Interim Results

RNS Number : 1806Q

Gulf Marine Services PLC

28 August 2014

 



For Immediate Release                                                                                   28 August 2014

Gulf Marine Services PLC

("Gulf Marine Services", "GMS", "the Company" or "the Group")

Interim results for the six months ended 30 June 2014

Good start to 2014: major fleet expansion on track

Gulf Marine Services  (LSE:GMS), the leading provider of self-propelled self-elevating support vessels (SESV) serving the offshore oil, gas and renewable energy sectors, today announces its interim results for the six months ended 30 June 2014.

Financial Results Summary

(US$ million)	H1 2014	H1 2013
Revenue	90.7	86.6
Gross profit	58.7	55.6
Adjusted EBITDA	58.6	57.4
Net profit	33.1	32.1
Adjusted net profit	38.1	32.6
Adjusted earnings per share (US cents)	11.45	10.69
Interim dividend per share (pence)	0.41	-

¹ Representing operating profit after adding back depreciation, amortisation and IPO costs.

² After adding back IPO costs.

Financial Highlights

·     Strong first half for 2014.  Full year results expected to be in line with expectations.

·     Revenue increased by 5% to US$ 90.7 million (H1 2013: US$ 86.6 million).

·     Robust cash flows generated from operations, adjusted EBITDA up 2% to US$ 58.6 million (H1 2013: US$ 57.4 million).

·     Adjusted EBITDA margin 65% (H1 2013: 66%). 

·     Adjusted net profit (excluding IPO costs) up by 17% to US$ 38.1 million for H1 2014 (H1 2013: US$ 32.6 million).

·     Adjusted earnings per share increased in the period by 7% to 11.45 cents.

·     Maiden dividend of 0.41 pence per share.

·     Well financed for future expansion with net debt of US$ 249.3 million (H1 2013: US$ 307.2 million) and committed undrawn bank facilities of US$ 130 million at 30 June 2014.

·     Successful IPO in March 2014 raised primary gross proceeds of approximately US$ 111 million. 

The above highlights are based on the Group's adjusted results.  A full reconciliation between the adjusted and statutory results is contained in note 4.

Operational Highlights

·     As at 25 August 2014, secured backlog, comprising firm and extension options, is US$ 361 million.

·     Continued high fleet utilisation for the period under review: 94% SESVs and 96% overall fleet, with strong day rates maintained.   

·     Two new contracts wins in period, including the first contract for new build Large Class vessel GMS Enterprise (four-month contract in MENA expected to commence at beginning of Q4 2014).

·     Three SESV contract extensions from existing clients: one Floating Accommodation Barge, two Small Class vessels.

·     The Company has entered into a letter of intent with an international oil company (IOC) for one of its existing Large Class vessels on a four-year charter (two years firm with two 12-month options) and the contract is currently being finalised.  Charter commencement date will be the beginning of Q2 2015.

·     The new build programme (which will expand SESV fleet capacity by 66% with the addition of six SESVs) is going well with all five SESVs currently under various stages of construction progressing as scheduled. 

·     Continued strong safety record with no Lost Time Injuries (LTIs).

Duncan Anderson, Chief Executive Officer for GMS, commented: 

"The Group has achieved a good start to 2014, sustaining high levels of fleet utilisation of over 90%.  The important step forward for the Group is the addition of six new jackup vessels which will expand the SESV fleet by two thirds by 2016. This is progressing well and as scheduled, with GMS Enterprise, our latest Large Class vessel and the first of the six new additions, due for completion next month and already pre-contracted by an engineering, procurement and construction (EPC) contractor working for a MENA-based national oil company (NOC).  Market prospects for the enlarged fleet are excellent; already we are seeing interest expressed in the future availability of the new tonnage by both new and existing clients who have experience and understanding of our cost-effective well service and maintenance solutions.  This augurs well for 2015 and beyond."

-ENDS-

A management presentation to analysts will be held on 28 August 2014 at 09:00 at Bank of America Merrill Lynch, 2 King Edward Street, London EC1A 1HQ.  For additional details and registration for admission, please contact James Lea via email at [e-mail].

Enquiries

For further information please contact:

Gulf Marine Services PLC	Bell Pottinger
Duncan Anderson	Philip Dennis
John Brown	Rollo Crichton-Stuart
Anne Toomey	Tel: [phone]
Tel: [phone]

Notes to Editors:

Gulf Marine Services PLC, a company listed on the London Stock Exchange, was founded in Abu Dhabi in 1977 and has become one of the largest providers of self-propelled self-elevating support vessels (SESV) in the world.  The fleet serves the oil, gas and renewable energy industries from its offices in the United Arab Emirates, Saudi Arabia and the United Kingdom.  GMS is working worldwide, with its assets capable of serving clients' requirements in the Middle East, South East Asia, West Africa and Europe.

The Group's SESVs are four-legged vessels that move independently, with no requirement for anchor handling or tug support. They have a large deck space, crane capacity and accommodation facilities that can be adapted to the requirements of the Group's clients. These vessels support GMS' clients in a broad range of offshore oil and gas platform refurbishment and maintenance activities, well intervention work and offshore wind turbine maintenance work (which are Opex-led activities) and offshore oil and gas platform installation and offshore wind turbine installation (which are Capex-led activities).

GMS' current fleet of nine SESVs is technically advanced and amongst the youngest in the industry, with an average age of nine years. The fleet is categorised by size into Large Class vessels (operating in water depth of up to 80m, with crane capacity of up to 400 tonnes and accommodation for up to 300 people)and Small Class vessels(operating in water depth of up to 45m, with crane capacity of up to 45 tonnes and accommodation for up to 300 people).  A third class, the Mid-Size Class vessels (operating in water depth up to 55m, with crane capacity of up to 150 tonnes and accommodation for up to 300 people) will be added to the fleet in 2015.

GMS plans to add up to six more vessels to its fleet by the end of 2016 as the Group responds to continued strong customer demand and an anticipated growing market in the foreseeable future.  

Demand for GMS' vessels is predominantly driven by their premium capabilities as well as market growth underpinned by the need to maintain ageing oil and gas infrastructure and increasing use of enhanced oil recovery techniques to offset declining production profiles.

www.gmsuae.com 

Disclaimer

The content of the Gulf Marine Services PLC website should not be considered to form a part of or be incorporated into this announcement.

Cautionary note

This announcement includes statements that are forward-looking in nature. All statements other than statements of historical facts could be deemed to be forward-looking statements. By their nature, these forward-looking statements involve numerous assumptions, uncertainties and opportunities, both general and specific.

Accordingly, the actual results, performance or achievements of the Company may be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements, due to known and unknown risks, uncertainties and other factors. Other than in accordance with the Company's obligations under the Listing Rules and the Disclosure Rules and Transparency Rules (DTR) of the Financial Conduct Authority, the Company undertakes no obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events or otherwise. No part of this announcement constitutes, or shall be taken to constitute, an invitation or inducement to invest the Company or any other entity, and must not be relied upon in any way in connection with any investment decision.  All written and oral forward-looking statements attributable to the Company or to persons acting on the Company's behalf are expressly qualified in their entirety by the cautionary statements referred to above.  

Chief Executive's Review

Good start for 2014

GMS has delivered a solid performance for the first half of the year.  A major highlight during this period was our successful IPO and admission into the FTSE All Share Index on the London Stock Exchange in March.  

Revenue has grown by 5% compared to H1 2013 and a strong operational performance is reflected in an adjusted net profit increase of 17% to US$ 38.1 million (net profit was US$ 33.1 million). EBITDA (adjusted for IPO costs) has increased by 2% on the comparative period to US$ 58.6 million, with a healthy EBITDA margin of 65%. We anticipate a continued good performance with results for the full year expected to be in line with expectations.

In line with the previously stated dividend policy for 2014, the Board of Directors has declared a maiden interim dividend of 0.41 pence per ordinary share, payable on 27 October 2014 to shareholders on the register on 26 September 2014.

The Group's strong balance sheet and robust cash generating position provide a good platform for future growth.  

·     Our reputation for delivering highly adaptable and cost effective self-propelled self-elevating support vessels (SESVs), operational expertise and strong safety record is reflected in our high utilisation rate of 94% for SESVs in the period.  Our entire fleet is currently contracted by national and international oil companies and engineering, procurement and construction contractors.

·     Our new build programme is progressing on schedule.  Our latest Large Class vessel, GMS Enterprise, which is currently undergoing sea trials, will be completed in September and is already contracted by an engineering, procurement and construction (EPC) contractor working for a MENA-based national oil company (NOC) to start work at the beginning of Q4.  Four other vessels are currently under various stages of construction.

We continue to enter into value-added partnerships as appropriate.  We are making good progress with our expansion plans in South East Asia with the formation of a marketing partnership in Malaysia, to focus on opportunities there.

We remain optimistic about our longer-term growth, with our business development activities producing a strong pipeline of opportunities.   

Operational Review

The fleet has performed well in the first half of the year, with utilisation for the entire fleet of 96% and for the SESVs of 94%.    

Charter day rates achieved for vessels in H1 2014 remained broadly consistent with those attained in the year ended 31 December 2013, with the Large Class vessels commanding an average of US$ 103,000 and Small Class vessels US$ 38,000. 

We continued to reduce the technical downtime (for repairs/maintenance) in H1 2014 through greater operational efficiencies, with only one Large Class vessel incurring three days off hire.  All other maintenance activities in the period were carried out with the vessels remaining on hire and we are hopeful that this performance will be maintained.

Our strong HSE track record has continued this year, with no lost time injuries (LTIs) both onshore and offshore throughout our global business and operations.  This is an excellent achievement which equates to a total of 1.6 million man hours without LTIs in H1.  One particular highlight in February was the presentation of a certificate of appreciation by our client, a MENA-based national oil company, to one of our Small Class SESVs in recognition of 14 working years with zero LTIs. 

There has been additional recruitment both onshore and offshore as we augment our management and strengthen our workforce to effectively meet the requirements of our growing business and our recent listing. 

GMS has continued to implement greater operational efficiencies.  These include the establishment of the GMS Academy, which allows us to deliver a best in class training and development programme for all our onshore and offshore staff globally that exceeds the requirements of the regulatory/government bodies and our clients. 

Market Commentary

Demand for GMS SESVs across the Middle East North Africa (MENA) region is excellent and we expect this to continue.  All seven of our Small Class vessels are chartered; the first availability of these vessels is not anticipated until Q3 2015.  We are currently bidding on a number of new opportunities with existing clients and expect that the charter rates we achieve will continue to strengthen for this class of vessel due to a shortage of appropriate vessels in the market. Our newest Large Class vessel will also commence its first charter in MENA, with the day rates in line with those previously indicated for the region. 

The market in Europe continues to be strong with both of our Large Class vessels currently contracted on operations there and achieving average day rates of over US$ 100,000 in H1 2014.  Utilisation of 75% for this class of vessel in the period was affected by an expected time off hire before commencing a contract that was delayed by a customer and then subsequently cancelled.  The vessel continues to be successfully redeployed on short term contracts in anticipation of commencement of a long term contract in 2015.   

The Company has also entered into a letter of intent (LOI) with an IOC for one of its existing Large Class vessels on a four-year charter (two years firm with two 12-month options) and the contract is currently being finalised.  Charter commencement date will be the beginning of Q2 2015.

Our secured backlog of US$ 361 million as at 25 August 2014, comprising of firm and extension options but not LOIs, provides good visibility on future earnings.  The outlook, based on our current pipeline of contracts under negotiation and other tender opportunities, suggests overall stronger demand driven primarily by our core brownfield oil and gas customer base.

All our vessels are currently on contracts performing a range of services including supporting brownfield oil and gas recovery, well services and maintenance work in the MENA region and North West Europe.  These existing clients have all exercised optional charter periods available to them in H1 2014 in order to secure the vessels, and in the case of some multi-year contracts to retain existing competitive day rates.

During H1 2014 the Group achieved a new contract win for one of our Small Class vessels and a contract extension for our Accommodation Barge.  Contract extensions for two other Small Class vessels were confirmed in July.  We are also very pleased to report that in August we signed the first charter for our latest new build Large Class vessel GMS Enterprise (which is currently under construction) and this is due to be delivered to our client in MENA around the beginning of Q4 for a four-month contract.  

We continue to see demand for SESVs such as our Large Class vessels in the renewables market generally.  These opportunities are driven by maintenance requirements, remedial works and infrastructure commissioning, where a larger installation jackup cannot be economically employed. The only sector with expected lower demand is in the pure wind farm construction market which has softened in the near term.

Our business development activities beyond the Middle East and Europe are producing an encouraging pipeline of opportunities, particularly in the Far East. Through new initiatives, which include a new marketing partnership in Malaysia with Dialog Group, we expect to be able to capitalise on these opportunities as our Mid-Size Class vessels are delivered in 2015 and beyond.

GMS has in excess of 35 years' experience in the sector.  We monitor possible competitors and the new build market (inexperience and inability to overcome operational barriers to entry can be major problems for potential new entrants).  Our assessment of the market provides confidence that GMS is well-placed to maintain our position as the leading provider of advanced self-propelled SESVs globally.

New Build Programme 

We are pleased to confirm that our new build programme is going well with all five of the SESVs currently under various stages of construction progressing as scheduled.  Construction of a further Large Class vessel will commence in Q2 2015. Completion of the current new build programme will increase our fleet capacity by 66%.

We achieved some key milestones within the first half of this year.  In February the hull for Large Class GMS Enterprise arrived at our yard in Abu Dhabi; this vessel is currently on sea trials and completion is due in September 2014.  In May we commenced construction in China of the hull for our first Mid-Size Class vessel GMS Shamal; this is due to arrive in Abu Dhabi in Q4 2014 and is scheduled for completion in Q2 2015.  A second Mid-Size Class vessel is also under construction in China, with completion due in Q3 2015.  We have commenced procurement for the third Mid-Size Class, and are monitoring the third party construction of the Enhanced Small Class vessel which we anticipate we will acquire initially on a bareboat charter in Q2 2015.   

Our well-established in-house facility continues to give us a competitive advantage over our peers, substantially lowering the cost of vessel construction (by approximately 30% on the Large Class vessels) and allowing for quality assurance, certainty of performance and delivery of final product.

Outlook 

Demand for GMS SESVs continues to be very strong and as we expand our fleet there is every indication that this will continue to be the case. We are already seeing interest expressed in the future availability of our new tonnage by both new and existing clients who have experience and understanding of our cost-effective well service and maintenance solutions.  We are confident that similar utilisation levels as 2014 will be achieved in 2015 and beyond.

Duncan Anderson

Chief Executive Officer

Financial Review

Introduction

The Group delivered a solid set of results during H1 2014. Our operations during H1 2014 have resulted in increased EBITDA (after adding back IPO costs) of US$ 58.6 million (H1 2013: US$ 57.4 million).  Adjusted net profit (excluding IPO costs) for H1 2014 improved by 17% to US$ 38.1 million.  Adjusted EPS was 11.45 cents.

Capital expenditure for H1 2014 of US$ 59.9 million (H1 2013 US$ 16.9 million) was primarily on construction of new vessels. The Group's net debt level (being borrowings and finance lease obligations less cash) reduced by 19% to US$ 249.3 million at the period end (H1 2013: US$ 307.2 million).  GMS continues to have a healthy financial position with robust operating cash flows and a strong balance sheet. The Group's bank borrowings leverage ratio was 2.0 times adjusted EBITDA.  At the period end, the Group had undrawn committed bank facilities of US$ 130.0 million (H1 2013: US$ 80.0 million).

Each of the following sections discusses the Group's adjusted results. The adjusting items (IPO costs) are discussed below in this review and reconciliation between the adjusted and statutory results is contained in note 4.

Revenue and Segment Profit

Revenue increased by 5% to US$ 90.7 million in H1 2014 (H1 2013: US$ 86.6 million) due to high utilization of 96% across the fleet (2013 full year: 94%) combined with maintenance of stable average charter day rates during the period.

The small vessel segment made the largest contribution to Group revenue with US$ 51.5 million (H1 2013: US$ 46.2 million).  Revenue from large and other vessel segments was US$ 32.5 million (H1 2013: US$ 34.3 million) and US$ 6.7 million (H1 2013: US$ 6.1 million), respectively.  The segment profit, being gross profit excluding depreciation is US$ 37.4 million (H1 2013: US$ 31.8 million) for small vessels, US$ 24.8 million (H1 2013: US$ 27.9 million) for large vessels, and US$ 4.5 million (H1 2013: US$ 3.5 million) for other vessels.

Cost of sales and General and administrative expenses

The Group has a relatively predictable operating cost base, which is kept under constant review to ensure tight control is maintained as the Group grows.  Cost of sales remained largely stable at US$ 32.0 million (H1 2013: US$ 31.0 million) as a percentage of revenue it was 35.3% (H1 2013: 35.8%).

General and administrative expenses, excluding non-recurring IPO costs of US$ 5.0 million, increased 31% to US$ 8.4 million (H1 2013: US$ 6.4 million) as we enhance our management and expand our workforce to effectively meet the increased requirements of our growing business and our recent listing.

EBITDA

Adjusted EBITDA for the period was US$ 58.6 million (H1 2013: US$ 57.4 million). The Group's EBITDA margin decreased marginally from 66% in 2013 to 65% in 2014, as general and administrative costs increased as outlined above, coupled with the lower utilisation for large class vessels of 75% in the period (full year 2013 large class vessels average: 88%). 

Finance costs

Net finance costs in H1 2014 were 25% lower at US$ 10.9 million (H12013: US$ 14.9 million), mainly as a result of more favorable loan terms following the bank refinancing discussed further below.

Taxation

The tax charge for the period was US$ 1.2 million (H1 2013: US$ 1.5 million), representing 3.6% (H1 2013: 4.6%) of profit for the period before taxation.  The decrease in tax charge is due to a greater weighting of profits being generated in lower tax jurisdictions, such as the UAE.

We note the recently issued revised draft UK tax legislation on offshore bareboat chartering (Finance Bill 2014) confirmed that where the provision of accommodation is incidental to the primary use of a vessel, it falls outside the scope of this tax. We currently have no vessels on charter in the UK where the accommodation is a primary service provided by us.

Adjusted net profit and earnings per share

The Group recorded an increase in adjusted net profit of 17% in H1 2014 to US$ 38.1 million (H1 2013: US$ 32.6 million).  The improvement in results is largely attributable to improved operating performance and lower finance costs. The fully diluted adjusted earnings per share (DEPS) for the six-month period ended 30 June 2014 is 11.45 cents (H1 2013: 10.69 cents).   Adjusted DEPS is calculated based on adjusted profit after tax and reconciliation between the adjusted and unadjusted profit is given in note 4.

Dividends

An interim dividend of 0.41p per ordinary share has been declared by the Board of Directors and is payable on 27 October 2014 to shareholders on the register at 26 September 2014. This interim dividend totaling US$ 2.4 million has not been recognised as a liability in the interim financial statements as it occurred after the balance sheet date.

Capital expenditure

The Group's capital expenditure during the six-month period ended 30 June 2014 was US$ 59.9 million (31 December 2013: US$ 53.5 million).  The main area of investment was additions to assets under the course of construction amounting to US$ 58.6 million (31 December 2013: US$ 53.0 million).  Additions to existing vessels was US$ 0.37 million (31 December 2013: US$ 0.22 million) and expenditure on operating equipment and additions to other fixed assets was US$ 0.93 million (31 December 2013: US$ 0.25 million).

Cash flow and liquidity

The Group's net cash flow from operating activities for H1 2014 reflected a net inflow of US$ 41.2 million (H1 2013: net inflow of US$ 47.9 million).

Net cash outflow from investing activities for H1 2014 was US$ 95.6 million (H1 2013: US$ 21.7 million). The increase in outflow was mainly due to investment on capital expenditure and movement in Short Term Deposits exceeding three months.

The Group's net cash relating to financing activities during H1 was an inflow of US$ 55.6 million (H1 2013: US$ 17.9 million).  This increase was mainly attributable to receipt of primary gross IPO proceeds during the period. 

Period end net debt was US$ 249.3 million (H1 2013: US$ 307.2 million).  The period-end outstanding debt was US$ 340.8 million (31 December 2013: US$ 354.1 million) being bank borrowings of US$ 254.3 million (31 December 2013: US$ 265.3 million) and finance lease obligations of US$ 86.5 million (31 December 2013: US$ 88.8 million). Undrawn committed bank facilities were US$ 130.0 million.  The Group was in full compliance with its debt covenants, with significant headroom, and expects to remain so.  In February 2014, the Group's main bank facility was restructured resulting in improvements to some of the key terms of the loan, such as available facility, margins and tenure.  Further details are given in note 15 to the financial statements.

Balance sheet

The Group has a robust and well financed balance sheet.  A review of the major components of the balance sheet follows.

Total current assets at 30 June 2014 were US$ 141.7 million (31 December 2013: US$ 91.1 million).  This movement is attributable to increase in cash and cash equivalents to US$ 91.2 million (31 December 2013: US$ 46.9 million) principally from the receipt of primary gross IPO proceeds of approximately US$ 111 million in March 2014.  Trade and other receivables increased to US$ 50.2 million (31 December 2013: US$ 43.2 million).   

Total current liabilities at 30 June 2014 were US$ 77.6 million (31 December 2013: US$ 43.2 million).  The principal movement was a reclassification of US$39.2 million in obligations under finance leases from non-current liabilities to current liabilities (31 December 2013: US$ 5.7 million), as the period remaining for the option to purchase a leased vessel is now less than a year. There was a reduction in both trade and other payables to US$ 24.5 million (31 December 2013: US$ 25.7 million) and bank borrowings to US$ 10.4 million (31 December 2013: US$ 11.0 million).

The combined result of the above was an increase in the Group's combined working capital and cash to US$ 64.1 million (31 December 2013: US$ 47.9 million).

Total non-current assets at 30 June 2014 were US$ 547.1 million (31 December 2013: US$ 495.1 million). This increase is primarily attributable to a US$ 51.9 million increase in the net book value of property, plant and equipment.

Total non-current liabilities at 30 June 2014 were US$ 289.9 million (31 December 2013: US$ 358.8 million). This reduction is primarily due to repayment of shareholder loans of US$ 19.5 million, repayment of bank borrowing aggregating US$ 10.3 million and obligations under finance leases of US$ 39.2 million being reclassified to current liabilities.

Shareholders' equity increased from US$ 182.9 million at 31 December 2013 to US$ 319.6 million at 30 June 2014.  The movement is mainly as a result of the new equity issued as part of the IPO which increased share capital to US$ 57.9 million (31 December 2013: US$ 0.3 million) and share premium to US$ 94.1 million (31 December 2013: US$ nil), as well as the retained profit for the period of US$ 33.1 million (H1 2013: US$ 32.1 million). These increases in equity were partially offset by the group restructuring reserve of US$ 49.4 million, created in the period as outlined in note 2.

Adjusting Items

The Group presents adjusted results, in addition to the statutory results, as the Directors consider that they provide a useful indication of performance.  The pre-tax item that is excluded from the adjusted results in H1 2014 is IPO costs of US$ 5.0 million (H1 2013: US$ 0.5 million).  A reconciliation between the adjusted and statutory results is given in note 4. 

Risks and uncertainties

The Group's operations expose it to a variety of risks and uncertainties. The Directors consider the risks and uncertainties that could have a material effect on the Group's performance are unchanged from those identified in the Prospectus published on 14 March 2014 for the Company's IPO.  No additional significant risks have been identified since that date.   

The principal risks relate to the ability to win new contracts and maintain existing contracts, day rates and utilisation; the delivery of our new build programme as scheduled and the successful operation of existing and new vessels with minimum technical downtime.

Effective management of these risks is essential to the delivery of the Group's business plans and strategic objectives.  The Group has a robust cash generating business and a strong track record of more than 35 years of successful operations.  The focus is on early identification of key risks, mitigation or removal of those risks and a fast and effective response should any risks crystallise.  The Board has overall responsibility for the management of risk across the Group and is supported by the Audit and Risk Committee and senior management within the organisation.

Independent review report TO GULF MARINE SERVICES PLC

We have been engaged by Gulf Marine Services PLC (the "Company") to review the condensed set of consolidated financial statements of the Company and its subsidiaries (the "Group") in the half-yearly financial report for the six months ended 30 June 2014 which comprises the condensed consolidated statement of comprehensive income, the condensed consolidated balance sheet, the condensed consolidated statement of changes in equity, the condensed consolidated statement of cash flows and related notes 1 to 19.  We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of consolidated financial statements.

This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board.  Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review report and for no other purpose.  To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 2, the annual consolidated financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of consolidated financial statements included in the half-yearly financial report has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting", as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of consolidated financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with the International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit.  Accordingly, we do not express an audit opinion.

Independent review report TO GULF MARINE SERVICES PLC (Continued)

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of consolidated financial statements in the half-yearly financial report for the six months ended 30 June 2014 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

This report does not cover, and we express no conclusion on, the financial information for the six month period ended 30 June 2013.

Deloitte LLP

Chartered Accountants and Statutory Auditor

27 August 2014

London, United Kingdom

Responsibility Statement

Financial information for the period ended 30 June 2014

We confirm that to the best of our knowledge:

(a) the condensed set of consolidated financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting;

(b) the interim management report includes a fair view of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

(c) the interim management report includes a fair view of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).

By order of the Board

Duncan Anderson		John Brown
Chief Executive Officer		Chief Financial Officer
27 August 2014		27 August 2014

Condensed consolidated statement of comprehensive income

for the period ended 30 June 2014

		Six months ended 30 June		Year ended   31 December
		2014	2013	2013
	Notes	US$'000	US$'000	US$'000
Revenue	3	90,650	86,565	184,264
Cost of sales		(31,957)	(30,979)	(65,506)
		_________	__________	___________
Gross profit		58,693	55,586	118,758
General and administrative expenses	5	(13,467)	(6,979)	(14,778)
		_________	__________	___________
Operating profit		45,226	48,607	103,980
Finance income		413	144	693
Finance expense		(11,381)	(15,115)	(29,495)
Other income/(loss)		115	32	(1,247)
Foreign exchange loss, net		(48)	(2)	(637)
		___________	__________	___________
Profit for the period before taxation		34,325	33,666	73,294
Taxation charge for the period	6	(1,238)	(1,537)	(3,861)
		___________	__________	____________
Profit for the period		33,087	32,129	69,433
Other comprehensive income
Exchange differences on translating foreign operations*		155	100	568
		___________	__________	___________
Total comprehensive income for the period		33,242	32,229	70,001
Profit attributable to:
Owners of the Company		32,722	31,548	68,201
Non-controlling interests		365	581	1,232
		__________	__________	___________
		33,087	32,129	69,433
Total comprehensive income attributable to:
Owners of the company		32,877	31,648	68,769
Non-controlling interest		365	581	1,232
		___________	__________	____________
		33,242	32,229	70,001
Earnings per share
Basic and diluted (cents per share)	7	9.93	10.52	22.73
Adjusted basic and diluted (cents per share)	7	11.45	10.69	23.45

 *May be reclassified subsequently to profit or loss.

 Results in each period are derived from continuing operations.

Condensed consolidated balance sheet  

as at 30 June 2014

		30 June	31 December
		2014	2013
	Notes	US$'000	US$'000
ASSETS
Non-current assets
Property, plant and equipment	8	542,279	490,354
Intangibles		2,133	1,125
Dry docking expenditure		892	778
Fixed assets prepayments		1,843	2,827
Total non-current assets		547,147	495,084
Current assets
Loans to related parties		-	445
Derivative financial instrument		-	541
Trade and other receivables	10	50,185	43,249
Cash and bank balances	9	91,571	46,897
Total current assets		141,756	91,132
Total assets		688,903	586,216
EQUITY AND LIABILITIES
Capital and reserves
Share capital	11	57,929	273
Share premium	11	94,092	-
Group restructuring reserve	12	(49,437)	-
Statutory reserve		-	136
Restricted reserve		272	136
Capital contribution	13	9,177	78,527
Share option reserve	14	97	-
Translation reserve		765	610
Retained earnings		206,700	103,228
Equity attributable to the owners of the company		319,595	182,910
Non-controlling interest		1,693	1,328
Total equity		321,288	184,238

Condensed consolidated balance sheet

as at 30 June 2014 (continued)

		30 June	31 December
		2014	2013
	Notes	US$'000	US$'000
Non-current liabilities
Bank borrowings	15	243,952	254,269
Obligations under finance leases		43,806	83,086
Loans from related parties	16	-	19,504
Provision for employees' end of service benefits		2,233	1,910
Total non-current liabilities		289,991	358,769
Current liabilities
Trade and other payables		24,534	25,720
Bank borrowings	15	10,437	11,010
Obligations under finance leases		42,653	5,697
Due to related parties		-	782
Total current liabilities		77,624	43,209
Total liabilities		367,615	401,978
Total equity and liabilities		688,903	586,216

The accompanying notes form an integral part of these condensed consolidated financial statements.

Condensed consolidated statement of changes in equity

For the period ended 30 June 2014

	Share capital	Share premium	Statutory reserve	Restricted reserve	Group restructuring reserve	Share option reserve	Capital contribution	Foreign currency translation reserve	Retained earnings	Attributable to the Owners of the Company	Non-controlling interests	Total equity
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
At 1 January 2013	273	-	136	136	-	-	70,750	42	115,027	186,364	598	186,962
Total comprehensive income for the period	-	-	-	-	-	-	-	100	31,548	31,648	581	32,229
Transfer of share appreciation rights payable	-	-	-	-	-	-	7,777	-	-	7,777	-	7,777
Dividends paid during the period	-	-	-	-	-	-	-	-	(80,000)	(80,000)	(502)	(80,502)
At 30 June 2013	273	-	136	136	-	-	78,527	142	66,575	145,789	677	146,466
At 1 January 2014	273	-	136	136	-	-	78,527	610	103,228	182,910	1,328	184,238
Total comprehensive income for the period	-	-	-	-	-	-	-	155	32,722	32,877	365	33,242
Share appreciation rights charge	-	-	-	-	-	-	1,400	-	-	1,400	-	1,400
Group restructuring (note 12)	49,437	-	-	-	(49,437)	-	-	-	-	-	-	-
Transfer of capital contribution (note 13)	-	-	-	-	-	-	(70,750)	-	70,750	-	-	-
Transfer to restricted reserve	-	-	(136)	136	-	-	-	-	-	-	-	-
Issue of share capital - IPO (note 11)	8,219	102,702	-	-	-	-	-	-	-	110,921	-	110,921
Share issue costs (note 5)	-	(8,610)	-	-	-	-	-	-	-	(8,610)	-	(8,610)
Share options granted	-	-	-	-	-	97	-	-	-	97	-	97
At 30 June 2014	57,929	94,092	-	272	(49,437)	97	9,177	765	206,700	319,595	1,693	321,288

The accompanying notes form an integral part of these condensed consolidated financial statements.

Condensed consolidated statement of cash flows

for the period ended 30 June 2014

	Six months ended 30 June		Year ended 31 December
	2014	2013	2013
	US$'000	US$'000	US$'000
Net cash from operating activities (note 17)	41,223	47,869	113,343
Investing activities
Payments for property, plant and equipment	(50,102)	(16,793)	(48,502)
Proceeds from disposal of property, plant and equipment	25	23	847
Fixed asset prepayments	(1,843)	-	(2,827)
Dry docking expenditure incurred	(390)	(855)	(855)
Investment in short term deposits exceeding three months	(43,400)	-	-
Movement in pledged deposits	-	(5,096)	(1,602)
Movement in guarantee deposits	(164)	848	309
Interest received	308	135	135
Net cash used in investing activities	(95,566)	(21,738)	(52,495)
Financing activities
Bank borrowings received	-	280,000	280,000
Proceeds from share issue	110,921	-	-
Share issue costs paid	(8,610)	-	-
Repayment of bank borrowings	(6,500)	(157,667)	(164,844)
Repayment of loans from related parties	(19,504)	-	(10,410)
Interest paid	(13,188)	(12,476)	(26,552)
Payment on obligations under finance lease	(2,324)	(2,127)	(4,352)
Dividends paid	-	(80,502)	(80,502)
Decrease in loans to related parties	445	99	133
Payment of issue costs on borrowings	(5,623)	(9,391)	(9,391)
Net cash generated from/(used in) financing activities	55,617	17,936	(15,918)
Net increase in cash and cash equivalents	1,274	44,067	44,930
Cash and cash equivalents at the beginning of the  period	46,897	1,967	1,967
Cash and cash equivalents at the end of the period (note 9)	48,171	46,034	46,897
Non-cash transaction
Transfer of share appreciation rights obligation to capital contribution	-	7,777	7,777

The accompanying notes form an integral part of these condensed consolidated financial statements.

Notes to the condensed consolidated financial statements

for the period ended 30 June 2014

Corporate information

Gulf Marine Services PLC (the "Company") is a Company which was registered in England and Wales on 24 January 2014. The Company is a public limited liability company with operations mainly in the Middle East and North Africa, and Europe. The address of the registered office of the Company is 1st Floor, 40 Dukes Place, London EC3A 7NH. The registered number of the Company is 08860816.

The Company completed its Premium Listing on the London Stock Exchange on 19 March 2014. The Company and its subsidiaries (collectively the "Group") are engaged in providing self-propelled, self-elevating accommodation jackup vessels which provide the stable platform for delivery of a wide range of services throughout the total lifecycle of offshore oil, gas and renewable energy activities and are capable of operations in the Middle East, South East Asia, West Africa and Europe.

The interim condensed consolidated financial statements of the Group for the six months ended 30 June 2014 were authorised for issue on 28 August 2014.  The interim condensed consolidated financial statements do not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. The condensed consolidated interim financial statements have been reviewed, not audited.

GMS Global Commercial Investments LLC (the previous parent company of the Group), a company incorporated in the United Arab Emirates, issued statutory financial statements for the year ended 31 December 2013 which were prepared in accordance with International Financial Reporting Standards (IFRS). Those financial statements were approved by the Board of Directors on 16 February 2014. The report of the auditor on those accounts was unqualified and did not contain an emphasis of matter paragraph. The relevant financial information was included within the initial public offering (IPO) prospectus released in March 2014 which is a publicly available document.

Basis of preparation

The annual consolidated financial statements of the Group are prepared in accordance with IFRS as adopted by the European Union.  The interim set of condensed consolidated financial statements included in this half-yearly financial report has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with International Accounting Standard (IAS) no. 34 Interim Financial Reporting as adopted by the European Union.

The condensed consolidated financial information does not include all the information required for full annual consolidated financial statements and should be read in conjunction with the Group's audited consolidated financial statements for the year ended 31 December 2013 as disclosed in the IPO prospectus. In addition, results for the six-month period ended 30 June 2014 are not necessarily indicative of the results that may be expected for the financial year ending 31 December 2014. The condensed consolidated statement of comprehensive income for the six month period ended 30 June 2014 is not affected significantly by seasonality of results.

Notes to the condensed consolidated financial statements

for the period ended 30 June 2014 (continued)

2          Basis of preparation (continued)

Group restructuring

On 24 January 2014, the Company was incorporated as the new holding company for the Group. On 5 February 2014, the Company legally acquired GMS Global Commercial Investments LLC, including the underlying subsidiaries. The transaction was affected by way of issuing shares in the Company to the existing shareholders of GMS Global Commercial Investments in exchange for their shares already held in GMS Global Commercial Investments LLC.  This transaction falls outside the scope of IFRS 3 Business Combinations, therefore the pooling of interests (merger accounting) method was applied and the condensed consolidated financial information of the Group is presented as a continuation of the existing group.  The following accounting treatment was applied:

·     the consolidated assets and liabilities of the previous parent, GMS Global Commercial Investments LLC, were recognised and measured at the pre-restructuring carrying amounts, without restatement to fair value;

·     the results for the year ended 31 December 2013 and the period from 1 January 2014 to the date of restructuring are those of GMS Global Commercial Investments LLC;

·     comparative numbers presented in the interim condensed consolidated financial statements are those of GMS Global Commercial Investments LLC for the six months ended 30 June 2013 and as at 31 December 2013; and

·     the difference between historical carrying amounts of net assets transferred and consideration paid has been recognised as a group restructuring reserve (note 12).

Going concern

The Group is expected to continue to generate positive operating cash flows on its own account for the foreseeable future and has in place a committed term loan facility of US$ 110 million, currently undrawn, to help fund its capital expenditure programme, and a committed working capital facility of US$ 40 million, of which only US$ 20 million has been drawn (see note 15).

On the basis of their assessment of the Group's financial position, the Group's Directors have a reasonable expectation that the Group will be able to continue in operational existence for the foreseeable future. Thus they have adopted the going concern basis of accounting in preparing the condensed consolidated financial statements.

Basis of consolidation

The condensed consolidated financial statements incorporates the financial statements of the Company and entities controlled by the Company (its subsidiaries). Management have assessed the control which the Company has over its subsidiaries in accordance with IFRS 10 Consolidated Financial Statements which provides that an investor controls an investee when the investor is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

Notes to the condensed consolidated financial statements

for the period ended 30 June 2014 (continued)

2          Basis of preparation (continued)

Significant accounting policies

The accounting policies and methods of computation adopted in the preparation of these condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2013 as disclosed in the IPO prospectus, except for the adoption of new standards and interpretations effective as of 1 January 2014 none of which had a material impact on the results or financial position of the Group. In addition the principles of merger accounting including the pooling of interests method for business combinations under common control have been used in accounting for the Group restructuring as referred to above.

The following new and revised IFRSs have been adopted in these condensed consolidated financial statements. The application of these new and revised IFRSs has not had any material impact on the amounts reported for the current and prior years but may affect the accounting for future transactions or arrangements.

·     IFRIC 21 Levies

·     Amendments to IAS 32 Financial Instruments: Presentation

·     Amendments to IAS 36 Impairment of Assets relating to recoverable amount disclosures for non-financial assets

·     Amendments to IAS 39 Financial Instruments: Recognition and Measurement, Novation of Derivatives and Continuation of Hedge Accounting

·     Amendments to IFRS 10 Consolidated Financial Statements, IFRS 12 Disclosure of Interests in Other Entities and IAS 27 Separate Financial Statements - Guidance on Investment Entities

Notes to the condensed consolidated financial statements

for the period ended 30 June 2014 (continued)

1          Segment reporting

The segment information provided to the Chief Operating Decision Makers for the operating and reportable segments for the period include the following:

	Revenue			Segment Profit
	6 months ended 30 June		31 December	6 months ended 30 June		31 December
	2014	2013	2013	2014	2013	2013
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Small Class vessels	51,519	46,213	94,448	37,410	31,835	65,533
Large Class vessels	32,481	34,304	77,701	24,766	27,964	63,548
Others	6,650	6,048	12,115	4,495	3,544	7,033
	_______	_______	_______	_______	_______	_________
Total	90,650	86,565	184,264	66,671	63,343	136,114
	_______	_______	_______	_______	_______	________
Less:
Loss on scrapping of property, plant and equipment				-	-	(1,507)
Depreciation charged to     cost of sales				(7,702)	(7,343)	(15,085)
Amortisation charged to cost of sales				(276)	(414)	(764)
				_______	_______	_________
Gross profit				58,693	55,586	118,758
General and administrative expenses				(13,467)	(6,979)	(14,778)
Finance income				413	144	693
Finance expense				(11,381)	(15,115)	(29,495)
Other income				153	53	31
Loss on sale of asset				(38)	(21)	(1,278)
Loss on exchange				(48)	(2)	(637)
				_______	_______	_________
Profit before taxation				34,325	33,666	73,294

Segment revenue reported above represents revenue generated from external customers. There   were no inter-segment sales in the periods.

Notes to the condensed consolidated financial statements

for the period ended 30 June 2014 (continued)

2          Presentation of adjusted results

The following table provides a reconciliation between the Group's adjusted and statutory financial results:

	6 months ended 30 June 2014			6 months ended 30 June 2013
	Adjusted	Adjusting	Statutory	Adjusted	Adjusting	Statutory
	results	items	total	results	Items	total
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Revenue	90,650	-	90,650	86,565	-	86,565
Cost of sales
-Operating expenses	(23,979)	-	(23,979)	(23,222)	-	(23,222)
-Depreciation and amortization	(7,978)	-	(7,978)	(7,757)	-	(7,757)
Gross profit	58,693	-	58,693	55,586	-	55,586
General and administrative
-Depreciation	(393)	-	(393)	(473)	-	(473)
-IPO costs*	-	(5,020)	(5,020)	-	(524)	(524)
-Other administrative costs	(8,054)	-	(8,054)	(5,982)	-	(5,982)
Operating profit	50,246	(5,020)	45,226	49,131	(524)	48,607
Finance income	413	-	413	144	-	144
Finance expense	(11,381)	-	(11,381)	(15,115)	-	(15,115)
Other income/ (loss)	115	-	115	32	-	32
Foreign exchange gain/ loss, net	(48)	-	(48)	(2)	-	(2)
Profit before taxation	39,345	(5,020)	34,325	34,190	(524)	33,666
Tax	(1,238)	-	(1,238)	(1,537)	-	(1,537)
Net profit	38,107	(5,020)	33,087	32,653	(524)	32,129
Profit attributable to
Owners of the Company	37,741	-	32,722	32,071	-	31,548
Non-controlling interest	366	-	365	582	-	581
Earnings per share	11.45	(1.52)	9.93	10.69	(0.17)	10.52
Supplementary non-statutory information
Operating profit	50,246	(5,020)	45,226	49,131	(524)	48,607
Add: Depreciation and Amortisation charges	8,371	-	8,371	8,230	-	8,230
EBITDA	58,617	(5,020)	53,597	57,361	(524)	56,837

*IPO costs, by their nature, are not considered part of the Group's underlying business. Further details are given in note 5

Notes to the condensed consolidated financial statements

for the period ended 30 June 2014 (continued)

3          General and administrative expenses

Transaction costs incurred during the period in relation to the completion of the Company's Premium Listing on the London Stock Exchange totalled US$ 13.6 million. US$ 5.0 million has been charged to general and administrative expenses in the statement of comprehensive income, and US$ 8.6 million, attributable to the issue of new equity, has been deducted from the share premium account. The IPO costs of US$ 5.0 million includes US$ 1.4 million relating to the remaining 15% of the pre-IPO SARs scheme, further details of which are provided in note 16.

4          Taxation

Tax is charged at 3.6% for the six months ended June 2014 (30 June 2013: 4.6%) representing the best estimate of the average annual effective tax rate expected to apply for the full year, applied to the Group's pre-tax income of the six month period.

The withholding tax included in the current tax charge amounted to US$ 1.25 million (six months June 2013: US$ 0.84 million)

5          Earnings per share

	6 months ended June	6 months ended June	31 December
	2014	2013	2013
Earnings for the purpose of basic and diluted earnings per share being profit for the period attributable to owners of the parent (US$'000)	32,722	31,548	68,201
	----------	----------	----------
Earnings for the purpose of adjusted basic and diluted earnings per share (US$'000) (see note 4)	37,741	32,071	70,350
Weighted average number of shares ('000)	329,553	300,000	300,000
Basic earnings per share (cents)	9.93	10.52	22.73
Diluted earnings per share (cents)	9.93	10.52	22.73
Adjusted earnings per share (cents)	11.45	10.69	23.45
Adjusted diluted earnings per share (cents)	11.45	10.69	23.45

Notes to the condensed consolidated financial statements

for the period ended 30 June 2014 (continued)

7          Earnings per share(continued)

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company for the period (as disclosed in the income statement) by the weighted average number of ordinary shares in issue during the period.

Adjusted earnings per share is calculated on the same basis but uses the earnings for the purpose of basic earnings per share (shown above) adjusted by adding back IPO Costs which have been charged to the income statement in the period (US$ 5.0 million). The adjusted earnings per share is presented as the Directors consider it provides an additional indication of the underlying performance of the Group.

Diluted earnings per share is calculated by dividing the profit attributable to equity holders of the Company for the period by the weighted average number of ordinary shares in issue during the period, adjusted for the weighted average effect of shares options outstanding during the period.

The impact of the share appreciation rights, disclosed in note 16, on dilutive earnings per share is not included in the calculation above as the number of shares that could be exercised is dependent on certain future events.

In accordance with the principles of merger accounting, the weighted average number of shares assumes that the 300 million shares issued as part of the group restructuring (see note 2) were in place throughout the current interim period as well as the comparative period.

Notes to the condensed consolidated financial statements

for the period ended 30 June 2014 (continued)

6          Property, plant and equipment

	Vessels	Assets under construction	Land, Building and Improvements	Vessel Spares	Others		Total
	US$'000	US$'000	US$'000	US$'000	US$'000		US$'000
Cost
Balance as at 1 January 2013	508,652	9,050	6,144	9,826	3,599		537,271
Additions	224	52,992	20	-	235		53,471
Transfers	10,603	(11,332)	197	532	-		-
Write-off of asset	(1,959)	-	-	-	-		(1,959)
Disposals	-	-	-	(2,269)	(129)		(2,398)
Balance as at 31 December 2013	517,520	50,710	6,361	8,089	3,705		586,385
Accumulated Depreciation
Balance at 1 January 2013	70,228	-	3,925	4,308	2,805		81,266
Eliminated on write-off of asset	(452)	-	-	-	-		(452)
Eliminated on disposals of assets	-	-	-	(163)	(110)		(273)
Depreciation expense	13,685	-	300	1,131	374		15,490
Balance as at 31 December 2013	83,461	-	4,225	5,276	3,069		96,031
Net Book Value as at 31 December 2013	434,059	50,710	2,136	2,813	636		490,354
	Vessels	Assets under construction	Land, Building and Improvements	Vessel Spares		Others	Total
	US$'000	US$'000	US$'000	US$'000		US$'000	US$'000
Cost
Balance as at 1 January 2014	517,520	50,710	6,361	8,089		3,705	586,385
Additions	371	58,589	-	886		48	59,894
Transfers	9,456	(10,092)	-	505		131	-
Disposals	(50)	-	-	-		(76)	(126)
Balance as at 30 June 2014	527,297	99,207	6,361	9,480		3,808	646,153
Accumulated Depreciation
Balance at 1 January 2014	83,461	-	4,225	5,276		3,069	96,031
Eliminated on write-off of asset	-	-	-	-		-	-
Eliminated on disposals of assets	(4)	-	-	-		(59)	(63)
Depreciation expense	7,210	-	81	432		183	7,906
Balance as at 30 June 2014	90,667	-	4,306	5,708		3,193	103,874
Net Book Value as at 30 June 2014	436,630	99,207	2,055	3,772		615	542,279

Notes to the condensed consolidated financial statements

for the period ended 30 June 2014 (continued)

8          Property, plant and equipment (continued)

Included within additions is US$ 1.9 million (31 December 2013: US$ 1.06 million) in respect of capitalised borrowing costs incurred on vessels under construction. The capitalisation rate used to determine this figure was 2.89% (2013: 5.96%).

7          Cash and bank balances

	30 June 2014	31 December 2013
	US$'000	US$'000
Cash at bank and in hand	48,171	46,897
Short term deposits	43,400	-
	________	________
Total cash and bank balances	91,571	46,897
Short term deposits with maturities of greater than three months	(43,400)	-
	________	________
Cash and cash equivalents	48,171	46,897

8          Trade and other receivables

	30 June	31 December
	2014	2013
	US$'000	US$'000
Trade receivables, net	37,927	22,915
Accrued income	5,950	14,465
Prepayments and deposits	4,754	5,215
Advances to suppliers	1,354	422
Other receivables	130	162
Due from related parties (note 16)	70	70
Total	50,185	43,249

Notes to the condensed consolidated financial statements

for the period ended 30 June 2014 (continued)

9          Share capital

The Company was incorporated on the 24 January 2014 with a share capital of 300,000,000 shares at a par value of £1 each. Subsequently on 5 February 2014, as part of the Group restructuring, the Company undertook a capital reduction by solvency statement, in accordance with s643 of the Companies Act 2006. The nominal value of the authorised and issued ordinary shares was reduced from £1 to 10p.

On 19 March 2014, the Company successfully completed its initial public offering (IPO) on the London Stock Exchange. A total of 49,527,804 shares with a par value of 10 pence per share were issued at a price of 135 pence (US$ 2.24) per share.

The movement in issued share capital and share premium is provided below.

The share capital of Gulf Marine Services PLC as at 30 June 2014 was as follows:

	Number of shares  (thousands)	Ordinary shares  US$'000	Total US$'000
Issued and fully paid	349,528	57,929	57,929

The share capital of GMS Global Commercial Investments LLC as at 31 December 2013 was as follows:

	Number of shares  (thousands)	Ordinary shares  US$'000	Total US$'000
Issued and fully paid	1	273	273

Issued share capital and share premium movement for the six months ended June 2014:

	Number of shares (thousands)	Ordinary shares US$'000	Share premium US$'000	Total US$'000
At 1 January 2014	1	273	-	273
Group restructuring
Restructuring	(1)	(273)	-	(273)
Issue of new    Shares	300,000	497,100	-	497,100
Capital reduction	-	(447,390)	-	(447,390)
Issue of new shares - IPO	49,528	8,219	102,702	110,921
Share issue costs (note 5)	-	-	(8,610)	(8,610)
	----------	----------	----------	----------
At 30 June 2014	349,528	57,929	94,092	152,021

Notes to the condensed consolidated financial statements

for the period ended 30 June 2014 (continued)

10        Group restructuring reserve

The group restructuring reserve arises on consolidation under the pooling of interests (merger accounting) method used for group restructuring. Under this method, the Group is treated as a continuation of GMS Global Commercial Investments LLC (the predecessor parent company) and its subsidiaries. At the date the Company became the new parent company of the Group via a share-for-share exchange, the difference between the share capital of GMS Global Commercial Investments LLC and the Company, amounting to US$ 49.44 million, was recorded in the books of Gulf Marine Services PLC as a group restructuring reserve (note 2). This reserve is non-distributable.

11        Capital contribution

As part of the Group restructuring (note 2) the pre-IPO Shareholders resolved to transfer a capital contribution balance of US$ 70.75 million to retained earnings.

12        Share option reserve

Share based expenses for the period of US$ 97 thousand (2013: US$ nil) relate to awards granted to employees under the long-term incentive plan. The charge is included in general and administrative expenses in the statement of comprehensive income.

13        Bank borrowings

In February 2014, the bank facility which was entered into in 2013 with Abu Dhabi Islamic Bank was restructured resulting in amendments to some of the key terms of the loan as follows:

·     The loan repayment period was extended by one (1) year to six (6) years;

·     The loan margin rate was reduced to 4.1% (December 2013: 5.2%) per annum plus LIBOR;

·     The term loan facility to fund capital expenditure was increased from US$ 80 million to US$ 110 million. The entire loan facility remained undrawn during the six month period and is available for draw down until June 2016; and

·     The working capital facility was increased to US$ 40 million (December 2013: US$ 20 million). During the year ended 31 December 2013 US$ 20 million was utilised with US$20 million remaining undrawn during the six month period.

The finance facility restructuring has resulted in lower finance costs incurred during the period comparable to the previous period.

Net debt during the period was as follows:

	30 June 2014	31 December 2013
	US$'000	US$'000
Bank borrowings	254,389	265,279
Obligation under finance leases	86,459	88,783
Less: Cash at Bank and in hand	(91,571)	(46,897)
	249,277	307,165

Notes to the condensed consolidated financial statements

for the period ended 30 June 2014 (continued)

14        Related parties

During the period, the Group repaid loans from shareholders and other related parties totalling US$ 19.5 million using proceeds from the IPO. These payments settled the loans payable to Green Investment Commercial Investments LLC, Al Ain Capital LLC, and Horizon Energy LLC.

During the period, as part of the IPO, the Directors of the company acquired 616,415 shares in the company at the IPO price of 135 pence (US$ 2.24) per share for a total amount of US$ 1.38 million.

Certain members of key management personnel received share awards during the period with an associated fair value of US$ 19.48 million, under the terms of the Group's share appreciation rights ("SARs") scheme set up prior to the IPO. On 1 January 2013, the obligation under the scheme, of which 85% had vested at 31 December 2013 were assumed by the pre-IPO shareholders of the Company and were settled by them during the current period as cash of US$ 9.74 million and via the award of 4,348,475 shares at the IPO strike price of 135p per share.  There is an additional 15% award which will become due at the earlier of a substantial exit of the pre-IPO shareholders and an agreed lock up period, and is dependent on achieving an expected market rate of return.

There were no other financially significant related party transactions during the six months ended 30 June 2014.

Notes to the condensed consolidated financial statements

for the period ended 30 June 2014 (continued)

15        Notes to the cash flow statement

	Six months ended 30 June		Year ended 31 December
	2014	2013	2013
	US$'000	US$'000	US$'000
Profit for the year before taxation	34,325	33,666	73,294
Adjustments for:
Depreciation of property, plant and equipment	7,906	7,567	15,490
Amortisation of intangibles	188	248	496
Amortisation of dry docking expenditure	277	414	764
End of service benefit charge	357	313	525
End of service benefits paid	(34)	(80)	(251)
Provision for doubtful debts	296	-	105
Fair value gain on derivative financial instrument	-	-	(541)
Loss on scrapping of property, plant and   equipment	-	-	1,507
Loss on disposal of property, plant and equipment	38	21	1,278
Share based payment expense	1,497	-	-
Interest income	(413)	(144)	(152)
Interest expense	10,461	12,555	26,001
Write-off of unamortised issue costs	-	2,154	2,154
Payments of share appreciation rights	-	-	(580)
Amortisation of issue costs	920	406	1,340
Cash flow from operating activities before   movement in working capital	55,818	57,120	121,430
Increase in trade and other receivables	(6,808)	(8,229)	(4,342)
(Decrease)/increase in trade and other payables	(3,035)	303	(22)
Decrease in due to related parties	(782)	-	-
Cash generated from operations	45,193	49,194	117,066
Taxation paid	(3,970)	(1,325)	(3,723)
Net cash generated from operating activities	41,223	47,869	113,343

Notes to the condensed consolidated financial statements

for the period ended 30 June 2014 (continued)

16        Commitments

Capital commitments

Capital commitments as at 30 June 2014 were US$ 59.2 million (31 December 2013: US$ 34.9 million) comprising mainly of capital expenditure which has been contractually agreed with suppliers for future periods for new build vessels or the refurbishment of existing vessels.

Lease commitment

In January 2014, a subsidiary of the Group entered into an arrangement with a third party to lease a vessel commencing in 2015 for a five (5) year term with a purchase option to acquire the vessel. The amount of the lease commitment during the term is US$ 45.2 million.

17        Events after the reporting period

After the period end, the Directors declared an interim dividend of 0.41 pence (0.69 cents) per ordinary share, which will be paid on 27 October 2014 to shareholders on the register on 26 September 2014. The interim consolidated financial statements do not reflect the interim dividend, which will be recognized in equity attributable to the owners of the parent as an appropriation of retained earnings in the financial statements for the year ending 31 December 2014. 

 

END

 

 

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