Gulf Marine Services announces 2020 Financial Results

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(Image Courtesy: Gulf Marine Services)

Gulf Marine Services PLC, a leading provider of advanced self-propelled, self-elevating support vessels serving the offshore oil, gas and renewables industries, today announced its full year unaudited financial results for the year to 31 December 2020.

2020 Financial Highlights

• Revenue fell by 6% to US$ 102.5 million (2019: US$ 108.7 million). Utilisation improved to 81% from 69% in 2019, with improvements in both of our core markets of MENA and North West Europe. This helped to offset the decrease in average rates of 18%, arising from the COVID-19 operating environment where delayed contract awards meant that two of our E-Class fleet were working at K-Class rates in order to meet demand.
• Cost of sales reduced to US$ 70.9 million (2019: US$ 74.6 million) despite higher utilisation and incurring costs associated with relocating two vessels from Europe to the Middle East and costs arising from the impact of COVID-19 totalling US$ 6.8 million and US$ 2.3 million respectively.
• Adjusted EBITDA1 at US$ 50.4 million was 2% lower than in 2019, while net cash flow before debt service2 reduced to US$ 31.9 million (2019: US$ 41.9 million).
• Our cost structure has fundamentally changed, with the cost saving programme now having delivered US$ 20.7 million on an annualised basis, helping to improve underlying trading performance.
• Impairment charges totalled US$ 87.2 million, on two of our E-Class vessels and five of our K-Class.
• Loss for the year rose to US$ 124.3 million from US$ 85.5 million following the impairment, further restructuring and exceptional costs of US$ 5.6 million and the total write-off of US$ 16.2 million relating to the renegotiation of bank facilities in June 2020.

2020 Operational Highlights

• HSE Performance improved with Lost Time Injury Rate at 0 (2019: 0.19) at the end of 2020. Total recordable injury rate was 0 (2019: 0.29).
• Successful first-time deployment of cantilever system on GMS Evolution, a technology designed and developed by GMS. The vessel is now on a long-term contract with the same client.
• Operational downtime remained low at less than 2%.
• Average fleet utilisation increased to 81% (2019: 69%) with marked improvements in both E- and K-Class vessels to 65% (2019: 51%) and 86% (2019: 68%) respectively, reflecting increased demand in Middle East and North Africa (MENA) following the relocation of two E-Class to MENA at the beginning of the year. S-Class declined slightly at 92% (2019: 97%).
• New charters and extensions secured in the year totalled just under seven years.
2020 Governance Highlights
• Four Requisitioned General Meetings held during 2020 resulted in complete Board overhaul.
• New Executive Chairman, Mansour Al Alami (appointed November 2020).
• Rashid Al Jarwan joined as an Independent Non-Executive Director (appointed November 2020).
• Saeed Abdullah Khoory joined as an Independent Non-Executive Director in November 2020 and sadly passed away in February 2021.
• Hassan Heikal joined as Non-Executive Director (appointed November). In February 2021 Mr Heikal was appointed Deputy Chairman.
• Tim Summers resigned as Executive Chairman in November 2020.

COVID-19

• Significant operational and financial risks experienced by all businesses across the energy sector persist. Four vessels reported COVID-19 cases during the year.
• Restrictions on travel and quarantine periods proved the biggest challenge to the Company in the year. To overcome this, crew rotations have been temporarily increased to minimise the number of crew changes required. This measure will remain in place for the time being.
• Temporary delays in contract awards, with some client projects unable to commence due to supply chain delays or inability to mobilise manpower.
• Incurred US$ 2.3 million of additional costs relating to COVID-19 in the year, which were mainly in relation crew quarantine requirements. Changes to operating practices implemented at end of the year should minimise these costs going forward.

Material Uncertainty Statement

• As part of the renegotiation of bank facilities agreed in March 2021, the Company is required to obtain shareholder approval from shareholders other than Seafox and Mazrui (as they are likely related parties to the transaction under the Listing Rules and have informally agreed to take up their prorated share of an equity raise) and raise a minimum of US$ 25 million of new equity by 30 June 2021. If the Company fails to meet these requirements then lenders would retain the right to call default on the loans. This would allow a majority of banks, representing at least 66.67% of total commitments, to exercise their rights to demand immediate repayment and/or enforce security granted by the Company as part of this facility at the asset level and/or by exercising the share pledge to take control of the Group.
• This indicates a material uncertainty that may cast significant doubt as to the Group’s ability to continue as a going concern. Notwithstanding this material uncertainty, the Directors believe that based on progress to date, shareholder approval will be obtained and US$ 25 million of equity will be raised by 30 June 2021. Accordingly, the going concern basis of accounting has been adopted in preparing the 2020 consolidated financial statements.

2021 Highlights and Outlook

• Secured backlog was US$ 199.0 million as at 6 May 2021 (US$ 240 million as at 31 March 2020) with the decrease reflecting delays in some contract awards arising from COVID-19.
• Seven of the fleet of 13 vessels are fully contracted for 2021. Secured utilisation for 2021 currently stands at 80% and 41% for 2022.
• Following appointment of the new Board, the agreement reached with banks in 2021 offers a significant saving in interest costs and an extension of time in which to carry out an equity raise to prevent GMS having to issue warrants or apply PIK3 to its borrowings.
• Current year-to-date4 unaudited EBITDA is in line with the Company’s 2021 Business Plan.

Mansour Al Alami, Executive Chairman said:

“GMS has been able to successfully navigate the challenges of 2020 and is now well positioned for 2021 and beyond. We are maximising the return on our assets through improving utilisation with a reduced cost base against a backdrop of strengthening market dynamics. This, combined with improved bank facility terms, means that GMS is well on the way to long-term recovery and growth. These are important steps in maximising cash generation and deleveraging GMS’ balance sheet over time. We are confident of completing the US$ 25 million equity raise by the end of June this year as another key milestone.
On behalf of the Board, I would like to thank all our staff for a year of hard work and for their continued commitment to GMS. I would also like to thank our stakeholders, including customers, suppliers and lenders for their support during the past year.”

Sea News, May 14

Baibhav Mishra
Author: Baibhav Mishra

Associate Editor, Sea News