Condensed unaudited consolidated interim financial information For the three-month period ended 31 st March 2018
Condensed unaudited consolidated interim financial information For the three-month period ended 31 st March 2018 Pages Condensed consolidated interim statement of comprehensive income 3 Condensed consolidated interim statement of financial position 4 Condensed consolidated interim statement of cash flows 5 Condensed consolidated interim statement of changes in equity 6 Notes to the condensed consolidated interim financial information 7-19
Condensed unaudited consolidated interim statement of comprehensive income for the three-month period ended 31 st March 2018 Notes Three months ended 31-Mar-18 USD'000 Three months ended 31-Mar-17 USD'000 Revenue 7 Cost of Revenue Gross Profit 65,976 58,211 (42,680) (37,337) 23,296 20,874 Administrative expenses (7,329) (6,672) Other income 5 - Profit from Operations 15,972 14,202 Finance cost - net 8 (14,899) (13,865) Profit / (Loss) before Income Tax 1,073 337 Income tax expense 9 (4.083) (3,715) Profit / (Loss) for the three months (3,010) (3,378) Add: Other Comprehensive Income - - Total Comprehensive Profit / (loss) for the threemonths ending 31 st March 2018 (3,010) (3,378) Total Comprehensive Income/ (Loss) attributable to: Owners of the Company (6,475) (9,056) Non-controlling interest 3,465 5,678 Total Comprehensive Profit / (loss) for the threemonths ending 31 st March 2018 (3,010) (3,378) (3)
Condensed unaudited consolidated interim statement of financial position as at 31 st March 2018 31-Mar-18 USD'000 31-Dec-17 USD'000 ASSETS Notes Non-current assets Property, plant and equipment 10 1,247,134 1,227,833 Intangible assets and goodwill 11 20,393 20,592 Long-term receivables and prepayments 438 530 Deferred tax asset 9,520 9,520 Total non-current assets 1,277,485 1,258,475 Current assets Inventories 12 10,488 9,987 Accounts receivable and prepayments 13 84,877 87,335 Due from related parties 21 16,899 16,742 Bank balances and cash 14 48,265 77,950 Asset classified as held-for-sale 12,879 12,879 Total current assets 173,408 204,893 Total Assets 1,450,893 1,463,368 EQUITY AND LIABILITIES Equity Share capital 15 284,720 284,720 Share premium 46,796 46,796 Retained earnings (163,675) (157,200) Total equity attributable to equity holders of the Company 167,841 174,316 Non-controlling interest 172,186 168,721 Total equity 340,027 343,037 Liabilities Non-current liabilities Term loans and Senior Notes 16 625,698 632,634 Loan due to holding company 17 64,534 66,536 Employees end of service benefits 18 3,962 3,758 Advance from Customers 20 201,853 207,310 Total non-current liabilities 896,047 910,238 Current liabilities Accounts payable and accruals 19 69,245 96,075 Advance from Customers 20 78,284 49,762 Term loans 16 30,000 30,000 Loan due to holding company 17 14,066 12,064 Due to related parties 21 66 66 Income tax payable 9 23,158 22,126 Total current liabilities 214,819 210,093 Total liabilities 1,110,866 1,120,331 Total Equity and Liabilities 1,450,893 1,463,368 (4)
Condensed unaudited consolidated interim statement of cash flows for the threemonth period ended 31 st March 2018 Three months ended 31-Mar-18 USD'000 Three months ended 31-Mar-17 USD'000 Profit / (loss) before income tax 1,074 337 Adjustments to reconcile profit (loss) before tax to net cash flows: Provision for employees end of service benefits 255 318 Finance costs (net) 14,899 13,865 Depreciation and amortization 16,565 17,075 Amortization of Mobilization costs - - Operating cash flows before changes in operating assets and liabilities 32,793 31,595 Inventories (501) (1,105) Accounts receivables, prepayments and other assets 2,364 27,958 Accounts payable, accruals and other liabilities (17,057) (32,046) Due from/to related parties (157) 1,794 Cash generated from operations 17,442 28,196 Income tax paid (3,051) (3,552) End of service benefits paid (51) (288) Net cash flows generated from operating activities 14,340 24,356 Cash flow from Investing activities Purchase of property, plant and equipment (35,616) (56,140) Payment for Intangible assets (51) (285) Change in Advances from Customers 23,093 65,358 Net cash flows generated from (used) in investing activities (12,574) 8,933 FINANCING ACTIVITIES Loans paid (7,500) (7,500) Interest paid (23,951) (6,041) Repayment of loan due to parent company - (2,000) Net cash flows generated from financing activities (31,451) (15,541) INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 29,685 17,748 Cash and cash equivalents at 1 January 77,950 39,459 CASH AND CASH EQUIVALENTS AT 31 March 2018 48,265 57,207 (5)
Condensed unaudited consolidated interim statement of changes in equity for the three-month period ended 31 st March 2018 Share capital Share premium Retained earnings Total Non-controlling interests Total equity Balance at 1 January 2017 284,720 46,796 (24,551) 306,965 155,912 462,877 Comprehensive loss for the year - - (132,649) (132,649) 16,412 (116,237) Dividend paid to non-controlling interests - - - - (3,603) (9,000) Balance at 284,720 46,796 (157,200) 174,316 168,721 343,037 Comprehensive loss for the period - - (6,475) (6,475) 3,465 (3,010) Dividend paid to non-controlling interests - - - Balance at 31 March 2018 284,720 46,796 (163,675) 167,841 172,186 340,027 (6)
the three-month period ended 31 st March 2018 1 GENERAL INFORMATION Topaz Energy and Marine Limited ("the Company") is a limited liability company incorporated in Bermuda. The Company is a subsidiary of Topaz Energy & Marine Limited ("the Holding Company"), an Offshore company registered in the Jebel Ali Free Zone. The address of the registered office of the Company is P.O. Box 1022, Clarendon House, Church Street - West, Hamilton HM DX, Bermuda. The ultimate holding company is Renaissance Services SAOG, ("the Ultimate Holding Company") a joint stock company incorporated in the Sultanate of Oman. The condensed consolidated interim financial information for the three-month period ended 31 March 2018 ( the interim financial information ) comprises the Company and its subsidiaries (together referred to as the Group and individually as Group entities ). The principal activities of the Group are the provision of offshore supply vessels and other marine vessels on charter primarily to the oil and gas industry. 2 BASIS OF PREPARATION The interim financial information has been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting as issued by the International Accounting Standards Board ( IASB ). The interim financial information has been presented in United States Dollars (USD), which is the functional currency of the Company and the presentation currency of the Group. All values are rounded to the nearest thousand (USD 000 ) except as otherwise indicated. The interim financial information does not include all information and disclosures required in the annual financial statements and should be read in conjunction with the Group s annual consolidated financial statements for the year ended 31 December 2017, which have been prepared in accordance with International Financial Reporting Standards (IFRSs). 3 SIGNIFICANT ACCOUNTING POLICIES The accounting policies adopted in the preparation of interim financial information are consistent with those followed in the preparation of the Group s annual consolidated financial statements for the year ended 31 December 2017. IFRS 15 Revenue from Contracts with Customers is applicable to the Group with effect from 1 st January 2018. The group is currently in the process of assessing the impact of IFRS 15. 4 ESTIMATES The preparation of interim financial information requires management to make judgments, estimates, and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. In preparing the interim financial information, the significant judgments made by management in applying the Group s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the Group s annual consolidated financial statements for the year ended 31 December 2017. (7)
5 FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS 5.1 Financial risk factors The Group s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk) credit risk and liquidity risk. The interim financial information does not include all financial risk management information and disclosures required in the annual financial statements; they should be read in conjunction with the Group s annual consolidated financial statements for the year ended 31 December 2017. There have been no changes in the risk management department or any risk management policies since the year end. 5.2 Liquidity risk Compared to year end, there was no material change in the contractual undiscounted cash outflows for financial liabilities. The main characteristics of the term loans provided to the Group are described in Note 16 and 17. 5.3 Fair value estimation Financial instruments comprise financial assets and financial liabilities. Fair value hierarchy The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows: Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). At 31 March 2018 Derivative financial instruments Total Level 1 Level 2 Level 3 Cost Derivative financial instruments - - - - - At 31 December 2017 Derivative financial instruments Derivative financial instruments - - - - - There were no transfers between Levels 1 and 2 during the period. (8)
5.4 Fair value of financial assets and liabilities measured at amortized costs The fair value of borrowings (including loan due to holding company) are as follows: Non-current 690,232 699,170 Current 44,066 42,064 734,298 741,234 The fair value of the following financial assets and liabilities approximate their carrying amount: Trade and other receivable Cash and cash equivalents (excluding bank overdrafts) Trade and other payables 6 SEGMENT INFORMATION Management has determined the operating segments based on the information reviewed by chief operating decision-maker for the purposes of allocating resources and assessing performance. The Group operates in three primary geographical segments. The geographic segments are organized and managed separately according to the nature of the services provided, with each segment representing a strategic operating unit that offers different services. With effect from 1 st January 2018, the group has added a new segment - Solutions specializing in provision of marine transportation and logistics worldwide. Geographic segments For management purposes, the Group is currently organized into four segments. These segments are the basis on which the Group reports its primary segmental information. These are: - Caspian - Solutions - MENA - Africa Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit after income tax, as included in the internal management reports that are reviewed by the chief operating decision-maker. Segment profit is used to measure performance as management believes that such information is most relevant in evaluating the results of individual segments relative to other entities that operate within these geographic segments. Inter-segment pricing is determined on an arm s length basis. (9)
The following table presents segmental information about these businesses: Caspian Solutions MENA Africa Corporate Elimination TOTAL 31st March 2018 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 Revenue 38,080 10,922 9,984 6,990 65,976 Direct costs (21,291) (5,086) (10,821) (5,393) (89) - (42,680) Gross profit 16,789 5,836 (837) 1,597 (89) - 23,296 Administrative expenses (2,823) (404) (1,576) (1,028) (1,498) - (7,329) Other Income - - 5 - - - 5 Finance cost, net (6,128) (74) (2,399) (2,888) (3,410) - (14,899) Income Tax expense (2,407) (620) (227) (829) - - (4,083) Profit for the period 5,431 4,738 (5,034) (3,148) (4,997) - (3,010) Caspian MENA Africa Corporate Elimination TOTAL 31st March 2017 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 Revenue 45,521 10,968 1,722 58,211 Direct costs (22,131) (12,908) (3,456) - 1,157 (37,338) Gross profit 23,390 (1,940) (1,734) - 1,157 20,873 Administrative expenses (2,815) (1,619) (1,074) (1,163) - (6,671) Finance cost, net (6,723) (2,293) (2,153) (2,696) - (13,865) Income Tax expense (3,164) (382) (169) - - (3,715) Profit for the period 10,688 (6,234) (5,130) (3,859) 1,157 (3,378) (10)
7 REVENUE 31 Mar 2017 Charter and other revenues from marine vessels 65,944 58,211 Income from mobilization of marine vessels 32-65,976 58,211 8 FINANCE INCOME AND COSTS Recognized in profit or loss 31 Mar 2017 Interest expense 14,855 14,209 Exchange loss 270 - Finance cost 15,125 14,209 Exchange gain 174 281 Fair value changes of derivative financial instruments - - Interest income 52 23 Finance income 226 304 Recognized in other comprehensive income Gain/ (loss) changes in the fair value of cash flow hedges - - 9 INCOME TAX Tax expense relates to corporation tax payable on the profits earned by certain Group entities which operate in taxable jurisdictions, as follows: 31 Mar 2017 Tax expense 4,083 3,715 Income tax payable 23,158 22,044 (11)
10 PROPERTY, PLANT AND EQUIPMENT Buildings Plant, machinery furniture, fixtures and office equipment Marine vessels Motor vehicles Capital work in progress Total Cost: At 1 January 2018 3,958 15,419 1,730,518 1,080 244,128 1,995,103 Additions - 345 4,536 34 30,709 35,624 Transfer - - 20,152 - (20,152) - Disposals / write offs - - - - - At 31 Mar 2018 3,958 15,764 1,755,206 1,114 254,685 2,030,727 Depreciation: At 1 January 2018 Charge for the year Relating to disposals/write offs At 31 Mar 2018 Net carrying amount At 31 Mar 2018 1,231 12,267 752,730 1,042-767,270 40 99 16,159 25 - - - - - - 16,323 1,271 12,366 768,889 1,067 0 783,593 2,687 3,398 986,317 47 254,685 1,247,134 - Capital work in progress includes costs incurred for construction of marine vessels. During the three months ended March 2018, the Group has capitalized borrowing cost amounting to Nil (2017: NIL). The depreciation charge has been allocated as follows: Direct costs 16,159 68,522 Administrative expenses 164 792 16,323 69,314 (12)
11 INTANGIBLE ASSETS AND GOODWILL Goodwill Mar 2018 Dec 2017 Computer Software Total Goodwill Computer Software Total At 1 January 18,383 2,209 20,592 26,174 2,500 28,674 Additions - 51 51-520 520 Amortization - (250) (250) - (811) (811) Impairment - - - (7,791) - (7,791) At 31 Mar/31 December 18,383 2,010 20,393 18,383 2,209 20,592 Cost (gross carrying amount) 26,174 4,620 30,794 26,174 4,569 30,743 Accumulated amortization - (2,610) (2,610) - (2,360) (2,360) Impairment (7,791) - (7,791) (7,791) - (7,791) Net carrying amount 18,383 2,010 20,393 18,383 2,209 20,592 Amortization of intangible assets has been allocated to administrative expenses in the condensed interim statement of comprehensive income. Goodwill comprises of the following: a) Goodwill arising from the acquisition of BUE Marine Limited with effect from 1 July 2005. b) Goodwill arising from the acquisition of Doha Marine Services WLL with effect from 8 May 2008. Goodwill has been allocated to two individual cash-generating units for impairment testing as follows: BUE Marine cash-generating unit; Doha Marine Services cash generating unit. Carrying amount of goodwill allocated to each of the cash-generating units is as follows: BUE Marine Limited Unit 18,383 18,383 Doha Marine Services Unit - - 18,383 18,383 The recoverable amount of each cash-generating unit is determined based on a value in use calculation, using cash flow projections based on financial budgets approved by senior management. The date of the last impairment testing was 31 December 2017. The goodwill recognized on Doha Marine Services has been written off in full during the year-ended 31 December 2017 due to the downturn in the business within the region. (13)
12 INVENTORIES Stores, spares and consumables 10,488 9,987 Provision for slow moving inventories - - 10,488 9,987 13 ACCOUNTS RECEIVABLE AND PREPAYMENTS Trade accounts receivable 73,864 77,521 Allowance for impairment of receivable (4,775) (4,753) 69,089 72,768 Prepaid expenses 4,498 5,009 Advance to suppliers 5,281 3,706 Retention receivable 1,102 2,069 Other receivables 4,907 4,313 84,877 87,865 Less: Non-current portion of deferred mobilization costs - (530) 84,877 87,335 At 31 March 2018, trade receivables with a nominal value of US$ 4,775 thousand (31 December 2017: US$ 4,753 thousand) were impaired. Movement in the allowance for impairment of receivables were as follows: At 1 January 4,753 4,538 Charge for the period 22 215 Amounts written off - - At the end of the period 4,775 4,753 (14)
13. ACCOUNTS RECEIVABLE AND PREPAYMENTS (continued) The maximum exposure to credit risk for trade receivables at the reporting date by geographic region was: MENA 7,779 6,204 Caspian 54,514 61,146 Others 6,796 5,418 At the end of the period 69,089 72,768 As at and, the ageing of unimpaired trade receivables is as follows: Neither past due nor impaired US$ 000 <30 days US$ 000 Past due but not impaired 30-60 days US$ 000 60-90 days US$ 000 90-120 days US$ 000 >120 days US$ 000 2018 69,089 48,625 13,729 1,391 1,260 1,850 2,234 2017 72,768 56,342 9,068 1,800 1,885 1,902 1,771 Unimpaired receivables are expected, on the basis of past experience, to be fully recoverable. It is not the practice of the Group to obtain collateral over receivables, and the clear majority are, therefore, unsecured. 14 CASH AND CASH EQUIVALENTS Cash and cash equivalents included in the condensed interim statement of cash flows include the following: Cash at bank - Short term Deposits 10,000 25,000 - Current accounts 38,104 52,813 48,104 77,813 Cash in hand 161 137 Cash and bank balances 48,265 77,950 Less: Deposits under lien - - Cash and cash equivalents 48,265 77,950 (15)
15 SHARE CAPITAL Authorised 400,000,000 shares of US$1 each (2017: 400,000,000 shares of US$ 1 each) Issued and fully paid 284,719,616 shares of US$ 1 each (2017: 284,719,616 shares of US$ 1 each) 400,000 400,000 284,720 284,720 16 TERM LOANS $375M 9.125% Senior Notes due 2022 (refer (i) below) Term loan, at LIBOR plus 2.75% p.a. repayable by April 2022 366,902 366,409 288,796 296,225 ----------- ---------- 655,698 662,634 ----------- ---------- Current portion 30,000 30,000 Non-current portion 625,698 632,634 The term loans are repayable as follows: Due within one year 30,000 30,000 Due between two to five years 625,698 632,634 Due after five years - - 644,481 662,634 (i) In July 2017, Topaz completed the offering of USD 375 million aggregate principal amount of Senior Notes due 2022 (the Notes ) at a fixed coupon of 9.125% per annum. The gross proceeds from the issue of the Notes were used to fund the repurchase and redemption of Topaz s existing US$350 million 8.625% Senior Notes due in 2018 and the associated costs. Of the total costs associated with the refinancing of the existing Senior Notes, USD 19 million was charged to Income Statement in 2017 comprising of USD 15.3 million incurred towards bond redemption premium and USD 3.7 million towards write-off of unamortized issuance costs relating to the redeemed notes. (16)
17 LOAN DUE TO ULTIMATE HOLDING COMPANY Term loan (refer (i) below) 78,600 78,600 Current portion 14,066 12,064 Non-current portion 64,534 66,536 The loan is repayable as follows: Due within one year 14,066 12,064 Due between two to five years 64,534 54,628 Due after five years - 11,908 78,600 78,600 (i) The loan is subordinated to the Conventional and Islamic term loan facility and the Senior Notes. Any repayment towards the debt from Holding Company is subject to consent from the lenders under the term loan facility. 18 EMPLOYEES END OF SERVICE BENEFITS Provision for employees end-of-service benefits is made in accordance with the labour laws of the respective countries in which the Group operates, and is based on current remuneration and cumulative years of service as at the reporting date. Movement in the provision is recognized in the condensed interim statement of financial position is as follows: Provision as at 1 January 3,758 3,529 Provided during the period 255 1,328 End of service benefits paid (51) (1,099) Closing Provision 3,962 3,758 (17)
19 ACCOUNTS PAYABLE AND ACCRUALS Current Trade accounts payables 8,891 32,103 Accrued expenses 48,050 42,070 Other payables 12,304 21,902 69,245 96,075 Non-current Advance from customers (refer (i) below) 185,511 112,051 20 ACCOUNTS PAYABLE AND ACCRUALS Advances from Customers Current 280,137 78,284 257,072 49,762 Non-Current 201,853 207,310 (i) Advance from Customers comprises of premobilization funds received from Tengizchevroil (TCO) towards the Offshore Marine Module Transport Contract. This advance will be recovered, subsequent to commencement of operations, against amount receivable from TCO for provision of transportation services. The current portion of USD 78.3m represents management s estimate of the advance recoverable over next 12 months based on progress of the contract at the reporting date. 21 RELATED PARTY TRANSACTIONS AND BALANCES Related parties represent associated companies, major shareholders, directors and key management personnel of the Group, and entities controlled, jointly controlled or significantly influenced by such parties. The Group's management approves pricing policies and terms of these transactions. Due from related parties Topaz Energy & Marine Limited Holding Company 16,893 16,740 Directors 6 2 16,899 16,742 (18)
21 RELATED PARTY TRANSACTIONS AND BALANCES (continued) Due from related parties Renaissance Services SAOG ("the Ultimate Holding Company") 61 61 Tawoos subsidiary of Ultimate Holding Company 5 5 66 66 22 CONTINGENCIES AND CLAIMS Contingent liabilities Letters of credit - - Letters of guarantee 33,570 29,544 33,570 29,544 These are non-cash banking instruments like bid bond, performance bond, refund guarantee, retention bonds, etc., which are issued by banks on behalf of group companies to customers/suppliers under the non-funded working capital lines with the banks. These lines are secured by the corporate guarantee from various group entities. The amounts are payable only in the event when certain terms of contracts with customers/suppliers are not met. 23 COMMITMENTS Capital expenditure commitment: Purchase of marine vessels 83,213 175,154 83,213 175,154 (19)