SEA TRUCKS GROUP LIMITED. Consolidated financial statements. For the year ended 31 December 2011

Transcription

1 ` SEA TRUCKS GROUP LIMITED Consolidated financial statements

2 27 th April 2012 Sea Trucks Group Limited 2011 audited financial statements Sea Trucks Group ( STG ), one of the largest and fastest growing oil and gas marine contractors in West Africa, publishes its 2011 audited financial statements. Full-year revenues of US$435.1m with an EBITDA margin of 31% (US$135.8m). Full-year profit after tax (PAT) of US$24.9m. Backlog as at 31 st December 2011 of US$269m, slightly down on 30 th September 2011 (US$293m). Cash and cash equivalents of US$65.8m at 31 st December 2011 (31 st December 2010 US$ 22.1m) significantly above prior-year and covenant requirement (US$ 10m). Since the publication of the unaudited preliminary 2011 financial results on 13 February 2012 the external audit has been completed by PwC. As a result of the audit three adjustments have been made to the unaudited preliminary 2011 financial results. These have resulted in a reduction in PAT of US$9.5m from the preliminary US$34.4m to the audited US$24.9m. One adjustment affected EBITDA which was only reduced by US$2.4m from US$138.2m to US$135.8m. The three adjustments were: A provision for a write-down of the Walvis 8 asset (US$4.3m reduction in PAT, no EBITDA effect). A provision for potential payroll-related taxation liabilities (US$2.4m reduction in PAT and EBITDA). Changes to accounting for convertible bond in compliance with latest IFRS (US$2.8m reduction in PAT, no EBITDA effect). STG will be releasing Q results on Friday 11 May 2012 and will host a conference call for bondholders on Tuesday 15 May In addition to the Q results this call will provide more detail on the three adjustments above. Enquiries: Sea Trucks Group Sean Downey +971 (0) Corrie van Kessel +31 (0) (0) College Hill Nick Elwes +44 (0) Catherine Maitland 1

3 Statement of senior management s responsibilities Senior management comprises: Jacques Roomans Fraser Moore Steve Assiter Senior management are responsible for preparing the financial statements in accordance with applicable law and regulations. In preparing these financial statements, the senior management have to: selected suitable accounting policies and then apply them consistently; make judgements and accounting estimates that are reasonable and prudent; state whether applicable IFRSs have been followed, subject to any material departures disclosed and explained in the financial statements; and prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business. The senior management are responsible for keeping adequate accounting records that are sufficient to show and explain the company s transactions and disclose with reasonable accuracy at any time the financial position of the group and enable them to ensure that the financial statements comply with the applicable company law. Senior management has accepted responsibility for safeguarding the assets of the company and the group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities Senior management s statement Each member of senior management confirms that, to the best of each person s knowledge and belief: the financial statements, prepared in accordance with IFRSs, give a true and fair view of the assets, liabilities, financial position and profit of the group. Statement on disclosure of information to the auditors Senior management in place at the date of approval of these financial statements confirm that: (a) So far as senior management are aware, there is no relevant audit information of which the company s auditors are unaware. Relevant information is defined as information needed by the company s auditors in connection with preparing their report (b) Senior management have taken all steps that they ought to have taken in their duty to shareholders in order to make themselves aware of any relevant information and to establish that the auditors are aware of that information. Senior Management 23 April

4 Independent auditors' report to the member of Sea Trucks Group Limited We have audited the financial statements of Sea Trucks Group Limited for the year ended 31 December 2011 which comprise the Consolidated Statements of Financial Position as at 31 December 2011, the Consolidated Statements of Income, Consolidated Statements of Comprehensive Income, Consolidated Statements of Changes in Equity and Consolidated Statements of Cash Flows for the year 2011, and a summary of significant accounting policies and other explanatory notes. The financial reporting framework that has been applied in the preparation of these financial statements is International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board (IASB). Respective responsibilities of the directors and auditors Senior management is responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the UK Auditing Practices Board s Ethical Standards for Auditors. This report, including the opinion, has been prepared for and only for management purposes in accordance with our engagement letter dated 23 rd July 2011 and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come including without limitation under any contractual obligations of the company, save where expressly agreed by our prior consent in writing. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the company s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by senior management; and the overall presentation of the financial statements. Opinion on financial statements In our opinion the financial statements: give a true and fair view of the state of the company s affairs as at 31 December 2011 and of its profit and cash flows for the year then ended; and have been properly prepared in accordance with IFRSs as issued by the IASB. PricewaterhouseCoopers LLP Chartered Accountants Aberdeen 25 April

5 Consolidated Statements of Income (Expressed in US $ 000) Note Revenues 435, ,104 Expenses Staff costs (115,676) (128,684) Depreciation 4 (61,442) (44,866) Equipment hire and subcontractor costs (37,597) (109,468) Repair and maintenance expense (39,940) (46,636) Other operating expense (106,108) (142,969) Profit from operating activities 74, ,481 Income from equity accounted joint venture ,431 Other income - 2,271 Net foreign exchange loss (1,432) (1,670) Finance income Finance costs 5 (21,765) (5,512) Profit before taxation 51, ,018 Taxation 15 (26,362) (38,422) Profit for the year 24, ,596 The notes on pages 8 to 37 are an integral part of these financial statements. 4

6 Consolidated Statements of Comprehensive Income (Expressed in US $ 000) Profit for the Year 24, ,596 Other comprehensive income Exchange differences in translating foreign operations Other comprehensive income for the year Total comprehensive income for the year 25, ,321 The notes on pages 8 to 37 are an integral part of these financial statements. 5

7 Consolidated Statements of Financial Position (Expressed in US $ 000) Note Non-Current Assets Fleet 4 760, ,154 Assets under construction 4 277, ,048 Other fixed assets 4 23,110 22,850 Property, plant and equipment 4 1,061, ,052 Participation in joint venture ,663 1,061, ,715 Current Assets Inventories 7 16,118 11,612 Trade and other receivables 9 132, ,152 Cash and cash equivalents 10 65,825 22, , ,897 Total Assets 1,276,193 1,212,612 Shareholder s Equity and Liabilities Capital and Reserves Issued share capital 12 50,000 50,000 Other reserves 575, ,457 Total Shareholder s Equity 625, ,457 Non-Current Liabilities Trade and other payables 11 12,763 26,400 Borrowings , , , ,566 Current Liabilities Trade and other payables , ,550 Current tax payable 24,814 27,396 Borrowings 13 85,258 73, , ,589 Total Shareholder s Equity and Liabilities 1,276,193 1,212,612 The notes on pages 8 to 37 are an integral part of these financial statements. Approved and authorised for issue by the Management of Sea Trucks Group Limited on 23 April 2012 and signed on its behalf by: J.J. ROOMANS S.ASSITER 6

8 Consolidated Statements of Changes in Shareholder s Equity (Expressed in US $ 000) Foreign Equity Share Contributed Retained Exchange Settled Other Capital Surplus Earnings Reserve Reserve Reserves Total Balance at 1 January , , , ,007 Profit for the year , ,596 Other comprehensive income for the year Total comprehensive income for the year , ,321 Transactions with owner Share based payment ,885-8,885 Transfer to liabilities (note 24) (30,756) - (30,756) Recapitalization (note 12) 50,000 (29,949) (20,051) Dividends (note 14) - - (5,000) (5,000) Balance at 1 January , , ,457 Profit for the year , ,937 Other comprehensive income for the year Total comprehensive income for the year , ,096 Convertible bond - equity component (note 13) ,367 3,367 Transactions with owner Dividends (note 14) - - (5,000) (5,000) At 31st December , ,492 1,061-3, ,920 The notes on pages 8 to 37 are an integral part of these financial statements. 7

9 Consolidated Statements of Cash Flows For the year ended 31st December 2011 (Expressed in US $ 000) Cash flows from operating activities Note Profit before taxation 51, ,018 Adjustments to reconcile profit before taxation to net cash provided by operating activities: Depreciation 4 61,442 44,866 Charge for share-based payment scheme 6,163 17,729 Payments from share based payment scheme (16,500) - Other income including net (gain) loss on disposal of vessels - (2,271) Finance income 5 (54) (17) Finance costs 5 21,765 5,512 Interest received Non cash gain / (loss) from joint venture investments 4,973 (1,732) Increase in inventories (4,506) (856) Decrease/(increase) in trade and other receivables 38,924 (101,968) Increase in trade and other payables 15,199 61,822 Cash generated from operations 178, ,120 Interest and bank charges paid (17,455) (10,442) Taxation paid (28,944) (26,683) Net cash generated from operating activities 132, ,995 Cash flows from investing activities Expenditure on assets under construction (198,339) (97,169) Proceeds on disposal of vessels and other vessel - 3,500 Net cash used in investing activities (198,339) (93,669) Cash flows from financing activities Proceeds from issuance of convertible bonds 200,000 - Proceeds from loans ,431 Repayment of loans (90,671) (58,647) Net cash used in financing activities 109,671 (47,216) Net increase in cash and cash equivalents 43,692 5,110 Cash and cash equivalents at 1 January 22,133 17,023 Cash and cash equivalents at 31 December 10 65,825 22,133 The notes on pages 8 to 37 are an integral part of these financial statements. 8

10 1. General information Sea Trucks Group Limited ( the company ) is the ultimate parent entity to a group of subsidiary undertakings (collectively the group ) whose principal activities are the provision of marine services to the offshore and onshore oil and construction industries in West Africa and Australia. The group commenced operations in The group s head office is in Ikoyi, Lagos, Nigeria and the company s registered office is located in the British Virgin Islands. These consolidated financial statements include the group holding company and the following significant subsidiary entities: Country of Name Principal activity incorporation Sea Trucks Group Limited Holding company of the Group British Virgin Islands Wholly Owned Subsidiaries: Diesel Power International (CI) Ltd Tug and barge owner and Guernsey operator and support services Offshore Contractors (CI) Ltd Tug and accommodation barge Guernsey operator, and pipeline engineering company Sea Trucks Australia Pty Ltd Project Management company Australia Sea Trucks Offshore Ltd Inland support vessel owner and Guernsey Operator Sea Trucks Offshore Ltd Operator and vessel manager Ghana Sea Trucks FZE Procurement and project United Arab Emirates management services Walvis International (CI) Ltd Operator and vessel manager Guernsey West African Ventures (CI) Ltd Operator and vessel manager Guernsey Sea Trucks Netherlands Project management services The Netherlands Cooperatie U.A. Consolidated Projects Ltd Procurement and project Guernsey management services 9

11 2. Accounting policies The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. (a) Basis of preparation and presentation of consolidated financial statements These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards. The consolidated financial statements have been prepared under the historical cost convention. The consolidated financial statements have been prepared on a going concern basis notwithstanding the fact that the group had net current liabilities of U.S. $ 56.0 million at 31 December 2011 (2010 U.S. $ million). This is on the basis that for at least the next twelve months following the date that the directors sign these financial statements the group will have sufficient working capital to continue in operational existence through the proceeds of new debt finance as well as through normal trading operations, the financing of vessels or by the disposal of assets. The consolidated financial statements are presented in U.S. Dollars since that is the currency in which the majority of the group s transactions are denominated. (b) Basis of consolidation The consolidated financial statements incorporate the financial statements of all entities controlled by the company. Control is achieved where the company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The results of the subsidiaries and joint ventures acquired or disposed of during the period are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. (i) Subsidiaries Subsidiaries are all entities (including special purpose entities) over which the group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases. Inter-company transactions, balances, income and expenses on transactions between group companies are eliminated. Profits and losses resulting from inter-company transactions that are recognised in assets are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group. (ii) Associates Associates are all entities over which the group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost. The group s investment in associates includes goodwill identified on acquisition, net of any accumulated impairment loss. 10

12 2. Accounting policies (continued) (ii) Associates (continued) The group s share of its associates post-acquisition profits or losses is recognised in the income statement, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the group s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. Unrealised gains on transactions between the group and its associates are eliminated to the extent of the group s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the group. Dilution gains and losses in associates are recognised in the income statement. (c) Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the senior management that makes strategic decisions. (d) Assets under construction Assets under construction are carried at cost, less any identified impairment loss. Cost includes materials, supervision fees and related expenses, professional fees and interest capitalised in accordance with the group s accounting policy on borrowing costs (see note 2 (p)). Depreciation of the assets commences when the assets are ready for their intended use and transferred to either fleet or other fixed assets. (e) Fixed assets and depreciation Fleet: The group s fleet is stated at historical cost less accumulated depreciation and provision for impairment. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. Routine repairs and maintenance costs are written off to the statement of income as incurred. Depreciation is provided on the basis that the book value of the vessels, less estimated residual values, is written off on a straight line basis over the remainder of their anticipated useful lives taken to be: Offshore fleet, comprising: Ocean going tugs, supply vessels, personnel craft vessels, pipelay vessels, and other offshore vessels. New-build - 15 years from date of building and delivery. Re-build - 10 years from date of re-building. Inshore fleet, comprising: Barges, tugs, landing craft, personnel carriers and other inshore vessels. - 7 years from date of building and delivery. 11

13 2. Accounting policies (continued) (e) Fixed assets and depreciation (continued) Other fixed assets: Land is not depreciated. Buildings and other fixed assets are stated at cost less accumulated depreciation. Depreciation is provided as follows: Buildings - Straight line basis over 20 years. Other fixed assets - Straight line basis over periods varying between 4 and 10 years. The residual value and useful life of each asset are reviewed at each financial year-end and, if expectations differ from previous estimates, the changes are accounted for prospectively in the income statement in the period of the change and future periods. The profit or loss arising on disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset less any incidental selling costs and is recognised in the income statement. (f) Impairment Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date. (g) Drydocking and special surveys Drydocking and special survey costs are expensed as incurred, where they are not a significant component part of a vessel s cost. (h) Inventories Inventories are valued at the lower of cost and net realisable value. Inventories comprise fuel bunkers (where applicable), lube oils, stores, spares and paints and are recognised on a first in first out basis. (i) Interests in joint ventures A joint venture is a contractual arrangement whereby two or more parties (ventures) undertake an economic activity that is subject to joint control. Joint control exists only when the strategic financial and operating decisions relating to the activity require the unanimous consent of the ventures. A jointly controlled entity is a joint venture that involves the establishment of a company, partnership or other entity to engage in economic activity that the group jointly controls with its fellow ventures. The results, assets and liabilities of a jointly controlled entity are incorporated in these financial statements using the equity method of accounting. Under the equity method, the investment in a jointly controlled entity is carried in the balance sheet at cost, plus postacquisition changes in the Group s share of net assets of the jointly controlled entity, less distributions received and less any impairment in the value of the investment. 12

14 2. Accounting policies (continued) (j) Construction contracts When the outcome of a construction contract can be estimated reliably, contract revenue and contract costs associated with the construction contract are recognised as revenue and expenses respectively by reference to the stage of completion of the contract activity at the end of the reporting period. Measuring the stage of completion will depend on the nature of the contracts and the scope of work being performed and will require management to exercise their judgement. Where the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred that it is probable will be recoverable. Contract costs are recognised as expenses in the period in which they are incurred. Any expected loss on the construction contract is recognised as an expense immediately. Revenue in respect of variations to the contract scope and claims is recognised when it is probable that it will be received and is capable of being reliably measured. Incentive payments are recognised when a contract is sufficiently far advanced that it is probable that the required conditions will be met and the amount of the payment can be reliably measured. The gross amounts due from customers under long-term contracts are stated at cost plus recognised losses and progress billings. These amounts are reported in trade and other receivables. Payments on account in excess of the gross amounts due from customers are included in trade and other payables. (k) Financial instruments Financial assets and liabilities are recognised in the statement of financial position when the group has become a party to the contractual provisions of the instrument. Financial assets Cash and cash equivalents and trade receivables are classified as loans and receivables. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Gains and losses are recognised in income when the loans and receivables are derecognised or impaired, as well as through the amortisation process. If there is objective evidence that an impairment loss on financial assets classified as loans and receivables has been incurred, the amount of the loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows discounted at the financial asset s original effective interest rate. The carrying amount of the assets is reduced, with the amount of the loss recognised in the income statement. 13

15 2. Accounting policies (continued) Financial liabilities Interest bearing bank loans and overdrafts are initially measured at net proceeds received and are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the settlement of the borrowings is recognised in the income statement over the term of the borrowings using the effective interest method. Trade payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method, where appropriate. Trade payables are not interest bearing. (l) Convertible Bonds Convertible bonds are issued in the functional currency of the Group and are accounted for as compound instruments. The net proceeds received from the issue of convertible bonds are split between a liability element and an equity component at the date of issue. The fair value of the liability component is estimated using the prevailing market interest rate for similar non convertible debt. The difference between the proceeds of issue of the convertible bonds and the fair value assigned to the liability component, representing the embedded option to convert the liability into equity of the Group, is included in equity and is not subsequently remeasured. The liability component is carried at amortised cost as measured using the effective interest rate method. (m) Provisions Provisions are recognised when the group has a present legal or constructive obligation as a result of a past event, and it is probable that the group will be required to settle that obligation. Provisions are measured at management s best estimate of the expenditure required to settle the obligation at the financial reporting date, and are discounted to present value where the effect is material. (n) Revenue recognition Revenues comprise income from the hire of vessels and other sales. Income from the hire of vessels is recognised on an accrual basis over the period of the contract. Income from other sales is recognised when the goods or services have been delivered or rendered. Revenue is measured at the fair value of the consideration received or receivable and is shown net of value added tax and after eliminating sales within the group. The group s policy for the recognition of construction contracts is described in note 2(j) above. (o) Currency translation The functional currency is the currency of the primary economic environment in which an entity operates and is normally the currency in which the entity primarily generates and expends cash. In individual companies, transactions in foreign currencies are initially recorded in the functional currency by applying the rate of exchange ruling at the date of the transaction. 14

16 2. Accounting policies (continued) (o) Currency translation (continued) Monetary liabilities and monetary assets in other currencies at the financial reporting date are translated into the functional currency at the relevant rates ruling on that date. Any resulting differences are included in the income statement. Non-monetary assets and liabilities, other than those measured at fair value, are not retranslated subsequent to initial recognition. The results and financial position of all the group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows: (p) i) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet ii) income and expenses for each income statement are translated at average exchange rates and iii) all resulting exchange differences are recognised in other comprehensive income. Finance costs Finance costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use, are added to the cost of those assets until such times as the assets are substantially ready for their intended use. All other finance costs are recognised in the income statement in the period in which they are incurred. (q) Income taxes Income tax currently payable is based on taxable profit for the year and subject to the fiscal regulations of the countries in which companies in the group are incorporated. The group s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the financial reporting date. (r) Deferred income taxes Deferred income taxes are provided for on all temporary differences arising between the tax basis of assets and liabilities and their carrying values for financial reporting purposes. A deferred income tax asset is recorded only to the extent that it is material and it is probable that a taxable profit will be available against which the deductible temporary differences can be utilised. Deferred income tax assets and liabilities are measured at tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantively enacted at the financial reporting date. (s) Share based payments The group operates a cash-settled share-based payment arrangement. The cost of the cash-settled transaction is measured at fair value and recognized as an expense over the vesting period, with a corresponding liability recognized in the balance sheet. (t) Leases Operating lease costs are charged to the income statement on a straight-line basis over the period of the lease. 15

17 2. Accounting policies (continued) (u) Critical accounting judgements and key sources of estimation uncertainty The preparation of consolidated financial statements in accordance with International Financial Reporting Standards requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. The following are the major accounting judgements concerning the future and sources of estimation uncertainty at the financial reporting date that have a risk of causing an, upward or downward, adjustment to the consolidated financial statements: 1. The estimate of the anticipated useful economic life of the fleet and the estimate of residual values used for the purpose of establishing the group s depreciation policy (note 2(e)); 2. Determining tax balances including provisions required for uncertain tax positions (notes 15 and 22); 3. Consideration of carrying values of tangible assets and any impairment related triggers and calculations at the financial reporting date (note 4); 4. Management s assessment of the stage of completion and the determination of future profits or losses arising on construction contracts (note 8). Such assessment of stage of completion would be required for any construction contracts that have not been completed at the year-end. 5. Management s determination of the market rate of interest to be used in measuring the initial and subsequent values of the financial liability and equity components of the $200m Bond liability (note 13). 16

18 3. Disclosure of impact of new and future accounting standards (a) New and amended standards and interpretations adopted by the Group There are no IFRSs or IFRIC interpretations that are effective for the first time for the financial year beginning on 1 January 2011 that have a material impact on the Group. (b) Amended standards and interpretations not relevant to the Group The following new standards, amendments to standards and interpretations are mandatory for the first time for the financial year beginning 1 January 2011, but are not currently relevant for the Group: IAS 32 'Financial instruments: Presentation'. Annual improvements to IFRSs 2010 IFRIC 19 'Extinguishing financial liabilities with equity investments'. Amendment to IFRIC 14, Prepayments of a minimum funding requirement Amendment to IFRS 1 on hyperinflation and fixed dates (c) Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Group. The following new standards, amendments to standards and interpretations have been issued, but are not effective for the financial year beginning 1 January 2012 and have not been early adopted: IAS 19 (revised 2011) 'Employee benefits' (effective 1 January 2013) IFRS 9 Financial instruments (effective 1 January 2015) IFRS 10 Consolidated financial statements (effective 1 January 2013) IFRS 12 Disclosures of interests in other entities (effective 1 January 2013) IFRS 13 Fair value measurement (effective 1 January 2013) IFRS 11, 'Joint arrangements'(effective 1 January 2013) IAS 27 (revised 2011) 'Separate financial statements' (effective 1 January 2013) IAS 28 (revised 2011) 'Associates and joint ventures' (effective 1 January 2013) Amendment to IAS 12,'Income taxes' on deferred tax (effective 1 January 2012) Amendment to IAS 1,'Presentation of financial statements' on OCI (effective 1 July 2012) IFRIC 20 'Stripping costs in the production phase of a surface mine (effective 1 January 2013) The Group is yet to assess the full impact of these new standards and amendments but does not expect them to have a material impact on the financial statements. 17

19 4. Property, plant and equipment Cost Assets Under Land and Fleet Construction Other buildings Total US $ 000 US $ 000 US $ 000 US $ 000 US $ 000 At 1 January , ,048 27,503 16,284 1,178,771 Exchange differences - - (300) (226) (526) Additions - 133, ,869 Disposals (2,479) (242) (133) - (2,854) Transfers in (out) 183,439 (187,475) 3, At 31 December , ,200 30,535 16,629 1,309,260 Accumulated depreciation At 1 January ,782-16,209 4, ,719 Exchange differences - - (267) ( 75) (342) Charge for the year 57,850-2, ,442 Disposals (2,479) - (133) - (2,612) At 31 December ,153-18,604 5, ,207 Net book value at 31 December , ,200 11,931 11,179 1,061,053 Cost At 1 January , ,987 25,407 15,622 1,082,430 Exchange differences Additions - 103, ,238 Disposals (6,805) - (98) - (6,903) Transfers in (out) 167,327 (170,177) 2, At 31 December , ,048 27,503 16,284 1,178,771 Accumulated depreciation At 1 January ,008-12,953 3, ,945 Exchange differences - - (24) - (24) Charge for the year 40,722-3, ,866 Disposals (4,948) - (120) - (5,068) At 31 December ,782-16,209 4, ,719 Net book value at 31 December , ,048 11,294 11, ,052 18

20 4. Property, plant and equipment (continued) The group s fleet comprises pipelaying vessels, ocean going tugs, flat top barges, accommodation and personnel vessels and various types of inland vessels. Assets under construction at 31 December 2011 comprise three vessels which are scheduled for delivery in 2012, 2014 and beyond. During the year, the group has capitalised borrowing costs amounting to U.S.$17.2 million (2010: U.S.$ 5.4 million) on the group s qualifying assets. Borrowing costs were capitalised at the weighted average rate of its general borrowings of 7.5% (2010: 2%). Refer to Note 13. Land and buildings comprise the group's head offices in Lagos and premises located at Warri and Onne in Nigeria, Sharjah in the United Arab Emirates and Perth in Australia. Miscellaneous assets mainly comprise plant and equipment, fixture and fittings and motor vehicles. The Bank of Scotland loan (note 13 (a)) is secured by mortgages on 28 vessels within the group's fleet and assets under construction and the First Bank of Nigeria loan (note 13 (a)) is secured by mortgages on 4 vessels within the group s fleet. The aggregate carrying value of the 32 secured vessels is U.S.$ million (2010: 30 vessels with an aggregate carrying value of U.S.$ million). In addition, Sea Trucks Group Limited has given corporate guarantees for a majority of the loans. At the end of each financial reporting date, management assesses the useful lives and residual values of the fleet in accordance with the group s accounting policy (see note 2 (e)). There was no material effect on the results for the years ended 31 December Management carries out an impairment review of the fleet and assets under construction on an annual basis and for 2011 have concluded that the recoverable amount of vessels and assets under construction is higher than their respective net book values, as supported by either independent professional valuations or their value in use. Value in use calculations involve estimating the discounted future cash flows, which require judgements to be made by management about long-term forecasts of future revenues and costs related to the vessels. Impairment charge of U.S.$4.3 million was charged to income statement during the year. 5. Finance income and costs US $ 000 US $ 000 Interest payable on bank and other loans (5,588) (9,400) Finance cost for convertible bond (31,583) - Bank changes (1,761) (1,480) Less: amounts capitalised on qualifying assets 17,167 5,368 Total finance costs (21,765) (5,512) Finance income Net finance costs (21,711) (5,495) Convertible bond Interest expense of U.S.$31.5m has been calculated using the effective interest method which is a method of calculating the amortised cost of a financial liability and allocating the interest expense over the relevant period. The charge incorporates the impact of the U.S.$40m premium payment expected to fall due in Had interest expense been calculated using a straight line method, excluding the impact of the premium payment, the expense incurred would have been U.S.$18.5m. During the year interest of U.S.$10m was paid. 19

21 6. Participation in joint venture US $ 000 US $ 000 At 1 January 5,663 3,931 Group s share of results for the year ,431 Distribution of results (5,094) (11,699) At 31 December 690 5,663 In 2010 and 2011, the group entered into joint ventures to hold a 50% equity shareholding with equivalent voting power in Svitsea Australia Pty and Clough Seatrucks JV respectively which in turn act as agents for unincorporated joint ventures. The group has put in place a joint and several guarantee of financial support, limited to the group s share both JVs liabilities, should the joint venture be unable to pay its liabilities as they fall due. Summarised financial information in respect of the group s joint ventures, which is recorded on an equity basis is as follows: US $ 000 US $ 000 Share of net assets Current assets ,980 Non-current assets - - Current liabilities (5) (10,317) Group s share of net assets 690 5,663 Revenues 13,906 72,224 Cost of sales (13,743) (58,675) Gross profit / (loss) ,549 Finance costs and other expenses/income (42) (118) Group s share of results for the year ,431 There are no contingent liabilities relating to the group s interest in the joint ventures. 20

22 7. Inventories US $ 000 US $ 000 Fuel Bunkers 2, Spare parts and consumables 13,610 10,635 16,118 11, Construction contracts The amounts recognised on construction contracts are as follows: US $ 000 US $ 000 Contract revenue recognised as revenue in the year 2, ,722 Contract costs incurred and recognised profits (less recognised losses) to date - 409,923 Less: Progress billings - (354,923) Gross amounts due from customers for contract work - 55,000 Advances received from customers 28,404 - There were no gross amounts due to customers for contract work for contracts in progress at 31 December 2011 including advances received (2010: U.S. $Nil). 9. Trade and other receivables US $ 000 US $ 000 Trade receivables 82, ,616 Amounts due from joint venture 4 5,266 82, ,882 Less: provision for impairment of receivables (2,103) (3,438) 80, ,444 Other debtors 19,745 3,111 Prepayments 32,283 13,597 Gross amounts due from customers (note 9) - 55, , ,152 21

23 9. Trade and other receivables (continued) Movement in the provision for impairment of receivables US $ 000 US $ 000 Balance at the 1 st January 3,438 4,438 (Decrease)/ increase in allowance recognised in the statement of income (1,312) (836) Exchange adjustments (23) (164) Balance at the 31 December 2,103 3, Cash and cash equivalents US $ 000 US $ 000 Cash at bank 65,570 21,692 Cash in hand ,825 22, Trade and other payables US $ 000 US $ 000 Trade payables 70, ,819 Cash-settled share based payment liability (see note 24) 29,263 39,600 Other payables and accruals 30,425 25,895 Advances from customers 42, Amounts due to other related parties (note 16) 1,131 2,240 Total Trade and Other Payables 173, ,950 Cash-settled share based payment (non-current portion) (12,763) (26,400) Trade and Other Payables current 160, ,550 22

24 12. Issued capital US $ 000 US $ 000 Authorised 1,000,000,000 (2010: 1,000,000,000) ordinary shares of U.S.$0.1 each 100, ,000 Allotted, issued and fully paid 500,000,000 (2010: 500,000,000) ordinary shares of U.S.$0.1 each 50,000 50,000 In conjunction with the company s registration in the British Virgin Islands, as outlined in note 1, the company increased its authorised share capital on 21 May 2010 from 50,000 ordinary shares of U.S.$ 0.1 each to 1,000,000,000 ordinary shares of U.S.$ 0.1 each. On the same day the company issued 500,000,000 ordinary shares of U.S.$ 0.1 each, equivalent of U.S.$ 50 million, to the company s existing shareholder, within the framework of a share recapitalisation. U.S. $29.9 million has been deducted from contributed surplus and the balance has been deducted from retained earnings. 13. Borrowings Non-current US $ 000 US $ 000 Bank loans 161, ,166 Convertible bond 205,216 - Current 366, ,166 Bank loans 80,007 60,217 Loan from ultimate controlling party 5,251 13,426 85,258 73,643 Total borrowings 451, ,809 (a) Bank loans at 31 December 2011 comprise: i) Bank of Scotland Plc balance outstanding of U.S.$ million (2010: U.S. $ 311 million). Repayable in quarterly instalments of U.S.$ 14.5 million followed by 5 million in subsequent months until November 2014, and $20 million in December 2014 This loan is part of a total facility available of U.S.$ 450 million which includes a loan facility of U.S.$ 400 million and a guarantee facility of U.S.$ 50 million. At 31 st December 2011, the group has utilised U.S.$ 31.8 million of the guarantee facility. The loan facility carries interest at a rate of US Libor +1.15% per annum (2010: US Libor +1.15% per annum). The loan is guaranteed by West African Ventures (C.I.) Limited, Offshore Contractors (C.I.) Limited, Walvis International (C.I.) Limited, Edremony Corporation Limited, West African Drydocks (C.I.) Limited, Diesel Power International (C.I.) Limited, Sea Trucks Offshore Limited and Consolidated Projects Limited. 23

25 13. Borrowings (continued) (ii) First Bank of Nigeria Plc balance outstanding of U.S.$ 3.7 million (2010: U.S.$ 7.7 million). The total loan of U.S.$ 20.0 million was drawn down in The loan is repayable in monthly instalments of U.S.$ 0.3 million with final repayment due in November The interest rate is 9.5% per annum (2010: 9.5% per annum). The loan is guaranteed by a personal guarantee provided by the ultimate controlling party and corporate guarantee of the Company and Diesel Power (Nigeria) Limited. Loan (i) is secured by mortgages on 28 vessels within the group s fleet and assets under construction and loan (ii) is secured by mortgages on 4 vessels within the group s fleet. The aggregate carrying value of the 32 secured vessels is U.S.$ million (2010: 30 vessels with an aggregate carrying value of U.S.$ million). In addition, Sea Trucks Group Limited has given corporate guarantees for a majority of the loans. (b) Loan from ultimate controlling party Loan from ultimate controlling party balance outstanding U.S.$ 5.3 million (2010: U.S.$ 13.2 million). The shareholder s loan has no specified repayment date and is interest free. The exposure of the group s borrowings to interest rate changes and the contractual repricing dates at the end of the reporting period are as follows: US $ 000 US $ 000 Repayable: - within twelve months of financial reporting date 85,258 73,643 - between one to two years 78,000 61,666 - between two to three years 83,500 58,000 - between three to four years 205,216 53,000 - between four to five years - 38,000 - after more than five years - 47, , ,809 (c) Convertible bond The company issued 200, % convertible bonds at a par value of $200 million, divided into two portions of U.S.$100,000 each on 31 January The bonds mature five years from the issue date at nominal value of U.S.$200 million plus a redemption premium of 20% of par. Should the Group undertake an Initial Public Offering ( IPO ), Bond holders can elect to convert their Bonds into Share Capital with each Bondholder entitled to a pro-rata share of the securities issued by the Group under IPO. Subsequent to repayment of the Bond, Bondholders retain their right to a proportionate share in any shares issued under an IPO until 31 January The Bonds include Equity Right Securities ( EERS ). The rights attached to EERS differ depending on the date of the IPO; 24

26 13. Borrowings (continued) (c) Convertible bond (continued) Date of IPO Total share for Bondholders Individual Bondholder s share Up to 30 January % of IPO securities issued Pro-rata share of IPO securities From 31 January % of IPO securities issued Pro-rata share of IPO securities Bond holders can elect to take a cash alternative upon IPO as opposed to exercising their EESR and taking shares. The net proceeds of the convertible bond issue were split between the liability element and equity component, representing the value attributable to the right to convert the liability into equity. The fair value of the liability component, included in non-current borrowings, was calculated using a market interest rate for an equivalent non-convertible bond. The residual amount, representing the value of the equity conversion option, is included in shareholders equity in other reserves. Both the liability and the equity components were initially measured net of transaction costs. Subsequent to initial measurement, the convertible bond was recognised in the balance sheet as follows: 2011 US $000 Face value of convertible bond issued on 31 January ,000 Equity component (3,367) Less: Issue costs (13,000) Liability component on initial recognition at 31 January ,633 Interest expense 31,583 Repayment of coupon rate (10,000) Liability component at 31 December ,216 The liability is calculated by discounting the future cash flows of the bond using an effective interest rate of 17.83%. Convertible bond Interest expense of U.S.$31.5m has been calculated using the effective interest method which is a method of calculating the amortised cost of a financial liability and allocating the interest expense over the relevant period. The charge incorporates the impact of the U.S.$40m premium payment expected to fall due in Had interest expense been calculated using a straight line method, excluding the impact of the premium payment, the expense incurred would have been U.S.$18.5m. During the year interest of U.S.$10m was paid. 25

27 14. Dividends US $ 000 US $ 000 Dividends declared 5,000 5,000 The dividends in respect of the year ended 31 December 2011 of U.S.$0.01 per share, amounting to a total dividend of U.S.$5 million, were credited to the shareholder s loan account. 15. Taxation The group is subject to taxation dependent on the taxation laws and rates applicable in the countries where the activity takes place. The majority of the taxation is deducted as withholding tax at rates between 5% - 20% from sales invoices rendered by the group and these amounts are treated as payments on account of the eventual tax liability. This also includes taxation for foreign companies assessable in Nigeria based on a percentage of revenues. The group's ship owning and operating subsidiaries are subject to the fiscal regulations of the countries in which they are incorporated. Currently the tax regimes in these countries levy no corporate taxes on vessel owners. Tax charge for the year is as follow: US $ 000 US $ 000 Profit before taxation 51, ,018 Calculated taxation 27,567 38,422 Under/(over) provision in prior years (1,205) - Current year tax charge 26,362 38,422 Effective tax rate 51.4% 24.0% Tax charge as percentage of revenue 6.1% 6.2% The tax rate applied in the above reconciliation for the years ended 31 December 2011 and 2010 is the corporate tax rate applicable in British Virgin Islands, on taxable profits under the tax law in that jurisdiction, which is 0%. There have been no material changes in underlying tax rates applicable to the group s operations during the years ended 31 December 2011 and Deferred taxation for the group has been considered by management and they are of the opinion that the amounts involved are not material at 31 December 2011 and Management has estimated and accrued all tax obligations relating to fiscal years not yet finalised with the Nigerian tax authorities at the financial reporting date. They are of the opinion that the risk of under or overstatement of the tax accrual at the financial reporting dates is not material (see note 22). 26