viva No. 31 JV Portside Business Park Steamships Annual Report 2023 3 FINANCIAL HIGHLIGHTS 2023 FINANCIAL HIGHLIGHTS Revenue and other income from continuing operations Profit attributable to shareholders Cash generated from operations Net cash (outflow) / inflow before financing Shareholders' funds External borrowings Earnings per share (toea) Dividends per share (toea) Shareholders' funds per share Underlying profit attributable to shareholders (Refer to page 8) Underlying earnings per share Gearing ratio Interest cover Dividend cover 2023 K’000 2022 K’000 Change (%) 669,296 58,144 103,559 (145,255) 1,052,595 420,218 631,262 57,985 183,519 30,096 1,027,010 263,084 187.5 95 33.95 50,240 162 26.8% 52.1 1.8 187.0 120 33.12 76,075 245 16.7% 74.3 1.6 6% 0% (44%) (583%) 2% 60% 0% (21%) 2% (34%) (34%) 60% (30%) 12% 0 0 0 ’ K 0 0 0 ’ K 4 Steamships Annual Report 2023 0200,000400,000600,000800,0001,000,0001,200,0002014201520162017201820192020202120222023Turnover K'000CommercialProperty and HospitalityLogistics - 100 200 300 400 5002014201520162017201820192020202120222023Earnings and Dividends ToeaEPS (toea)Underlying EPS (toea)Dividends per share (toea)0200,000400,000600,000800,0001,000,0001,200,0002014201520162017201820192020202120222023Net Assets Employed K'000CommercialProperty and HospitalityLogistics0%5%10%15%20%2014201520162017201820192020202120222023Return to ShareholdersNet profit to shareholders' funds %Underlying profit to shareholders' funds %0200,000400,000600,000800,0001,000,0001,200,0002014201520162017201820192020202120222023Turnover K'000CommercialProperty and HospitalityLogistics - 100 200 300 400 5002014201520162017201820192020202120222023Earnings and Dividends ToeaEPS (toea)Underlying EPS (toea)Dividends per share (toea)0200,000400,000600,000800,0001,000,0001,200,0002014201520162017201820192020202120222023Net Assets Employed K'000CommercialProperty and HospitalityLogistics0%5%10%15%20%2014201520162017201820192020202120222023Return to ShareholdersNet profit to shareholders' funds %Underlying profit to shareholders' funds %0200,000400,000600,000800,0001,000,0001,200,0002014201520162017201820192020202120222023Turnover K'000CommercialProperty and HospitalityLogistics - 100 200 300 400 5002014201520162017201820192020202120222023Earnings and Dividends ToeaEPS (toea)Underlying EPS (toea)Dividends per share (toea)0200,000400,000600,000800,0001,000,0001,200,0002014201520162017201820192020202120222023Net Assets Employed K'000CommercialProperty and HospitalityLogistics0%5%10%15%20%2014201520162017201820192020202120222023Return to ShareholdersNet profit to shareholders' funds %Underlying profit to shareholders' funds %0200,000400,000600,000800,0001,000,0001,200,0002014201520162017201820192020202120222023Turnover K'000CommercialProperty and HospitalityLogistics - 100 200 300 400 5002014201520162017201820192020202120222023Earnings and Dividends ToeaEPS (toea)Underlying EPS (toea)Dividends per share (toea)0200,000400,000600,000800,0001,000,0001,200,0002014201520162017201820192020202120222023Net Assets Employed K'000CommercialProperty and HospitalityLogistics0%5%10%15%20%2014201520162017201820192020202120222023Return to ShareholdersNet profit to shareholders' funds %Underlying profit to shareholders' funds %0200,000400,000600,000800,0001,000,0001,200,0002014201520162017201820192020202120222023Turnover K'000CommercialProperty and HospitalityLogistics - 100 200 300 400 5002014201520162017201820192020202120222023Earnings and Dividends ToeaEPS (toea)Underlying EPS (toea)Dividends per share (toea)0200,000400,000600,000800,0001,000,0001,200,0002014201520162017201820192020202120222023Net Assets Employed K'000CommercialProperty and HospitalityLogistics0%5%10%15%20%2014201520162017201820192020202120222023Return to ShareholdersNet profit to shareholders' funds %Underlying profit to shareholders' funds %0200,000400,000600,000800,0001,000,0001,200,0002014201520162017201820192020202120222023Turnover K'000CommercialProperty and HospitalityLogistics - 100 200 300 400 5002014201520162017201820192020202120222023Earnings and Dividends ToeaEPS (toea)Underlying EPS (toea)Dividends per share (toea)0200,000400,000600,000800,0001,000,0001,200,0002014201520162017201820192020202120222023Net Assets Employed K'000CommercialProperty and HospitalityLogistics0%5%10%15%20%2014201520162017201820192020202120222023Return to ShareholdersNet profit to shareholders' funds %Underlying profit to shareholders' funds %0200,000400,000600,000800,0001,000,0001,200,0002014201520162017201820192020202120222023Turnover K'000CommercialProperty and HospitalityLogistics - 100 200 300 400 5002014201520162017201820192020202120222023Earnings and Dividends ToeaEPS (toea)Underlying EPS (toea)Dividends per share (toea)0200,000400,000600,000800,0001,000,0001,200,0002014201520162017201820192020202120222023Net Assets Employed K'000CommercialProperty and HospitalityLogistics0%5%10%15%20%2014201520162017201820192020202120222023Return to ShareholdersNet profit to shareholders' funds %Underlying profit to shareholders' funds %0200,000400,000600,000800,0001,000,0001,200,0002014201520162017201820192020202120222023Turnover K'000LogisticsProperty and HospitalityCommercial - 100 200 300 400 500201420152016201720182020202120222023Earnings and Dividends ToeaEPS (toea)Underlying EPS (toea)Dividends per share (toea)0200,000400,000600,000800,0001,000,0001,200,0002014201520162017201820192020202120222023Net Assets Employed K'000LogisticsProperty and HospitalityCommercial0%5%10%15%20%201420152016201720182020202120222023Return to ShareholdersNet profit to shareholders' funds %Underlying profit to shareholders' funds %FINANCIAL HIGHLIGHTS SUMMARY OF PAST PERFORMANCE 2014 K’000 2015 K’000 2016 K’000 2017 K’000 2018 K’000 2019 K’000 2020 K’000 2021 K’000 2022 K’000 2023 K’000 STATEMENTS OF COMPREHENSIVE INCOME (including discontinued operations) Revenue 941,708 773,535 732,701 705,687 648,106 585,168 540,406 563,929 631,262 669,296 Profit before tax Share of associates profit Income tax (expense) / credit Minority interests Net profit attributable to shareholders Equity adjustment Dividends paid or provided for the year 134,789 3,843 (38,487) (11,490) 88,655 - (43,411) 136,042 3,062 (37,710) (2,415) 98,979 2,206 (48,062) 118,686 5,865 (35,677) (4,664) 84,210 - (40,291) 62,686 7,525 (32,621) 3,926 41,516 - (32,559) 112,493 5,628 (54,420) 5,828 69,529 - (26,357) 61,284 5,010 (18,928) 2,629 49,995 - (44,962) 63,813 4,026 11,198 (182) 78,855 - (17,055) 88,248 5,062 (1,694) (1,066) 90,550 2,950 (35,659) 79,786 6,288 (26,633) (1,456) 57,985 - (35,659) 77,103 7,286 (25,722) (523) 58,144 - (32,559) Earnings retained this year 45,244 53,123 43,919 8,957 43,172 5,033 61,800 57,841 22,326 25,585 Underlying profit attributable to shareholders (adjusted for significant items) 108,808 STATEMENTS OF FINANCIAL POSITION 80,651 71,721 61,775 43,304 31,505 36,927 67,081 76,075 50,240 SHARE CAPITAL AND 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 24,200 711,764 735,964 30,773 766,737 24,200 24,200 764,887 808,806 833,006 789,087 48,831 47,515 881,837 836,602 24,200 896,105 24,200 860,843 24,200 24,200 24,200 24,200 24,200 817,764 980,484 1,002,810 1,028,395 922,643 841,964 920,305 885,043 946,843 1,004,684 1,027,010 1,052,595 17,028 16,983 36,190 963,826 1,020,929 1,044,069 1,069,623 878,154 17,747 19,723 940,028 902,790 16,245 17,059 1,115,123 1,072,955 1,068,892 66,445 36,458 36,680 36,914 80,491 80,491 400,480 997,125 67,196 30,250 80,002 284,200 294,800 33,193 33,521 80,491 366,479 970,928 890,576 41,586 65,276 2,311 1,683 76,433 76,433 470,810 360,385 945,075 36,992 1,010 76,433 933,983 39,367 2,571 76,433 428,703 464,635 947,451 1,073,933 45,495 45,458 4,627 2,020 76,433 76,433 501,242 444,331 TOTAL ASSETS 1,628,807 1,627,298 1,536,708 1,469,373 1,504,778 1,451,643 1,488,213 1,516,989 1,515,693 1,701,730 Current liabilities Non-current liabilities TOTAL LIABILITIES NET ASSETS RATIOS 190,621 671,449 541,292 249,404 184,646 221,560 470,225 369,659 352,541 229,779 148,286 212,209 400,567 294,608 198,688 297,372 359,424 112,200 152,295 479,812 862,070 790,696 654,871 591,219 564,750 548,853 524,387 496,060 471,624 632,107 766,737 836,602 881,837 878,154 940,028 902,790 963,826 1,020,929 1,044,069 1,069,623 Current assets to current liabilities 1.92 Borrowings to shareholders funds 95.2% Gearing 47.8% Tangible net asset backing per share (Kina) 22.13 Net profit to revenue % 9.4% 12.0% Net profit to shareholders' funds % Underlying profit to shareholders' funds % 14.8% 140 Dividends per share (toea) 286.0 EPS (toea) 351 Underlying EPS (toea) 51.0% Earnings retained % 0.74 81.7% 43.1% 24.38 12.8% 12.5% 10.2% 155 319.0 260 53.7% 1.16 57.0% 34.6% 25.84 11.5% 10.1% 8.6% 130 272.0 231 52.2% 1.00 50.2% 33.1% 25.74 5.9% 4.9% 7.3% 110 134.0 199 21.6% 1.15 39.7% 28.2% 27.85 11.1% 7.6% 4.7% 165 224.0 140 62.1% 1.83 35.4% 19.5% 26.65 8.5% 5.6% 3.6% 80 161.0 102 10.1% 1.40 32.1% 13.7% 28.62 14.6% 8.3% 3.9% 80 254.0 119 78.4% 1.42 26.1% 16.5% 30.46 16.0% 9.0% 6.7% 100 292.0 218 63.9% 0.68 25.6% 16.7% 31.21 9.2% 5.6% 7.4% 120 187.0 245 38.5% 1.70 39.9% 26.8% 32.03 8.7% 5.5% 4.8% 95 187.5 162 44.0% Notes Earnings per share = profit attributable to shareholders / average shares in issue Gearing = net debt / net 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 2023 5 CHAIRMAN’S REPORT “The past 12 months have proven to be tough in terms of underlying economic fundamentals; headwinds in both inflationary pressure and economic growth, as well as delayed progress of various natural resources projects, have dampened the post-pandemic economic recovery trajectory which started in 2022. Steamships, through its diversified portfolio, was able to navigate such challenges and provide positive returns to its shareholders, whilst at the same time executing strategic capital investments to position itself for sustainable growth in coming years.“ Geoff Cundle, Chairman. Properties experienced firmer demand for both residential and commercial units, although experienced a reduction in available inventory driven by renovation and repair work. The division significantly bolstered its property development management team to support the increasing number of development opportunities, such as Portside Business Park and Dobel Shopping Centre, as well as expand its Property Management services for third parties. Hospitality benefited from overseas government business attending international forums in the first half of the year. ENZO’s continues to expand its food and beverage offering with the opening of new outlets. Major renovation projects across all hotels will position the division for expected increased demand in years to come. The Logistics division experienced weaker market conditions with results reflecting competitive pressures in an inflationary environment. Early signs are that the weak market in 2023 will continue into 2024. The new Project Logistics arm of the division invested significantly in tugs and barges, targeting resources projects. The expected post-COVID growth that started in 2022 did not continue in 2023. Demand for Logistics products and services in particular experienced only modest revenue growth (but at a higher operating cost) whilst both Properties and Hospitality divisions were able to meet underlying demand profitably. South, comprising Marriott Harbourside Executive Apartments, a mixed-use flagship property project completed in early 2024 and opened recently. The property will significantly enhance the existing Harbourside precinct and stimulate demand and activity in the Downtown area. Group Revenue grew by 4% in 2023, largely driven by hospitality which benefited from the large influx of foreign diplomats and Pacific Island Forum in the first half of the year. Profit attributable to shareholders increased by 0.3% to K58.1 million with insurance proceeds from Blaikie Apartments earthquake damage offsetting a strong inflationary pressure on margin as well as strategic investment in additional management capability undertaken in 2023 to position the Group for growth. Underlying profit declined 34% from 2022 to K50 million. (before exceptional items) however, 6 Steamships Annual Report 2023 CHAIRMAN’S REPORT Steamships adopts a forward-thinking, long-term approach to our operations and decision-making, prioritising sustainable growth. The Group has made substantial investments in 2023 across its portfolio of Properties, Hospitality and Logistics assets in order to ensure it’s well positioned for future growth and upcoming project opportunities. Papua New Guinea is our home and principal place of business, and we remain committed to actively foster its economic and social advancement. The Board of Directors would like to thank all our staff for their commitment and personal dedication during what has been a challenging few years for the entire country. Steamships Annual Report 2023 7 DIRECTORS’ REVIEW 2023 was a challenging year for Steamships. The PNG economy suffered from inflationary pressure and a lack of foreign currency. The anticipated surge in domestic demand, driven by investment in natural resource projects, was largely absent. The Group was able to balance softer demand for its Logistics services with stronger performance from Properties and Hospitality. The Group’s net operating cash flow generation decreased by 44% to K103.6 million against K183.5 million in 2022. The cash balance at year end is K25.9 million. A final dividend of 60 toea per share has been proposed and will be paid after the Annual General Meeting on 13th June 2024, subject to Steamships’ ability to secure foreign exchange for non-PNG shareholders. As there was an interim dividend paid during the year of 35 toea per share, the total dividend for the year is 95 toea per share (2022: 120 toea per share). The dividend is unfranked and there is no conduit foreign income. Change 0.3% 2023 K’000 58,144 - (7,904) (7,904) 2022 K’000 57,985 18,090 - 18,090 50,240 76,075 (34.0%) Reflecting its positive long-term strategic outlook, the Company invested heavily in management resources and equipment to position for the incoming growth of demand. Steamships’ sales revenue, on a continuing basis, increased 4.0% to K656.3 million against last year’s K631.3 million, with improved revenue across the various businesses. Underlying profit fell by 34% year-on-year, primarily reflecting a higher cost of doing business this year. Depreciation in 2023 was K104.5 million against K95.3 million in 2022, and interest on net borrowings (excluding capitalised interest) was K1.7 million against K1.2 million in 2022. Capital expenditure for the year was K222.8 million against K129.2 million in 2022. Net profit attributable to shareholders Add back / (less) impact of significant items (post tax and minority interest) Impairment of properties Blaikie Apartments insurance claim settlement Total impact of significant items Underlying profit attributable to shareholders 8 Steamships Annual Report 2023 DIRECTORS’ REVIEW Significant Items Commercial The results of Colgate-Palmolive (PNG) Limited, a PNG incorporated joint venture, showed strong growth across most product categories as well as margin improvements driven by favourable sales mix and effective cost controls. Supply chain performance has returned to pre-COVID levels and inflationary pressures have been offset by price adjustments. Trading Outlook There is still optimism that early-works activity for the Papua LNG project and broader infrastructure investment should gain traction in 2024. However, there are worrying indications that the timeline of the project may be slipping again. Steamships will maintain a cautious approach to committing capital to project related activity until final investment decision is secured. Steamships, through its investments in 2023, is well positioned to benefit from an improvement in economic conditions. It remains committed to continuous improvement in productivity and is vigilant in identifying opportunities for growth. The opening of Harbourside South should inject new vibrancy into the downtown precinct. The Blaikie Apartments in Lae suffered damage because of the earthquake in September 2022, resulting in the Group making an impairment to the value reported in the previous financial year. The Group lodged a claim with its insurer and received proceeds from the claim in the 2023 financial year. The details are as follows: Coral Sea Hotels Coral Sea Hotels’ Hospitality division’s solid performance can be largely attributed to a significant influx of diplomatic visits for the Pacific Island Forum, showcasing the division’s ability to deliver a premium customer experience. ENZO’s express pizza outlets continues to expand with the opening of new outlets. A major renovation program across all hotel properties in 2024 will position the division for the expected increase in demand when the LNG project activity gains momentum. Pacific Palms Property Pacific Palms Property’s experienced encouraging demand for both residential and commercial units. However, inventory was reduced to carry out renovations and repair work. This reduced both revenue growth and profitability. The new development in Port Moresby, Harbourside South and Marriott Executive Apartments, was opened in Q1 2024. Phase 1 of the Dobel Shopping Centre in Mount Hagen was completed ahead of schedule in Q3 2023. Phase 2 has entered final design and financing stage. Logistics Both Consort Express Lines and EastWest Transport experienced headwinds driven by weak demand. Reflecting Steamships’ long-term horizons, additional shipping capacity was added to cater for expected underlying growth as well as resource project driven demand, arising from Papua LNG. The first assets were successfully contracted to the Papua LNG project in 2023. Pacific Towing provided a consistently reliable harbour towage service throughout the year. Returns were bolstered by salvage operations late in the year. Steamships Annual Report 2023 9 K’000Insurance proceeds11,292Less tax effect(3,388)Total7,904DIRECTORS’ REVIEW Compliance with Laws and Regulations Going Concern Statement Based on a robust assessment, the Directors confirm that given the strong cash generation trend of the Group, as well as the level of borrowing facilities available, they have an expectation that the Group has adequate resources to continue to operate for a period of at least 12 months from the date of approval of financial statements. For this reason, they continue to adopt the going concern basis of preparing the financial statements. Internal Controls Effectiveness The Directors confirm the effectiveness of internal controls and risk management processes and deem them to be appropriate. they have reviewed that Engagement with Traditional Landowners Steamships’ success heavily relies on building and maintaining close and supportive relationships with communities and organisations that may be impacted by the decisions we take; Steamships actively engages with communities through our Community Grants Programme, as well as inviting cross-sector external partners on projects that bring community benefit and support sustainable development within Papua New Guinea. At Steamships, we always aim to do the right thing, in the right way and we make compliance and business integrity non-negotiable. For the 2023 financial year, the Directors declare that, to the best of their knowledge, Steamships has not engaged in any activities which contravene laws and regulations. Outside Interests and Conflicts Directors confirm that all material interests in contracts involving the Group were declared and refrained from voting on manners in which they were interested. Shareholders Engagement Steamships is dedicated to ensuring fair and equitable treatment of all shareholders and offers diverse channels of access to information concerning the Group’s operations. Directors affirm that Steamships has made every effort to ensure fair and equitable treatment of all shareholders, implementing procedures that safeguard shareholder rights and eliminate obstacles to the exercise of those rights. 10 Steamships Annual Report 2023 REVIEW OF OPERATIONS - LOGISTICS CONSORT EXPRESS LINES The Project Logistics arm of CEL successfully contracted assets to support the Papua LNG project in H2 2023. The large investment to enhance its fleet capacity in 2023 was executed with the view of fortifying its position for future expansion and optimise its ability to seize incoming opportunities. Consort Express Lines (CEL) operates a fleet of 10 coastal vessels, all of which are PNG flagged, and is PNG’s only domestic operator that is ISO accredited for safety, environment and quality. LINER SERVICES CEL connects 13 ports around PNG to the main international gateway ports of Lae and Port Moresby. CEL also has scheduled services to the North Coast, South Coast, New Guinea Islands, Bougainville, and Western Province. CEL proudly serves the people of PNG by providing an important supply link to many of the communities on its routes. CEL carries a range of cargoes including containerised, break- bulk, reefer, LCL and project cargo. CEL transports cargo for a diverse customer base from domestic manufacturers and wholesalers to international liner carriers transhipping cargo. In addition to owning and operating ships, CEL manages PNG’s largest fleet of containers offering customers easy access to a wide range of container types. PROJECT CHARTERS CEL 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, customs clearance, lay down areas and warehousing. CEL liner performance in 2023 showed a modest decline compared to 2022, largely because of weak underlying economic conditions. Inflationary pressure, as well as in management capacity, put pressure on margins. investment increased Steamships Annual Report 2023 11 REVIEW OF OPERATIONS - LOGISTICS PACIFIC TOWING Pacific Towing is PNG’s leader in the provision of a diverse range of marine services, enjoying a reputation for excellence and reliability across the region. Pacific Towing is a full member of the International Salvage Union and the International Spill Control Organisation. Core services include towage, mooring, salvage and commercial diving. Although primarily operating in PNG waters, Pacific Towing also services a broader area, if required, for salvage activity or ad- hoc towing services. Pacific Towing operates a fleet of 25 vessels (15 tugs and 10 associated support vessels) and has first responder salvage capability. Vessels are in five ports across PNG (being Port Moresby, Lae, Rabaul, Kimbe and Madang) and in Honiara, Solomon Islands. Pacific Towing is the only marine services and towage company in PNG to be ISO accredited for Quality, Safety and Environment. The volume of harbour towage significantly increased compared to 2022 whilst non-harbour operations were boosted by salvage revenue in the second half of the year. Pacific Towing continues its strategy of developing local talent, supporting cadets to study at the Maritime Academy of Fiji. This programme is critical to address the shortage of capacity in both junior and senior officers in PNG. Additionally, the “PacTow Women in Maritime” programme continues to produce high calibre female officers. Pacific Towing has committed to a re-fleeting programme that will phase out older tugs over the next five years. Tug Keera was purchased in 2023, and further enhances Pacific Towing capacity to respond to industry needs throughout PNG. Further investment is expected in oncoming years and by the end of the five-year re-fleeting plan, all ports should be serviced. 12 Steamships Annual Report 2023 REVIEW OF OPERATIONS - LOGISTICS JOINT VENTURE PORT SERVICES JVPS performed in line with expectation and showed growth in volume compared to prior year. Focus has been on offering a safe, reliable, and cost-effective service to all customers. Security continues to be a strong focus and technology has been deployed as a solution where possible including biometric payroll, increased levels of surveillance, and improved cargo tracking. The Joint Venture Hire, which hires out heavy machinery on wet and dry leases, continued to provide a reliable service to all ports and to external customers. Joint Venture Port Services (JVPS) operate 16 stevedoring and cargo handling businesses throughout the country including in the principal ports of Port Moresby and Lae, secondary ports elsewhere on the mainland and on Bougainville, New Ireland and New Britain. 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 communities in which the joint ventures operate. JVPS is the only group of stevedoring and handling companies in PNG to be ISO accredited for Quality, Safety and Environment. The business continues to work hard to provide a seamless logistics solution for customers in PNG. Steamships Annual Report 2023 13 REVIEW OF OPERATIONS - LOGISTICS EASTWEST TRANSPORT 2023 was another challenging year for EWT. A combination of a general market weakness as well as excess capacity in the industry put pressure on margins as volumes showed a relatively modest reduction compared to prior year. Both fuel cartage and general transport volumes have slightly declined from 2022. The focus on EWT has been on improving asset reliability and availability, consolidating its strategic alignment with Consort Express Lines shipping to provide a “door-to-door” delivery across the network. EWT continued its investment in state-of-the-art technology to drive operational efficiencies and develop a digital customer experience as well as strengthening its management in key positions. East West Transport (EWT) is one of Papua New Guinea’s largest trucking companies, providing a range of transport related activities. It is ISO accredited for Environmental Management, Occupational Health & Safety and Quality. Based in Port Moresby, EWT has operations in Lae, Kimbe, Rabaul, Madang, Wewak, Alotau, and Kavieng. EWT 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 facilities, safety teams, recovery vehicles, and emergency response teams. EWT’s activities include bulk fuel, containerised cargo, break-bulk cargo, and depot services such as equipment hire, warehousing and bonded or unbonded yard storage. localised workshop 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 and door-to-door logistics and project solutions for the mining, oil and gas sectors and new or existing commercial sectors. 14 Steamships Annual Report 2023 REVIEW OF OPERATIONS - PROPERTY AND HOSPITALITY CORAL SEA HOTELS Coral Sea Hotels (CSH) is the largest hotel group in Papua New Guinea, managing seven hotels throughout the country. CSH comprises of the Grand Papua Hotel, Gateway Hotel and Apartments, Ela Beach Hotel and Apartments in Port Moresby, Huon Gulf Hotel in Lae, Highlander Hotel and Apartments in Mount Hagen, Bird of Paradise Hotel in Goroka and Cassowary Hotel in Kiunga. CSH also operates several food and beverage (F&B) outlets including ENZO’s Pizza, Ela Beach Bakery, and Harbourside Bakery. The Port Moresby market remained oversupplied with hotel rooms. CSH competed effectively to secure a strong share of the important Pacific Island Forum event business in the first half of the year. The Grand Papua Hotel (GPH), in its first full year under Radisson brand, was once again the recipient of the ‘World Luxury Hotel Award’, further strengthening its position as the leading business hotel in Papua New Guinea. GPH will be undergoing significant refurbishment in 2024, during which public areas, guestrooms, and restaurants will all be comprehensively upgraded. The targeted investment into training and food & beverage offering continues as part of CSH’s overall strategy. The expansion of the ENZO’s chain continues with six stores now opened in Port Moresby and further new outlets are planned in 2024 . The focus for CSH continues to be delivering a consistent, high-quality, and affordable service across all hotels and restaurants. In line with this, CSH will invest significant resources and capital in 2024 to upgrade all its hotels throughout Papua New Guinea to improve the customer experience. Steamships Annual Report 2023 15 REVIEW OF OPERATIONS - PROPERTY AND HOSPITALITY PACIFIC PALMS PROPERTY With a portfolio of over 200 properties across Residential, Commercial, Retail, and Industrial asset classes in Port Moresby, Lae, Madang, Wewak, Goroka, Mount Hagen, and Rabaul, Pacific Palms Property (PPP) is one of the premier property developers and managers in PNG. PPP’s strategy of investing in projects of scale and quality, in diversified real estate asset classes, in both established and upcoming locations, results in stable revenues, net operating income, and cashflow. Despite the reduction of inventory, driven by renovation and repair work as well as reinstatement of Blaikie Apartments in Lae following the 2022 earthquake, the division demonstrated strong economic fundamentals, showcasing its ability to maximise returns from a high-quality diversified portfolio. In tune with Steamships’ long term investment approach and commitment to development and growth of PNG, PPP opened Portside Business Park in 2023, adding another gateway for commercial activities in the region; located in the heart of Port Moresby’s industrial and logistics zone at Motukea, Portside Business Park offers PNG’s businesses seamless accessibility through land and sea channels thereby offering strategic connectivity to domestic and global markets. Portside Business Park will be further developed in 2024 with the set up of infrastructure and commercial buildings to cater for increasing demand. PPP further expanded its reach beyond Port Moresby with setting up a joint venture development in Mount Hagen of Dobel Shopping Centre, a large scale, mixed-use development. Phase I was completed ahead of time and budget in 2023, PPP is now focusing on Phase II, which will include supermarkets, restaurants, homeware, retail stores as well as government and financial agencies. Harbourside South, PPP’s latest mixed-use development in Downtown Port Moresby officially opened in February 2024 with strong leasing commitments for its office and retail space. Its strategic location overlooking Port Moresby harbour and outstanding facilities will complement the existing Harbourside developments. The 88 Executive Serviced Apartments represent the Marriott group’s first entry into the PNG market. PPP continues its commitment to investing in green technology and green building standards in all its developments. With its existing portfolio of ready for occupancy properties and its landbank of properties with secure titles in key strategic locations, PPP is well positioned to benefit from an improvement in demand for real estate once the resource projects ramp-up. 16 Steamships Annual Report 2023 SUSTAINABILITY Steamships’ commitment to Sustainable Development was underpinned in 2023 by the resolution of the Board of Directors that the Group will achieve net zero emissions across all three scopes by 2050. This is an ambitious target for a diverse conglomerate operating in an emerging market, but one that we see as imperative as we support PNG to achieve its corresponding national development goals. Work is now underway to ensure that our business is equipped to adapt to the risks and opportunities presented by climate change, to take practical steps to decarbonise our operations, and to develop ambitious science-based targets for net zero by 2050 and interim steps along the way. We continue our efforts to improve our environmental stewardship on a day- to-day basis, such as introducing a recycling programme at our head office, removing single-use plastics from our hotel operations, and trialling recycled fuel product on our vessels in a bid to contribute to the circular economy. The expansion of our in-house sustainability team sets us up well to continue to embed sustainable business practices across all levels and functions of our organisation in 2024 and beyond. With zero fatalities recorded across our operating businesses in 2023, the Group is focused in sustaining this standard in alignment with our “Target 2” strategy (which aims to halve our injury frequency rate). We dedicated our efforts to strengthening our safety capabilities through training, smart- system implementation, and crisis management. Notably, our annual safety day took place in September 2023 under the theme ‘Leveraging International Standards to Improve Safety Performance’, featuring interactive sessions attended by Steamships executives, safety teams, and senior management from all divisions. The event also hosted external safety leaders to share best practices. We undertook 261,000 man-training hours to supporting workforce capabilities through a comprehensive suite of training initiatives. Additionally, we conducted a culture survey, achieving a high engagement rate. The survey results highlighted strengths and opportunities, which will inform strategic decision-making to further our organisational growth and development. to sustained its commitment local Steamships has communities, with over K1.75 million donated to charitable and community causes in 2023 through our Community Grants Programme and event sponsorships. We have continued to support long-term partnerships with organisations including Buk Bilong Pikinini, Femili PNG, and the Sea Women of Melanesia, to name a few, whose work we know to be impactful in our focus areas of Health, Education, Social Welfare, and Environment. We are also delighted to extend our support to new partners looking to make a difference to the economic empowerment of people with disabilities, to implement traditional reef custodianship methods in remote island communities, and to provide WASH facilities for school pupils. Steamships continues to sponsor the Hiri Moale Festival as a major cultural event. As our business grows, we are mindful of the need to manage this growth sustainably, continuing to empower our people and communities while managing our environmental impact. We remain committed to continue this journey in 2024. Steamships publishes an Annual SD report to complement this Annual Report. The Annual SD Report is prepared with reference to the updated standards of the Global Reporting Initiative (GRI), a worldwide corporate transparency initiative. The report is available on the Steamships website at www.steamships.com.pg. Steamships Annual Report 2023 17 CORPORATE GOVERNANCE Steamships, its employees and its board are committed to achieving and demonstrating the highest standards of corporate governance and ethical behaviour. 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 and guidelines. Each section addressing a key principle includes references to relevant information that appears elsewhere in the 2023 Annual Report or on the Steamships’ website. Steamships believes it complied with the ASX Corporate Governance Principles (the fourth edition) during the twelve months ended 31 December 2023, except where noted in the Corporate Governance Report. Steamships’ Corporate Governance Report can be found at https://www.steamships.com.pg/about-us/corporate- governance/charters-and-policies/ 18 Steamships Annual Report 2023 STATEMENTS OF COMPREHENSIVE INCOME Steamships Trading Company Limited Year Ended 31 December 2023 (Amounts in Kina ‘000) Consolidated Parent Entity Note 2023 2022 2023 2022 Continuing Operations Revenue Other income Operating expenses OPERATING PROFIT / (LOSS) Finance income Finance costs Share of profit of associates and joint ventures PROFIT / (LOSS) BEFORE INCOME TAX Income tax (expense) / credit PROFIT / (LOSS) FROM CONTINUING OPERATIONS 3(a) 3(a) 3(b) 3(e) 3(e) 4(b) 5(a) 656,290 13,006 (590,541) 78,755 14,174 (15,826) 7,286 84,389 (25,722) 58,667 631,262 - (550,301) 80,961 13,537 (14,712) 6,288 86,074 (26,633) 59,441 PROFIT / (LOSS) FOR THE YEAR 58,667 59,441 TOTAL COMPREHENSIVE INCOME / (LOSS) FOR THE YEAR Attributable to: Non-controlling interests Shareholders TOTAL COMPREHENSIVE INCOME / (LOSS) FOR THE YEAR Attributable to owners arises from: Continuing operations Discontinued operations 523 58,144 58,667 58,144 - 58,144 1,456 57,985 59,441 57,985 - 57,985 11,503 5,098 (1,692) 14,909 85 - - 14,994 (1,047) 13,947 13,947 - 13,947 13,947 13,947 - 13,947 1,032 2,036 (4,831) (1,763) 85 - - (1,678) 815 (863) (863) - (863) (863) (863) - (863) Basic and Diluted Earnings per share Continuing & discontinued (toea) 3(f) 187.5t 187.0t - - These Statements of Comprehensive Income are to be read in conjunction with the accompanying notes. Steamships Annual Report 2023 19 STATEMENTS OF CHANGES IN EQUITY Steamships Trading Company Limited Year Ended 31 December 2023 (Amounts in Kina ‘000) Consolidated Share Capital Retained Earnings Other Reserves Total Capital and Reserves Non- Controlling Interest Total Equity BALANCE AT 1 JANUARY 2022 24,200 1,020,779 (40,295) 1,004,684 16,245 1,020,929 Profit for the year Dividends paid 2022 - - 57,985 (35,659) - - 57,985 (35,659) 1,456 (642) 59,441 (36,301) BALANCE AT 31 DECEMBER 2022 24,200 1,043,105 (40,295) 1,027,010 17,059 1,044,069 Profit for the year Dividends paid 2023 - - 58,144 (32,559) - - 58,144 (32,559) 523 (554) 58,667 (33,113) BALANCE AT 31 DECEMBER 2023 24,200 1,068,690 (40,295) 1,052,595 17,028 1,069,623 Parent Entity BALANCE AT 1 JANUARY 2022 Loss for the year Dividends paid 2022 BALANCE AT 31 DECEMBER 2022 Profit for the year Dividends paid 2023 BALANCE AT 31 DECEMBER 2023 Share Capital 24,200 - - 24,200 - - 24,200 Retained Earnings 70,825 (863) (35,659) 34,303 13,947 (32,559) 15,691 Total Equity 95,025 (863) (35,659) 58,503 13,947 (32,559) 39,891 These Statements of Changes in Equity are to be read in conjunction with the accompanying notes. There is no other comprehensive income. 20 Steamships Annual Report 2023 STATEMENTS OF FINANCIAL POSITION Steamships Trading Company Limited As at 31 December 2023 (Amounts in Kina ‘000) Current assets Cash and cash equivalents Trade and other receivables Inventories Income tax receivable Asset held for sale Non-current assets Property, plant and equipment Investment properties Investments in related companies Due from related companies Intangible assets Deferred tax assets TOTAL ASSETS Current liabilities Trade and other payables Lease liabilities Provisions for other liabilities and charges Due to related companies Due to a 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 Note 2023 2022 2023 2022 Consolidated Parent Entity 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 28,804 184,726 39,480 5,163 - 258,173 692,559 381,374 45,495 243,069 76,433 4,627 1,443,557 1,701,730 108,680 2,576 6,122 1,862 160 32,895 - 152,295 55,234 28,086 11,191 385,301 479,812 632,107 53,436 147,620 28,463 12,088 3,001 244,608 558,555 388,896 45,458 199,723 76,433 2,020 1,271,085 1,515,693 108,038 2,667 5,635 2,902 160 240,022 - 359,424 57,245 24,379 10,576 20,000 112,200 471,624 1,069,623 1,044,069 24,200 1,028,395 1,052,595 24,200 1,002,810 1,027,010 17,028 17,059 1,069,623 1,044,069 - 45,298 - - - 45,298 22,995 - 55,252 9,531 - 832 88,610 - 35,908 - 38 - 35,946 25,068 - 51,752 8,909 - 1,657 87,386 133,908 123,332 - - - 93,982 - - 35 94,017 - - - - - 94,017 39,891 24,200 15,691 39,891 - 39,891 1,677 - - 63,152 - - - 64,829 - - - - - 64,829 58,503 24,200 34,303 58,503 - 58,503 For and on behalf of the Board: 28 March 2024 G.L. Cundle Chairman R.P.N. Bray Managing Director These Statements of Financial Position are to be read in conjunction with the accompanying notes. Steamships Annual Report 2023 21 STATEMENTS OF CASH FLOWS Steamships Trading Company Limited Year Ended 31 December 2023 (Amounts in Kina ‘000) Note 2023 2022 2023 2022 Consolidated Parent Entity CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers Payments to suppliers and employees Interest received Interest and other finance costs paid Income tax paid Net cash from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment Proceeds from sale of property, plant and equipment Subscription of additional shares in a joint venture company Loans issued to associated companies Dividends received from joint venture and associates Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from borrowings Repayments of borrowings Loans received from subsidiaries Loans repaid (to) / from associated companies Lease repayments Dividends paid Net cash from / (used in) financing activities NET DECREASE IN CASH HELD NET CASH AT BEGINNING OF THE YEAR NET CASH AT END OF THE YEAR CASH COMPRISES: Cash and cash equivalents Bank overdrafts 5(e) 19(a) 6 16 627,185 (493,706) 2,401 (15,826) (16,495) 103,559 (222,769) 6,370 (3,500) (31,571) 2,656 (248,814) 185,000 (30,000) - (1,040) (2,597) (33,113) 118,250 (27,005) 52,914 25,909 28,804 (2,895) 25,909 628,260 (437,595) 13,526 (14,712) (5,960) 183,519 (129,152) 6,338 - (33,307) 2,698 (153,423) 30,000 (30,000) - 115 (2,250) (36,301) (38,436) (8,340) 61,254 52,914 53,436 (522) 52,914 2,401 - 85 - (137) 2,349 - - (3,500) (622) 3,502 (620) - - 30,830 - - (32,559) (1,729) - - - - - - 4,552 - 85 - (117) 4,520 (3,578) - - - 1,032 (2,546) - - 33,685 - - (35,659) (1,974) - - - - - - These Statements of Cash Flows are to be read in conjunction with the accompanying notes. 22 Steamships Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS Steamships Trading Company Limited Year Ended 31 December 2023 (Amounts in Kina ‘000 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 28 March 2024. The Board of Directors has the power to amend the financial statements after their issue. (a) Basis of preparation The financial statements have been prepared in accordance with the Papua New Guinea Companies Act 1997 (as amended) and comply with International IFRS Financial Reporting Standards Interpretations Committee interpretations (IFRS applicable to companies reporting under IFRS and other generally accepted accounting practice in Papua New Guinea. The financial statements have been prepared under the historical cost convention. (IFRS) and IC) The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 1(z). (i) Standards, amendments and interpretations effective in the year ended 31 December 2023 The following standards, amendments and interpretations to existing standards became applicable for the first time during the accounting period ended 31 December 2023. • • • IFRS 17, Insurance Contracts. This standard replaced IFRS 4, which permitted a wide variety of practices in accounting for insurance contracts. IFRS 17 fundamentally changes the accounting by all entities that issue insurance contracts. Narrow scope amendments to IAS 1, Practice statements 2 and IAS 8. The amendments aim to improve accounting policy disclosures and to help users of the financial statements to distinguish in accounting estimates and between changes changes in accounting policies. Amendment to IAS 12 – deferred tax related to assets and liabilities arising from a single transaction. These amendments require companies to recognise deferred tax on transactions that, on initial recognition, give rise to equal amounts of taxable and deductible temporary differences. Amendment to IAS 12 - International tax reform. temporary These amendments give companies relief from accounting for deferred taxes arising from the Minimum Tax Implementation Handbook tax reform. The amendments also international for introduce affected companies. targeted disclosure requirements The above 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 2023 or adopted early The following standards, amendments and interpretations to existing standards have been published and are mandatory for the entity’s accounting periods beginning on or after 1 January 2024 or later periods, but the entity has not early adopted them: • • • • Amendment to IFRS 16 – Leases on sale and leaseback (effective 1 January 2024). These amendments include requirements for sale and leaseback transactions in IFRS 16 to explain how an entity accounts for a sale and leaseback after the date of the transaction. Sale and leaseback transactions where some or all the lease payments are variable lease payments that do not depend on an index or rate are most likely to be impacted. to IAS 1 – Non-current liabilities Amendment with covenants (effective 1 January 2024). These amendments clarify how conditions with which an entity must comply within twelve months after the reporting period affect the classification of a liability. The amendments also aim to improve information an entity provides related to liabilities subject to these conditions. Amendment to IAS 7 and IFRS 7 - Supplier finance (effective 1 January 2024 - with transitional reliefs in the first year). These amendments require disclosures to enhance the transparency of supplier finance arrangements and their effects on an entity’s liabilities, cash flows and exposure to liquidity risk. The disclosure requirements are the IASB’s response to investors’ concerns that some companies’ supplier finance arrangements are not sufficiently visible, hindering investors’ analysis. Amendments to IAS 21 - Lack of Exchangeability (1 January 2025 - early adoption is available). An entity is impacted by the amendments when it has a transaction or an operation in a foreign currency that is not exchangeable into another currency at a measurement date for a specified purpose. A currency is exchangeable when there is an ability to obtain the other currency (with a normal administrative delay), Steamships Annual Report 2023 23 NOTES TO THE FINANCIAL STATEMENTS Steamships Trading Company Limited Year Ended 31 December 2023 (Amounts in Kina ‘000 unless otherwise stated) and the transaction would take place through a market or exchange mechanism that creates enforceable rights and obligations. 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. New IFRS sustainability disclosure standards effective after 1 January 2024 • • IFRS S1, ‘General requirements for disclosure of sustainability-related financial information (effective 1 January 2024 - This is subject to endorsement of the standards by the Accounting Standards Board of PNG). This standard includes the core framework for the disclosure of material information about sustainability-related risks and opportunities across an entity’s value chain. IFRS S2, ‘Climate-related disclosures’ (effective 1 January 2024 - This is subject to endorsement of the standards by the Accounting Standards Board of PNG). This is the first thematic standard issued that sets out requirements for entities to disclose information about climate-related risks and opportunities. (iii) Comparative information Where necessary comparative figures have been adjusted to conform to changes in presentation in the current year and comparative purposes. (b) Foreign currency The Group’s functional and presentation currency is the Papua New Guinea Kina. Transactions in foreign currencies have been translated into the functional currency at rates ruling at the date of the transaction. Amounts payable to and by the Group in foreign currencies have been translated to the functional currency at rates of exchange ruling at the year end. Gains and losses arising from movements in foreign exchange rates are recognised in the statements 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 2023 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. 24 Steamships Annual Report 2023 The acquisition method of accounting is used to account for business combinations by the Group (refer to Note 1(d)). Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. Non-controlling interests in the results and equity of subsidiaries are shown separately in the statements of comprehensive income, statements of changes in equity and statements in financial position, 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 income. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Dividends receivable from associates are recognised as a reduction in the carrying amount of the investment. When the Group’s share of losses in an associate equal or exceeds its interest in the associate, including any other unsecured long-term receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group. NOTES TO THE FINANCIAL STATEMENTS Steamships Trading Company Limited Year Ended 31 December 2023 (Amounts in Kina ‘000 unless otherwise stated) (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 treats transactions with non-controlling The Group 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 from a contingent consideration arrangement and the fair value of any pre- existing equity interest in the subsidiary. Acquisition- related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisition- by-acquisition basis, the Group recognises any non- controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net identifiable assets. The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition date fair value of any previous equity interest in the acquiree over the fair value of the Group’s share of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired and the measurement of all amounts has been reviewed, the difference is recognised directly in determining profit or loss as a bargain purchase. Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions. Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently re-measured to fair value with changes in fair value recognised in profit or loss. is applied for business Predecessor accounting combinations among entities under common control, including acquisitions of entities and amalgamations of entities under common control. Under this method, the financial statements of the combined entity are presented as if the businesses had been combined from the date when the combining entities were amalgamated. Assets and liabilities of the acquired or amalgamated 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 consideration given and the aggregate book value of the assets and liabilities of the acquired or amalgamated entity at the date of the transaction is included in equity in retained earnings. (e) Revenue recognition Revenue which represents income arising in the course of the Group’s ordinary activities is recognised by reference to each distinct 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 Steamships Annual Report 2023 25 NOTES TO THE FINANCIAL STATEMENTS Steamships Trading Company Limited Year Ended 31 December 2023 (Amounts in Kina ‘000 unless otherwise stated) 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 24, revenue from external customers comes from the logistics business, property and hospitality business, and commercial business. Revenue from the logistics business includes revenue freight and from providing shipping activities, land transport activities, towage and salvage activities, and sale of goods. following services: the from freight and shipping services, land Revenue 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 recognised at a point of time. 26 Steamships Annual Report 2023 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 receives 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. The Group incurs costs needed to fulfil 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 are 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 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 NOTES TO THE FINANCIAL STATEMENTS Steamships Trading Company Limited Year Ended 31 December 2023 (Amounts in Kina ‘000 unless otherwise stated) in hotels business is recognised 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 recognised on a straight-line basis over the term of the lease. Revenue from the commercial business relates to sale of goods and is recognised 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 recognised across the Group as follows: Interest income Interest income is recognised using the effective interest method. Dividend income Dividends are recognised when the right to receive payment is established. (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 recognised 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. (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 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 sale Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of their carrying amount and fair value less costs to sell, except for assets such as deferred tax assets, assets arising from employee benefits, financial assets and contractual rights under insurance contracts, which are specifically exempt from this requirement. An impairment loss is recognised for any initial or subsequent write down of the asset (or disposal group) to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset (or disposal group) is recognised at the date of derecognition. Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while they are classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be recognised. Non-current assets classified as held for sale and the assets of a disposal group classified as held for sale are presented separately from the other assets in the statement of financial position. The liabilities of a disposal group classified as held for sale are presented separately from other liabilities in the statements of financial position. Steamships Annual Report 2023 27 NOTES TO THE FINANCIAL STATEMENTS Steamships Trading Company Limited Year Ended 31 December 2023 (Amounts in Kina ‘000 unless otherwise stated) 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 statement of comprehensive income. (k) Financial assets The Group classifies all of its financial assets in the measurement category ‘Financial assets at amortised cost’. The Group classifies its financial assets at amortised cost when the asset is held within a business model whose objective is to collect the contractual cash flows and the contractual terms give rise to cash flows that are solely payments of principal and interest (“SPPI”). Financial assets of the Group that fall under this category are trade and other receivables, bank balances, deposits and cash, and loans to related companies. At initial recognition, the Group measures a financial asset at its fair value plus transaction costs that are directly attributable to the acquisition of the financial asset. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other gains and losses together with foreign exchange gains and losses. As of 31 December 2023 and 31 December 2022, the Group had no financial instruments classified as financial assets at fair value through other comprehensive income (“FVOCI”) - Equity instruments 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. 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). For trade receivables, 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 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. 28 Steamships Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS Steamships Trading Company Limited Year Ended 31 December 2023 (Amounts in Kina ‘000 unless otherwise stated) (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. method. Like property, plant and equipment, investment properties are normally depreciated using the straight- line method over similar useful lives. (n) Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired business at the date of acquisition. Goodwill is capitalised and assessed for impairment annually or more frequently if events or changes in circumstances indicate a potential for impairment and is carried at cost less impairment losses. Any impairment is recognised immediately as an expense and is not subsequently reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash-generating units for the purpose of impairment testing. (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. (m) Investment properties (p) Provisions Investment properties include land held for long-term capital appreciation and buildings leased out under operating leases. Properties that comprise a portion held to earn rentals and a portion for own use or occupation will only be classified as investment property if an insignificant portion is held for own use of occupation. Investment properties are recognised when it is probable that future economic benefits associated with the property will flow to the Group and the cost of the investment property can be reliably measured. Investment properties are stated at cost less accumulated depreciation and accumulated impairment losses. Transaction costs are included on initial measurement. Borrowing costs directly attributable to the acquisition or construction of qualifying assets are added to the cost of those assets until the assets are ready for their intended use. The fair values of investment properties are disclosed in the Note 11. These are assessed using internationally accepted valuation methods, such as taking comparable properties as a guide to current market prices or by applying the discounted cash flow 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. Steamships Annual Report 2023 29 NOTES TO THE FINANCIAL STATEMENTS Steamships Trading Company Limited Year Ended 31 December 2023 (Amounts in Kina ‘000 unless otherwise stated) 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 Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits at the earlier of the following dates: (a) when the Group can no longer withdraw the offer of those benefits; and (b) when the entity recognises costs for a restructuring that is within the scope of IAS 37 and involves the payment of termination benefits. In the case of an offer made to encourage voluntary redundancy, the termination benefits are measured based on the number 30 Steamships Annual Report 2023 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 for incurred Borrowing costs 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 4.14% (2022: 3.92%) (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. NOTES TO THE FINANCIAL STATEMENTS Steamships Trading Company Limited Year Ended 31 December 2023 (Amounts in Kina ‘000 unless otherwise stated) (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 statement of financial position. (x) Leases 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. 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. 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 payments), less any lease incentives receivable; (including in-substance fixed 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; lease payments made at or before less any lease the incentives any commencement date 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 in 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 determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension 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. (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. Steamships Annual Report 2023 31 NOTES TO THE FINANCIAL STATEMENTS Steamships Trading Company Limited Year Ended 31 December 2023 (Amounts in Kina ‘000 unless otherwise stated) The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below: (i) Estimated impairment of goodwill The Group tests annually whether goodwill has suffered any impairment. The recoverable amounts of cash- generating units have been determined based on value- in-use calculations. These calculations require the use of estimates as further detailed in Note 12. (ii) Estimated equipment impairment of property, plant and The Group tests the recoverable amount of property, plant and equipment when impairment indicators are identified. Where an indicator of impairment is identified, the recoverable amount is determined using the higher of fair value less cost to sell and its value in use. Fair value is determined using market-based information, while value in use is determined using a pre-tax cashflow projections and discount rate. Refer to Note 10. (iii) Deferred tax assets The analysis of the recognition and recoverability of the deferred tax assets is judgemental. For management’s judgments in relation to recoverability of deferred tax assets, refer to Note 5. 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% higher/(lower), lease liabilities as of 31 December 2023 would be K4.5 million lower and K8.7 million higher, respectively (2022: K4.5 million lower and K9.3 million 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. (iv) Incremental borrowing rate relating to lease liabilities (ii) Price risk As disclosed in Note 14, management assessed that the weighted average interest rate on collateralized borrowings obtained from financial institutions during 2023 and previous years of 4.5% approximates the incremental borrowing rate at the date of initial adoption of IFRS 16 and at 31 December 2023. 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 to the weighted average rate on borrowings are needed to reflect differences in secured assets, lease periods compared to maturity of borrowings, and other factors affecting the 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 The Group is not significantly exposed to equity securities or commodities price risk. (iii) Cash flow interest rate risk The Group’s interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. Long term borrowings are a mix of fixed and variable rate interest. It is not the Group’s policy to hedge cash flow and interest rate risk. At 31 December 2023, 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 K5.8 million (2022: K3.6 million) lower/higher, mainly as a result of higher/lower interest expense on floating rate borrowings. 32 Steamships Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS Steamships Trading Company Limited Year Ended 31 December 2023 (Amounts in Kina ‘000 unless otherwise stated) (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 intercompany 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 2023 or 31 December 2022 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 analysed GDP and employment rate of PNG to be the most relevant factors, and accordingly adjusts the historical loss rates based on expected changes in these factors. Management concluded that the impairment provision for trade receivables is not materially affected by changes in GDP and employment rate. 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: • • 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 initial recognition is identified, the financial instrument is moved to ‘Stage 2’ but is not yet deemed to be credit impaired. • If the financial instrument is credit-impaired, the financial instrument is then moved to ‘Stage 3’. • Financial instrument in Stage 1 has 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 2023 and 31 December 2022 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 recognised; • There are no historic losses or write offs on these loans; Steamships Annual Report 2023 33 NOTES TO THE FINANCIAL STATEMENTS Steamships Trading Company Limited Year Ended 31 December 2023 (Amounts in Kina ‘000 unless otherwise stated) • 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 2023 and 31 December 2022 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 Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of committed credit facilities. The Group manages liquidity risk by maintaining sufficient bank balances to fund its operations and the availability of funding through committed credit facilities. Management monitors rolling forecasts of the Group’s liquidity reserve on the basis of expected cash flows. Undrawn finance facilities as of 31 December were as follows: Undrawn Facilities 2023 K’000 2022 K’000 189,699 274,900 The table below analyses the Group’s financial liabilities which will be settled on a net basis into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. At 31 December 2023 Borrowings Borrowings from minority shareholders Borrowings from related parties Trade and other payables Lease liabilities At 31 December 2022 Borrowings Borrowings from minority shareholders Borrowings from related parties Trade and other payables Lease liabilities Less than 1 year K’000 Between 1 & 2 years K’000 Between 2 & 5 years K’000 Over 5 years K’000 Total K’000 Carrying amount K’000 (46,682) (85,385) (325,120) - (457,187) (418,196) (160) (1,899) (108,680) (5,283) (162,704) (248,073) (160) (2,960) (108,038) (5,296) (364,527) - - - (5,283) - - - (11,981) - - - (111,566) (160) (1,899) (108,680) (134,113) (160) (1,862) (108,680) (57,810) (90,668) (337,101) (111,566) (702,039) (586,708) (990) - - - (5,296) (6,286) (20,814) - - - (12,125) (32,939) - - - - (115,725) (115,725) (269,877) (160) (2,960) (108,038) (138,442) (519,477) (260,022) (160) (2,902) (108,038) (59,912) (431,034) The Group does not hold derivative financial instruments. 34 Steamships Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS Steamships Trading Company Limited Year Ended 31 December 2023 (Amounts in Kina ‘000 unless otherwise stated) (d) Capital risk management The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns to shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as external borrowings and unsecured loans less cash and cash equivalents. Net debt for the purposes of the gearing ratio does not include lease liabilities, trade and other payables and provisions for other liabilities and charges. Total capital is calculated as capital and reserves attributable to the Group’s shareholders plus net debt. The gearing ratios at each balance date were as follows: Total external borrowing and unsecured loans Less: Cash and cash equivalents Net debt Total equity Total capital Gearing ratio 2023 K’000 2022 K’000 420,218 263,084 28,804 53,436 391,414 1,069,623 209,648 1,044,069 1,461,037 1,253,717 27% 17% The Group is subject 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 2023 and 31 December 2022, 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. Steamships Annual Report 2023 35 NOTES TO THE FINANCIAL STATEMENTS Steamships Trading Company Limited Year Ended 31 December 2023 (Amounts in Kina ‘000 unless otherwise stated) 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 Other income (net)* Consolidated Parent Entity 2023 2022 2023 2022 67,236 467,694 121,360 - 656,290 13,006 63,334 459,154 108,774 - 631,262 - - - 11,503 11,503 - 5,098 - - - 1,032 1,032 2,036 * Other income includes royalties, management fees, gain on sale of assets and net proceeds from insurance claims. The Group’s revenue from contracts with customers are recognised at a point in time and over time. Most of the revenue from the provision of services is recognised over time, while revenue from sale of goods is recognised at a point in time. Further disaggregation of revenue by segment is provided in Note 24. The aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied (or partially unsatisfied) as of 31 December 2023 that relates to shipping and freight services which commenced in late 2023 and will be finalised within January 2024 is K1.3 million (2022: K2.8 million). (b) Expenses comprise: Cost of sales Staff costs (Note 3c) Depreciation and amortisation Impairment of properties Impairment of vessels Electricity and fuel Insurance Security cost Motor vehicle expenses Other operating expenses / (income) - net Total operating expense (c) Staff costs: Wages and salaries Retirement benefit contributions Other benefits 132,979 174,530 104,529 - - 46,889 10,054 13,125 33,861 74,574 590,541 146,622 5,776 22,132 174,530 125,177 137,037 95,279 25,842 767 51,869 7,405 13,017 29,669 64,239 550,301 114,375 5,175 17,487 137,037 Number of staff employed by the Group at year end: Full-time 3,010 2,705 - - 2,073 - - - - - - (381) 1,692 - - - - - - - 2,102 - - - - - - 2,729 4,831 - - - - - 36 Steamships Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS Steamships Trading Company Limited Year Ended 31 December 2023 (Amounts in Kina ‘000 unless otherwise stated) 3. Operating results (continued) (d) The operating profit before income tax is arrived at after charging and crediting the following specific items: Consolidated Parent Entity 2023 2022 2023 2022 After charging: Audit fees Fees for non-audit services to Auditors Bad and doubtful debts provided Impairment of properties Donations After crediting: Net proceeds from insurance claims Gain on sale of property, plant and equipment Bad and doubtful debts released (e) Cost of financing – net: Interest expense* Interest income Net finance costs 1,172 122 7,460 - 1,792 (11,292) (1,714) (38) 15,826 (14,174) 1,652 1,141 489 1,461 25,842 1,353 - (534) (968) 14,712 (13,537) 1,175 - - - - - - - - - (85) (85) - - - - - - - - (85) (85) *The interest expense excludes capitalised interest which is KNil in 2023 (2022: KNil). (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 and discontinued) Basic earnings per share (continuing) Basic earnings per share (discontinued) Consolidated 2023 2022 58,144 31,008 187.5 toea 187.5 toea - 57,985 31,008 187.0 toea 187.0 toea - 4. Investments in subsidiaries, associates and joint ventures Consolidated Parent Entity 2023 2022 2023 2022 (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 - 5,464 40,031 45,495 121 7,165 7,286 - 5,593 39,865 45,458 249 6,039 6,288 55,252 - - 55,252 - - - 51,752 - - 51,752 - - - Steamships Annual Report 2023 37 NOTES TO THE FINANCIAL STATEMENTS Steamships Trading Company Limited Year Ended 31 December 2023 (Amounts in Kina ‘000 unless otherwise stated) 5. Income tax (a) Income tax expense / (credit) Current tax Deferred tax Adjustments for current and deferred tax of prior periods Utilisation of losses in tax return, Note 5(b) Consolidated Parent Entity 2023 2022 2023 2022 24,622 420 680 - 25,722 30,710 (6,549) 3,654 (1,182) 26,633 222 825 - - 1,047 166 (979) (2) - (815) (b) The income tax in the Statements 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 / (loss) before income tax Non-taxable income - dividends Tax on non-deductible expenses Tax losses utilised in current year – previously unrecognised Income not assessable for tax Adjustments for current and deferred tax of prior periods Unrecognised deferred tax asset on tax losses (c) The deferred tax (liabilities) / assets comprise: Provisions Lease liabilities Prepayments and consumables Property, plant and equipment Right-of-use assets Deferred tax asset Deferred tax liability 25,317 - 677 - (2,186) 680 1,234 25,722 14,247 17,341 (14,342) (31,427) (9,278) (23,459) 4,627 (28,086) (23,459) 25,822 - 185 (1,182) (1,846) 3,654 - 26,633 14,754 17,972 (11,800) (33,158) (10,127) (22,359) 2,020 (24,379) (22,359) 4,498 (3,451) - - - - - 1,047 51 - - 781 - 832 832 - 832 (503) (310) - - - (2) - (815) 934 - - 723 - 1,657 1,657 - 1,657 Beginning Balance Charge to profit Ending Balance 14,754 17,972 (11,800) (33,158) (10,127) (22,359) 723 934 1,657 (507) (631) (2,542) 1,731 849 (1,100) 58 (883) (825) 14,247 17,341 (14,342) (31,427) (9,278) (23,459) 781 51 832 d) The gross movement on the deferred tax account is as follows: Consolidated Provisions and accruals Lease liabilities Prepayments and consumables Property, plant and equipment Right-of-use assets Total Parent Company Property, plant and equipment Loan receivable Total 38 Steamships Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS Steamships Trading Company Limited Year Ended 31 December 2023 (Amounts in Kina ‘000 unless otherwise stated) 5. Income tax (continued) (e) The movement in income tax (receivable) / payable is as follows: At 1 January Income tax provision Prior year under/(over) provisions Utilisation of previously unrecognised tax losses - Note 5(b) Utilisation of previously recognised tax losses Utilisation of interests withholding tax Others Tax payments made 6. Cash and cash equivalents Cash and short-term deposits Consolidated Parent Entity 2023 2022 2023 2022 (12,088) 24,622 - - - (2,115) 913 (16,495) (5,163) (23,627) 30,710 2,000 (1,182) (11,355) (1,822) (852) (5,960) (12,088) (38) 222 (12) - - - - (137) 35 (64) 166 15 - - (13) (25) (117) (38) Consolidated 2023 28,804 28,804 2022 53,436 53,436 Parent Entity 2023 2022 - - - - The maximum exposure to credit risk at the reporting date is the fair value of cash and cash equivalents on the statements of financial position. 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 Trade receivables - related parties (Note 18) Provision for impairment Other receivables Prepayments Consolidated 2023 2022 86,390 37,828 (17,385) 106,833 64,201 13,692 184,726 73,373 42,192 (11,163) 104,402 28,772 14,446 147,620 Parent Entity 2023 - 45,296 - 45,296 - 2 45,298 2022 - 35,905 - 35,905 3 - 35,908 Steamships Annual Report 2023 39 NOTES TO THE FINANCIAL STATEMENTS Steamships Trading Company Limited Year Ended 31 December 2023 (Amounts in Kina ‘000 unless otherwise stated) 7. Trade and other receivables (continued) (i) Credit losses As at 31 December 2023 and 31 December 2022, loss allowance was determined as follows for trade receivables: 31 December 2023 Expected credit loss rate Gross carrying amount - trade receivables Loss allowance 31 December 2022 Current More than 30 days past due More than 60 days past due More than 90 days past due Total 0.01%-0.07% 0.07%-10% 26,340 65,102 419 2,570 10%-25% 9,854 2,342 25%-75% 22,922 14% 124,218 12,054 17,385 Current More than 30 days past due More than 60 days past due More than 90 days past due Total Expected credit loss rate Gross carrying amount - trade receivables 0.01%-0.05% 0.05%-0.15% 30,170 57,507 0.15%-2% 9,812 2%-80% 18,076 9.95% 115,565 Loss allowance 17 26 63 11,057 11,163 Movement in the provision for impairment of trade receivables is as follows: Opening balance Impairments recognised during the year Provision released Write off Total Consolidated 2023 11,163 7,460 (38) (1,200) 17,385 2022 12,736 1,461 (2,947) (87) 11,163 Parent Entity 2023 2022 - - - - - - - - - - The creation and release of the provision for impaired receivables is included in operating expenses in the statements 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. (ii) 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, dividends from a joint venture 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 2023 and 31 December 2022, 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. 8. Inventories Finished goods Provision for obsolescence Consolidated 2023 39,624 (144) 39,480 2022 28,607 (144) 28,463 Parent Entity 2023 2022 - - - - - - Inventories recognised as an expense during the year ended 31 December 2023 and included in cost of sales and cost of providing services amounted to K23.1 million (2022: K21.0 million). 40 Steamships Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS Steamships Trading Company Limited Year Ended 31 December 2023 (Amounts in Kina ‘000 unless otherwise stated) 9. Due from / (to) related companies Non-Current John Swire & Sons Limited Colgate Palmolive (PNG) Limited Huhu Rural LLG Pacific Rumana Limited Harbourside Development Limited Viva No. 31 Limited Wonye No. 2 Limited Wakang Inc. Due to associates and joint ventures: Stevedoring associates Loans from subsidiaries Consolidated Parent Entity 2023 2022 2023 2022 8,995 536 1,103 25,375 203,503 2,584 957 16 243,069 (1,862) - (1,862) 8,409 500 1,035 26,930 160,833 2,000 - 16 199,723 (2,902) - (2,902) 8,995 536 - - - - - - 9,531 8,409 500 - - - - - - 8,909 - (93,982) (93,982) - (63,152) (63,152) The loans to Harbourside Development Limited are secured and earn interest at 6.5% p.a. The loan to Pacific Rumana Limited is unsecured and earns interest at 8.5% p.a. The loan from stevedoring associates is unsecured and incurs interest at 2% p.a. 10. Property, plant and equipment Consolidated 2023 Cost Accumulated depreciation (including impairment losses) Net book value Opening value Additions Disposals Depreciation Closing value 2022 Cost Accumulated depreciation (including impairment losses) Net book value Opening value Additions Disposals Impairments Depreciation Closing value Property Ships Plant and Vehicles Right-of-use assets Total 570,926 (282,274) 288,652 305,522 4,590 (382) (21,078) 288,652 539,613 (234,091) 305,522 332,662 2,274 (120) (4,010) (25,284) 305,522 406,495 (179,403) 227,092 139,910 120,012 (31) (32,799) 227,092 295,993 (156,083) 139,910 108,415 58,883 (140) (767) (26,481) 139,910 437,174 (266,629) 170,545 104,456 94,681 (1,242) (27,350) 170,545 347,635 (243,179) 104,456 84,940 43,164 (136) - (23,512) 104,456 42,912 (36,642) 6,270 8,667 495 - (2,892) 6,270 42,417 (33,750) 8,667 32,551 826 (142) (21,832) (2,736) 8,667 1,457,507 (764,948) 692,559 558,555 219,778 (1,655) (84,119) 692,559 1,225,658 (667,103) 558,555 558,568 105,147 (538) (26,609) (78,013) 558,555 In the 31 December 2022 financial year, the Group committed to a plan to sell certain cargo vessels. These assets were classified as ‘Assets held for sale’. The cargo vessels were sold in the 31 December 2023 financial year. Steamships Annual Report 2023 41 NOTES TO THE FINANCIAL STATEMENTS Steamships Trading Company Limited Year Ended 31 December 2023 (Amounts in Kina ‘000 unless otherwise stated) 10. Property, plant and equipment (continued) Parent Entity 2023 Cost Accumulated depreciation (including impairment losses) Net book value Opening value Depreciation Closing value 2022 Cost Accumulated depreciation (including impairment losses) Net book value Opening value Additions Transfers Depreciation Closing value Property Plant and Vehicles Total 81,987 (60,353) 21,634 23,379 (1,745) 21,634 81,987 (58,608) 23,379 22,240 2,882 (6) (1,737) 23,379 7,313 (5,952) 1,361 1,689 (328) 1,361 7,313 (5,624) 1,689 1,352 696 6 (365) 1,689 89,300 (66,305) 22,995 25,068 (2,073) 22,995 89,300 (64,232) 25,068 23,592 3,578 - (2,102) 25,068 (a) Assets in the course of construction The carrying amounts of the assets disclosed above include the following expenditure recognised in relation to property, plant and equipment and investment properties which are in the course of construction: Property Ships and plant and vehicles Total assets in the course of construction Consolidated 2023 20,654 86,138 106,792 2022 34,103 6,812 40,915 Parent Entity 2023 2022 - - - - - - The cost of additions in 2023 did not include any capitalised borrowing costs (2022: KNil) in relation to qualifying assets. The Group used capitalisation rate of 4.14% (2022: 3.72%) p.a. to determine the amount of borrowing costs eligible for capitalisation. (b) Impairment losses There were no conditions that indicated impairment of property, plant and equipment as at 31 December 2023. The property impairments as of 31 December 2022 comprised of: • K21.8 million impairment of the Cassowary Hotel right of use asset. The recoverable amount was determined based on value-in- use calculations. The calculations use pre-tax cashflow projections based on financial budgets approved by management covering a three-year period. Beyond the three-year period, revenue and cost growth was set at 4% for the remainder of the lease period. A discount rate of 13.5% was adopted. • K4.0 million impairment of a building reflecting earthquake damage to a building. The Group lodged a claim with its insurer in 2022. The claim was finalised in 2023 and the Group received net insurance proceeds of K11.3 million (net of GST). 42 Steamships Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS Steamships Trading Company Limited Year Ended 31 December 2023 (Amounts in Kina ‘000 unless otherwise stated) 10. Property, plant and equipment (continued) (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 equipment is provided below: Opening net book amount Lease agreements made during the year Disposal Depreciation Impairment Closing net book amount At cost Accumulated depreciation (including impairment losses) 2023 K’000 8,667 495 - (2,892) - 6,270 42,912 (36,642) 6,270 2022 K’000 32,551 826 (142) (2,736) (21,832) 8,667 42,417 (33,750) 8,667 11. Investment properties Investment properties represent the Group’s residential and commercial properties that are available for external lease rather than internal use. Properties used by the Group are shown in ‘Property’ within Note 10. Cost Accumulated depreciation Net book value Opening value Additions Disposal Depreciation Closing value (a) Right-of-use assets Consolidated Parent Entity 2023 2022 2023 2022 592,008 (210,634) 381,374 388,896 12,888 - (20,410) 381,374 580,814 (191,918) 388,896 375,415 30,780 (33) (17,266) 388,896 - - - - - - - - - - - - - - - - The recognised right-of-use assets relate state land leases related to properties owned by the Group (including investment properties). The breakdown of right-of-use assets classified under investment properties is provided below: Opening net book amount Terminated Depreciation Others Closing net book amount At cost Accumulated depreciation 2023 2022 25,086 - (432) 19 24,673 26,781 (2,108) 24,673 25,663 (142) (435) - 25,086 26,781 (1,695) 25,086 Steamships Annual Report 2023 43 NOTES TO THE FINANCIAL STATEMENTS Steamships Trading Company Limited Year Ended 31 December 2023 (Amounts in Kina ‘000 unless otherwise stated) 11. Investment properties (continued) 2023 2022 (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 121,360 (3,485) (24,094) 108,774 (2,516) (22,890) (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 from previous years, adjusted by observable market trends related to PNG residential and commercial properties, as well as land values, on an annual basis. Included in properties are the following: Investment properties Other properties (Note 10) Total NBV 381,374 288,652 670,026 Valuation Range Lower Higher 1,406,240 454,171 1,860,411 1,757,799 567,713 2,325,512 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. (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 Consolidated Parent Entity 2023 2022 2023 2022 81,104 145,261 18,700 245,065 69,326 75,838 17,185 162,349 - - - - - - - - 44 Steamships Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS Steamships Trading Company Limited Year Ended 31 December 2023 (Amounts in Kina ‘000 unless otherwise stated) 12. Intangible assets Opening balance Disposal of Subsidiary Closing balance Consolidated 2023 76,433 - 76,433 2022 76,433 - 76,433 Parent Entity 2023 2022 - - - - - - Goodwill is allocated to the Group’s cash-generating units (CGUs) identified according to operating segment. The goodwill balance of K76.4 million (2022: K76.4 million) is attributable to various business acquisitions in the logistics segments including Pacific Towing (K67.4 million) and New Britain Shipping (K9 million). 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 7% for New Britain Shipping and 7% for Pacific Towing (2022: 5% for New Britain Shipping and 5% for Pacific Towing). A pre-tax discount rate of 14.9% per annum (2022: 13.4% 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 K36.1 million (2022: K23.2 million) and K6.7 million (2022: K9.1 million), respectively. Management believes that growth rate of revenue of 7% p.a. for Pacific Towing and New Britain Shipping is appropriate, as approved three-year financial budgets are based on conservative assumptions. Management determined the budgeted gross margin based on past performance and its market expectations. If the revised growth rate beyond three years had been 1% lower than management’s estimates the Group would need to reduce the carrying value of goodwill of Pacific Towing by KNil 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 5.4% p.a. for Pacific Towing and 5.3% 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 1% higher than management’s estimates, the recoverable amounts of goodwill of Pacific Towing and New Britain Shipping would exceed their carrying amounts by K15.6 million and K4.3 million, respectively. The CGUs’ carrying amount would be equal to value in use at a pre-tax discount rate of approximately 19.4% p.a. and 22.5% p.a. respectively. 13. Trade and other payables Trade payables Trade payables - related parties (Note 18) Accruals Other payables Consolidated Parent Entity 2023 42,741 8,343 39,638 17,958 108,680 2022 2023 2022 32,979 6,323 51,520 17,216 108,038 - - - - - - - 1,677 - 1,677 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 and 11, 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). State land leases Properties Total lease liabilities 2023 25,868 31,942 57,810 2022 26,155 33,757 59,912 Total lease liabilities as of 31 December 2023 include current liabilities of K2.6 million (31 December 2022: K2.7 million) and non- current liabilities of K55.2 million (31 December 2022: K57.2 million). Steamships Annual Report 2023 45 NOTES TO THE FINANCIAL STATEMENTS Steamships Trading Company Limited Year Ended 31 December 2023 (Amounts in Kina ‘000 unless otherwise stated) 14. Lease liabilities (continued) 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 2023 2022 5,283 17,264 111,566 134,113 (76,303) 57,810 2,576 14,100 41,134 57,810 5,296 17,421 115,725 138,442 (78,530) 59,912 2,667 13,967 43,278 59,912 61,554 826 (218) 2,693 (4,943) 59,912 Interest on lease liabilities recognised in profit or loss by the Group amounts to K2.6 million (2022: K2.7 million). Movement in net lease liabilities as per below: Opening Lease agreements made during the year Disposal during the year Finance costs Repayment 59,912 495 - 2,593 (5,190) 57,810 The weighted average lessee’s incremental borrowing rate applied to the lease liabilities on 31 December 2022 and 31 December 2023 was 4.5% p.a. Management assessed that weighted average interest rate on borrowings obtained from financial institutions during 2023 and previous years approximates incremental borrowing rate at the date of initial adoption of IFRS 16 and at 31 December 2023. For related management’s judgments refer to Note 1(z). The Group recognised expenses relating to short-term leases and expenses relating to leases of low-value assets that are not short-term leases of K3.5 million and KNil for the year ended 31 December 2023 (2022: K5.3 million and KNil), respectively. These expenses 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 and loss Utilised/ reversal during year Closing value Current Non-current Employee Insurance Claims Others 15,695 9,091 (8,165) 16,621 5,430 11,191 16,621 516 571 (516) 571 571 - 571 - 121 - 121 121 - 121 2023 Total 16,211 9,783 (8,681) 17,313 6,122 11,191 17,313 2022 Total 58,167 4,255 (46,211) 16,211 5,635 10,576 16,211 A description of employee provisions is disclosed in Note 1(p). During the 2022 year, the disputed insurance claim was settled resulting in the utilisation / reversal of the associated provision and reinsurance receivable. 46 Steamships Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS Steamships Trading Company Limited Year Ended 31 December 2023 (Amounts in Kina ‘000 unless otherwise stated) 16. Borrowings Current: Bank overdrafts (secured) Bank loans Other loans (unsecured) Non-current: Bank loans (secured) Total Borrowings Consolidated Parent Entity 2023 2022 2023 2022 2,895 30,000 160 33,055 385,301 385,301 418,356 522 239,500 160 240,182 20,000 20,000 260,182 - - - - - - - - - - - - - - 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 4.14% (2022: 3.92%). Bank overdrafts are interest-only with no agreed repayment schedule. Bank loans are secured loans with varying 1 to 3 year terms. The effective interest rate on other loans is 2% (2022: 2%). 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 Ordinary shares (b) Number of shares (000s) Consolidated Parent Entity 2023 2022 2023 2022 24,200 24,200 24,200 24,200 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) Dividends The Directors advised that a dividend of 60 toea per share will be paid immediately after the Annual General Meeting on 13th June 2024. Dividends payable to shareholders resident outside of Papua New Guinea will be converted to Australian Dollars at the prevailing rate which the Company is able to secure. During the year, the Company paid dividends totalling 105 toea per share which relate to the final dividend of 2022 at 70t per share amounting to K21.71 million, and interim dividend for 2023 financial year of K10.85 million at 35t per share. Steamships Annual Report 2023 47 NOTES TO THE FINANCIAL STATEMENTS Steamships Trading Company Limited Year Ended 31 December 2023 (Amounts in Kina ‘000 unless otherwise stated) 18. Related party disclosures 18. Related party disclosures (a) Loss of control: On 21st September 2023, the Board of Wonye No. 2 Limited has approved the issuance of 3.5 million ordinary shares each to Steamships Trading Company Limited and Tininga Limited, respectively. As a result of the subscription, Steamships Trading Company Limited no longer has effective control. Wonye No. 2 Limited is now accounted for as a joint venture company. The loss of control did not result in a material gain or loss to the Group. (b) Interest in subsidiaries, associates and joint ventures: These are set out in Notes 21, 22 and 23 respectively. (c) 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 2023 2022 2023 2022 Key management personnel disclosure Wages and salaries Other short-term benefits (d) Material transactions: Sales of goods and services - Associates and joint ventures - Key management - Associated groups - Other shareholders Lease and rental income - Associates and joint ventures - Associated groups - Other shareholders Dividends received / receivable - Associates and joint ventures Management fee received - Associates and joint ventures - Associated groups - Other shareholders Interest received / receivable - Associates and joint ventures Royalties received - Associates and joint ventures Shipping and towage services - Associates and joint venture - Associated groups Cartage and storage services - Associates and joint ventures - Associated groups Purchase of goods and services - Associates and joint ventures - Associated groups - Key management 48 Steamships Annual Report 2023 18,744 1,177 14,651 932 4,636 1,751 7,074 - - 473 - 277 158 7,700 313 - 2,503 - 10,654 197 1,229 - - 3,436 - 377 13,926 12,368 - - - - - - - - - - - - - - - - - - - - - - - - - - 2,154 2,036 2,154 2,036 - 50,308 - 3,797 (248) (4,383) (7) - 44,867 - 7,348 - (341) - - - - - - - - - - - - - - - NOTES TO THE FINANCIAL STATEMENTS Steamships Trading Company Limited Year Ended 31 December 2023 (Amounts in Kina ‘000 unless otherwise stated) 18. Related party disclosures (continued) Consolidated Parent Entity 2023 2022 2023 2022 Management fees and recharges - Associated groups Purchase of assets - Associated groups Dividends paid - Other shareholders (minority interest) - Controlling shareholder - Significant shareholders Loans to/(from) related companies - Associates and joint ventures (10,244) (12,072) - (13,348) (554) (23,481) (9,078) (642) (25,717) (9,942) 41,183 35,580 All transactions with related parties are made on normal commercial terms and conditions. Balances with related companies: Stevedoring associates (Note 9) Basiloc Limited (Note 16) Due from related Companies: Colgate Palmolive (PNG) Limited Harbourside Development Limited Pacific Rumana Limited Huhu Rural LLG Viva No. 31 Limited Wonye No. 2 Limited Wakang Inc. John Swire & Sons Limited Total due from related companies (Note 9) Balances receivable / (payable) from / (to) related companies: Receivables John Swire & Sons Limited Colgate Palmolive (PNG) Limited Harbourside Development Limited Wonye Limited Swire Shipping Pte Ltd Makerio Stevedoring Ltd Nikana Stevedoring Ltd Total trade receivables from related companies (Note 7) Payables John Swire & Sons Limited Swire Shipping Pte Ltd Total trade payables from related companies (Note 13) (1,862) (160) (2,902) (160) 536 203,503 25,375 1,103 2,584 957 16 8,995 243,069 36,228 1,068 - - - 131 401 37,828 (8,343) - (8,343) 500 160,833 26,930 1,035 2,000 - 16 8,409 199,723 33,870 2,035 908 429 4,950 - - 42,192 (6,064) (259) (6,323) - - - - - - (23,481) (9,078) (25,717) (9,942 - - - 536 - - - - - - 8,995 9,531 36,228 9,068 - - - - - 45,296 - - - - - - 500 - - - - - 8,409 8,909 33,870 2,035 - - - - - 35,905 - - - Steamships Annual Report 2023 49 NOTES TO THE FINANCIAL STATEMENTS Steamships Trading Company Limited Year Ended 31 December 2023 (Amounts in Kina ‘000 unless otherwise stated) 19. Reconciliation of cashflows Consolidated Parent Entity 2023 2022 2023 2022 (a) Cash generated from operations Profit / (Loss) from continuing operations after tax Depreciation and impairment Dividend and interest income Net gain / (loss) on sale of fixed assets Impairment of properties and vessel Share of profit of associates and joint ventures Adjustment on dividend Lease disposals Loan written off Change in operating assets and liabilities (Increase) / decrease in trade debtors and other receivables Increase in inventory (Increase) / decrease in deferred tax assets Decrease in operating assets Increase in trade creditors and other payables Increase / (decrease) in other operating liabilities Decrease in income tax receivable Increase in deferred tax liabilities Net cash from operating activities (b) Net debt reconciliation Net debt as at 1 January 2022 Proceeds from borrowings Repayments Lease agreements made during the year Disposal during the year Finance costs Payment of lease liabilities Net debt as at 31 December 2022 Proceeds from borrowings Repayments Lease agreements made during the year Finance costs Payment of lease liabilities Net debt as at 31 December 2023 20. Retirement benefit plans 58,667 104,529 (11,775) (1,714) - (7,286) - - - (37,106) (11,018) (2,607) - 642 596 6,925 3,706 103,559 Lease Liabilities (61,554) - - (826) 218 (2,693) 4,943 (59,912) - - (495) (2,593) 5,190 (57,810) 59,441 95,279 - (534) 26,609 (6,288) (173) (103) 777 29,017 (5,454) 551 - 9,989 (43,040) 11,539 5,909 183,519 Bank Loans (260,584) (30,000) 30,000 - - 1,084 - (259,500) (185,000) 30,000 - (801) - (415,301) 13,947 2,073 (11,503) - - - - - - (1,388) - 825 - - (1,677) 72 - 2,349 Other Loans (2,947) (115) - - - - - (3,062) - 1,040 - - - (2,022) (863) 2,102 (1,032) - - - - - - - - (996) 3,606 - 1,677 26 - 4,520 Total (325,085) (30,115) 30,000 (826) 218 (1,609) 4,943 (322,474) (185,000) 31,040 (495) (3,394) 5,190 (475,133) The total cost of retirement benefits of the Group in 2023 was K5.7 million (2022: K5.2 million). 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. 50 Steamships Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS Steamships Trading Company Limited Year Ended 31 December 2023 (Amounts in Kina ‘000 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): Name of Entity Country of Incorporation Class of Shares Equity Holdings(1) 2023 Equity Holdings(1) 2022 Steamships Limited Croesus Limited Oro Stevedoring Limited Kiunga Stevedoring Company Limited Windward Apartments Limited Pacific Towing SI Limited Kavieng Port Services Limited New Britain Shipping Limited(2) United Stevedoring Limited Morobe Terminals Limited(3) Lae Port Services Limited(3) Port Services PNG Limited(3) Madang Port Services Limited Motukea United Limited Palm Stevedoring & Transport Limited Sandaun Agency & Stevedoring Limited(4) Gazelle Port Services Limited(5) Portside Business Park Limited(6) Wonye No. 2 Limited(7) Gulf Maritime Services Limited(8) Papua New Guinea Papua New Guinea Papua New Guinea Papua New Guinea Papua New Guinea Solomon Islands 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 Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary 100 100 100 100 100 100 60 50 70 50.5 51.5 54 60 64.1 66.7 100 100 100 50 100 100 100 100 100 100 100 60 50 70 50.5 51.5 54 60 64.1 66.7 100 100 100 100 - (1) The portion of ownership is equal to the proportion of voting power held. (2) Consolidated by virtue of control over the operating decisions and returns. As at 31 December 2023, Steamships Trading Company Limited still has control over this entity. (3) Morobe Terminals Limited, Lae Port Services Limited and Port Services PNG Limited are in liquidation. (4) Incorporated since 9 March 2012 and is 100% owned by Steamships Limited. This Company is operating as an agency of Consort. JV Port Services assumed the control of the management in 2022 with its 3-year Stevedoring license validity. (5) Incorporated on 21 July 2021 and is domiciled in Rabaul, Papua New Guinea. The company is still under start-up phase. (6) Previously known as Motukea Industrial Park Limited, this company was incorporated on 30 April 2020 and is still under start-up phase. (7) Incorporated on 8 October 2021 and is still under start-up phase. Wonye No. 2 became a joint venture company on 21 September 2023. The loss of control did not result in a material gain or loss to the Group. (8) Incorporated on 9 May 2023 and is still non-operating. Steamships Annual Report 2023 51 NOTES TO THE FINANCIAL STATEMENTS Steamships Trading Company Limited Year Ended 31 December 2023 (Amounts in Kina ‘000 unless otherwise stated) 21. Subsidiaries and transactions with non-controlling interests (continued) Shares in subsidiary companies have been stated at cost or fair value on acquisition less dividends received from pre-acquisition profits. The summarised financial information of the Group’s largest subsidiaries with non-controlling interest as at 31 December 2023 and 31 December 2022 is as follows: 2023 Madang Port Services Limited New Britain Shipping Limited Motukea United Limited Kavieng Port Services Limited United Stevedoring Limited 2022 Madang Port Services Limited New Britain Shipping Limited Motukea United Limited Kavieng Port Services Limited United Stevedoring Limited 22. Investment in associates (a) Movement in carrying amounts Opening value Share of profits before tax Income tax expense Dividends received Adjustments Closing value Ownership Interest % Assets Liabilities Carrying Value Revenue Profit / (loss) 60 50 64.1 60 70 60 50 64.1 60 70 6,352 21,338 2,767 3,818 2,451 5,974 19,996 2,810 4,552 3,308 824 2,979 1,064 555 1,343 975 1,297 1,129 868 2,307 5,528 18,359 1,703 3,263 1,108 4,999 18,699 1,681 3,684 1,001 5,712 10,387 8,916 4,765 16,487 5,654 12,668 9,344 5,813 17,687 658 (283) 261 142 107 294 1,397 502 598 117 Consolidated Parent Entity 2023 2022 2023 2022 5,593 173 (52) (155) (95) 5,464 5,541 366 (117) (197) - 5,593 - - - - - - - - - - - - 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: 2023 Makerio Stevedoring Limited Nikana Stevedoring Limited Riback Stevedoring Limited Ownership Interest % Assets Liabilities Carrying Value Revenue Profit 45 45 49 2,008 3,277 2,501 7,786 654 1,624 44 2,322 1,354 1,653 2,457 5,464 1,938 2,201 - 4,139 19 102 - 121 52 Steamships Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS Steamships Trading Company Limited Year Ended 31 December 2023 (Amounts in Kina ‘000 unless otherwise stated) 22. Investment in associates (continued) 2022 Makerio Stevedoring Limited Nikana Stevedoring Limited Riback Stevedoring Limited Ownership Interest % Assets Liabilities Carrying Value Revenue Profit / (loss) 45 45 49 - 2,501 3,314 2,501 8,316 1,132 1,591 - 2,723 1,369 1,723 2,501 5,593 2,100 2,355 - 4,455 117 157 (25) 249 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. 23. Investment in joint ventures (a) Movement in carrying amounts Opening value Additions during the year Share of profits before tax Income tax expense Dividends received /receivable Adjustments Closing value 2023 39,865 3,500 10,370 (3,111) (10,499) (94) 40,031 2022 33,826 - 8,627 (2,521) - (67) 39,865 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. 2023 Colgate Palmolive (PNG) Limited Harbourside Development Limited Pacific Rumana Limited Viva No. 31 Limited Wonye Limited Wonye No. 2 Limited 2022 Colgate Palmolive (PNG) Limited Harbourside Development Limited Pacific Rumana Limited Viva No. 31 Limited Wonye Limited Ownership Interest % Assets Liabilities Carrying Value Revenue Profit / (loss) 50 50 50 50 50 50 33,528 496,315 4,714 9,924 50,840 8,410 603,731 19,893 457,656 121 6,729 35,841 4,801 525,041 13,635 - 4,593 3,195 14,999 3,609 40,031 51,512 14,152 2,561 843 3,358 236 72,662 5,758 - 595 (135) 838 109 7,165 Ownership Interest % Assets Liabilities Carrying Value Revenue Profit / (loss) 50 50 50 50 50 24,133 415,015 5,259 10,490 51,516 506,413 5,756 381,068 1,262 7,160 37,355 432,601 18,377 - 3,997 3,330 14,161 39,865 34,545 10,706 2,180 84 3,258 50,773 4,779 - 421 (98) 937 6,039 Steamships Annual Report 2023 53 NOTES TO THE FINANCIAL STATEMENTS Steamships Trading Company Limited Year Ended 31 December 2023 (Amounts in Kina ‘000 unless otherwise stated) 23. Investment in joint ventures (continued) The Group’s share of the capital commitments of joint ventures at 31 December 2023 is K26.0 million (2022: K37.0 million). There are no contingent liabilities arising from the Group’s interests in the joint ventures. 24. Segmental reporting (a) Description of segments The Board monitors the business from a product perspective and has identified three reportable segments. A brief description of each segment is outlined below: • Property and hospitality – consist 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 include new assets in the course of construction. • Logistics – consists of shipping and land-based freight transport and related services divisions. • Commercial and investments – consists of 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 2023 is as follows: 2023 Total revenue and other income from continuing operations Interest revenue Interest expense Segment results Share of joint ventures and associates profit Total tax (expense) / credit Profit / (loss) from continuing operations Segment assets Segment liabilities Net assets Total assets include investments in joint ventures and associates Capital expenditure Depreciation Property and Hospitality Logistics Commercial and Investments (and elimination) Total 295,273 - (2,593) 104,142 - (31,243) 72,899 679,348 (68,787) 610,561 23,200 51,953 43,545 382,525 111 - 6,066 - (1,820) 4,246 550,572 (332,162) 218,410 5,464 168,071 57,533 (8,502) 14,063 (13,233) (33,105) 7,286 7,341 (18,478) 669,296 14,174 (15,826) 77,103 7,286 (25,722) 58,667 471,810 (231,158) 240,652 1,701,730 (632,107) 1,069,623 16,831 2,745 3,451 45,495 222,769 104,529 54 Steamships Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS Steamships Trading Company Limited Year ended 31 December 2023 (Amounts in Kina 000s unless otherwise stated) 24. Segmental reporting (continued) 2022 Total revenue and other income from continuing operations Interest revenue Interest expense Segment results Share of joint ventures and associates profit Total tax (expense) / credit Profit / (loss) from continuing operations Segment assets Segment liabilities Net assets Total assets include investments in joint ventures and associates Capital expenditure Depreciation Property and Hospitality Logistics Commercial and Investments (and elimination) Total 248,595 705 2,185 54,537 - (16,361) 38,176 696,098 (1,367) 694,731 21,488 33,453 44,237 380,337 199 (4,414) 41,612 - (12,484) 29,128 423,173 (217,099) 206,074 5,593 94,517 47,669 2,330 12,633 (12,483) (16,363) 6,288 2,212 (7,863) 631,262 13,537 (14,712) 79,786 6,288 (26,633) 59,441 396,422 (253,158) 1,515,693 (471,624) 143,264 1,044,069 18,377 1,182 3,373 45,458 129,152 95,279 These figures include non-controlling interests share of operating profits and assets. Revenue from the hotels and property business mostly relates to the provision of services and is recognised over time. A minor portion represents revenue from the sale of goods and is recognised 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 operations in the Solomon Islands and Fiji. 25. Contingent liabilities There were contingent liabilities at the Balance Sheet date as follows: (a) Steamships Trading Company Limited holds a 50% interest in an associated company, Colgate-Palmolive (PNG) Limited, (“CP (PNG) Ltd”). In 2022 CP (PNG) Ltd received a notice from PNG Customs seeking to reassess the historic rate of import duty applied to a specific product, known as soap noodles, resulting in an additional duty of K11.1 million and an intention to apply the higher rate on future imports. CP (PNG) Ltd has disputed the interpretation of the product characteristics by PNG Customs and formally appealed against this higher assessed rate of duty. The appeal process remains in progress. To the extent that any of the additional duty is deemed payable by CP (PNG) Ltd following the appeal process, the Group’s share of profits from associates and the equity accounted investment in CP (PNG) Ltd will be reduced by 50% of the amount payable, net of any tax effect. (b) The parent entity has given a secured guarantee in respect of the bank overdrafts and loans of certain subsidiaries, associates and joint ventures. (c) The parent entity has given letters of comfort 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 2023 55 NOTES TO THE FINANCIAL STATEMENTS Steamships Trading Company Limited Year Ended 31 December 2023 (Amounts in Kina ‘000 unless otherwise stated) 26. Commitments (a) Capital commitments Contracts outstanding for capital expenditure: - less than 12 months - 1-5 years 27. Subsequent events Consolidated Parent Entity 2023 2022 2023 2022 19,223 - 19,223 135 - 135 - - - - - - • • On 10th January 2024, significant civil commotion across the country resulted in looting and arson of three of the Company’s properties in Port Moresby. The Company is pursuing an insurance claim for the reinstatement of the properties and for business interruption. Whilst the incident has had a devastating effect on many retail businesses in the country, the impact on the Company’s own operations and balance sheet is not significant. The Directors advised that a dividend of 60 toea per share will be paid immediately after the Annual General Meeting on 13th June 2024. Dividends payable to shareholder resident outside of Papua New Guinea will be converted to Australian Dollars at the prevailing rate which the Company is able to secure. 56 Steamships Annual Report 2023 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 2023, 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 2023 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 2023, and their financial performance and cash flows for the year then ended. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Group in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements. Our firm carries out other services for the Group in the areas of taxation and other non-audit services. The provision of these other services has not impaired our independence as auditor of the Company and the Group. Our audit approach An audit is designed to provide reasonable assurance about whether the financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking into account the management structure of the Company and the Group, their accounting processes and controls and the industries in which they operate. PricewaterhouseCoopers, PwC Haus, Level 6, Harbour City, Konedobu, PO Box 484 Port Moresby, Papua New Guinea T: +675 321 1500 / +675 305 3100, www.pwc.com/pg Steamships Annual Report 2023 57 INDEPENDENT AUDITOR’S REPORT to the Shareholders of Steamships Trading Company Limited Materiality Audit Scope Key audit matters • Amongst other relevant topics, we communicated the following key audit matter to the Audit and Risk Committee: • Goodwill impairment assessment • This matter is further described in the Key audit matter section of our report. • We (PwC Papua New Guinea) conducted audit work over the Group’s significant operations including the significant subsidiaries included in the Group consolidation sufficient to express an opinion on the financial statements as a whole. • All subsidiaries of the Group at the year end are incorporated and operating in Papua New Guinea with the exception of one subsidiary which has operations in the Solomon Islands. • All significant associates of the Group are incorporated and operating in Papua New Guinea and audited by PwC Papua New Guinea. • Our audit focused on where the directors made subjective judgements; for example, significant accounting estimates involving assumptions and inherently uncertain future events. • For the purpose of our audit of the Group we used overall group materiality of approximately 5% of the Group’s profit before tax and net proceeds from insurance claim for the year ended 31 December 2023. • 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 and net proceeds from insurance claim 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. 58 Steamships Annual Report 2023 INDEPENDENT AUDITOR’S REPORT to the Shareholders of Steamships Trading Company Limited Key audit matter Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements for the current period. The key audit matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matter described below to be a key matter 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 Goodwill impairment assessment (Refer to note 12 of the financial statements) The Group has goodwill totalling K76.4 million at 31 December 2023. 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 2023. The Group has calculated the value of the respective cash generating units which the goodwill relates to based on financial models comprising cash flow projections. The cash flow projections use a number of forward looking assumptions, including revenue and cost growth, and the value calculation is sensitive to these. We considered this a key audit matter because of the significant judgements around future revenues and costs, and the discount rate to be applied in determining the recoverable amount of the cash generating units. We have considered and tested the financial models used by the Group to determine the values 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. Together with our valuation expert we reviewed the financial models methodology used in determining the value of the respective cash generating units. We compared the forecast revenues and expenditures in the financial models to approved budgets and obtained an understanding of the Group’s budgeting procedures upon which forecasts are based. We also evaluated the reliability of estimates made by comparing forecasts made in prior years to actual outcomes. We benchmarked certain assumptions 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 in the financial models. 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. Steamships Annual Report 2023 59 INDEPENDENT AUDITOR’S REPORT to the Shareholders of Steamships Trading Company Limited Information other than the financial statements and auditor’s report The directors are responsible for the annual report which includes other information. Our opinion on the financial statements does not cover the other information included in the annual report and we do not express any form of assurance conclusion on the other information. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the directors for the financial statements The directors are responsible, on behalf of the company for the preparation of financial statements that give a true and fair view in accordance with International Financial Reporting Standards and other generally accepted accounting practice in Papua New Guinea and the Companies Act 1997 and for such internal control as the directors determine is necessary to enable the preparation of financial statements that 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. 60 Steamships Annual Report 2023 INDEPENDENT AUDITOR’S REPORT to the Shareholders of Steamships Trading Company Limited Auditor’s responsibilities for the audit of the financial statements (continued) • Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However future events or conditions may cause the Group to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. 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. Steamships Annual Report 2023 61 INDEPENDENT AUDITOR’S REPORT to the Shareholders of Steamships Trading Company Limited 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 2023: • 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 Jonathan Grasso Partner Registered under the Accountants Act 1996 Port Moresby 28 March 2024 62 Steamships Annual Report 2023 DIRECTORS’ REPORT Steamships Trading Company Limited Year ended 31 December 2023 Steamships Trading Company Limited and Subsidiary Companies The Directors submit their Annual Report for the year ended 31 December 2023 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 Property and Hospitality, Logistics and Commercial and 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. Results The Group operating profit for the year attributable to shareholders was K58,144,000 (2022: K57,985,000). Dividends The Directors advise that a final dividend of 60 toea per share will be paid after the Annual General Meeting on 13th June 2024. Dividends payable to shareholders resident outside of Papua New Guinea will be converted to Australian Dollars at the prevailing rate which the Company is able to secure. Rounding Off Amounts in the Directors’ Report and accounts have been rounded off to the nearest thousand Kina. Steamships Annual Report 2023 63 DIRECTORS’ REPORT Steamships Trading Company Limited Year ended 31 December 2023 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 2015 Managing Director 2013 to 2015 Member of the Remuneration and Nomination 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 & Transport from 1989-1992. He was the Managing Director of Steamships Trading Company Limited from 1st January 2013 to 12th January 2015. He is the Chairman and Chief Executive Officer of John Swire and Sons (Australia) Pty Limited. P. J. Aitsi MBE Director from 1st July 2021 Director 2014 to 2018 Peter Aitsi is a senior Papua New Guinean business leader with over 30 years of experience from having led and managed a number of PNG’s leading companies. Along with his corporate roles, Peter has a long-standing involvement with community organisations such as Transparency International PNG, Badili Club of PNG, and Kokoda Track Foundation. He continues to serve on several boards of both listed and unlisted companies; Steamships Trading Company, Chair of MiBank PNG, Chair of PNG Property Developers Association, Director of OilMin Holdings and Chair of media company PNGFM Ltd. He studied Banking and Finance at the PNG Institute of Banking and Finance in Port Moresby (now IBBM), he is a member of the Australian Institute of Directors and a member of the PNG Institute of Directors (PNGID) and was awarded the Male Director of the Year in 2018. In 2004 he was accorded a Queens award as a Member of the British Empire (MBE) in recognition for his contributions to the development of PNG media and his long-standing voluntary service to various community organisations. R.P.N. Bray Managing Director from 20th September 2020 Member of the Strategic Planning Committee Member of the Remuneration and Nomination Committee Director since 2018 Appointed Managing Director in 2020, Mr. Bray was Chief Operating Officer from 2018 until his appointment as Managing Director. Mr Bray was previously Marine Services Director of Singapore based Swire Pacific Offshore Pte Ltd. There, he was responsible for Swire Pacific Offshore’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 holds directorship of various Steamships Trading Company subsidiaries, joint ventures, and associated companies. He sits on a number of charitable advisory boards and PNG business groupings, including chairing anti-gender-based violence charity, Bel isi, The Salvation Army PNG, acting as the deputy chair industry body, PNG Property Developers Association, the United Nations Biodiversity & Climate Fund for PNG, and the Business Council’s Energy Working Group. He graduated with a Bachelor of Science from Bristol University (UK) and holds a Master of Marine Sciences from Nanyang Technical University (Singapore). He is a graduate of the Australian Institute of Company Directors and holds several IOSH Health & Safety qualifications. 64 Steamships Annual Report 2023 DIRECTORS’ REPORT Steamships Trading Company Limited Year ended 31 December 2023 L.M. Bromley Chairperson of the Audit and Risk Committee since July 2021 Member of the Strategic Planning Committee since July 2021 Member of the Remuneration and Nomination Committee since July 2021 Director since 2019 Ms Bromley has been a Senior Executive of the Bromley Group of Companies for over 12 years. She is currently a Director of the Bromley Group’s various commercial operating Companies some of which include Heli Niugini Ltd, Maps Tuna Ltd and Western Drilling Ltd 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, Aerolift (Singapore) Pte. Ltd. in Singapore and AAB Holdings Pty Ltd Group of Companies in Australia and is responsible for the aviation operation, logistic support and group- investment functions. She is the Managing Director of Merit Finance Limited which serves as the Bromley Group’s treasury arm. Ms Bromley also consults on the Bromley Group’s property development and property management Companies through advisory roles in Papua New Guinea and Australia. She is a Director of Viva No 31 Ltd, a Steamships Trading Company joint venture Company, and has previously held positions on the Divisional Boards of EastWest Transport and Steamships shipping. Ms Bromley holds a Bachelor of Commerce and a Bachelor of Laws. D.H. Cox OL, OBE Managing Director 2004 to 2012 Member of the Audit and Risk Committee Member of the Strategic Planning Committee Director since 2003 Mr Cox joined Steamships as a Manager in 1992, rising to become Managing Director from 2004-2012. He has extensive experience in the Asia-Pacific business environment and holds an MBA in International Hospitality & BSc (Hons) in Accounting & Business Management. C. Kasou Appointed as Non-Executive Director on 1st March 2024 Christine began her career in private practice in 2001 as a commercial lawyer with Gadens Lawyers (now Dentons) in Port Moresby. In 2006, Christine joined Oil Search (PNG) Limited, now a subsidiary of Santos Limited. She has over 17 years of experience in Papua New Guinea’s oil and gas industry working extensively in the organization’s contracting and procurement functions, legal and compliance department, gas projects development and people and culture function. Christine has substantial experience in corporate governance and regulatory responsibilities within the jurisdiction and is currently the Senior Commercial Manager, PNG. Christine holds a Bachelor of Laws from the University of Papua New Guinea. Steamships Annual Report 2023 65 DIRECTORS’ REPORT Steamships Trading Company Limited Year ended 31 December 2023 J.B. Rae-Smith Director since 2019 Mr Rae-Smith is Chairman of Swire Energy Services, Swire Renewable Energy and United States Cold Storage, a Director and Chairman of the Audit and Risk Committee of Swire Shipping Co Pte Ltd and Swire Bulk Pte Ltd and Vice President of the United Kingdom Chamber of Shipping. He 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. 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. M.R. Scantlebury Finance Director & Company Secretary from June 2016 to September 2018 and from September 2020 to present Managing Director from September 2018 to September 2020 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 holds Directorship of various Steamships Trading Company subsidiaries, joint ventures, and associated companies. Lady W.T. Kamit CBE Member of the Audit and Risk Committee Director since 2005, resigned on 15th June 2023 Lady Winifred Kamit is a senior partner at Dentons PNG. Lady Kamit is a Director of Bunowen Services Ltd, Kamchild Limited, Dentons Administration Services Ltd, Post Courier Limited and its subsidiaries and Brian Bell Group. Lady Kamit also serves on a number of non-government and charitable organisations, including Anglicare PNG Inc. 66 Steamships Annual Report 2023 DIRECTORS’ REPORT Steamships Trading Company Limited Year ended 31 December 2023 Remuneration of Directors Directors remuneration received or receivable from the Company as directors during the year, is as follows: GL Cundle (Chairman) LM Bromley DH Cox JB Rae Smith PJ Aitsi Lady WT Kamit JH Woodrow 2023 K’000 249 280 252 205 140 95 - 1,221 2022 K’000 223 249 224 126 124 174 63 1,183 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 2023 No. 2022 No. Remuneration K’000 2023 No. 2022 No. 100-110 110-120 120-130 130-140 140-150 150-160 160-170 170-180 180-190 190-200 200-210 210-220 220-230 230-240 240-250 250-270 270-280 280-290 18 8 9 7 11 7 5 5 4 3 5 2 1 3 3 12 3 4 11 4 9 7 5 6 6 1 4 2 5 2 3 3 3 4 5 1 290-300 300-310 310-340 340-360 360-370 370-380 380-390 390-400 400-500 500-600 600-700 710-800 810-900 910-1000 1,000-1,100 1,100-2,000 2,000-2,900 2,900-3,000 3 4 4 3 1 3 3 - 15 5 13 7 4 2 1 3 1 1 1 2 4 3 2 2 - - 5 7 6 2 - 3 1 4 2 - For and on behalf of the Board: Port Moresby 28 March 2024 G.L. Cundle Chairman R.P.N. Bray Managing Director Steamships Annual Report 2023 67 STOCK EXCHANGE INFORMATION Steamships Trading Company Limited Year Ended 31 December 2023 Shares are listed on the Australian Securities Exchange and the Port Moresby Stock Exchange. All shares carry equal voting rights. Shareholdings At 29 February 2024, there were 361 shareholders. 264 Holding 65 Holding 17 Holding 11 Holding Holding 4 1 1,001 5,001 10,001 100,001 - Over - 1,000 units - 5,000 units - 10,000 units - 100,000 units The number of shareholders holding less than a marketable parcel was 33. The 20 largest shareholders were: Number of shares JS&S (PNG) LIMITED BERNE NO 132 NOMINEES PTY LTD <722124 A/C> NATIONAL SUPERANNUATION FUND LIMITED BERNE NO 132 NOMINEES PTY LTD <657243 A/C> JOHN E GILL OPERATIONS PTY LIMITED HYLEC INVESTMENTS PTY LIMITED PRAFUL PATEL INVESTMENTS PTY LTD PRAFUL & ANITA PATEL S/ A/C BOND STREET CUSTODIANS LIMITED MR RAMESH MAHTANI CITICORP NOMINEES PTY LIMITED BUDLEAF PTY LTD BNP PARIBAS NOMINEES PTY LTD INTERCONTINENTAL ASSETS PTY LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED MRS LUCY ANN KING MS JENNIFER MAY FORBES BNPP NOMS PTY LTD HUB24 CUSTODIAL SERV LTD 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 23,082 23,067 21,700 20,240 19,659 19,562 15,000 10,767 10,348 10,000 9,568 8,768 8,161 8,161 % 72.12 18.58 6.00 1.44 0.18 0.10 0.07 0.07 0.07 0.07 0.06 0.06 0.05 0.03 0.03 0.03 0.03 0.03 0.03 0.03 30,723,901 99.08 Applicable Legislation The Company is incorporated in Papua New Guinea and is not generally subject to Australian Corporations Law including, in particular, Chapter 6 of the Australian Corporations Law dealing with the acquisition of shares (including substantial shareholdings and takeovers). The Company is subject to the requirements of the Papua New Guinea Companies Act 1997, Securities Act 1997 and the Takeovers Code. The Companies Act and the Securities Act regulate the issue and buy-back of shares and contain provisions as to the trading in securities, provisions as to financial benefits to related parties, substantial shareholders provisions, remedies in cases of oppression or injustice and actions by, and access to, records by shareholders. The Takeovers Code regulates offers where a person already holds more than 20% of the voting rights in a company or where a person becomes the holder of more than 20% of the voting rights in a manner permitted by the Code. A code offer, which can either be a full offer or a partial offer, must be extended to all holders of voting securities in the Company. The Code also contains compulsory purchase and sale provisions if more than 90% of the shares are acquired under an offer. 68 Steamships Annual Report 2023 Steamships Annual Report COMPANY DIRECTORY CHAIRMAN G. L. Cundle §& MANAGING DIRECTOR R. P. N. Bray §& FINANCE DIRECTOR M. R. Scantlebury NON-EXECUTIVE DIRECTORS P. J. Aitsi MBE L. M. Bromley +§& D. Cox OL, OBE +& J. B. Rae Smith C. Kasou + Member of the Audit and Risk Committee § Member of the Remuneration and Nomination Committee & Member of the Strategic Planning Committee SECRETARY M. R. Scantlebury REGISTERED OFFICE Level 2, @345, Stanley Esplanade Section 20, Allotments 3, 4, and 5 Granville, Port Moresby, National Capital District Papua New Guinea Telephone: +675 313 7400 / 79987000 P. O. Box 1 Port Moresby, National Capital District, 121 Papua New Guinea AUDITORS PricewaterhouseCoopers P. O. Box 484 Port Moresby, NCD Papua New Guinea SHARE REGISTRARS Computershare Investor Services Pty Limited GPO Box 2975 Melbourne VIC 3001 Australia Telephone: (Aus) 1300 85 05 05 (Overseas) +61 (0)3 9415 4000 Fax: +61 3 9473 2500 STOCK EXCHANGE Shares are listed on both the PNGX Markets Limited and the Australian Securities Exchange Limited A. R. B. N. 055 836 952 Level 2, @345, Stanley Esplanade, Section 20, Allotments 3, 4 and 5 Granville, Port Moresby, National Capital District, Papua New Guinea P.O. Box 1, Port Moresby, National Capital District, 121, Papua New Guinea P: +675 313 7400 / 79987000 www.steamships.com.pg 

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