Interim Results 2020
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Global Ports Holding PLC (GPH)
Global Ports Holding Plc Interim results for the six months ended 30 June 2020 Global Ports Holding Plc ("GPH" or "Group"), the world's largest independent cruise port operator, today announces its unaudited results for the six months ended 30 June 2020.
Emre Sayin, Chief Executive Officer, said: "With the Covid-19 crisis continuing to cause unprecedented disruption to both global economies and the global travel sector, cash preservation remains the key focus of the Group. Our flexible business model and our decisive actions to reduce costs early in the crisis means that the Group is well positioned to navigate through it. While cruise volumes remain very low versus historical standards, we currently expect a steady increase in cruise ship calls and passenger volumes over the remainder of the year. And it is encouraging to note that our cruise line partners continue to report strong bookings for 2021. In the meantime, we continue to work closely with all relevant partners and health authorities on the safe return to cruising across our portfolio. When the cruise industry begins to exit this crisis in a meaningful way, we expect significant new cruise port opportunities will present themselves. As the world's largest cruise port operator, with a proven and flexible business model, an ability to bring global best practice to ports and destinations, including leading health and safety standards, as well as the ability to combine the raising of financing for new projects with a flexible approach to cruise port concession and management, Global Ports Holding remains in a strong position to play a leading role as new opportunities arise."
Overview
Covid-19 crisis management and actions As previously disclosed on the 14 April 2020 and 10 June 2020, in light of the exceptional circumstances that have engulfed the cruise industry, the board and management took several significant actions to protect the balance sheet and long term future of the business. On the 14 April 2020 the board stated that the actions taken meant that even under a severe downside scenario the Group would have sufficient cash resources to remain in operation at the end of April 2021. This severe downside scenario included a number of key assumptions, two of which were, an assumption of no cruise calls for the remainder of 2020 and extending into 2021 for certain ports, and for marble container throughput volumes to fall by 75% compared to management expectations over the period from May to September 2020. While the board and management remain focussed on controlling costs and preserving cash, it is notable that recently some of our cruise ports have started to plan for the first cruise calls following the Covid-19 related suspension of activities and that marble volumes for April to June 2020 are above those achieved in Q12020 and significantly ahead of the key assumption in the severe downside scenario. Flexible cost base GPH's cruise port business model is inherently flexible. Outsourced service providers are extensively used across our cruise ports. This means that a high percentage of costs automatically expands and contracts in line with cruise traffic. The flexibility of this model has helped protect the business and preserve cash during the Covid-19 crisis. With this evident in a Q2 EBITDA loss of just $1.8m in Cruise, despite almost zero cruise calls in the period and underlying Cruise revenue (i.e. excluding Nassau's IFRIC-12 revenue related to construction activity) of only $0.9m. In addition, trading at our commercial ports has remained positive despite the macroeconomic issues arising in context of Covid-19. Thanks to diversification of GPH's income sources a positive Adjusted EBITDA of $3.2m at the Group level in Q2 2020 was achieved. Looking ahead, when cruise calls increase and passengers begin to return to our cruise ports, the structure of our business model is such that the majority of the costs will rise or fall depending on the volume. This means that each cruise call at any of our ports should have a positive impact on EBITDA. In terms of the costs that are not directly driven by cruise calls, as cruise demand recovers, these costs will naturally return. However, we will only allow them to rise in a meaningful way when the demand has reached levels which can be considered sustainable. Investment related costs such as new port project expenses and capex, with the exception of capex in Nassau and Antigua, are expected to remain low for at least the next 12 months. New Port Capital Commitments Since the global outbreak of Covid-19 all but essential maintenance capex has been suspended across our portfolio. However, the capex at our new ports in the Caribbean has continued as planned. In Antigua, the Group has contributed all required equity at closing of the transaction in October 2019. The balance of the necessary investment, required to complete the new pier, will be fully funded through a committed bank loan from a syndicate of lenders. In Nassau, the construction phase has now begun, with an expected completion date of April 2022. The scheduled capex for the marine component of the construction has been fully financed by the recent issue of a 20-year $150m 8.0% coupon bond by Nassau Cruise Port. Further funding at Nassau Cruise Port will not be required until the second half of 2021. While new cruise port project expenses have effectively been suspended, the board believes that despite and partly due to Covid-19 there is still considerable scope for future expansion of the business over the medium to long term. While there continues to be a strong appetite to finance investment in cruise port infrastructure, as evidenced by the successful Nassau Cruise Port bond issuance, not all new port projects require up-front investment from GPH. For example, in Spain GPH recently partnered with Balearia Group in their tender submission for a 35-year concession for the port of Valencia. While the plans include an investment of $37m into the infrastructure, including a new environmentally friendly passenger terminal in the port of Valencia, GPH will not be investing in the infrastructure and will focus solely on managing the cruise port operations. The outcome of this tender is expected to be announced before the year end. While the Covid-19 crisis has clearly impacted the plans of many current cruise port owners or and local authorities, it will have also impacted the plans of would-be investors in cruise ports. With a proven ability to bring global best practice and leading health and safety protocols to ports as well as the ability to raise financing for new projects even in the most challenging of times, Global Ports Holding is well positioned to play an active role as new opportunities arise. Strategic Review and Eurobond On 11 March 2020 GPH announced that following a competitive sales process it had entered exclusive negotiations with a potential buyer of Port Akdeniz. Negotiations continue to progress positively but a final outcome on the sale process has not yet been reached. There can be no certainty as to the timing of the sale or that the terms of a sale will be agreed. A further announcement will be made when it is appropriate to do so. After this process has ended the Group will decide on the most appropriate refinancing structure for its $250m 2021 Eurobond. The Group's $250m 2021 Eurobond has a covenant of five times Gross Debt to EBITDA for the bond issuer Global Liman, a 100% subsidiary of Global Ports Holding, and its consolidated subsidiaries. As at 30 June 2020, Gross Debt to EBITDA was 6.7x. As an incurrence covenant, the impact is that incurrence of additional debt at Global Liman and its subsidiaries and dividend distributions from Global Liman are restricted until such time as the Gross Debt to EBITDA leverage falls below five times.
Cruise - Significant impact from Covid-19
Commercial - steady underlying performance continues
Outlook & current trading Looking into the remainder of 2020, the near term outlook for Cruise remains highly uncertain. A number of cruise lines have recently commenced sailings and more are planning to do so over the remainder of 2020. Understandably, there remains considerable uncertainty over these sailings. All of our ports have worked hard and continue to work hard to ensure they play their part in helping the industry set sail once again and that cruise passengers, health authorities and cruise lines are reassured by the new health and safety measures at our ports. Looking into 2021 and beyond, it is very encouraging to see strong booking trends across all regions. While on-board distancing measures will mean cruise ship occupancy levels are likely to be down in 2021, the level of continued consumer demand is encouraging. Despite these signs, no material revenue and hence no material improvement compared to Q2 2020 is expected in the Cruise segment for the remainder of the year. Our commercial ports have continued to show stable performance albeit not being fully immune against the major disruptions caused by Covid-19. Over the remainder of the year, we expect our Commercial ports to improve compared to H1 2020. Notes- For full definitions and explanations of each Alternative Performance measures in this statement please refer to Note 2f
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Group performance review With the Covid-19 outbreak leading to an effective global shutdown of leisure travel, including the suspension of cruising in the second quarter, the first half of 2020 has proven to be the most difficult period in the company's history. Group revenue was down just 0.8% (-0.3% ccy) to $54.2m, however, this figure is heavily influenced by the impact of IFRIC-12 on the Nassau Cruise Port concession. Due to the concession agreement granting the Group the right to operate Nassau Cruise Port falling within the scope of IFRIC-12 "Service Concession Arrangements", the Group recognises revenue and operating expenditure as construction takes place to improve the port infrastructure. This revenue does not represent amounts that will be paid directly to the Group by either the local port authority or the ports customers. As a result, we have also presented analysis of the Group's results excluding this revenue and the related expense. This revenue is referred to as 'IFRIC-12' throughout the performance review. Excluding this impact Group revenue fell by 41%. Adjusted EBITDA fell 61.2% (-61.1% ccy) to $13.5m (H1 2019: $34.8m) in the period. An underlying loss of $3.5m was reported for the period, compared to an underlying profit of $6.0m for the same period last year and loss after tax of $34.9m compared to a $15.8m loss after tax for the same period last year. 2020 was the year that the strategy we set at the IPO in 2017 really started to deliver operational and financial results. Our successful expansion into the Caribbean drove a step change in our Cruise operations in Q1. Unfortunately, the subsequent Covid-19 crisis had a materially negative impact on the business, delaying but not cancelling the impact of our successful expansion in the Caribbean. In the first half of the year, cruise passenger volumes fell 35.7% to 1.3m (H1 2019: 2.1m, FY 2019: 5.3m). This is in sharp contrast to the reported growth in cruise passenger volumes in Q1 of 146% yoy, which was driven by the first time contribution from the new Caribbean cruise ports in The Bahamas and Antigua. At all ports, including equity accounted associate ports La Goulette, Lisbon, Singapore and Venice, we welcomed 1.6m passengers (H1 2019: 3.3m, FY 2019: 9.3m). Cruise Revenue in the first half increased by 41.9% to $33.9m (H1 2019: $23.9m, FY 2019: $63.0m), while Cruise EBITDA fell by 76.9% to $3.9m. However, these figures, particularly revenue, are heavily influenced by the application of accounting standard IFRIC 12 on Nassau Cruise Port concession. This increased revenue at Nassau Cruise Port by $22.0m in the period and EBITDA by $0.4m. With the global shutdown of the cruise industry in Q2, the vast majority of Cruise activity took place in Q1. Excluding IFRIC-12, H2 Cruise revenue and EBITDA was $11.9m and $3.5m respectively, reflecting the global cruise industry shutdown, Q2 Cruise revenue and EBITDA was $0.9m and $-2.2m. Most of the revenue generated in Q2 2020 was Ancillary Revenue such as rental income from retail facilities. On a constant currency basis, first half cruise revenue was $34.0m and Cruise EBITDA was $3.0m. In the context of a global crisis the underlying performance of our Commercial Port operations was positive in the period. While Commercial revenues fell by 33.6% to $20.3m in the period (H1 2019: $30.8m, FY 2019: $54.8m), excluding the impact of the oil services contract at Port Akdeniz in H1 2019, Commercial revenue fell 19.1%. While Commercial Revenue was stable in Q2, falling by just 4.6%, a strong performance in light of the prevailing crisis. Revenues from Port Akdeniz fell by 36.5% in H1 2020, while Port Adria's revenue fell by 18.7%. Port Akdeniz's revenue decline reflects the impact of the 2019 Oil services contract, excluding this impact, Port Akdeniz revenue fell 19.3%. Commercial EBITDA fell by 41.9% to $12.9m, with both ports reporting a decline. Port Akdeniz delivered a decline in EBITDA of 42.6% to $11.9m, however excluding the impact of the 2019 Oil services contract, EBITDA declined 25.9%. This better underlying performance at Port Akdeniz is reflected in the cargo volumes. In H1 2020, General & Bulk cargo volumes rose 65.7% (Q1 2020: 86.0%), while Container volumes fell -20.7% (Q1 2020: -20.3%). Port of Adria reported an EBITDA decline of 30.4% to $1.1m. General & Bulk cargo volumes fell 77.5% (Q1 2020: Central costs were reduced by 22.1% in the period, reflecting the prompt action taken in Q2 to control costs and conserve cash as the Covid-19 crisis started to have a significant impact on the global cruise industry. The cost reduction program has reduced costs by about two thirds compared to Q1 2020, the full impact of which will be visible during H2 2020. Loss after tax for the period of $34.9 million (H1 2019: $15.8m) results primarily from the $21.3m fall in Adjusted EBITDA, the net finance costs increase to $23.0m (H1 2019: $18.4m) and decrease in income from equity accounted associates to $0.7m (H1 2019: $3.3m), largely offset by a tax credit of $7.1m, which compares to a tax expense of $1.9m in H1 2019. The increased net finance costs are due to non-cash loss when revaluing the Eurobond debt, along with non-cash revaluation losses on Turkish entities foreign currency dominated liabilities and the increase in net interest expenses increased to $13.9m (H1 2019: $14.3m). The tax credit reflects the impact of the loss before tax in the period.
Cruise Ports Business Review As stated above, 2020 was the year that the strategy we set at the IPO was expected to start to really deliver operational and financial results. By the end of Q1, this expectation was becoming reality, with cruise passenger volumes up 146% yoy and Cruise EBITDA up 61% at the end of March 2020. Unfortunately, the global outbreak of Covid-19 and the subsequent unprecedented disruption to both global economies and the global travel sector put the cruise sector into hibernation. As of today, there have been only a few signs of cruising returning to our porst, with a small number of cruise ships now sailing very restricted itineraries. However, while there are plans for further ships to set sail over the remainder of 2020, the short term outlook remains uncertain. However, looking into 2021 and beyond, it is very encouraging to see such strong booking trends across the cruise industry and across all regions. The major cruise lines have stated that booking trends for 2021 are strong and while the industry has seen some early retirement of older ships and small delays to new ship orders, the long term outlook for the cruise ship fleet remains positive. It should come as no surprise to see our Cruise port operations so badly affected by the global shutdown in 2020. However, it is testament to our business model and our speed of response to the crisis that at the EBITDA level of our Cruise port business lost only $1.8m in Q2 2020, generating a H1 2020 EBITDA of $3.9m.
Overall in H1 2020 we welcomed 1.3m Cruise passengers, a 36% decline compared to the same period last year. With the strong first time contribution from our new ports in the Caribbean in Q1 2020 helping to offset the impact of the shutdown of the cruise industry in Q2 2020. At all ports including equity accounted associate ports La Goulette, Lisbon, Singapore and Venice we welcomed 1.6m passengers (H1 2019: 3.3m, FY 2019: 9.3m). In the first half Cruise Revenue increased 41.9% to $33.9m vs H1 2019 $23.9m and Cruise Segmental EBITDA fell 76.9% to $3.9m (H1 2019: $16.8m). However, Cruise revenue was inflated by the accounting standard IFRIC-12, which resulted in $22.0m of capital expenditure at Nassau Cruise Port in Q2 having to be recognised as revenue. Excluding this impact Cruise Revenue in H1 2020 was $11.9m and Cruise Segmental EBITDA was $3.5m. The most significant contributor to Cruise Segmental EBITDA was the first time underlying contribution of Nassau, which reported EBITDA of $2.8m in H1 2020. Elsewhere, with almost no passenger volumes in Q2 2020, Valletta and Ege performed better than most other ports in the period as a result of their non-passenger related retail revenue such as waterfront restaurants. Overall the pro-rata net income contribution from our equity accounted associate ports to Other Cruise EBITDA was $0.7m (H1 2019: $3.3m) during the period.
With the onset of the Covid-19 outbreak, the focus of our cruise operations quickly became cost cutting and cash preservation. GPH's business model is inherently flexible in its Cruise ports. The extensive use of outsourced serviced providers means that a high percentage of costs automatically expand and contract in line with cruise traffic. Fixed costs were reduced through a range of measures including a significant reduction in employee costs through a reduced working week, salary deferrals, and suspension of board members' salaries and fees until 2021. Marketing costs, new port project costs and consultancy fees were significantly reduced. In addition, at a number of ports minimum concession fees have either been discounted or deferred. With the exception of the ports in Nassau and Antigua, all but essential maintenance capital expenditure has been suspended, yielding a significant saving. The flexibility of this model has helped protect the business and preserve cash during the Covid-19 crisis and the reporting of $3.9m of Cruise Segmental EBITDA in H1 2020 and an EBITDA loss of just $1.8m in Q2 2020 is testament to the flexibility and strength of the business model in the face of a never seen before crisis.
While most of our cruise ports have been very quiet in Q2 2020, in the Caribbean, work has continued in transforming Nassau Cruise Port and Antigua Cruise Port. So far in 2020, $28.9m has been invested into Nassau Cruise Port and $9.1m has been invested into Antigua Cruise Port. Phase two of the Nassau Cruise Port project is now underway, this phase will involve completing the marine works, which includes material purchases, an expansion of the berthing capacity of the port, and upgrades to existing infrastructure. In 2021, phase three will see the completion of the landside works, including the new arrivals terminal and plaza, Junkanoo Museum, retail Market Place, amphitheatre, and other food and beverage and entertainment spaces. The project will also see the port integrated into Bay Street with the expectation that it will serve as a catalyst for the wider development of downtown Nassau. Transforming not just Nassau Cruise Port into one of the iconic cruise destinations in the world but also transforming the experience for cruise passengers, locals and the cruise lines, while generating local jobs and driving economic growth. In May 2020, Nassau Cruise Port successfully issued a 8.0% coupon $150m 2040 bond through a private offering. The success of this issue, underpins the strength and attractions not only of this project but of the continued long term attractions of the global cruise industry. In Antigua, significant progress has been made in the period on the work to complete the new pier. Once complete the pier will be capable of berthing the largest cruise ships in the world, acting as a key enabler of passenger volume growth over the medium term. Completion of the new pier is targeted for Q42020. In addition to the continued investment in the Caribbean in H1 2020, the footprint of GPH's cruise port portfolio increased when its joint venture with MSC Cruises S.A., announced it had completed the acquisition of Goulette Shipping Cruise, the company that operates the cruise terminal in La Goulette, Tunisia. The concession to operate the cruise port was awarded to Goulette Shipping Cruise in 2006 on a 30-year basis, with a right to extend the term for an additional 20 years. In addition, GPH increased its effective ownership of Malaga Cruise Port to 62% from 49.6%, when Creuers Del Port de Barcelona SA ("Creuers") completed the purchase of Autoridad Portuaria de Malagas's (Malaga Port Authority) 20.0% holding in the Malaga cruise port concession for €1.5m. This transaction is in line with GPH's strategy to buy out, at fair value, minority shareholdings where possible and appropriate to do so. Commercial Ports Business Review Our Commercial ports business has proven to be resilient in the first half of 2020, despite the turmoil caused to the global economy from the Covid-19 crisis. While our commercial ports are never immune to macro-economic factors, the performance has nevertheless been pleasing given the prevalent conditions. The performance from Port Akdeniz has been far stronger than the severe downside scenario outlined at the time of the full year results on the 14 April 2020. A key element of this scenario was marble volumes at Port Akdeniz falling by 75% between May to September 2020 when compared to management expectations. In Q2 2020 Container Throughput volumes actually rose 1.5% QoQ, while marble volumes were up QoQ, performing significantly better than the severe downside assumption, albeit below our original expectations at the beginning of the year.
Our Commercial port operations delivered a decline in revenue of 33.9% to $20.3m (H1 2019: $30.8m). While Commercial EBITDA fell by 41.9% to $12.9m (H1 2019: $22.3m). Excluding the impact of the oil services contract in 2019, Commercial revenue and EBITDA fell 19.1% and 25.9% respectively. Overall Container Throughout volumes declined by 13.8% in H1 2020, with Q2 volumes actually delivering growth of 10.6% QoQ, despite the onset of the Covid-19 crisis. While General & Bulk Cargo volumes were strong, rising by 27.3% in the period. This growth was driven by the continued impact of a new volume focussed pricing structure at Port Akdeniz. In terms of yields, total throughput container yields were down 3.0%, while cargo yields were down 27.8%. With this drop in cargo yields primarily the result of the volume related pricing initiative at Port Akdeniz in the period.
Port Akdeniz, our largest commercial port, reported a revenue decline of 36.5% to $16.7m (H1 2019: $26.3m), with EBITDA declining 42.6% to $11.9m (H1 2019: $20.7m), with the EBITDA margin falling to 71.1%. Excluding the impact of the oil services contract in 2019, Port Akdeniz Revenue fell 19.3% and EBITDA fell 25.3%. The success of the new pricing strategy led to General & Bulk Cargo volumes rising strongly, increasing by 65.7%, with the increase in Q2 moderating from the 86.0% increase in Q1. Throughput container volumes fell by 20.7% in H1 2020, with Q2 volumes following a similar trend to Q1. Container Throughout yields were broadly unchanged, while General & Bulk cargo yields reduced as part of our volume based pricing strategy. Looking into H2 2020, despite the Covid-19 crisis, we expect our Commercial ports to improve compared to H1 2020. On 11 March 2020 GPH announced that following a competitive sales process it had entered exclusive negotiations with a potential buyer of Port Akdeniz. Negotiations continue to progress positively but a final outcome on the sale process has not yet been achieved. There can be no certainty as to the timing or that the terms of a sale will be agreed. A further announcement will be made when it is appropriate to do so.
At Port of Adria, Revenue fell 18.7% to $3.6m (H1 2019: $4.5m), while EBITDA fell $0.5m or 32.0% to $1.1m (H1 2019: $1.6m). General & Bulk Cargo volumes fell 77.5% in the period, driven primarily by a sharp drop in steel coils volumes. While Throughput container volumes rose 7.2%. We continue to work on growing the volumes at this port and remain in talks with a number of parties, both importers and exporters about introducing new cargos at the port. Financial Overview Loss after tax for the period of $34.9 million (H1 2019: $15.8m) is driven by an increase in net finance costs to $23.0m (H1 2019: $18.4m), lower contribution from equity accounted associates of $0.7m (H1 2019: $3.3m), while there was a tax credit of $7.1m compared to a tax expense of $1.9m in H1 2019. The increased net finance costs are primarily due to non-cash loss when revaluing the Eurobond debt, along with non-cash revaluation losses on Turkish entities foreign currency dominated liabilities. Net interest expenses increased to $15.5m (H1 2019: $12.7m). The tax credit reflects reflect the impact of the loss before tax in the period. The tax credit reflects the impact of reporting an operating loss, driven by the significantly lower taxable profit contribution from cruise operations and lower taxable profits from commercial ports. Specific Adjusting Items in Operating Profit As of 30 June 2020, specific adjusting items totalled $5.4m (H1 2019: $6.5m), comprising project expenses amounting to $4.5m (H1 2019: $4.7m) which were mostly incurred in the first four months of the year, provisions $0.1m (H1 2019: $1.2m) and other specific adjustment items $0.8m (H1 2019: $0.6m) Please see note 2 (f) in the interim condensed consolidated financial statements for more details. Finance Costs The Group's net finance charge in the period was $23.9m, an increase on the $18.4m charge in H1 2019. This increase was due to the Turkish Lira depreciation against $ in the year, which creates a foreign exchange charge and gain on liabilities and assets respectively. This occurs for two reasons. Firstly, the group's Eurobond is issued by Global Liman, a 100% owned entity within the group with a functional currency of Turkish Lira. When the Turkish Lira depreciates against the $ a non-cash foreign exchange loss occurs when revaluing the Eurobond debt, while a non-cash foreign exchange gain should occur if the Turkish Lira appreciates against the $. Secondly, although all our Turkish ports charge in $, they must legally keep the accounting books in Turkish Lira, so when the Turkish Lira depreciates against the $ this results in non-cash foreign exchange losses on revaluing the Turkish entities' foreign currency denominated liabilities and non-cash foreign exchange gains on revaluing the Turkish entities foreign currency assets. During the period net finance expenses increased to $34.9m (H1 2019: $28.9m), primarily due to non-cash foreign exchange loss of $17.2m (H1 2019: $13.1m), interest expenses on loans and borrowings increased slightly to $13.4m (H1 2019: $12.7m) and interest expenses on lease obligations increased to $2.2m (H1 2019: $1.7m). Finance income increased to $11.0m (H1 2019: $10.5m), primarily as a result in an increase in in the non-cash foreign exchange gains on Turkish entities' Turkish Lira costs base to $16.2m (H1 2019: $16.2m). Taxation Global Ports Holding is a multinational group and as such is liable for taxation in multiple jurisdictions around the world. The Group's incurred a tax credit for the period of $7.1m, compared to a tax expense of $1.9m in H1 2019. The tax credit compared with prior years is primarily the result of reporting an operating loss in the period, driven by the significantly lower taxable profit contribution from cruise operations and lower taxable profits from commercial ports. Earnings Per Share The Group's basic earnings per share was -46.2.5c (H1 2019: -26.0c), this decrease is in line with the decline in profit for the year attributable to owners of the company -$29.1m (H1 2019: -$16.3m). Adjusted earnings per share of -5.6c (H1 2019: 9.5c), reflects the decline in the underlying profit measure, which is calculated as (loss)/profit for the period after removing the impact of the amortisation of port operating rights and depreciation of right of use assets, non-cash provisional income and expenses, non-cash foreign exchange transactions and specific non-recurring expenses and income. Cash Flow and Investment Operating cash flow was $16.6m (H1 2019: -$1.3m). The improvement in operating cash flow was driven by a working capital movement that resulted in a positive cash flow of $8.8m in the period, primarily as a result of the unwind in trade and other receivables in the absence of cruise calls in Q2 2020 and following the peak cruise season in the Caribbean. Capital expenditure during the period was $43.9m, a significant increase on the $5.7m incurred in H1 2019. $38.0m was spent on the Caribbean ports in Antigua and Nassau. $3.4m was spent across the rest of the cruise portfolio, with $1.9m spent in Barcelona on terminal improvements and $1.4m in Valletta on investment into the waterfront infrastructure. While $2.5m was spent on the Commercial ports, with the vast majority spent at Port Akdeniz. Balance Sheet Gross debt at period end was $559.2m (31st December 2019: $410.0m), with this increase driven largely by the issuing of the $150m Nassau Cruise Port bond in the period. At 30th June 2019 net debt was $436.9m (31st December 2019: $389.2m). The Group's Net Debt/Adjusted EBITDA ratio was 7.8x times as at 30th June 2020 (31st December 2019: 4.3x). Excluding IFRS 16 impact net debt was $372.6m (31st December 2019: $324.3m) and the Net Debt/Adjusted EBITDA ratio was 6.7x. The Leverage Ratio as per GPH's Eurobond was 6.7x at 30th June 2020 (31st December 2019: 4.2x), vs an incurrence covenant of 5.0x, the leverage ratio excludes the IFRS 16 impact, in line with the bond terms. Impact of Foreign Currency Movements All of GPH's European and Adriatic cruise ports operate in Euros, with the majority of costs being in Euros at our non-Turkish cruise ports. Our Commercial port, Port of Adria receives revenues in Euros and the majority of its costs are incurred in Euros. The translation of profits from these port operating entities are not hedged and as a result, the movement of the US dollar and Euro exchange rates directly affects the Group's reported results. The vast majority of our revenues at our Turkish cruise ports are in US Dollars, while the majority of costs are in Turkish Lira. Our Commercial port, Port of Antalya, receives revenues in US Dollars and c70% of its costs are incurred in Turkish Lira. The group does not hedge this exposure as a result, the movement of the US dollar exchange rates to the Turkish Lira directly affects the Group's reported results. In the first half of 2019, the group was impacted by unfavourable movements against the prior year in respect of the US Dollar against Euro and a favourable movement in respect of the US Dollar against the Turkish Lira. The details of the foreign exchange rates used in the period can be found in Note 2 e) of the consolidated financial statements. Dividend On the 14 April the board announced that in light of the unprecedented level of disruption to global trade and the cruise industry and the associated uncertainty, the Board of GPH decided that it was prudent and in the best interests of all stakeholders to temporarily suspend the dividend for full year 2019, until the situation becomes clearer. Clearly significant uncertainty remains and the group has experienced a significant drop in trading since the onset of the Covid-19 crisis. It is therefore in the best interests of all stakeholders that the dividend remains suspended for at least financial year 2020.
Global Ports Holding PLC
Interim condensed consolidated financial statements
For the six months ended 30 June 2020
Contents
Responsibility Statement
We confirm that to the best of our knowledge:
By order of the Board,
Mehmet KUTMAN Chairman 19 August 2020
The notes on pages 23 to 46 are an integral part of these condensed consolidated interim financial statements
The notes on pages 23 to 46 are an integral part of these condensed consolidated interim financial statements
The notes on pages 23 to 46 are an integral part of these condensed consolidated interim financial statements
The notes on pages 23 to 46 are an integral part of these condensed consolidated interim financial statements
(*) The Group has initially applied IFRS 16 at 1 January 2019, using the modified retrospective approach. Under this approach, comparative information is not restated and the cumulative effect of initially applying IFRS 16 (if any) is recognized in retained earnings at the date of initial application.
The notes on pages 23 to 46 are an integral part of these condensed consolidated interim financial statements
The notes on pages 23 to 46 are an integral part of these condensed consolidated interim financial statements
Global Ports Holding PLC is a public limited company listed on the London Stock Exchange, and incorporated in the United Kingdom and registered in England and Wales under the Companies Act 2006. The address of the registered office is 34 Brook Street 3rd Floor, London, England, W1K 5DN, United Kingdom. Global Ports Holding PLC is the ultimate holding company of Global Liman Isletmeleri A.S. and its subsidiaries (the "Group").
These unaudited condensed interim consolidated financial statements of Global Ports Holding PLC (the "Company", and together with its subsidiaries, the "Group") for the six months ended 30 June 2020 were authorised for issue in accordance with a resolution of the directors on 19 August 2019.
This condensed set of consolidated financial statements included in this half-yearly financial report has been prepared in accordance with the International Accounting Standard 34 'Interim Financial Reporting', as adopted by the European Union and the requirements of the Disclosure and Transparency Rules ("DTR") of the FCA in the United Kingdom as applicable to interim financial reporting.
The interim condensed financial statements represent a 'condensed set of financial statements' as referred to in the DTR issued by the FCA. The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the consolidated financial statements as at and for the year ended 31 December 2019 available on the Company website. Also, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance since the last annual financial statements.
The financial information contained in this report for the six months ended 30 June 2019 and 30 June 2020 is unaudited. These interim financial statements were authorised for issue by the Company's board of directors on 19 August 2020.
The comparative figures for the financial year ended 31 December 2019 are not the company's statutory accounts for that financial year. Those accounts have been reported on by the company's auditor and delivered to the registrar of companies. The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
The Group operates 14 ports in 8 different countries and is focusing on increasing its number of Ports in different geographical locations to support its operations and diversify economic and political risks. As a consequence, the directors believe that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook.
Management has produced forecasts that have stress tested to reflect plausible but, highly unlikely, severe downside scenario as a result of the COVID-19 pandemic and its impact on the global economy, which have been reviewed by the directors at the beginning of the financial year. The management analysis, inclusive of the downside scenario, reflects that the Group has adequate resources to continue to operate for the foreseeable future. The details of downside scenario was provided at the last annual consolidated financial statements as at and for the year ended 31 December 2019. The Group's performance for the first half of the year showed the Group is performing better than the downside scenario produced at the year end.
The directors believe that the Group is well placed to manage its financing and other business risks satisfactorily, and have a reasonable expectation that the Group will have adequate resources to continue in operation for at least 12 months from the signing date of these consolidated financial statements. They therefore consider it appropriate to adopt the going concern basis of accounting in preparing the financial statements.
The adoption of IFRS 16 does not impact the ability of the Group to comply with its Gross debt to EBITDA covenant.
2 Accounting Policies (continued)
In the application of the Group's accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
In preparing these condensed consolidated interim financial information, the significant judgments made by management in applying the Group's accounting policies and the key sources of estimation uncertainty, except as described below, were the same as those that applied to the consolidated financial statements as at and for the year ended 31 December 2019.
Impairment review of cash generating units (CGUs)
IFRS requires management to perform impairment tests annually for goodwill and, for finite lived assets, if events or changes in circumstances indicate that their carrying amounts may not be recoverable.
Impairment testing requires management to judge whether the carrying value of Assets and the associated goodwill of CGU can be supported by the net present value of future cash flows it generates. Calculating the net present value of the future cash flows requires estimates to be made in respect of highly uncertain matters including management's expectations of:
- Operational growth expectations including the forecast number of calls, passengers and container volumes, - appropriate discount rates to reflect the risks involved
Management prepares formal forecast for Ege Liman, Bodrum Liman, Creuers, Malaga Port, VCP, Port of Adria and Ortadoğu Liman operations for the remaining concession period, which are used to estimate their value in use. VIU calculations requires subjective judgements based on a wide range of variables at a point in time including future passenger numbers or commercial volumes. Any significant decrease in variables used for value in use calculation is assessed as an impairment indicator. If the recoverable amount of an investment is estimated to be less than its carrying amount, the carrying amount of the investment is reduced to its recoverable amount and an impairment loss is recognised in the income statement.
Management forecasted a recovery in following two years for number of passengers, and the cash flows for following seven years with the remaining concession term having minimal estimated growth or industry growth. The key assumptions used in the estimation of the recoverable amount are set out below.
The resulting ViU of each CGU gives a recoverable amount higher than the carrying value of Asset and associated goodwill of CGU.
Changing the assumptions selected by management, in particular the discount rate and growth rate assumptions used in the cash flow projections, could significantly affect the Group's impairment evaluation and hence reported assets and profits or losses.
The accounting policies applied in these interim financial statements are the same as those applied in the Group's consolidated financial statements as at and for the year ended 31 December 2019. The changes in accounting policies are also expected to be reflected in the Group's consolidated financial statements as at and for the year ending 31 December 2020.
2 Accounting Policies (continued)
Transactions in foreign currencies are translated into the respective functional currencies of the Group entities by using the exchange rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at the reporting date. Non-monetary assets and liabilities denominated in foreign currencies carried at historical cost should be retranslated using the exchange rate at the date of the transaction. Foreign currency differences arising on retranslation are recognised in profit or loss.
The Group entities use United Stated Dollars ("USD"), Euro or Turkish Lira ("TL") as their functional currencies since these currencies represent the primary economic environment in which they operate. These currencies are used to a significant extent in, or have a significant impact on, the operations of the related Group entities and reflect the economic substance of the underlying events and circumstances relevant to these entities. Transactions and balances not already measured in the functional currency have been re-measured to the related functional currencies in accordance with the relevant provisions of IAS 21 The Effect of Changes in Foreign Exchange Rates.
For the purpose of the interim condensed consolidated financial statements, US Dollars has been chosen as the presentation currency by management to facilitate the investors' ability to evaluate the Group's performance and financial position in relation to similar companies domiciled in different jurisdictions, and to eliminate the depreciating effect of TL against hard currencies, considering all subsidiaries of the Company are earning revenues in hard currencies.
Assets and liabilities of those Group entities with a different functional currency than the presentation currency of the Group are translated into the presentation currency of the Group at the rate of exchange ruling at the reporting date. The income and expenses of the Group entities are translated into the presentation currency at the average exchange rates for the period. Equity items, except for net income, are translated using their historical costs. These foreign currency differences are recognised in "other comprehensive income" ("OCI"), within equity under "translation reserves".
Below are the foreign exchange rates used by the Group for the periods shown.
As at 30 June 2020, 31 December 2019 and 30 June 2019, foreign currency exchange rates of the Central Bank of the Turkish Republic were as follows:
For the six months ended 30 June 2020, 30 June 2019 and for the year ended 31 December 2019, average foreign currency exchange rates of the Central Bank of the Turkish Republic were as follows:
2 Accounting Policies (continued)
This interim condensed set of financial statements includes certain measures to assess the financial performance of the Group's business that are termed "non-IFRS measures" because they exclude amounts that are included in, or include amounts that are excluded from, the most directly comparable measure calculated and presented in accordance with IFRS, or are calculated using financial measures that are not calculated in accordance with IFRS. In order to account for the impact of IFRS 16, which is applied in the Group financials using the modified retrospective approach, comparative information is not restated, and the impact has been presented as a separate reconciling item on computations. These non-GAAP measures comprise the following.
Segmental EBITDA
Segmental EBITDA calculated as income/(loss) before tax after adding back: interest; depreciation; amortisation; unallocated expenses; and specific adjusting items.
Management evaluates segmental performance based on Segmental EBITDA. This is done to reflect the fact that there is a variety of financing structures in place both at a port and Group-level, and the nature of the port operating right intangible assets vary by port depending on which concessions were acquired versus awarded, and which fall to be treated under IFRIC 12. As such, management considers monitoring performance in this way, using Segmental EBITDA, gives a more comparable basis for profitability between the portfolio of ports and a metric closer to net cash generation. Excluding project costs for acquisitions and one-off transactions such as unallocated expenses, gives a more comparable year-on-year measure of port-level trading performance.
Management uses Segmental EBITDA to evaluate each port and group-level performances on operational level.
Specific adjusting items
The Group presents specific adjusting items separately. For proper evaluation of individual ports financial performance and consolidated financial statements, Management considers disclosing specific adjusting items separately because of their size and nature. These expenses and income include project expenses; being the costs of specific M&A activities and the costs associated with appraising and securing new and potential future port agreements which should not be considered when assessing the underlying trading performance, the replacement provisions, being provision created for replacement of fixed assets which does not include regular maintenance, employee termination expenses, income from insurance repayments, income from scrap sales, gain/loss on sale of securities, other provision expenses, redundancy expenses and donations and grants.
Specific adjusting items comprised as following,
2 Accounting Policies (continued)
f) Alternative performance measures (continued)
Adjusted EBITDA
Adjusted EBITDA calculated as Segmental EBITDA less unallocated (holding company) expenses.
Management uses an Adjusted EBITDA measure to evaluate Group's consolidated performance on an "as-is" basis with respect to the existing portfolio of ports. Notably excluded from Adjusted EBITDA, the costs of specific M&A activities and the costs associated with appraising and securing new and potential future port agreements. M&A and project development are key elements of the Group's strategy in the Cruise segment. Project lead times and upfront expenses for projects can be significant, however these expenses (as well as expenses related to raising financing such as acquisition financing) do not relate to the current portfolio of ports but to future EBITDA potential. Accordingly, these expenses would distort Adjusted EBITDA which management is using to monitor the existing portfolio's performance.
A full reconciliation for Segmental EBITDA and Adjusted EBITDA to profit before tax is provided in the Segment Reporting Note 3 to these financial statements.
Underlying Profit
Management uses this measure to evaluate the profitability of the Group normalised to exclude the specific non-recurring expenses and income, and adjusted for the non-cash port intangibles amortisation charge, giving a measure closer to actual net cash generation, which the directors' consider a key benchmark in making the dividend decision. Underlying Profit is also consistent with Consolidated Net Income (CNI), as defined in the Group's 2021 Eurobond, which is monitored to ensure covenant compliance.
Underlying Profit is calculated as profit/(loss) for the year after adding back: amortization expense in relation to Port Operation Rights, depreciation expense in relation to Right-of-use assets and specific non-recurring expenses and income.
Adjusted earnings per share Adjusted earnings per share is calculated as underlying profit divided by weighted average per share.
Management uses these measures to evaluate the profitability of the Group normalised to exclude the specific non-recurring expenses and income and adjusted for the non-cash port intangibles amortisation charge, giving a measure closer to actual net cash generation, which the directors' consider a key benchmark in making the dividend decision.
Underlying profit and adjusted earnings per share computed as following;
2 Accounting Policies (continued)
f) Alternative performance measures (continued)
Net debt Net debt comprises total borrowings (bank loans, Eurobond and finance leases net of accrued tax) less cash, cash equivalents and short-term investments. Management includes short term investments into the definition of Net Debt, because these short-term investments are comprised of marketable securities which can be quickly converted into cash. Net debt comprised as following;
Leverage ratio Leverage ratio is used by management to monitor available credit capacity of the Group. Leverage ratio is computed by dividing gross debt to Adjusted EBITDA. Leverage ratio computation is made as follows;
CAPEX CAPEX represents the recurring level of capital expenditure required by the Group excluding M&A related capital expenditure. CAPEX computed as 'Acquisition of property and equipment' and 'Acquisition of intangible assets' per the cash flow statement.
2 Accounting Policies (continued)
f) Alternative performance measures (continued) Cash conversion ratio Cash conversion ratio represents a measure of cash generation after taking account of on-going capital expenditure required to maintain the existing portfolio of ports. It is computed as Adjusted EBITDA less CAPEX divided by Adjusted EBITDA.
Hard currency Management uses the term hard currency to refer to those currencies that historically have been less susceptible to exchange rate volatility. For the period ended 30 June 2020 and 2019, and for the year ended 31 December 2019, the relevant hard currencies for the Group are US Dollar, Euro and Singaporean Dollar.
The Group operates various cruise and commercial ports and all revenue is generated from external customers such as cruise liners, ferries, yachts, individual passengers, container ships and bulk and general cargo ships.
Operating segments are defined as components of an enterprise for which discrete financial information is available, that is evaluated regularly by the chief operating decision-maker, in deciding how to allocate resources and assessing performance.
The Group has identified ports in each country with same operations as an operating segment, separately, as each country represents a set of activities which generates revenue and the financial information of ports are reviewed by the Group's chief operating decision-maker in deciding how to allocate resources and assess performance. The Group's chief operating decision-maker is the Chief Executive Officer ("CEO"), who reviews the management reports of each port at least on a monthly basis.
The CEO evaluates segmental performance on the basis of earnings before interest, tax, depreciation and amortisation ("EBITDA") excluding the effects of specific adjusting income and expenses comprising project expenses, bargain purchase gains and reserves, board member leaving fees, employee termination payments, unallocated expenses, finance income, finance costs, and including the share of equity-accounted investees which is fully integrated into the GPH cruise port network ("Adjusted EBITDA" or "Segmental EBITDA"). Adjusted EBITDA is considered by Group management to be the most appropriate profit measure for the review of the segment operations because it excludes items which the Company does not consider to represent the operating cash flows generated by underlying business performance. The share of equity-accounted investees has been included as it is considered to represent operating cash flows generated by the Group's operations that are structured in this manner.
3 Segment reporting (continued)
b) Reportable segments (continued)
The Group has the following operating segments under IFRS 8:
The Group's reportable segments under IFRS 8 are BPI, VCP, Ege Liman, Nassau Cruise Port, Ortadoğu Liman (Commercial port operations) and Port of Adria (Commercial port operations).
Bodrum Cruise Port, Italian Ports, Ortadoğu Liman (Cruise operations), Port of Adria (Cruise Operations), and GPH Antigua, [that just started its operations at the end of 2019] are not exceeding the quantitative threshold, have been included in Other Cruise Ports.
Global Depolama does not generate any revenues and therefore is presented as unallocated to reconcile to the consolidated financial statements results.
Assets, revenue and expenses directly attributable to segments are reported under each reportable segment.
Any items which are not attributable to segments have been disclosed as unallocated. 3 Segment reporting (continued)
The following is an analysis of the Group's revenue, results and reconciliation to profit before tax by reportable segment:
* Please refer to Note 2 (f) for alternative performance measures (APM) on pages 16 to 19.
3 Segment reporting (continued)
The Group did not have inter-segment revenues in any of the periods shown above.
The following is an analysis of the Group's assets and liabilities by reportable segment:
3 Segment reporting (continued)
The following table details other segment information:
3 Segment reporting (continued) b) Reportable segments (continued)
Non-current assets relating to deferred tax assets and financial instruments (including equity-accounted investees) are presented as unallocated.
The Group has acquired minority shares of Cruceros Malaga at 23 January 2020. 20% of total shares of Cruceros Malaga owned by Malaga Port Authority acquired by Creuers del Port de Barcelona. Total consideration paid for 20% shares amounted to Eur 1,540 thousand (USD 1,707 thousand). Minority provided for 20% shares of the Port as of 31 December 2019 was 1,853 thousand, which was reversed for finalization of acquisition accounting.
The Group's subsidiary, Bodrum Cruise Port directors, decided to increase paid in capital of the Company by TRY 4,984 thousand (USD 814 thousand) from TRY 18,000 thousand (USD 12,726 thousand) to TRY 22,984 thousand (USD 13,540 thousand).
Sales from the Cruise business are more heavily weighted towards the second half of the calendar year with, on average, approximately 58% of annual sales arising during the July to December period for the last three years. In 2019, 38% of the Group's full year revenue fell in the first six months, 45% in 2018 and 43% in 2017.
The Group's operations and main revenue streams are those described in the last annual financial statements. The Group's revenue is derived mainly from cruise and commercial operations.
6 Revenue (continued) For the six month period 30 June, revenue comprised the following:
The following table provides information about receivables, contract assets and contract liabilities from contracts with customers;
The contract assets primarily relate to the Group's rights to consideration for work completed but not billed at the reporting date on Commercial services provided to vessels and rental agreements. The contract assets are transferred to receivables when the rights become unconditional. This occurs when the Group issues an invoice to the customer.
The contract liabilities primarily relate to the advance consideration received from customers for providing services, for which revenue is recognised over time. These amounts will be recognised as revenue when the services has provided to customers and billed, which was based on the nature of the business less than one week period.
The amount of $967 thousand recognised in contract liabilities at the beginning of the period has been recognised as revenue for the period ended 30 June 2020.
The amount of revenue recognised in the period ended 30 June 2020 from performance obligations satisfied (or partially satisfied) in previous periods is $1,765 thousand. This is mainly due to the nature of operations.
No information is provided about remaining performance obligations at 30 June 2020 that have an original expected duration of one year or less, as allowed by IFRS 15.
Finance income comprised the following:
(*) The Group's foreign exchange gains arise mainly through its operations in Turkey, depreciation of TL against the functional currencies of these entities results in a benefit as the cost base is significantly more weighted to TL than the revenues.
The income from financial instruments within the category financial assets at amortized costs is USD 82 thousand (30 June 2019: USD 873 thousand, 31 December 2019: USD 251 thousand).
Finance costs comprised the following:
(*) The Group's foreign exchange losses arise mainly through its USD denominated borrowings held in a Turkish Lira functional currency entity. The interest expense for financial liabilities not classified as fair value through profit or loss is USD 15,610 thousand (30 June 2019: USD 14,334 thousand, 31 December 2019: USD 28,355 thousand).
Venetto Sviluppo, the 51% shareholder of APVS, which in turn owns a 53% stake in Venezia Terminal Passegeri S.p.A (VTP), has a put option to sell its shares in APVS partially or completely (up to 51%) to Venezia Investimenti (VI). This option originally can be exercised between 15th May 2017 and 15th November 2018, extended until the end of November 2021. If VS exercises the put option completely, VI will own 99% of APVS and accordingly 71.51% of VTP. The Group has given a guarantee letter for its portion of 25% in VI, which in turn has given the full amount of call option as guarantee letter to VS.
Dividends
Dividend distribution declarations are made by the Company in GBP and paid in USD in accordance with its articles of association, after deducting taxes and setting aside the legal reserves as discussed above.
The Board of the Company has decided to temporarily suspend the dividend for full year 2019, until the situation related to spread of Covid-19 ("coronavirus") becomes clearer.
GPH PLC proposed and paid a 2019 interim dividend of GBP 0.155 per share to its shareholders, giving a distribution of GBP 9,738 thousand (USD 12,580 thousand).
GPH PLC declared 2018 final dividend of GBP 0.212 per share to its shareholders on 24 May 2019 and paid on 5 July 2019, giving a distribution of GBP 13,319 thousand (USD 16,645 thousand).
The total dividends in respect of the year ended 31 December 2019 were USD 29,225 thousand.
Dividends to non-controlling interests totaled USD 237 in 2020 (2019: USD 6,366 thousand) and comprised a distribution of USD 213 thousand (2019: USD 3,751, fully paid in cash) made to other shareholders by Barcelona Port Investments no cash settlement, a distribution of USD 25 thousand (2019: USD 2,550 thousand, USD 1,264 paid in cash) made to other shareholders by Valletta Cruise Port (2019: a distribution of USD 65 thousand made to other shareholders by Cagliari Cruise Port no cash settlement).
Loans and borrowings comprised the following:
(i) The sales process of the Eurobond issuances amounting to USD 250 million with 7 years of maturity, and a 8.125% coupon rate based on 8.250% reoffer yield was completed on 14 November 2014. Coupon repayment are made semi-annually. The bonds are quoted on the Irish Stock Exchange.
Eurobonds contain the following key financial covenants:
If a concession termination event occurs at any time, Global Liman (the "Issuer") must offer to repurchase all of the notes pursuant to the terms set forth in the indenture (a "Concession Termination Event Offer"). In the Concession Termination Event Offer, the Issuer will offer a "Concession Termination Event Payment" in cash equal to 100% of the aggregate principal amount of notes repurchased, in addition to accrued and unpaid interest and additional amounts, if any, on the notes repurchased, to the date of purchase (the "Concession Termination Event Payment Date"), subject to the rights of holders of notes on the relevant record date to receive interest due on the relevant interest payment date.
According to the Eurobond issued by Global Liman, the consolidated leverage ratio may not exceed 5.0 to 1 (incurrence covenant). The consolidated leverage ratio as defined in the Eurobond includes Global Liman as the issuer and all of its consolidated subsidiaries excluding Nassau Cruise Port and Antigua Cruise Port (both being Unrestricted Subsidiaries as defined in the Eurobond). Irrespective of the consolidated leverage ratio, the issuer will be entitled to incur any or all of the following indebtedness:
10 Loans and borrowings (continued)
Group debt covenants are calculated based on applicable IFRSs as of the time the lease obligations were initially recognised. Therefore, the group debt covenants as at period end have not been affected from the transition to IFRS 16. Management will assess in the future for any new transactions that will be entered into, depending on the nature of them, whether debt covenants' calculations are affected.
(ii) Nassau Cruise Port has issued an unsecured bond with a total nominal volume of USD 150 million pursuant to the Bond Subscription Agreement dated 29 June 2020. The unsecured bonds have been sold to institutional investors at par across two tranches in local currency Bahamian Dollar and US-Dollar, which are pari-passu to each other, and with a fixed coupon of 8.0% across both tranches payable semi-annually starting 30 June 2021. Final maturity of the bond is 30 June 2040, principal repayment will occur in ten equal, annual installments, beginning in June 2031 and each year afterwards until final maturity. Bonds with a nominal value of USD 25 million will be issued later in H2-2020 based on firm and binding subscriptions from certain investors (delay draw).
The bonds are general obligation of Nassau Cruise Port and not secured by any specific collateral or guarantee. No other entity of the Group has provided any security or guarantee with respect to the Nassau Cruise Port bond. The bond contains a covenant that Nassau Cruise Port must maintain a minimum debt service coverage ratio of 1.30x prior to the distribution of any dividends to shareholders.
For the period ended 30 June, the movements of the provisions as below:
(*) As part of the concession agreement between Creuers and the Barcelona and Malaga Port Authorities entered in 2013, the Company has an obligation to maintain the port equipment in good operating condition throughout its operating period, and in addition return the port equipment to the Port Authorities in a specific condition at the end of the agreement.
(**) As part of agreement between NCP and Government of Bahamas entered in 2019 (see note 30(c)), ancillary contributions will be made to local community to increase the wealth of people of Bahamas. These payments will be made as grant and partly as interest free loan. Therefore, a provision is provided for ancillary contributions based on Management's best estimate of these payments.
11 Provisions (continued)
(***) On 16 December 2009, Ravenna Port Authority and Ravenna Passenger Terminal S.r.l. ("RTP") entered into an agreement regarding the operating concession for the Ravenna Passenger Terminal which terminates on 27 December 2019. RTP had an obligation to pay a concession fee to the Port Authority of Euro 86,375 per year until end of concession. The expense relating to this concession agreement is recognized on a straight-line basis over the concession period, giving rise to an accrual in the earlier years.
On 13 June 2011, Catania Port Authority and Catania Cruise Terminal S.r.l. ("CCT") entered into an agreement regarding the operating concession for the Catania Passenger Terminal which terminates on 12 June 2026. CCT had an obligation to pay a concession fee to the Catania Port Authority of Euro 135,000 per year until end of concession. The expense relating to this concession agreement is recognized on a straight-line basis over the concession period, giving rise to an accrual in the earlier years.
The Group presents basic earnings per share ("basic EPS") data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period, less own shares acquired.
During the year, the Group introduced share-based payments as part of its long-term incentive plan to directors and senior management. The shares to be granted to the participants of the scheme are only considered as potential shares when the market vesting conditions are satisfied at the reporting date. None of the market conditions are satisfied at the reporting date and therefore there is no dilution of the earnings per share or adjusted earnings per share (Note 2f). There are no other transactions that can result in dilution of the earnings per share or adjusted earnings per share (Note 2f).
Earnings per share is calculated by dividing the profit attributable to ordinary shareholders, by the weighted average number of shares outstanding.
Legal proceedings in relation to Ortadoğu Antalya, Ege Liman and Bodrum Liman's applications for extension of their concession rights
On 6 June 2013, the Turkish Constitutional Court partially annulled a law that prevented operators of privatised facilities from applying to extend their operating term. The respective Group companies then applied to extend the concession terms of Port Akdeniz-Antalya, Ege Port-Kuşadası and Bodrum Cruise Port to give each concession a total term of 49 years from original grant date. After these applications were rejected, the respective Group companies filed lawsuits with administrative courts challenging the decisions.
After going through legal proceedings, Bodrum Cruise Port's application for the extension of concession term is accepted by the relevant administrative authority. The extension agreement is executed on December 2018 which has extended the remaining concession period to 49 years. The original concession agreement was due to expire in December 2019 and following this new agreement the concession will now expire in December 2067.
13 Commitment and contingencies (continued)
Port Akdeniz-Antalya filed lawsuits against Privatization Administration and the General Directorate of Turkey Maritime Organization requesting cancellation with respect to rejection of the extension applications. The Court dismissed the case and the Group lawyers appealed the Court decision to the Council of State. The Counsel of State rejected the appeal of Port Akdeniz-Antalya and approved the decision of the Court. The Group lawyers have applied to the Council of State for reversal of this judgement and the case is still pending.
Ege Port-Kuşadası filed lawsuits against Privatization Administration and General Directorate of Turkey Maritime Organization requesting cancellation with respect to rejection of the extension applications. The Court dismissed the case and the Group lawyers appealed the Court decision to the Council of State. The Counsel of State accepted the appeal and reversed the Court's judgement in favor of Ege Port-Kuşadası. The Privatization Administration applied to the Council of State for reversal of this judgement and this time, the Council of State has changed its standpoint and approved the Court's decision against Ege Port-Kuşadası. In this regard, Ege Port-Kuşadası has submitted an individual application to the Constitutional Court. Constitutional Court has rendered its decision against Ege Port-Kuşadası and the judicial process for the extension of the concession period has been concluded against Ege Port-Kuşadası. Accordingly, upon expiration of the concession period in 2033, Ege Port-Kuşadası will need to participate in the tender for new concession term.
Competition Authority Investigation
On 29 April 2019, the Competition Authority notified Port Akdeniz, that it has commenced an investigation into Port Akdeniz due to an alleged breach of Article 6 of the Law on the Protection of Competition, Law No. 4054 due to excessive pricing concerns on certain services. Port Akdeniz has engaged legal representation and submitted a full defence against all allegations on 28 May 2019. Subsequently, the investigation report issued by the Competition Authority is notified to Port Akdeniz on 15 April 2020. Whole process before the Competition Authority may take up to an additional 6 to 12 months (excluding the possibility to file an administrative lawsuit against a negative decision of the Competition Authority).
Other legal proceedings
The Port of Adria-Bar (Montenegro) is a party to the disputes arising from the collective labour agreement executed with the union by Luka Bar AD (former employer/company), which was applicable to Luka Bar AD employees transferred to Port of Adria-Bar. The collective labour agreement has expired in 2010, before the Port was acquired by the Group under the name of Port of Adria-Bar. However, a number of lawsuits have been brought in connection to this collective labour agreement seeking (i) unpaid wages for periods before the handover of the Port to the Group, and (ii) alleged underpaid wages as of the start of 2014. On March 2017, the Supreme Court of Montenegro adopted a Standpoint in which it is ruled that collective labour agreement cannot be applied on rights, duties and responsibilities for employees of Port of Adria-Bar after September 30th, 2010. Although the Standpoint has established a precedent that has applied to the claims for the period after September 30th, 2010; there are various cases pending for claims related to the period of October 1st, 2009 - September 30th, 2010. In respect of the foregoing period of one year, the Port of Adria-Bar has applied to the Constitutional Court to question the alignment of the collective labour agreement with the Constitution, Labor Law and general collective agreement. The Port of Adria-Bar is notified that the application for initiating the procedure for reviewing the legality of the Collective Agreement has been rejected due to a procedural reason, without evaluating the arguments submitted. In evaluation of the pending cases, the local courts have given decisions contradicting with the previous decisions which have enabled Port of Adria to appeal to higher court and request re-examination of the applicability of the disputed clauses of collective labour agreement. The decision of the higher court is pending.
13 Commitment and contingencies (continued)
Global Liman İletmeleri AŞ, as the majority shareholder of one of its subsidiaries, has paid a share purchase amount of 1,500,000 USD to the shareholder of the relevant subsidiary, and the shareholder has not transferred its shares in the subsidiary to Global Liman. Global Liman has initiated an action of debt against the shareholder. It is expected that the case would resolve for the return of the share purchase amount or the completion of the share transfer.
One of Port Akdeniz' clients in the cement business has initiated a lawsuit against Port Akdeniz in relation to a commercial dispute on the fees payable by that client for its import and export transactions in 2018. Furthermore, a counter-claim has been initiated by Port Akdeniz for an amount due from this client in relation to loading services provided and extra fees incurred due to delays. During the initial court proceedings, Port Akdeniz and the client have executed a settlement agreement and withdrawn their respective claims at the competent court. The settlement agreement incorporates commercial terms in favour of both parties ensuring the continuity of the trade between the parties.
There are no changes in the related parties of these interim financial statements compared to those used in the Group's consolidated financial statements as at and for the year ended 31 December 2019.
All related party transactions between the Company and its subsidiaries have been eliminated on consolidation and are therefore not disclosed in this note.
Due from related parties Current and non-current receivables from related parties comprised the following:
(*) These amounts are payments in advance for contracted work. These have an interest rate changed of 9.75% p.a. as at 30 June 2020 (31 December 2019: 11.75%, 30 June 2019: 9.75%). (**) Company is financing its Joint venture for the payment of La Goultte Shipping Company acquisition price with a maturity of 5 years. Yearly interest of 4.5% is charged.
14 Related parties (continued)
Due to related parties
Current payables to related parties comprised the following:
(*) These amounts are related to professional services provided. These have an interest rate of 12.50% p.a. as at 30 June 2020 (31 December 2019: 12.50%, 30 June 2019: 19.50%).
Transactions with related parties
Transactions with other related parties comprised the following for the following periods:
Fair value measurements
The information set out below provides information about how the Group determines fair values of various financial assets and liabilities.
Determination of the fair value of a financial instrument is based on market values when there are two counterparties willing to sell or buy, except under the conditions of events of default forced liquidation. The Group determines the fair values based on appropriate methods and market information and uses the following assumptions: the fair values of cash and cash equivalents, other monetary assets, which are short term, trade receivables and payables and long term foreign currency loans and borrowings with variable interest rates and negligible credit risk change due to borrowings close to year end are expected to approximate to the carrying amounts.
15 Financial Instruments' fair value disclosures (continued)
Fair value measurements (continued)
The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable and consists of the following three levels:
Except as detailed in the following table, the directors consider the carrying amounts of the Group's financial assets and financial liabilities were approximate to their fair values.
The Group's lease obligations fair value has been obtained using the discounted cash flow model. All loans have been included in Level 2 of the fair value hierarchy as they have been valued using quotes available for similar liabilities in the active market. The valuation technique and inputs used to determine the fair value of the loans and borrowings is based on discounted future cash flows and discount rates. The groups Eurobond liability has been included in level 1 of the fair value hierarchy as it has been valued using quotes available on its quoted market. The fair value of loans and borrowings has been determined in accordance with the most significant inputs being discounted cash flow analysis and discount rates. Financial instruments at fair value The table below analyses the valuation method of the financial instruments carried at fair value. The different levels have been defined as follows:
(USD '000)
The valuation technique and inputs used to determine the fair value of the interest rate swap is based on future cash flows estimated based on forward interest rates (from observable yield curves at the end of the reporting period) and contract interest rates, discounted at a rate that reflects the credit risk of various counterparties.
None.
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| ISIN: | GB00BD2ZT390 |
| Category Code: | IR |
| TIDM: | GPH |
| Sequence No.: | 82475 |
| EQS News ID: | 1120929 |
| End of Announcement | EQS News Service |
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