GOLDENPORT HOLDINGS INC. 
By Goldenport Holdings Inc.
Athens, 3 February 2014
Final Results for the Year Ended 31 December 2013
Goldenport Holdings Inc. ("Goldenport" or "the Company"), (LSE: GPRT) the international shipping company that owns and operates a fleet of container and dry bulk vessels, today announces the results for the year ended 31 December 2013.
Financial Highlights (amounts in US$ '000 except per share data)
§ Revenue of US$ 62,945, -19.6% decrease (2012: US$ 78,271)
§ EBITDA of US$ 20,980, -13.6% decrease (2012: US$ 24,285)
§ Adjusted Net Loss of US$ 11,876 (2012: Adjusted Net Loss of US$ 16,826)
§ Net Loss of US$ 12,177 (2012: Net Loss of US$ 65,339)
§ Loss per share of US$ (0.13) calculated on 93,191,758 shares (2012: US$ (0.71) calculated on 92,306,453 shares)
§ Total cash as 31 December 2013 of US$ 18,111 (31 December 2012: US$ 22,789)
§ Net debt to book capitalisation, as at 31 December 2013, 48% (31 December 2012: 49%)
§ No impairment loss incurred on any vessel in the fleet (2012: Impairment loss of US$47,600)
§ In full compliance with debt covenants
CEO Statement (amounts in US$'000):
John Dragnis, Chief Executive Officer of the Company commented:
For the year ended 31 December 2013, the Company reported a 19.6% decline in revenues, reflecting a decrease in the average number of vessels from 24 to 19 that was partly offset by an improvement in fleet utilisation. The company reported a 13.6% drop in EBITDA to US$ 20,980 and a net loss of US$ 12,177 or US$ 0.13 per share (net loss of US$ 8,310 or US$ 0.09 per share excluding losses from the disposal of vessels). It is worth highlighting that in the fourth quarter of the year, our dry bulk vessels benefited from a recovery in this sector and traded profitably at the bottom line.
Confidence in the business, political and financial environment is improving, but the economic recovery is not yet established. That said, asset prices and rates have bottomed out in the dry bulk sector with the value of a 5-year old Supramax increasing by more than 25% during 2013 and the BSI (Baltic Supramax Index) increasing by 10% on average compared to 2012. The trading recovery was first seen in the performance of the largest vessels and fed through to the medium-sized ones that are more versatile and have been solid performers with reduced earnings volatility. The container market remained under pressure for a fifth year with earnings remaining at levels close to all time lows. The new-building overhang in both the dry bulk and container sectors remains significant, but is mitigated by non deliveries and accelerated scrapping.
In anticipation of a recovery, we have so far opted to employ our fleet on a short term basis under 3-6 month time charter agreements, but we are witnessing increased appetite for 6-12 month time charters which we may choose to selectively enter into at profitable levels. On the whole, we expect that 2014 will allow us to employ our vessels on better terms than 2013 and this is supported by the Supramax FFA for the remainder of 2014 which is currently trading at US$ 12,500 per day compared to a BSI average TC rate of US$ 10,328 for 2013.
During 2013, we took advantage of high scrap prices to continue our strategy of fleet renewal by disposing of older tonnage and utilized part of the cash proceeds to acquire a younger vessel and to further reduce our debt. We made loan repayments of US$ 28,870, which represent a 13% decrease in bank debt since the beginning of the year or 34% since the beginning of 2012.
Looking forward into 2014 we believe that the dry bulk sector is going to recover before the containership sector and offers a more attractive risk-return profile so we are planning to further increase our exposure to small- and medium-sized dry bulk carriers and reduce our exposure to older containerships, while maintaining a competitive operating cost base.
Fleet Developments (amounts in US$ '000):
Vessels disposals
On 24 April 2013, the Company agreed the sale of the 3,007 TEU, 1992 built vessel "MSC Scotland", to an unaffiliated third party. The sale was concluded at a net consideration of US$ 6,155 cash and the vessel was delivered to the new owners on 14 May 2013. The loss resulting from the sale of the vessel was US$ 2,034.
On 2 August 2013, the Company agreed the sale of the 152,065 DWT, 1990 built vessel "Vasos", to an unaffiliated third party. The sale was concluded at a net consideration of US$ 7,330 cash and the vessel was delivered to the new owners on 20 August 2013. The gain resulting from the sale of the vessel was US$ 118.
On 10 September 2013, the Company agreed the sale of the 1,889 TEU, 1985 built vessel "MSC Accra", to an unaffiliated third party. The sale was concluded at a net consideration of US$ 3,490 cash and the vessel was delivered to the new owners on 20 September 2013. The gain resulting from the sale of the vessel was US$ 1,955.
On 6 December 2013, the Company agreed the sale of the 2,420 TEU, 1994 built vessel "MSC Anafi", to an unaffiliated third party. The sale was concluded at a net consideration of US$ 5,910 cash and the vessel was delivered to the new owners on 31 December 2013. The loss resulting from the sale of the vessel was US$ 3,906.
Vessel acquisition
On 12 April 2013, the Company took delivery of M/V Thasos, a 1998 built container of 2,452 TEU, which was acquired for US$ 5,971, including bunkers and lubricants remaining on board at the delivery of the vessel.
Impairment
No impairment loss was recognised for the year ended 31 December 2013 (U.S.$47,600 impairment loss was recognised for the year ended 31 December 2012).
Fleet Forward Coverage:
The percentage of available days of the fleet already fixed under contracts as of 31 January 2014 assuming the earliest charter expiration is as follows:
2014 (1) | ||
Total Fleet | 26% (9%) | |
Containers | 33% (16%) | |
Bulk Carriers | 19% (2%) |
(1) Percentage of available days of the fleet fixed under contract as reported on 19 November 2013, being the date of the previous trading update, is given in brackets
2014 Financial Calendar:
Despatch Annual Report and AGM Documentation: | April 2014 |
Annual General Meeting | May 2014 |
Conference Call and Webcast:
The Company's management team will host a conference call today, Monday 3 February 2014, at 2:30pm (London), 4:30pm (Athens) and 9:30am (New York) to discuss the results.
Conference Call details:
Participants should dial into the call 10 minutes before the scheduled time using the following numbers: 0800-953-0329 (from the UK), 1-866-819-7111 (from the US) or +44 (0)1452-542-301 (all other callers). Please quote "Goldenport Holdings" to the operator.
A replay of the conference call will be available until Monday 10 February 2014 by dialling 0800-953-1533 (from the UK), 1-866-247-4222 (from the US) or +44 (0)1452-550-000 (all other callers). The access code required for the replay is: 6906584#.
Slides and audio webcast :
There will also be a simultaneous live webcast over the Internet, through the Goldenport website . Participants to the live webcast should register on the website approximately 10 minutes prior to the start of the webcast.
For further information, please contact
Goldenport Holdings Inc.:
John Dragnis, Chief Executive Officer +30 210 8910 500
Alexis Stephanou, Chief Investment Officer and Head of Investor Relations +30 210 8910 542
Investor Relations Coordinators:
Capital Link:
Christina Daouti - London +44 203 206 1322
Nicolas Bornozis - New York +1 212 661 7566
E-mail: finance@goldenport.biz
goldenport@capitallink.com
Market Outlook:
Current Market Outlook:
Dry Cargo Market
As of January 2014, the worldwide dry bulk carrier fleet of vessels in excess of 15,000 DWT comprised 10,540 vessels representing approximately 733 million DWT. The average age of this fleet as at 31 December 2013 was approximately 9.5 years (by DWT).
In 2013 22.8 million DWT of dry cargo vessels were scrapped compared to newbuilding deliveries of 62 million DWT. The number of new orders placed within the year was 81.5 million DWT compared to 22 million DWT in 2012. The net result for the world dry cargo fleet was an increase amounting to about 5.7% (in DWT terms) and 3.7% in the number of vessels (13.5% in 2012).
Newbuilding tonnage on order as at 31 December 2013 was approximately 1,724 vessels of about 135 million DWT which constitutes approximately 18.4% of the world's existing fleet by DWT. There are 251 Capesize, 419 Panamaxes and Post-Panamaxes, 579 Supramax/Handymaxes and 475 Handysize scheduled for delivery between 2014 and 2016.
Dry bulk shipping demand is a "derived" demand (measured in tons x miles) depending upon the distance over which cargo is transported and determined by the underlying demand for commodities transported (mainly raw materials). Overall in 2013 about 3.9 billion tons of dry bulk cargoes were shipped. Three of the most important cargoes are iron ore, coal and grains.
The dry bulk market has already shown the first signs of recovery since the beginning of the last quarter of 2013. This cyclical market recovery is expected to continue and strengthen over the next couple of years. This is reflected in the FFA Market where the average rates for Calendar 2014 and 2015 are currently between +22% and +42% above the average rates for Calendar 2013 (per sector):
2013 FFA 2014 FFA 2015
Panamax US$ 9,515US$13,500US$13,400
Supramax US$10,328US$12,500US$12,825
Handy US$ 8,222US$10,350US$10,250
The sector fundamentals confirm this optimistic view with expected demand growth in 2014 of 7% compared with anticipated net fleet growth of approximately 5%.
Containers:
As of January 2014, the containership fleet comprised around 5,665 ships of about 17.5 million TEU capacity. In terms of TEU carrying capacity, the container fleet increased by 5.3% last year whilst the number of vessels in the fleet remained unaltered which is indicative of the larger size of vessels now being deployed by the major liner companies. The average age of the container fleet, as at 31 December 2013, was around 10.8 years.
The new-building market firmed up in 2013 with 240 new orders placed (of about 2 million TEU capacity). In January 2014, the orderbook stands at 3.67 million TEU / 468 vessels (around 21% of the existing fleet in TEU terms) for delivery within the next 1-2 years. Although this figure seems high, 83% of the orderbook in terms of TEU represents vessels in excess of 8,000 TEU, implying much lower fleet growth in the medium and small size vessels.
Demand as measured by port handling movements has increased last year by 2.7% as opposed to an average annual growth rate of 7.4% since 2000. Demand for containers is almost entirely reliant on the fortunes of the US and EU economies from which 70% of effective demand is derived.The outlook for the global economy in 2014 is positive with GDP growth expected to accelerate to 3.4%, from 2.5% in 2013. US private consumption is expected to pick up meaningfully, while the Euro-zone economy is expected to continue growing at a modest rate as the fiscal drag abates further.
With the estimated growth in demand for container vessels in 2014 of 6.4% expected to exceed the estimated net expansion of the container fleet (5.1%) (after allowing for scrapping) for the first time since 2007, the outlook for freight rates in this sector for the forthcoming year is positive. 2013 was a year of low charter rates and asset values and the outlook for the sector in 2014 is positive, as a result of increasing demand as well as continuous scrapping of older vessels. It is, however, difficult to predict either the pace or the magnitude of the recovery.
Summary of Selected Financial and Operating Data:
Year ended | Year ended | ||
Income Statement Data (in US$ '000 ): | 31-Dec-13 | 31-Dec-12 | |
Revenue | 62,945 | 78,271 | |
EBITDA | 20,980 | 24,285 | |
EBIT | ( 5,53 1) | ( 59,198 ) | |
Net Loss | ( 12,177 ) | ( 65,339 ) | |
Adjusted Net Loss | ( 11,876 ) | ( 16,826 ) | |
Weighted average number of shares | 93,191,758 | 92,306,453 | |
Loss per Share, basic and diluted | (0.13) | (0.71) | |
Adjusted Loss per Share, basic and diluted | (0.13) | (0.18) | |
FLEET DATA: | |||
Average number of vessels | 19 | 24 | |
Number of vessels at end of year | 17 | 20 | |
-Operating | 17 | 19 | |
- Non-operating | - | 1 | |
Ownership days | 7,096 | 8,782 | |
Available days | 6,960 | 8,264 | |
Operating days | 6,751 | 7,372 | |
Fleet utilisation | 97% | 89% | |
AVERAGE DAILY RESULTS (in US$): | |||
Time Charter Equivalent (TCE) rate | 8,154 | 8,278 | |
Average daily vessel operating expenses | 4,206 | 4,177 |
See Appendices, for Notes on the Summary of Selected Financial and Operating Data, for detailed Fleet Employment profile, for Notes on the Summary of Selected Financial and Operating Data, for forward looking statements and for full set of financial statements.
Financial review (amounts in US$ '000)
T i m ea n d V oy a g e C h a r t e r R ev e n ue s:
Revenues decreased by US$ 15,326 or 19.6% to US$ 62,945 for 2013 (2012: US$ 78,271). The main reason for this was the decrease in the average number of vessels in the fleet as compared to the previous year.
V oy a g e e x p e n s e s to t a l :
V oy a g e e x pe n s e s de c re a s e d by U S $3,667 o r 37.2 % t o U S $ 6,192fo r 2 0 13( 2 0 12 : U S $ 9,859 ) m ain l y du e t o i) decreased cost of bunkers consumed as a result of the reduction in idle or ballast days and ii) due to the decreased average number of vessels resulting in lower port and other voyage expenses.
V es se lo p era t in g e x p e n s e s:
V e s se loper a t i n g e x pe n s e s decrea s e d by U S $6,834 o r18.6 % t oU S $ 29,845fo r2 0 13( 2 0 12 : U S $ 36,679 ) . The decrease is mainly attributed to the disposal of older tonnage reducing the total ownership days of the fleet.
G e ner a l a n dad min i s t ra t i v e e x p e n s e s:
G e n era l a n d a d m in i s t r a t i ve e x pe n se s de c re a s e d by U S $ 747o r 23 . 9 % t o U S $ 2,380( 2 0 12 : U S $ 3,127 ). The decrease is mainly attributed to the de-recognition of the provisional amount relating to the "one-off" awards granted to certain Directors in 2010 which lapsed due to the fact that the performance targets were not met due to the depressed state of both the world economy and the shipping markets. Further reductions were achieved through the control of general remuneration levels.
D e precia t i o n :
Vessels' depreciation charge decreased by US$ 11,964 or 36.4% to US$ 20,880 for 2013 (2012: US$ 32,844). The decrease is attributed to the following: i) decrease of total ownership days due to the reduction in the average number of vessels in the fleet and ii) due to the adjustment of the estimated scrap rate used to calculate a vessel residual value from U.S.$180 to U.S.$250 per lightweight ton.
D e precia t i o no f d r y - doc kin g co s t s:
Depreciation of dry-docking costs decreased by US$ 2,165 or 60.4% to US$ 1,417 for 2013 (2012: US$ 3,582) mainly due to the decreased number of vessels which were dry-docked compared to the previous year.
Loss f r o m v es se l d i s po sa l s:
In 2013 the Company disposed of four vessels, MSC Scotland, Vasos, MSC Accra and MSC Anafi realizing a net loss of US$ 3,867, while in 2012 the Company disposed of seven vessels, Alex D, MSC Finland, Lindos, Tilos, Pos Yantian, Limnos and Bosporus Bridge, realizing a net gain of US$ 1,411.
Financing costs:
Interest expense decreased by US$1,200 or 16.1% to US$ 6,249 for 2013 (2012: US$ 7,449). This is mainly due to the decreased average amount of debt as compared to the previous year.
Cash and cash equivalents:
As of 31 December 2013, the Company had US$ 15,469 of unrestricted cash and cash equivalents (2012: US$ 16,775). The decrease of cash is a result of the average time charter rates in 2013 being lower than the cash flow break-even level.
Restricted Cash:
The Company as of 31 December 2013 had US$ 2,642 of restricted cash (2012: US$ 6,014) relating to cash restricted in use by the financing bank subject to fulfilment of certain terms and conditions, as provided in the loan agreements.
APPENDIX 1:
Fleet Employment Profile
Operational fleet | ||||||||||
Vessel | Type | Capacity | Built | Rate (US$) per day | Earliest Expiration (1) | |||||
Dry Bulk | DWT | |||||||||
1 | D Skalkeas | Post Panamax | 93,000 | 2011 | 16,500 | Jan-14 | ||||
Repositioning | ||||||||||
2 | Eleni D | Supramax | 59,000 | 2010 | 12,450 | Apr-14 | ||||
3 | Milos | Supramax | 57,000 | 2010 | 15,000 | Jan-14 | ||||
6,100+ballast bonus 55,000 | Feb-14 | |||||||||
4 | Sifnos | Supramax | 57,000 | 2010 | 10,000 | Mar-14 | ||||
5 | Pisti | Supramax | 57,000 | 2011 | 11,000 | Apr-14 | ||||
14,000 | Jul-14 | |||||||||
6 | Sofia | Supramax | 57,000 | 2011 | 14,000 | Jan-14 | ||||
6,800 | Feb-14 | |||||||||
7 | Ermis (ex Marie Paule) (2) | Supramax | 53,800 | 2009 | 5,500 | Jan-14 | ||||
Ballast for Dry-docking | ||||||||||
8 | Alpine Trader (2) | Supramax | 53,800 | 2009 | 13,000 | Mar-14 | ||||
9 | Golden Trader | Handymax | 48,170 | 1994 | 10,500 | Jan-14 | ||||
Ballast for Dry-docking | ||||||||||
Containers | TEU | |||||||||
APPENDIX 2:
Notes on Summary of Selected Financial and Operating Data:
(1) Average number of vessels is the number of vessels that constituted our fleet for the relevant period, as measured by the sum of the number of days each vessel was a part of our fleet during the period divided by the number of calendar days in the period.
(2) Ownership days are the aggregate number of days in a period during which each vessel in our fleet has been owned by us. Ownership days are an indicator of the size of our fleet over a period and affect both the amount of revenues and the amount of expenses that we record during a period.
(3) Available days are the number of our ownership days less the aggregate number of days that our vessels are off-hire due to scheduled repairs or repairs under guarantee, vessel upgrades or special surveys and the aggregate amount of time that we spend positioning our vessels. The shipping industry uses available days to measure the number of days in a period during which vessels should be capable of generating revenues.
(4) Operating days are the number of available days in a period less the aggregate number of days that our vessels are off-hire due to any reason, including unforeseen circumstances. The shipping industry uses operating days to measure the aggregate number of days in a period during which vessels actually generate revenues.
(5) We calculate fleet utilisation by dividing the number of our operating days during a period by the number of our available days during the period. The shipping industry uses fleet utilisation to measure a company's efficiency in finding suitable employment for its vessels and minimising the amount of days that its vessels are off-hire for reasons other than scheduled repairs or repairs under guarantee, vessel upgrades, special surveys or vessel positioning.
(6) Daily vessel operating expenses, which include crew wages and related costs, the cost of insurance, expenses relating to repairs and maintenance, the costs of spares and consumable stores, tonnage taxes and other miscellaneous expenses, are calculated by dividing vessel operating expenses by ownership days for the relevant period.
(7) TCE rates are defined as our time and voyage charter revenues less voyage expenses during a period divided by the number of our available days during the period, which is consistent with industry standards. Voyage expenses include port charges, bunker (fuel oil and diesel oil) expenses, canal charges and commissions. TCE rate is a standard shipping industry performance measure used primarily to compare daily earnings generated by vessels on time charters with daily earnings generated by vessels on voyage charters, because charter hire rates for vessels on voyage charters are generally not expressed in per day amounts while charter hire rates for vessels on time charters are generally expressed in such amounts.
(8) Net debt to book capitalisation is defined as total debt minus cash over the carrying amount of vessels.
(9) Adjusted Net Loss is defined as the Net loss for the period decreased by the one-off non-cash impairment loss and the provision for doubtful trade receivables for the same year.
APPENDIX 3:
Forward-Looking Statement
Matters discussed in this release may constitute forward-looking statements. Forward-looking statements reflect the current views of Goldenport Holdings Inc. ("the Company") with respect to future events and financial performance and may include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts.
The forward-looking statements in this release are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management's examination of historical operating trends, data contained in our records and other data available from third parties. Although the Company believes that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, the Company cannot assure you that it will achieve or accomplish these expectations, beliefs or projections.
Important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include the strength of world economies and currencies, general market conditions, including changes in charter hire rates and vessel values, changes in demand that may affect attitudes of time charterers to scheduled and unscheduled dry-docking, changes in the Company's operating expenses, including bunker prices, dry-docking and insurance costs, or actions taken by regulatory authorities, potential liability from pending or future litigation, domestic and international political conditions, potential disruption of shipping routes due to accidents and political events or acts by terrorists. The Company does not assume, and expressly disclaims, any obligation to update these forward-looking statements.
This press release is not an offer of securities for sale in the United States. The Company's securities have not been registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States or to a U.S. person absent registration pursuant to, or an applicable exemption from, the registration requirements under U.S. securities laws.
APPENDIX 4:
Goldenport Holdings Inc.
Consolidated Financial Statements
31 December 2013
Independent Auditors Report
To the Shareholders of Goldenport Holdings Inc.
We have audited the accompanying consolidated financial statements of Goldenport Holdings Inc. and its subsidiaries ("the Group"), which comprise the consolidated statement of financial position as at 31 December 2013 and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes.
Management's Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards as adopted by the European Union and for such internal controls as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as at 31 December 2013, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards, as adopted by the European Union.
31 January 2014
Athens
Notes | 2013 | 2012 | ||||
Revenue | 62,945 | 78,271 | ||||
Expenses: | ||||||
Voyage expenses | 3 | (6,192) | (9,859) | |||
Vessel operating expenses | 3 | (29,845) | (36,679) | |||
Management fees - related party | 21 | (3,548) | (4,321) | |||
Depreciation | 8 | (20,880) | (32,844) | |||
Depreciation of dry-docking costs | 8 | (1,417) | (3,582) | |||
General and administrative expenses | 4 | (2,380) | (3,127) | |||
Impairment loss | 8 | - | (47,600) | |||
Operating loss before disposal of vessels and provisions for doubtful trade receivables | (1,317) | (59,741) | ||||
Provision for doubtful trade receivables | (301) | (913) | ||||
(Loss)/gain from disposal of vessels | 8 | (3,867) | 1,411 | |||
Operating loss including disposal of vessels and provision for doubtful trade receivables | (5,485) | (59,243) | ||||
Finance expense | 5 | (6,249) | (7,449) | |||
Loss on valuation of financial assets | 11 | (304) | - | |||
Finance income | 246 | 996 | ||||
Foreign currency (loss)/gain, net | (339) | 312 | ||||
Loss for the year | (12,131) | (65,384) | ||||
Other comprehensive income | - | - | ||||
Total comprehensive loss for the year | (12,131) | (65,384) | ||||
Attributable to: | ||||||
Goldenport Holdings Inc. Shareholders | (12,177) | (65,339) | ||||
Non-controlling interest | 46 | (45) | ||||
(12,131) | (65,384) | |||||
Loss per share (U.S.$): | ||||||
- Basic and diluted LPS | 7 | (0.13) | (0.71) | |||
The accompanying notes 1 to 23 are an integral part of these consolidated financial statements.
Notes | 2013 U.S.$'000 | 2012 U.S.$'000 | ||||
ASSETS | ||||||
Non-current assets | ||||||
Vessels at cost, net | 8 | 345,530 | 387,762 | |||
345,530 | 387,762 | |||||
Current assets | ||||||
Inventories | - | 97 | ||||
Trade receivables | 2,155 | 3,913 | ||||
Insurance claims | 12 | 253 | 445 | |||
Due from related parties | 21 | 5,627 | 4,560 | |||
Prepaid expenses and other assets | 13 | 5,143 | 2,895 | |||
Other current assets | 10 | - | 238 | |||
Financial assets | 11 | 1,920 | - | |||
Restricted cash | 15 | 2,642 | 6,014 | |||
Cash and cash equivalents | 14 | 15,469 | 16,775 | |||
33,209 | 34,937 | |||||
TOTAL ASSETS | 378,739 | 422,699 | ||||
SHAREHOLDERS' EQUITY AND LIABILITIES | ||||||
Equity attributable to equity holders of the parent | ||||||
Issued share capital | 16 | 932 | 932 | |||
Share premium | 16 | 148,307 | 148,307 | |||
Treasury Stock | 6 | (483) | (483) | |||
Other capital reserves | - | 531 | ||||
Retained earnings | 30,642 | 42,819 | ||||
179,398 | 192,106 | |||||
Non-controlling interest | 16 | 1,001 | 955 | |||
TOTAL EQUITY | 180,399 | 193,061 | ||||
Non-current liabilities | ||||||
Long-term debt | 17 | 165,258 | 188,553 | |||
Other non-current liabilities | 10 | - | 159 | |||
165,258 | 188,712 | |||||
Current liabilities | ||||||
Trade payables | 4,754 | 7,282 | ||||
Due to related parties | 21 | 974 | - | |||
Current portion of long-term debt | 17 | 18,763 | 24,115 | |||
Accrued liabilities and other payables | 18 | 7,344 | 6,911 | |||
Other current liabilities | 10 | 177 | 1,644 | |||
Deferred revenue | 1,070 | 974 | ||||
33,082 | 40,926 | |||||
TOTAL LIABILITIES | 198,340 | 229,638 | ||||
TOTAL EQUITY AND LIABILITIES | 378,739 | 422,699 |
The accompanying notes 1 to 23 are an integral part of these consolidated financial statements.
Number of shares - par value | Par value U.S.$ | Issued share capital U.S.$'000 | Treasury stock U.S.$'000 | Share premium U.S.$'000 | Other capital reserves U.S.$'000 | Retained earnings U.S.$'000 | Total Equity attributable to parent U.S.$'000 | Non-controlling interest U.S.$'000 | Total Equity U.S.$'000 | |||||||||||
As at 1 January 2012 | 90,860,667 | 0.01 | 909 | (483) | 145,419 | 339 | 113,980 | 260,164 | 1,000 | 261,164 | ||||||||||
Loss for the year | - | - | - | - | - | - | (65,339) | (65,339) | (45) | (65,384) | ||||||||||
Other Comprehensive Income | - | - | - | - | - | - | - | - | - | - | ||||||||||
Total Comprehensive Loss | - | - | - | - | - | - | (65,339) | (65,339) | (45) | (65,384) | ||||||||||
Share based payment transactions (Note 21) | - | - | - | - | - | 192 | - | 192 | - | 192 | ||||||||||
Dividends to equity shareholders | 2,331,091 | 0.01 | 23 | - | 2,888 | - | (5,822) | (2,911) | - | (2,911) | ||||||||||
As at 31 December 2012 | 93,191,758 | 0.01 | 932 | (483) | 148,307 | 531 | 42,819 | 192,106 | 955 | 193,061 | ||||||||||
(Loss)/Profit for the year | - | - | - | - | - | - | (12,177) | (12,177) | 46 | (12,131) | ||||||||||
Other Comprehensive Income | - | - | - | - | - | - | - | - | - | - | ||||||||||
Total Comprehensive Loss | - | - | - | - | - | - | (12,177) | (12,177) | 46 | (12,131) | ||||||||||
Share based payment transactions (Note 21) | - | - | - | - | - | (531) | - | (531) | - | (531) | ||||||||||
As at 31 December 2013 | 93,191,758 | 0.01 | 932 | (483) | 148,307 | - | 30,642 | 179,398 | 1,001 | 180,399 |
The accompanying notes 1 to 23 are an integral part of these consolidated financial statements.
Notes | 2013 U.S.$'000 | 2012 U.S.$'000 | |||
Operating activities | |||||
Loss for the year | (12,131) | (65,384) | |||
Adjustments to reconcile loss for the year to net cash inflow from operating activities: | |||||
Depreciation | 8 | 20,880 | 32,844 | ||
Depreciation of dry-docking costs | 8 | 1,417 | 3,582 | ||
Impairment Loss | 8 | - | 47,600 | ||
Loss/ (gain) from disposal of vessels | 8 | 3,867 | (1,411) | ||
Finance expense | 5 | 6,249 | 7,449 | ||
Loss on valuation of held for trading investment | 11 | 304 | - | ||
Finance income | (246) | (996) | |||
Recognition of held for trading investment through profit & loss | 11 | (2,224) | - | ||
Share-based payment transactions | 21 | (531) | 192 | ||
Foreign currency loss / (gain), net | 339 | (312) | |||
Operating profit before working capital changes | 17,924 | 23,564 | |||
Working capital adjustments: | |||||
Decrease in inventories | 97 | 306 | |||
(Increase) / Decrease in trade receivables, prepaid expenses & other assets | (253) | 4,280 | |||
Decrease in insurance claims | 12 | 192 | 126 | ||
Decrease in trade payables, accrued liabilities & other payables | (3,281) | (4,082) | |||
Increase/ (Decrease) in deferred revenue | 96 | (1,237) | |||
Net cash flows from operating activities before movement in amounts due from related parties | 14,775 | 22,957 | |||
Due from/to related parties | 21 | (93) | (3,187) | ||
Net cash flows provided by operating activities | 14,682 | 19,770 | |||
Investing activities | |||||
Acquisition/improvements of vessels | 8 | (5,758) | (5,162) | ||
Proceeds from disposal of vessels net of commissions | 8 | 22,885 | 44,856 | ||
Dry-docking costs | (1,423) | (1,197) | |||
Interest received | 20 | 84 | |||
Net cash flows provided by investing activities | 15,724 | 38,581 | |||
Financing activities | |||||
Repayment of long-term debt | 17 | (28,870) | (67,666) | ||
Restricted cash | 15 | 3,372 | (2,014) | ||
Interest paid | 17 | (6,054) | (7,349) | ||
Dividends paid to equity holders of the parent | 19 | - | (2,911) | ||
Net cash flows used in financing activities | (31,552) | (79,940) | |||
Net decrease in cash and cash equivalents | (1,146) | (21,589) | |||
Exchange (loss)/ gain on cash and cash equivalents | (160) | 346 | |||
Cash and cash equivalents at beginning of year | 16,775 | 38,018 | |||
Cash and cash equivalents at end of year | 15,469 | 16,775 |
The accompanying notes 1 to 23 are an integral part of these consolidated financial statements.
1. FORMATION, BASIS OF PRESENTATION AND GENERAL INFORMATION:
Goldenport Holdings Inc. ('Goldenport' or the 'Company') was incorporated under the laws of the Marshall Islands, as a limited liability company, on 21 March 2005. On 5 April 2006Goldenport Holdings Inc. was admitted in the Official List and its shares started trading on the London Stock Exchange ("LSE").
The address of the registered office of the Company is Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH 96960. The address of the Head Office of the Company is Status Center, 41 Athinas Avenue, 166-71, Vouliagmeni, Greece.
Goldenport as at 31 December 2013 is the majority holding Company for fifteen intermediate holding companies, each in turn owning a vessel-owning company, and the 50% owner of another intermediate holding company, owning two vessel owning companies, as listed in the table below (see (a) and (b) below). Also, as at 31 December 2013 Goldenport is the holding Company of a fully owned subsidiary named Goldenport Marine Services, which provides the Company and its affiliates with a wide range of shipping services, such as insurance consulting, legal, financial and accounting services, quality and safety, information technology (including software licences) and other administrative activities in exchange for a daily fixed fee, per vessel. Goldenport Marine Services has been registered in Greece under the provisions of Law 89/1967.
On 24 October 2011, the Group sold 20% of the voting shares in Tuzon Maritime Company, the vessel owning company of Paris JR. This 20% is accounted for as non-controlling interest as at 31 December 2013 and 2012.
Goldenport and its subsidiaries will be hereinafter referred to as the 'Group' .
The consolidated financial statements comprising the financial statements of the Company, its wholly owned subsidiaries, Tuzon Maritime Co, the 80% owned subsidiary (see (a) below) and the proportionately consolidated financial statements of the jointly controlled entity (see (b) below) were authorised for issue in accordance with a resolution of the Board of Directors on 24 January 2014. The shareholders of the Company have the right to amend the financial statements at the Annual General Meeting to be held in May 2014.
a) The subsidiaries of the Company are as at 31 December 2013:
Intermediate holding company | Vessel - owning company | Country of Incorporation of vessel-owning company | Name of Vessel owned by Subsidiary | Type of Vessel | |
Kariba Shipping S.A. | Kosmo Services Inc. | Marshall Islands | MSC Fortunate | 2006 | Container |
Jaxon Navigation Ltd. | Hampson Shipping Ltd. | Liberia | Gitte | 2007 | Container |
Tuscan Navigation Corp. | Longfield Navigation S.A. | Liberia | Brilliant | 2007 | Container |
Oceanrace Maritime Limited | Seasight Marine Company | Marshall Islands | MSC Socotra | 2009 | Container |
Aleria Navigation Company | Melia Shipping Limited | Liberia | Golden Trader | 2010 | Bulk Carrier |
Alacrity Maritime Inc. | Giga Shipping Ltd. | Marshall Islands | Milos | 2010 | Bulk Carrier |
Seaward Shipping Co. | Valaam Incorporated | Liberia | Sifnos | 2010 | Bulk Carrier |
Lativa Marine Inc. | Dionysus Shipholding Carrier Co. | Liberia | Eleni D | 2010 | Bulk Carrier |
Abyss Maritime Ltd. | Moonglade Maritime S.A. | Liberia | Pisti | 2011 | Bulk Carrier |
Clochard Maritime Limited | Shila Maritime Corp. | Marshall Islands | D. Skalkeas | 2011 | Bulk Carrier |
Jubilant Marine Company | Cheyenne Maritime Company | Marshall Islands | Sofia | 2011 | Bulk Carrier |
Chanelle Shipping Company | Loden Maritime Co. | Marshall Islands | Erato | 2011 | Container |
Accalia Navigation Limited | Tuzon Maritime Company | Liberia | Paris JR | 2011 | Container |
Kamari Shipping Corp. | Venetian Corporation | Liberia | Thira | 2012 | Container |
Passion Shipping Co. | Ailsa Shipping Corp. | Liberia | Thasos | 2013 | Container |
Goldenport Marine Services | - | Marshall Islands | - | ||
Companies of disposed vessels | |||||
Intermediate holding company | Vessel - owning company | Country of Incorporation of vessel-owning company | |||
Karana Ocean Shipping Co. Ltd. | Malta | ||||
Carrier Maritime Co. | Black Diamond Shipping Co. Ltd. | Malta | |||
Medina Trading Co. | Carina Maritime Ltd. | Malta | |||
Shavannah Marine Inc. | Serena Navigation Ltd. | Malta | |||
Genuine Marine Corp. | Breaport Maritime S.A | Panama | |||
Sirene Maritime Inc. | Alvey Marine Inc. | Liberia | |||
Muriel Maritime S.A. | Ipanema Navigation Corp. | Marshall Islands | |||
Knight Maritime S.A. | Mona Marine S.A. | Liberia | |||
Foyer Marine Inc. | Ginger Marine Company | Marshall Islands | |||
Dormant Companies Baydream Shipping Inc., Hinter Marine S.A., Nemesis Maritime Inc., Guildford Marine S.A., Superb Maritime S.A., Fairland Trading S.A., Platinum Shipholding S.A., Nilwood Comp. Inc., Platax Shipholding Carrier S.A., Sycara Navigation S.A., Prunella Shipholding S.A., Bacaro Services Corp. | |||||
The dormant companies that have been dissolved are no longer included in Note 1(a).
b) Proportionately consolidated 50% Joint Venture (Note 9)
Intermediate holding company | Vessel-owning company | Country of Incorporation of vessel-owning company | Name of Vessel owned by Subsidiary | Year of acquisition of vessel | Type of Vessel | |||||
Sentinel Holdings Inc. | Ermis Trading S.A. (previously Citrus Shipping Corp.) | Marshall Islands | Ermis (ex.Marie-Paule) | 2009 | Bulk Carrier | |||||
Sentinel Holdings Inc. | Barcita Shipping S.A. | Marshall Islands | Alpine Tr ader | 2009 | Bulk Carrier |
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(a) Basis of preparation: The Group's financial statements have been prepared on a historical cost basis, except for derivative financial instruments and financial assets through profit and loss that are measured at fair value. The consolidated financial statements are presented in US dollars and all financial values are presented and rounded to the nearest thousand ($000), except for the per share information.
(b) Statement of compliance: The consolidated financial statements as at 31 December 2013 have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union.
(c) Basis of Consolidation: The consolidated financial statements comprise the financial statements of the Company and its subsidiaries and the proportionately consolidated financial statements of the jointly controlled entity, listed in note 1. The financial statements of the subsidiaries are prepared for the same reporting date as the Company, using consistent accounting policies. All material inter-company balances and transactions have been eliminated upon consolidation. Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group.
(d) Accounting for joint ventures: A joint venture is an entity whose economic activities are jointly controlled by the Group and one or more other venturers in terms of a contractual arrangement. The Group's interest in jointly controlled entities is accounted for by the proportional consolidation method of accounting. Jointly controlled entities have the same reporting date as the Group and apply common accounting policies. The Group combines its share of the joint venturers' individual income and expenses, assets and liabilities and cash flows on a line-by-line basis with similar items in the Group's financial statements.
(e) Current versus non-current classification: The Group presents assets and liabilities in the statement of financial position based on current/non-current classification.
An asset is current when it is:
· Expected to be realised or intended to be sold or consumed in the normal operating cycle
· Held primarily for the purpose of trading
· Expected to be realised within twelve months after the reporting period, or
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
· Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period
All other assets are classified as non-current.
A liability is current when it is:
· Expected to be settled in the normal operating cycle
· Held primarily for the purpose of trading
· Due to be settled within twelve months after the reporting period, or
· There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period
The Group classifies all other liabilities as non-current.
(f) Fair value measurement: The Group measures financial instruments, such as, derivatives, and financial assets at fair value at each reporting date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
· In the principal market for the asset or liability, or
· In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible to the Group.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between Levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
External valuers are involved for valuation of significant assets, such as financial assets, and significant liabilities, such as contingent obligations. Involvement of external valuers is decided upon annually by management after discussion with and approval by the Company's audit committee. Selection criteria include market knowledge, reputation, independence and whether professional standards are maintained.
At each reporting date, Management analyses the movements in the values of assets and liabilities which are required to be re-measured or re-assessed as per the Group's accounting policies. For this analysis, management verifies the major inputs applied in the latest valuation by agreeing the information in the valuation computation to contracts and other relevant documents.
Management, in conjunction with the Group's external valuers, also compares the changes in the fair value of each asset and liability with relevant external sources to determine whether the change is reasonable.
For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
(g) Use of judgements, estimates and assumptions: The preparation of the Group's consolidated financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future. The estimates and assumptions that have the most significant effect on the amounts recognised in the consolidated financial statements, are the following:
Vessels: Management makes estimates in relation to useful lives of vessels considering industry practices. Estimated useful life of vessels is 25 years and estimated residual value is equal to a vessel lightweight tonnage and estimated scrap rate, which until 31 December 2012 was U.S.$180 . In order to align the scrap rate with current average scrap rates, effective from 1 January 2013, the Company adjusted the estimated scrap rates used to calculate a vessels' residual value from U.S.$180 to U.S.$250 per lightweight ton. The impact of the increase in the estimated scrap rate is a decrease in depreciation expense going forward. The effect of this change in accounting estimates, which did not require retrospective application as per IAS 8, "Accounting Policies, Changes in Accounting Estimates and Errors", is a decrease in the net loss for the year ended 31 December 2013 by U.S.$1,413 or U.S.$0.015 per share loss, basic and diluted. (Vessels have a carrying amount of U.S.$345,530 and U.S.$387,762 as at 31 December 2013 and 2012, respectively). Estimates and assumptions relating to the impairment of vessels are discussed in paragraph (q).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
Provisions for doubtful trade receivables: Provisions for doubtful trade receivables are recorded based on management's views on the future collectability of the receivables. (Receivables as included in the consolidated statement of financial position in trade receivables, have a carrying amount of U.S.$2,155 and U.S.$3,913 as at 31 December 2013 and 2012, respectively). Provisions for doubtful trade receivables as at 31 December 2013 amounted to U.S.$301 (U.S.$913 as at 31 December 2012) as included in the consolidated statement of comprehensive income.
Insurance Claims: Amounts receivable for insurance claims are provided when amounts are virtually certain to be received, based on the Company's judgement and the estimates of independent adjusters as to the amount of the claims. (Insurance claims have a carrying amount of U.S.$253 and U.S.$445 as at 31 December 2013 and 2012, respectively as included in the consolidated statement of financial position).
(h) Revenues and Related Expenses: The Group generates its revenues from charterers for the charter hire of its vessels. Vessels are chartered using either a) time charters, where a contract is entered into for the use of a vessel for a specific period of time and a specified daily charter hire rate; or b) voyage charters, where a contract is made in the spot market for the use of a vessel for a specific voyage for a specified charter rate per ton of a cargo. If a charter agreement exists and collection of the related revenue (operating lease income) is reasonably assured, revenue is recognised as it is earned, evenly over the duration of the period of each voyage or time charter. A voyage is deemed to commence upon the completion of discharge of the vessel's previous cargo and is deemed to end upon the completion of discharge of the current cargo. Time-charter revenues arising from chartering the vessels is accounted for on a straight line basis over the term of the charter. Certain time-charter agreements specify scheduled rate increases/decreases over the charter term ("non-level charters"). As revenues from time chartering of vessels are accounted for on a straight line basis at the average charter hire rates over the charter periods of such charter agreements, as service is performed, an asset or liability is created.
Deferred revenue represents cash received prior to the reporting date which relates to revenue earned after such date. On time charters, the charterer as per industry practice pays the revenue related to the specific agreement in advance. Therefore, as at the reporting date the amount of revenue relating to the next financial year that was paid by the charterer is presented in deferred revenue in the consolidated statement of financial position.
Vessel voyage expenses included in the consolidated statement of comprehensive income primarily consisting of port, canal and bunker expenses that are unique to a particular charter are paid for by the charterer under time charter arrangements or by the Group under voyage charter arrangements. Furthermore, voyage expenses include commission on income including third party commissions, paid by the Group. The Group defers bunker expenses under voyage charter agreements and charges them to the statement of comprehensive income over the related voyage charter period to the extent revenue has been recognised. Port and canal costs are accounted for on an actual basis.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
Operating expenses are accounted on an accrual basis and are included in the consolidated statement of comprehensive income.
(i) Foreign Currency Translation: The functional currency of the Group is the U.S. dollar which is also the presentation currency of the Group because the Group's vessels operate in international shipping markets, where the U.S. dollar is the currency used for transactions. Transactions involving other currencies during the year are converted into U.S. dollars using the exchange rates in effect at the time of the transactions. At the reporting dates, monetary assets and liabilities, which are denominated in currencies other than the U.S. dollar, are translated into the functional currency using the year end exchange rate. Gains or losses resulting from foreign currency transactions are included in foreign currency gain or loss in the consolidated statement of comprehensive income.
(j) Cash and Cash Equivalents: The Group considers highly liquid investments such as time deposits and certificates of deposit with an original maturity of three months or less to be cash equivalents included in the consolidated statement of financial position.
(k) Restricted Cash: Certain of the Group's loan agreements may require the Group to deposit funds into a loan retention account in the borrower's name. The amount is not freely available to the Group, and it is used solely for repaying interest and principal on the loan. Restricted cash in the consolidated statement of financial position amounts to U.S.$2,642 (Note 15) as at 31 December 2013 (U.S.$6,014 as at 31 December 2012) and relates to cash restricted in use by the financing bank subject to fulfilment of certain financial covenant terms as provided by the agreements of loans b, c, f, g and h.
(l) Inventories: Inventories in the consolidated statement of financial position consist of bunkers and are stated at the lower of cost or net realisable value. Cost is determined by the first-in first-out method. Any bunkers remaining on vessels which are laid up, are recognised as inventory. No inventory existed as at 31 December 2013 as none of the vessels was laid up.
(m) Trade Receivables: The amount shown as trade receivables at each reporting date in the consolidated statement of financial position includes estimated recoveries from charterers for hire, freight and demurrage billings, net of the allowance for doubtful trade receivables. Subsequent to initial recognition, trade receivables are recognised and carried at the lower of their original invoiced value and recoverable amount. The carrying amount of receivables is reduced through an allowance account. Impaired debts are derecognized when they are assessed as uncollectible.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
(n) Insurance Claims: The Group recognises insurance claim recoveries for insured losses incurred on damages to vessels as insurance claims and are shown in the consolidated statement of financial position . Insurance claim recoveries are recorded net of any deductible amounts, at the time the Group's vessels suffer insured damages. They include the recoveries from the insurance companies for the claims, provided the amounts are virtually certain to be received. Claims are submitted to the insurance company, which may increase or decrease the claim amount. Such adjustments are recorded in the year they become known and have not been material to the Group's financial position or results of operation in 2013 or 2012.
(o) Financial assets: Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated upon initial recognition at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with net changes in fair value presented as finance costs (negative net changes in fair value) or finance income (positive net changes in fair value) in the statement of comprehensive income.
(p) Vessels : The vessels are stated in the statement of financial position at cost, net of accumulated depreciation and any accumulated impairment. Vessel cost consists of the contract price for the vessel and any material expenses incurred upon acquisition of the vessel (initial repairs, improvements, delivery expenses and other expenditures) to prepare the vessel for its initial voyage. Subsequent expenditures for major improvements are also capitalised when it is probable that future economic benefits associated with the improvement will flow to the entity and the cost of the improvement can be measured reliably.
For vessels acquired in the second-hand market, and where the vessel is subject to an operating lease which is reflected in the acquisition cost of that vessel, the amount of the lease is determined in accordance with the lease policy of the Group (also see Note 2 (w)) and this component is amortized over the remaining term of the lease. The amortization is included as revenue in the consolidated statement of comprehensive income.
The cost of each of the Group's vessels is depreciated beginning when the vessel is ready for its intended use, on a straight-line basis over the vessels' remaining economic useful life, after considering the estimated residual value. Management estimates the useful life of new vessels at 25 years, which is consistent with industry practice. Acquired second-hand vessels are depreciated from the date of their acquisition over their remaining estimated useful life. The remaining useful life of the Group's vessels is between 4 and 23 years. A vessel is derecognised upon disposal or when no future economic benefits are expected from its use. Any gain or loss arising on derecognition of the vessel (calculated as the difference between the net disposal proceeds and the carrying amount of the vessel including any unamortised portion of dry-docking) is included in the statement of comprehensive income in the year the vessel is derecognised.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
From time to time the Group's vessels are required to be dry-docked in line with vessel flag and international regulations and standards at which time major repairs and maintenance that cannot be performed while the vessels are in operation are generally performed. The Group capitalises the costs associated with dry-docking as they occur by adding them to the cost of the vessel and amortises these costs on a straight-line basis over 2.5 years, which is generally the period until the next scheduled dry-docking. In the cases where the dry-docking takes place earlier than 2.5 years since the previous one, the carrying amount of the previous dry-docking is derecognised. In the event of a vessel sale, the respective carrying value of dry-docking costs is derecognised together with the vessel's carrying amount at the time of sale.
At the date of acquisition of a second hand-vessel or upon completion of construction of a new built vessel, management estimates the component of the cost that corresponds to the economic benefit to be derived until the next scheduled dry-docking of the vessel under the ownership of the Group, and this component is depreciated on a straight-line basis over the remaining period to the estimated dry-docking date.
(q) Impairment of vessels: The Group's vessels are reviewed for impairment in accordance with IAS 36, "Impairment of Assets." Under IAS 36, the Group assesses at each reporting date whether there is an indication that a vessel may be impaired. If such an indication exists, the Group makes an estimate of the vessel's recoverable amount. Any impairment loss of the vessel is assessed by comparison of the carrying amount of the asset to its recoverable amount. Recoverable amount is the higher of the vessel's fair value as determined by independent marine appraisers less costs to sell and its value in use.
If the recoverable amount is less than the carrying amount of the vessel, the asset is considered impaired and an expense is recognised equal to the amount required to reduce the carrying amount of the vessel to its then recoverable amount.
The calculation of value in use is made at the individual vessel level since separately identifiable cash flow information is available for each vessel. In developing estimates of future cash flows, the Group makes assumptions about future charter rates, vessel operating expenses, and the estimated remaining useful lives of the vessels. (see also note 8)
The projected net operating cash flows are determined by considering:
i) the time charter equivalent revenues from existing time charters for the fixed fleet days and an estimated daily time charter equivalent for the unfixed days based on average historical 10 year rates for six months time charter for each type of our bulk carrier vessels and one year time charter for each type of our container vessels over the remaining estimated useful life of each vessel, considering the vessel's age and technical specifications.
ii) an average increase of 4% per annum on charter revenues,
iii) cash inflows are considered net of brokerage, and
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
iv) expected outflows for scheduled vessels' maintenance and vessel operating expenses are determined assuming an average annual inflation rate of 3%.
The net operating cash flows are discounted using the Weighted Average Cost of Capital of each vessel owning company to their present value as at the date of the financial statements.
Historical average six-month and one-year time charter rates used in our impairment test exercise are in line with our overall chartering strategy, especially in periods of low charter rates. The historical averages used reflect the operating history of vessels of the same type and particulars with our operating fleet and they cover at least a full business cycle.
The average annual inflation rate applied for determining vessels' maintenance and operating costs approximates current projections for global inflation rate for the remaining useful life of our vessels.
Effective fleet utilization is assumed at 95%, after taking into consideration the periods each vessel is expected to undergo scheduled maintenance (dry-docking and special surveys). These assumptions are in line with the Group's historical performance and the expectations for future fleet utilization under our current fleet deployment strategy.
The impairment test exercise is highly sensitive to variances in the time charter rates and fleet effective utilization. Consequently, a sensitivity analysis was performed by assigning possible alternative values to these two significant inputs.
No impairment loss was identified by the Group for the year ended 31 December 2013 (U.S.$ 47,600 as at 31 December 2012).
(r) Long-term debt : Long-term debt is initially recognised at the fair value of the consideration received net of issue costs directly attributable to the borrowing. After initial recognition, long-term debt is subsequently measured at amortised cost using the effective interest method. Amortised cost is calculated by taking into account any issue costs, and any discount or premium on settlement.
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expired. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized as finance expense in the consolidated statement of comprehensive income.
(s) Borrowing costs:Borrowing costs on loans specifically used to finance the construction, or reconstruction of vessels are capitalised to the cost of that asset during the construction period.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
(t) Derivative financial instruments and hedging:The Group uses derivative financial instruments such as interest rate swaps and foreign currency forwards to hedge its risks associated with interest rate and foreign exchange rates fluctuations respectively. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative.
The fair value of interest rate swap and foreign currency forward contracts is determined through valuation techniques.
None of the Group's derivatives have been designated as hedging instruments, therefore gains or losses arising from changes in the fair value of the derivatives are taken to the consolidated statement of comprehensive income.
(u) Segment Reporting: The Group reports financial information and evaluates its operations by charter revenues and not by other factors such as (i) the length of ship employment for its customers, i.e. spot or time charters; or (ii) type of vessel. Management, including the chief operating decision maker, reviews operating results solely by revenue per day and operating results of the fleet and thus, the Group has determined that it operates under one reportable segment. Furthermore, when the Group charters a vessel to a charterer, the charterer is free to trade the vessel worldwide and, as a result, the disclosure of geographic information is impracticable. Revenue from the Group's largest client amounted to U.S.$25,234 for the year ended 31 December 2013 (2012: U.S. $31,050).
(v) Finance income: Finance income included in the consolidated statement of comprehensive income is earned from the Group's short term deposits and the interest rate swap and is recognised on an accrual basis.
(w) Leases: Leases of vessels where the Group does not transfer substantially all the risks and benefits of ownership of the vessel are accounted for as operating leases. Lease income on operating leases is recognized on a straight line basis over the lease term and classified under revenue in the consolidated statement of comprehensive income (see also note 2(h)).
(x) Annual incentive plan: All share based compensation provided to Directors and Senior Management for their service is included in 'General and administrative expenses' of the Consolidated Statement of Comprehensive Income. The shares vest upon grant. The fair value of the employees' services received in exchange for the Company's restricted shares is accrued and recognized as an expense in the year of grant. Upon issuance of the relevant shares the total number of shares and their value is separately reflected in the Consolidated Statement of Changes in Equity.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
(y) Share-based payment transactions: Employees and Directors of the Group receive remuneration also in the form of share-based payment transactions, whereby employees and directors render services as consideration for equity instruments (equity-settled transactions).
The cost of equity-settled transactions is recognized, together with a corresponding increase in other capital reserves in equity, over the period in which performance and/or service conditions are fulfilled. The cumulative expense recognized for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group's best estimate of the number of equity instruments that will ultimately vest. The income statement expense or credit for a period represents the movement in cumulative expense recognized as at the beginning and the end of that period and is recognized in administrative expenses of the consolidated statement of comprehensive income.
Any dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.
(z) Share Capital: Ordinary shares are classified as equity. Incremental costs directly attributed to the issue of new shares are recognized in equity as deductions from proceeds.
(aa) Treasury Stock: Own equity that is reacquired (treasury shares) is recognised at cost and deducted from equity. No gain or loss is recognised in the statement of comprehensive income on the purchase, sale, issue or cancellation of the Group's own equity instruments. Any difference between the carrying amount and the consideration, if reissued is recognised in share premium. Voting rights related to the treasury shares are nullified for the Group and no dividends are allocated to them respectively.
(ab) Provisions: Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the statement of comprehensive income net of any reimbursement.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
(ac) Changes in accounting policies and disclosures:A. The accounting policies adopted are consistent with those of the previous financial year except for the following amended IFRSs which have been adopted by the Group as of 1 January 2013:
Ø IAS 1 Financial Statement Presentation (Amended) - Presentation of Items of Other Comprehensive Income.
Ø IAS 19 Employee Benefits (Revised)
Ø IFRS 7 Financial Instruments: Disclosures (Amended) - Offsetting Financial Assets and Financial Liabilities
Ø IFRS 13 Fair Value Measurement
Ø Annual Improvements to IFRSs - 2009 - 2011 Cycle
When the adoption of the standard or interpretation is deemed to have an impact on the financial statements or performance of the Group, its impact is described below:
· IAS 1 Financial Statement Presentation (Amended) - Presentation of Items of Other Comprehensive Income
The amendments to IAS 1 change the grouping of items presented in OCI. Items that could be reclassified (or 'recycled') to profit or loss at a future point in time (for example, net gain on hedge of net investment, exchange differences on translation of foreign operations, net movement on cash flow hedges and net loss or gain on available-for-sale financial assets) would be presented separately from items that will never be reclassified (for example, actuarial gains and losses on defined benefit plans and revaluation of land and buildings). The amendment affects presentation only and has no impact on the Group's financial position or performance.
· IAS 19 Employee Benefits (Revised)
IAS 19 initiates a number of amendments to the accounting for defined benefit plans, including actuarial gains and losses that are now recognised in other comprehensive income (OCI) and permanently excluded from profit and loss; expected returns on plan assets that are no longer recognised in profit or loss, instead, there is a requirement to recognise interest on the net defined benefit liability (asset) in profit or loss, calculated using the discount rate used to measure the defined benefit obligation, and; unvested past service costs are now recognised in profit or loss at the earlier of when the amendment occurs or when the related restructuring or termination costs are recognised. Other amendments include new disclosures, such as, quantitative sensitivity disclosures. The amendments to IAS 19 (2011) were issued on 21 November 2013 and are effective for annual periods beginning on or after 1 July 2014. The pronouncement amends the standard to clarify the requirements that relate to how contributions from employees or third parties that are linked to service should be attributed to periods of service. In addition, it permits a practical expedient if the amount of the contributions is independent of the number of years of service, in that contributions can, but are not required, to be recognised as a reduction in the service cost in the period in which the related service is rendered. These amendments have not yet been endorsed by the EU. Management has assessed that there is no impact on the Group's financial position.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
· IFRS 7 Financial Instruments: Disclosures (Amended) - Offsetting Financial Assets and Financial Liabilities
These amendments require an entity to disclose information about rights to set-off and related arrangements (e.g. collateral agreements). The disclosures would provide users with information that is useful in evaluating the effect of netting arrangements on an entity's financial position. The new disclosures are required for all recognized financial instruments that are set off in accordance with IAS 32 Financial Instruments: Presentation. The disclosures also apply to recognized financial instruments that are subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are set off in accordance with IAS 32.Management has assessed that there is no impact on the Group's financial position.
· IFRS 13 Fair Value Measurement
IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted. The application of IFRS 13 has not materially impacted the fair value measurements carried out by the Group. IFRS 13 also requires specific disclosures on fair values, some of which replace existing disclosure requirements in other standards, including IFRS 7 Financial Instruments: Disclosures.
Management has assessed that there is no impact on the Group's financial position.
The IASB has issued the Annual Improvements to IFRSs - 2009 - 2011 Cycle , which contains amendments to its standards and the related Basis for Conclusions. The annual improvements project provides a mechanism for making necessary, but non-urgent, amendments to IFRS.
Ø IAS 1 Presentation of Financial Statements:This improvement clarifies the difference between voluntary additional comparative information and the minimum required comparative information. Generally, the minimum required comparative period is the previous period.
Ø IAS 16 Property, Plant and Equipment: This improvement clarifies that major spare parts and servicing equipment that meet the definition of property, plant and equipment are not inventory.
Ø IAS 32 Financial Instruments, Presentation: This improvement clarifies that income taxes arising from distributions to equity holders are accounted for in accordance with IAS 12 Income Taxes.
Ø IAS 34 Interim Financial Reporting: The amendment aligns the disclosure requirements for total segment assets with total segment liabilities in interim financial statements. This clarification also ensures that interim disclosures are aligned with annual disclosures.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
B. Standards issued but not yet effective and not early adopted
· IAS 28 Investments in Associates and Joint Ventures (Revised)
The Standard is effective for annual periods beginning on or after 1 January 2014. As a consequence of the new IFRS 11 Joint arrangements and IFRS 12 Disclosure of Interests in Other Entities, IAS 28 Investments in Associates, has been renamed IAS 28 Investments in Associates and Joint Ventures, and describes the application of the equity method to investments in joint ventures in addition to associates. Management has assessed the impact from the adoption of the standard and is disclosed in Note 9.
· IAS 32 Financial Instruments: Presentation (Amended) - Offsetting Financial Assets and Financial Liabilities
The amendment is effective for annual periods beginning on or after 1 January 2014.These amendments clarify the meaning of "currently has a legally enforceable right to set-off". The amendments also clarify the application of the IAS 32 offsetting criteria to settlement systems (such as central clearing house systems) which apply gross settlement mechanisms that are not simultaneous.Management has assessed that there is no impact on the Group's financial position.
· IFRS 9 Financial Instruments: Classification and Measurement and subsequent amendments to IFRS 9 and IFRS 7-Mandatory Effective Date and Transition Disclosures; Hedge Accounting and amendments to IFRS 9, IFRS 7 and IAS 39
IFRS 9, as issued, reflects the first phase of the IASBs work on the replacement of IAS 39 and applies to classification and measurement of financial assets and financial liabilities as defined in IAS 39. The adoption of the first phase of IFRS 9 will have an effect on the classification and measurement of financial assets, but will not have an impact on classification and measurements of financial liabilities. In subsequent phases, the IASB will address hedge accounting and impairment of financial assets. The standard was initially effective for annual periods beginning on or after 1 January 2013 but amendments to IFRS 9 Mandatory Effective Date of IFRS 9 and Transition Disclosures, issued in December 2011, moved the mandatory effective date to 1 January 2015. The subsequent package of amendments issued in November 2013 initiate further accounting requirements for financial instruments. These amendments a) bring into effect a substantial overhaul of hedge accounting that will allow entities to better reflect their risk management activities in the financial statements; b) allow the changes to address the so-called 'own credit' issue that were already included in IFRS 9 Financial Instruments to be applied in isolation without the need to change any other accounting for financial instruments; and c) remove the 1 January 2015 mandatory effective date of IFRS 9, to provide sufficient time for preparers of financial statements to make the transition to the new requirements . These standard and subsequent amendments have not yet been endorsed by the EU. Management has assessed that there is no impact on the Group's financial position.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
· IFRS 10 Consolidated Financial Statements, IAS 27 Separate Financial Statements
The new standard is effective for annual periods beginning on or after 1 January 2014. IFRS 10 replaces the portion of IAS 27 Consolidated and Separate Financial Statements that addresses the accounting for consolidated financial statements. It also addresses the issues raised in SIC-12 Consolidation - Special Purpose Entities.
IFRS 10 establishes a single control model that applies to all entities including special purpose entities. The changes introduced by IFRS 10 will require management to exercise significant judgment to determine which entities are controlled and therefore are required to be consolidated by a parent, compared with the requirements that were in IAS 27. Management has assessed that there is no impact on the Group's financial position.
· IFRS 11 Joint Arrangements
The new standard is effective for annual periods beginning on or after 1 January 2014. IFRS 11 replaces IAS 31 Interests in Joint Ventures and SIC-13 Jointly-controlled Entities - Non-monetary Contributions by Venturers. IFRS 11 removes the option to account for jointly controlled entities (JCEs) using proportionate consolidation. Instead, JCEs that meet the definition of a joint venture must be accounted for using the equity method. Management has assessed the impact from the adoption of the standard and is disclosed in Note 9.
· IFRS 12 Disclosures of Interests in Other Entities
The new standard is effective for annual periods beginning on or after 1 January 2014. IFRS 12 includes all of the disclosures that were previously in IAS 27 related to consolidated financial statements, as well as all of the disclosures that were previously included in IAS 31 and IAS 28. These disclosures relate to an entity's interests in subsidiaries, joint arrangements, associates and structured entities. A number of new disclosures are also required. Management is in the process of assessing the impact from the adoption of the standard.
· Transition Guidance (Amendments to IFRS 10, IFRS 11 and IFRS 12)
The guidance is effective for annual periods beginning on or after 1 January 2014. The IASB issued amendments to IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests in Other Entities. The amendments change the transition guidance to provide further relief from full retrospective application. The date of initial application' in IFRS 10 is defined as 'the beginning of the annual reporting period in which IFRS 10 is applied for the first time'. The assessment of whether control exists is made at 'the date of initial application' rather than at the beginning of the comparative period. If the control assessment is different between IFRS 10 and IAS 27/SIC-12, retrospective adjustments should be determined. However, if the control assessment is the same, no retrospective application is required. If more than one comparative period is presented, additional relief is given to require only one period to be restated. For the same reasons IASB has also amended IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests in Other Entities to provide transition relief. Management is in the process of assessing the impact from the adoption of the standard.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
· Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27)
The amendment is effective for annual periods beginning on or after 1 January 2014. The amendment applies to a particular class of business that qualify as investment entities. The IASB uses the term 'investment entity' to refer to an entity whose business purpose is to invest funds solely for returns from capital appreciation, investment income or both. An investment entity must also evaluate the performance of its investments on a fair value basis. Such entities could include private equity organisations, venture capital organisations, pension funds, sovereign wealth funds and other investment funds. Under IFRS 10 Consolidated Financial Statements, reporting entities were required to consolidate all investees that they control (i.e. all subsidiaries). The Investment Entities amendment provides an exception to the consolidation requirements in IFRS 10 and requires investment entities to measure particular subsidiaries at fair value through profit or loss, rather than consolidate them. The amendment also sets out disclosure requirements for investment entities. Management has assessed that there is no impact on the Group's financial position.
· IAS 36 Impairment of Assets (Amended) - Recoverable Amount Disclosures for Non-Financial Assets
This amendment is effective for annual periods beginning on or after 1 January 2014. These amendments remove the unintended consequences of IFRS 13 on the disclosures required under IAS 36. In addition, these amendments require disclosure of the recoverable amounts for the assets or CGUs for which impairment loss has been recognised or reversed during the period. Management is in the process of assessing the impact from the adoption of the standard.
· IAS 39 Financial Instruments (Amended): Recognition and Measurement - Novation of Derivatives and Continuation of Hedge Accounting
This amendment is effective for annual periods beginning on or after 1 January 2014. Under the amendment there would be no need to discontinue hedge accounting if a hedging derivative was novated, provided certain criteria are met. The IASB made a narrow-scope amendment to IAS 39 to permit the continuation of hedge accounting in certain circumstances in which the counterparty to a hedging instrument changes in order to achieve clearing for that instrument. Management has assessed that there is no impact on the Group's financial position.
· IAS 19 Defined Benefit Plans (Amended): Employee Contributions
The amendment is effective from 1 July 2014. The amendment applies to contributions from employees or third parties to defined benefit plans. The objective of the amendment is to simplify the accounting for contributions that are independent of the number of years of employee service, for example, employee contributions that are calculated according to a fixed percentage of salary. This amendment has not yet been endorsed by the EU. Management is in the process of assessing the impact from the adoption of the standard.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
· IFRIC Interpretation 21: Levies
The interpretation is effective for annual periods beginning on or after 1 January 2014. The Interpretations Committee was asked to consider how an entity should account for liabilities to pay levies imposed by governments, other than income taxes, in its financial statements. This Interpretation is an interpretation of IAS 37 Provisions, Contingent Liabilities and Contingent Assets. IAS 37 sets out criteria for the recognition of a liability, one of which is the requirement for the entity to have a present obligation as a result of a past event (known as an obligating event). The Interpretation clarifies that the obligating event that gives rise to a liability to pay a levy is the activity described in the relevant legislation that triggers the payment of the levy . This interpretation has not yet been endorsed by the EU. Management has assessed that there is no impact on the Group's financial position.
The IASB has issued the Annual Improvements to IFRSs 2010 - 2012 Cycle , which is a collection of amendments to IFRSs. The amendments are effective for annual periods beginning on or after 1 July 2014. These annual improvements have not yet been endorsed by the EU. Management is in the process of assessing the impact from the adoption of the standard.
Ø IFRS 1 First-time Adoption of International Financial Reporting Standards
The amendment clarifies that an entity, in its first IFRS financial statements, has the choice of applying an existing and currently effective IFRS or applying early a new or revised IFRS that is not yet mandatorily effective, provided that the new or revised IFRS permits early application. An entity is required to apply the same version of the IFRS throughout the periods covered by those first IFRS financial statements. As the amendment only affects the Basis of Conclusions, it is effective immediately .
Ø IFRS 2 Share-based Payments:This improvement amends the definitions of 'vesting condition' and 'market condition' and adds definitions for 'performance condition' and 'service condition' (which were previously part of the definition of 'vesting condition').
Ø IFRS 3 Business combinations:This improvement clarifies that contingent consideration in a business acquisition that is not classified as equity is subsequently measured at fair value through profit or loss whether or not it falls within the scope of IFRS 9 Financial Instruments.
Ø IFRS 8 Operating Segments:This improvement requires an entity to disclose the judgments made by management in applying the aggregation criteria to operating segments and clarifies that an entity shall only provide reconciliations of the total of the reportable segments' assets to the entity's assets if the segment assets are reported regularly.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
Ø IFRS 13 Fair Value Measurement:This improvement in the Basis of Conclusion of IFRS 13 clarifies that issuing IFRS 13 and amending IFRS 9 and IAS 39 did not remove the ability to measure short-term receivables and payables with no stated interest rate at their invoice amounts without discounting if the effect of not discounting is immaterial.
Ø IAS 16 Property Plant & Equipment: The amendment clarifies that when an item of property, plant and equipment is revalued, the gross carrying amount is adjusted in a manner that is consistent with the revaluation of the carrying amount. The amendment to IAS 16, Par. 35(b) clarifies that the accumulated depreciation/amortisation is eliminated so that the gross carrying amount and carrying amount equal the market value.
Ø IAS 24 Related Party Disclosures: The amendment clarifies that an entity providing key management personnel services to the reporting entity or to the parent of the reporting entity is a related party of the reporting entity.
Ø IAS 38 Intangible Assets: The amendment clarifies that when an intangible asset is revalued the gross carrying amount is adjusted in a manner that is consistent with the revaluation of the carrying amount.
The IASB has issued the Annual Improvements to IFRSs 2011 - 2013 Cycle , which is a collection of amendments to IFRSs. The amendments are effective for annual periods beginning on or after 1 July 2014. These annual improvements have not yet been endorsed by the EU. Management is in the process of assessing the impact from the adoption of the standard.
Ø IFRS 3 Business Combinations:This improvement clarifies that IFRS 3 excludes from its scope the accounting for the formation of a joint arrangement in the financial statements of the joint arrangement itself.
Ø IFRS 13 Fair Value Measurement:This improvement clarifies that the scope of the portfolio exception defined in paragraph 52 of IFRS 13 includes all contracts accounted for within the scope ofIAS 39Financial Instruments: Recognition and Measurement orIFRS 9Financial Instruments, regardless of whether they meet the definition of financial assets or financial liabilities as defined inIAS 32Financial Instruments: Presentation.
Ø IAS 40 Investment Properties:This improvement clarifies whether a specific transaction meets the definition of both a business combination as defined inIFRS 3Business Combinations and investment property as defined inIAS 40Investment Property requires the separate application of both standards independently of each other.
3. VOYAGE AND VESSEL OPERATING EXPENSES:
The amounts in the accompanying consolidated statement of comprehensive income are analysed as follows:
Voyage expenses
2013 U.S.$'000 | 2012 U.S.$'000 | |||
Port charges | (930) | (872) | ||
Bunkers (fuel costs), net | (1,465) | (4,369) | ||
Commissions | (2,644) | (3,114) | ||
(5,039) | (8,355) | |||
Voyage expenses - related party | ||||
Commissions (Note 21(a)) | (1,153) | (1,504) | ||
(6,192) | (9,859) |
Vessel operating expenses
2013 U.S.$'000 | 2012 U.S.$'000 | |||
Crew expenses | (15,872) | (18,956) | ||
Stores and Consumables | (645) | (932) | ||
Spares | (2,643) | (2,499) | ||
Repairs and Maintenance | (1,076) | (1,387) | ||
Lubricants | (3,197) | (4,459) | ||
Insurance | (2,747) | (4,077) | ||
Taxes (other than income tax) | (645) | (674) | ||
Other operating expenses | (3,020) | (3,695) | ||
(29,845) | (36,679) |
4. GENERAL AND ADMINISTRATIVE EXPENSES:
2013 U.S.$'000 | 2012 U.S.$'000 | |||
Directors and Management team Remuneration (Note 21 (b)) | (1,090) | (1,163) | ||
Share-based payment transactions (Note 21(b)) | 531 | (192) | ||
Payroll cost (Goldenport Marine Services) | (774) | (829) | ||
Rents | (328) | (314) | ||
Audit fees | (264) | (239) | ||
Legal fees | (23) | (24) | ||
Other | (432) | (366) | ||
(2,380) | (3,127) |
5. FINANCE EXPENSE:
2013 U.S.$'000 | 2012 U.S.$'000 | |||
Interest expense | (6,028) | (7,052) | ||
Finance charges amortisation | (221) | (397) | ||
(6,249) | (7,449) |
6. TREASURY STOCK - LIMITED SHARE BUY BACK PROGRAMME:
On 26 September 2011, the Group commenced a limited share buy-back programme, which was conducted in accordance with the resolution passed at the fifth Annual General Meeting on 11 May 2011, providing the Company a general authorisation to make purchases of up to 9,128,243 shares of U.S.$0.01 each, representing approximately 10% of the Company's issued share capital at the Annual General Meeting. During the period from 26 September 2011 to 31 December 2011, 427,887 shares of U.S.$0.01 par value each, were purchased under the buy-back share programme. The purchase cost amounted to U.S.$486 and is separately reflected in the accompanying Consolidated Statement of Changes in Equity. During 2012 and 2013, there were no share purchases under the buy-back programme.
7. LOSS PER SHARE:
Basic and diluted loss per share ("LPS") of U.S.$(0.13) (2012: U.S.$(0.71) is calculated by dividing the loss for the year attributable to Goldenport Holdings Inc. shareholders (U.S.$12,177) and (U.S.$65,339) for the years ended 31 December 2013 and 31 December 2012, respectively), by the weighted average number of shares outstanding (93,191,758 and 92,306,453 for the years ended 31 December 2013 and 31 December 2012, respectively). The weighted average number of shares outstanding as at 31 December 2013 reflects the number of shares existed on 31 December 2012, since no other shares were issued within the year ended 31 December 2013. The weighted average number of shares outstanding as at 31 December 2012 reflects the weighted average number of shares existed on 31 December 2011 and the shares issued on 18 May 2012 relating to the share dividend programme (as approved by the AGM on 11 May 2012).
Diluted LPS reflects the potential dilution that could occur if share options or other contracts to issue shares were exercised or converted into shares. There is no dilution effect for the years ended 31 December 2013 and 2012.
8. VESSELS:
Vessels consisted of the following at 31 December:
2013 U.S.$'000 | 2012 U.S.$'000 | |||
Cost | ||||
At 1 January | 544,687 | 648,849 | ||
Reduction of cost | (79) | - | ||
Additions | 5,758 | 5,162 | ||
Disposals | (103,427) | (109,324) | ||
At 31 December | 446,939 | 544,687 | ||
Depreciation and impairment | ||||
At 1 January | (158,489) | (145,065) | ||
Depreciation charge for the year | (20,880) | (32,844) | ||
Impairment loss | - | (47,600) | ||
Disposals | 76,675 | 67,020 | ||
Accumulated depreciation | (102,694) | (158,489) | ||
Net carrying amount of vessels | 344,245 | 386,198 | ||
Cost of dry-dockings | ||||
At 1 January | 45,736 | 47,096 | ||
Additions | 1,138 | 1,264 | ||
Disposals | - | (2,624) | ||
At 31 December | 46,874 | 45,736 | ||
Depreciation | ||||
At 1 January | (44,172) | (42,073) | ||
Depreciation charge for the year | (1,417) | (3,582) | ||
Disposals | - | 1,483 | ||
Accumulated depreciation | (45,589) | (44,172) | ||
Net carrying amount of dry-docking costs | 1,285 | 1,564 | ||
Total net carrying amount at 31 December | 345,530 | 387,762 |
All of the Company's vessels, except for vessels Paris JR and Gitte having an aggregate carrying value of U.S.$7,923 as at 31 December 2013 (U.S. $19,877 as at 31 December 2012, concerning vessels MSC Accra, Thira, Paris JR and MSC Socotra), have been provided as collateral to secure the loans discussed in note 17.
8. VESSELS (continued):
Operational vessel acquisition
On 12 April 2013, the Company took delivery of M/V Thasos, a 1998 built container of 2,452 TEU, which was acquired for U.S.$5,971, including bunkers and lubricants remaining on board at the delivery of the vessel amounting to U.S.$213.
Disposals
On 24 April 2013, the Company agreed the sale of the 3,007 TEU, 1992-built vessel "MSC Scotland", to an unaffiliated third party. The sale was concluded at a net consideration of U.S. $6,155 cash and the vessel was delivered to the new owners on 14 May 2013. As of delivery date, M/V MSC Scotland had a net carrying value U.S. $8,189. A commission of 3% on the gross consideration was paid for this disposal. The loss resulting from the sale of the vessel was U.S. $2,034 and is included in the consolidated statement of comprehensive income.
On 2 August 2013, the Company agreed the sale of the 152,065 DWT, 1990-built vessel "Vasos", to an unaffiliated third party. The sale was concluded at a net consideration of U.S. $7,330 cash and the vessel was delivered to the new owners on 20 August 2013. As of delivery date, M/V Vasos had a net carrying value U.S. $7,212. A commission of 3% on the gross consideration was paid for this disposal. The gain resulting from the sale of the vessel was U.S. $118 and is included in the consolidated statement of comprehensive income.
On 10 September 2013, the Company agreed the sale of the 1,889 TEU, 1985-built vessel "MSC Accra", to an unaffiliated third party. The sale was concluded at a net consideration of U.S. $3,490 cash and the vessel was delivered to the new owners on 20 September 2013. As of delivery date, M/V MSC Accra had a net carrying value U.S. $1,535. A commission of 3% on the gross consideration was paid for this disposal. The gain resulting from the sale of the vessel was U.S. $1,955 and is included in the consolidated statement of comprehensive income.
On 6 December 2013, the Company agreed the sale of the 2,420 TEU, 1994-built vessel "MSC Anafi", to an unaffiliated third party. The sale was concluded at a net consideration of U.S. $5,910 cash and the vessel was delivered to the new owners on 31 December 2013. As of delivery date, M/V MSC Anafi had a net carrying value U.S. $9,816. A commission of 3% on the gross consideration was paid for this disposal. The loss resulting from the sale of the vessel was U.S. $3,906 and is included in the consolidated statement of comprehensive income.
Dry-docking costs
During 2013 three vessels of the Group completed scheduled dry-dockings at a cost of U.S.$1,138 (U.S.$ 1,264 as at 31 December 2012 for dry docking of six vessels).
Impairment
No impairment loss was recognised for the year ended 31 December 2013 (U.S.$47,600 impairment loss was recognised for the year ended 31 December 2012). The Group's accounting policy regarding impairment of vessels is described in Note 2(q).
9. JOINT VENTURE:
The Group's 50% portion in the consolidated financial statements of Sentinel Holdings Inc., as at 31 December and for the year then ended were as follows:
Consolidated Statement of Financial Position | 2013 U.S.$'000 | 2012 U.S.$'000 | ||
ASSETS | ||||
Non-current assets | ||||
Vessels | 26,466 | 27,667 | ||
26,466 | 27,667 | |||
Current assets | ||||
Prepaid expenses and other assets | 1,241 | 1,058 | ||
Cash and cash equivalents | 1,252 | 842 | ||
2,493 | 1,900 | |||
TOTAL ASSETS | 28,959 | 29,567 | ||
SHAREHOLDERS' EQUITY AND LIABILITIES | ||||
Equity attributable to Goldenport Holdings Inc. Shareholders | ||||
Retained earnings | 1,810 | 2,850 | ||
TOTAL EQUITY | 1,810 | 2,850 | ||
Non-current liabilities | ||||
Long-term debt | 15,737 | 14,095 | ||
15,737 | 14,095 | |||
Current liabilities | ||||
Current portion of long-term debt | 1,412 | 4,762 | ||
Other liabilities | 10,000 | 7,860 | ||
11,412 | 12,622 | |||
TOTAL LIABILITIES | 27,149 | 26,717 | ||
TOTAL EQUITY AND LIABILITIES | 28,959 | 29,567 |
9. JOINT VENTURE (continued):
Consolidated Statement of Comprehensive Income | 2013 U.S.$'000 | 2012 U.S.$'000 | ||
Revenue | 3,154 | 3,059 | ||
Expenses | ||||
Voyage expenses | (526) | (371) | ||
Vessel operating expenses | (1,784) | (2,336) | ||
Management fees - related party | (256) | (256) | ||
Depreciation | (1,178) | (1,206) | ||
Depreciation of dry-docking costs | (22) | (27) | ||
Operating loss | (612) | (1,137) | ||
Finance expense | (402) | (470) | ||
Foreign currency (loss)/gain, net | (26) | 2 | ||
Loss for the year attributable to Goldenport Holdings Inc. shareholders | (1,040) | (1,605) |
Consolidated Statement of Cash Flows
2013 U.S.$'000 | 2012 U.S.$'000 | |||
Loss for the year | (1,040) | (1,605) | ||
Adjustments to reconcile loss for the year to net cash (outflow)/inflow from operating activities | 1,628 | 1701 | ||
Operating profit before working capital changes | 588 | 96 | ||
Working capital adjustments | (981) | 716 | ||
Net cash (outflow)/inflow (used in)/provided by operating activities | (393) | 812 | ||
Net cash flows used in investing activities | - | (56) | ||
Net cash flows provided by/(used in) financing activities | 803 | (583) | ||
Net increase in cash and cash equivalents | 410 | 173 | ||
Cash and cash equivalents at the beginning of the year | 842 | 669 | ||
Cash and cash equivalents at the end of the year | 1,252 | 842 |
9. JOINT VENTURE (continued):
IFRS 11 Joint Arrangements and IAS 28 Investments in Associates and Joint Ventures
The application of IFRS 11 commencing 1 January 2014, will impact the Group's accounting of its interest in joint venture, Sentinel Holdings Inc. Prior to the transition to IFRS 11, Sentinel Holdings Inc was classified as a jointly controlled entity and the Group's share of the assets, liabilities, revenue, income and expenses was proportionately consolidated in the consolidated financial statements.
Upon adoption of IFRS 11, the Group has determined its interest in Sentinel Holdings Inc. to be classified as a joint venture under IFRS 11 and it is required to be accounted for using the equity method. The transition will be applied retrospectively as required by IFRS 11 and consequently, the comparative information for the immediately preceding period, the financial statements for the year ended 31 December 2013 will be restated.
The effect of applying IFRS 11 on the Group's financial statements for the year ended 31 December 2013 would be as follows:
Impact on the consolidated statement of comprehensive income (increase/(decrease)) on net loss for the year:
2013 U.S.$'000 | ||
Revenue | (3,154) | |
Expenses | 3,766 | |
Finance expenses and other | 428 | |
Share of loss from joint venture | (1,040) | |
Net impact on loss for the year | - |
The transition will not have any impact on either Other Comprehensive Income for the year or the Group's basic or diluted LPS.
Impact on equity (increase/(decrease) in net equity):
Consolidated Statement of Financial Position | 2013 U.S.$'000 | |
ASSETS | ||
Non-current assets | ||
Vessels | (26,466) | |
Investment in Joint Venture | 1,810 | |
Prepaid expenses and other assets | (1,241) | |
Cash and cash equivalents | (1,252) | |
TOTAL ASSETS | (27,149) | |
Long-term debt ( including current portion ) | 17,149 | |
Other liabilities | 10,000 | |
TOTAL LIABILITIES | 27,149 | |
Net impact on equity | - |
9. JOINT VENTURE (continued):
Impact on cash flow statements (increase/(decrease) in cash flows):
2013 U.S.$'000 | ||
Operating | 393 | |
Investing | - | |
Financing | (803) | |
Net decrease in cash and cash equivalents | (410) |
10. OTHER ASSETS - LIABILITIES:
The amounts in the accompanying statement of financial position are analysed as follows:
ASSETS
2013 U.S.$'000 | 2012 U.S.$'000 | |||
Current: | ||||
Non-level charters | - | 238 | ||
- | 238 |
The amount of U.S.$238 as at 31 December 2012 relates to the asset created upon accounting for charter agreements with specified rate increases over the charter term (non-level charters). As at 31 December 2013 the asset was fully amortised.
LIABILITIES
The amounts in the accompanying statement of financial position are analysed as follows:
2013 U.S.$'000 | 2012 U.S.$'000 | |||
Non- current: | ||||
Fair value of interest rate swaps- non current(1) | - | (159) | ||
Current: | ||||
Fair value of interest rate swaps- current(1) | (177) | (244) | ||
Shipyard credit- current (2) | - | (1,400) |
1) Interest rate swap
During 2007, the Group entered into an interest rate swap for the loan of vessel Bosporus Bridge. The initial notional amount of this contract amounted to U.S.$12,166 amortising in accordance with the initial loan repayment schedule. Under the swap agreement, the Group exchanged variable to fixed interest rate at 4.64%. The fair value of the specific derivative financial instrument as at 31 December 2013 and 31 December 2012 was a liability of U.S.$177 and U.S.$403 respectively, gains or losses arising from changes in the fair value of the interest rate swap are taken to the statement of comprehensive income as finance income or finance expense respectively.
10. OTHER ASSETS - LIABILITIES (continued)
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
The interest rate swap of the Group was assessed as Level 2.
As the Group did not designate the derivative agreement as an accounting hedge, net gains resulting from this derivative instrument, which approximated U.S.$226 and U.S.$227 for the years ended 31 December 2013 and 2012, respectively, were recorded in finance income in the consolidated statement of comprehensive income.
2) Shipyard credit
On 12 July 2011, the Group entered into an agreement with Cosco (Zhousan) Shipyard Co. Ltd. to defer part of the delivery instalment of vessel M/V Sofia, amounting to U.S.$4,200. The outstanding balance of the deferred amount as at 31 December 2012 was U.S.$1,400. On 13 July 2013, the Company proceeded with the full and final settlement of the outstanding amount.
11. FINANCIAL ASSETS:
Cheyenne Maritime Company, the vessel owing company of M/V Sofia, Dionysus Shipholding Carrier Co. the vessel owing company of M/V Eleni D and Ermis Trading S.A., the vessel owing company of M/V Ermis (ex. Marie Paule), were registered as unsecured creditors in the Rehabilitation proceedings that were commenced by Korea Line Corporation with respect to unpaid hire and/or damages amounting to U.S.$10,300, U.S.$8,028 and U.S.$643, for the aforementioned companies, respectively.
Further to certain amendments in the initial Rehabilitation plan (see note 20), the claim was finally settled by receipt of U.S.$495 in cash representing the net present value of the outstanding rehabilitation claim (calculated at an annual interest rate of 6.12% over a nine years period) as well as shares registered to the vessel owning companies amounting to 43,094 shares for Cheyenne Maritime Company, 33,589 shares for Dionysus Shipholding Carrier Co. and 4,252 shares for Ermis Trading S.A.
The shares registered to the vessel owning companies were initially recognised at fair value through profit and loss in an amount of U.S.$2,224 and are included in revenue in the statement of comprehensive income.
The value of these shares as at 31 December 2013 was U.S.$1,920, which is presented as financial assets in the statement of financial position, with the net change in fair value of U.S.$304 presented as a loss on valuation of financial assets in the statement of comprehensive income.
12. INSURANCE CLAIMS:
2013 U.S.$'000 | 2012 U.S.$'000 | |||
Balance as at 1 January | 445 | 571 | ||
Additions | 99 | 717 | ||
Collections | (259) | (672) | ||
Amounts written off | (32) | (171) | ||
Balance as at 31 December | 253 | 445 |
13. PREPAID EXPENSES AND OTHER ASSETS:
The amounts in the accompanying statement of financial position at 31 December are analysed as follows:
2013 U.S.$'000 | 2012 U.S.$'000 | |||
Antipiracy costs receivable from charterers | 51 | 104 | ||
Prepaid insurance cost | 75 | 144 | ||
Prepaid fuel cost | 1,885 | 210 | ||
Other prepaid expenses | 3,132 | 2,437 | ||
5,143 | 2,895 |
14. CASH AND CASH EQUIVALENTS:
2013 U.S.$'000 | 2012 U.S.$'000 | |||
Cash at banks | 6,059 | 2,997 | ||
Short term deposits at banks | 9,410 | 13,778 | ||
15,469 | 16,775 |
Cash at banks earns interest at floating rates based on daily bank deposit rates. Short term deposits are made for varying periods of between one day and three months, depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates.
The Group's loan agreements contain minimum liquidity clauses requiring available cash balances of at least U.S.$9,247 (U.S.$10,666 in 2012) throughout the year.
15. RESTRICTED CASH:
Restricted cash amounts as at 31 December 2013 and 31 December 2012 are analysed as follows:
2013 U.S.$'000 | 2012 U.S.$'000 | |||
i) Loans b and c (Note 17) | 2,500 | 4,000 | ||
ii) Loans f, g and h (Note 17) | 142 | 2,014 | ||
2,642 | 6,014 |
The restricted cash of U.S. $2,642 as at 31 December 2013 (U.S. $6,014 as at 31 December 2012) relates to cash restricted in use by the financing banks subject to the rectification and/or fulfilment of certain financial covenant ratios and/or other terms, as provided by the agreements of loans b, c, f, g and h (Note 17).
i) On 13 June 2013 the Group signed a supplemental agreement with the financing bank, which provided for the progressive release of the restricted cash and its pro-rata application towards the eight consecutive quarterly repayment instalments of each of loans b and c, falling due within the period from 21 April 2013 to 6 February 2015. The amount of restricted cash relating to the principal instalments falling due after 21 April 2013 to 6 November 2013 was released to the Group during 2013.
ii) On 5 May 2013, as part of the amendments signed with the bank (also refer to note 17) for loan g, an amount of U.S. $871 of restricted cash was released by the financing bank, from which an amount of U.S. $760 was applied towards the outstanding balance of the loan, in order of maturity, and the remaining amount of U.S.$111 was utilised to settle the interest accrued as of the date of release.
On 18 July 2013, as part of the amendments signed with the bank (also refer to note 17) for loan h, an amount of U.S. $463 of restricted cash was released by the financing bank, from which an amount of U.S. $326 was applied towards the outstanding balance of the loan, in order of maturity, and the remaining amount of U.S.$137 was utilised to settle the interest accrued as of the date of release.
On 25 July 2013, as part of the amendments signed with the bank (also refer to note 17) for loan f an amount of U.S.$680 of restricted cash was released by the financing bank, from which an amount of U.S.$530 was applied towards the outstanding balance of the loan, in order of maturity, and the remaining amount of U.S.$150 was utilised to settle the interest accrued as of the date of release. On 7 November 2013 and as part of the aforementioned amendments signed with the bank, the Company deposited an amount of U.S.$142 to the respective pledged account. On 25 January 2014 the amount of U.S.$142 was prepaid towards the balloon instalment of loan f.
16. SHARE CAPITAL, SHARE PREMIUM AND NON CONTROLLING INTEREST:
(a) Share Capital:
Share capital consisted of the following at 31 December:
201 3 U.S.$'000 | 201 2 U.S.$'000 | |||
Authorised | ||||
200,000,000 Shares of $0.01 each | 2,000 | 2,000 | ||
Issued and paid | ||||
93,191,758 Shares of $0.01 each | 9 32 | 9 32 | ||
Total issued share capital | 9 32 | 9 32 |
(b) Annual Incentive Plan (AIP):
At its meeting on 13 December 2013 the Remuneration Committee did not recommend and the Board of Directors approved no Base Award to Executive Directors under AIP for the current year.
(c) Share Premium:
The analysis of the share premium is as follows:
U.S. $'000 | ||
Balance 31 December 2011 | 145,419 | |
Scrip dividend shares | 2,888 | |
Balance 31 December 2012 | 148,307 | |
Balance 31 December 2013 | 148,307 |
(d) Non-Controlling Interest:
Amount of U.S.$1,001 (U.S.$ 955 as at 31 December 2012) in the accompanying statement of financial position concerns the net consideration received for the disposal of 20% of the voting shares of Tuzon Maritime Co., the vessel owning company of Paris JR, increased by the 20% portion of the profit attributable to Tuzon Maritime Co., which for the year ended 31 December 2013, amounted to U.S.$46.
17. LONG-TERM DEBT:
The amounts in the accompanying statement of financial position are analysed as follows:
31 December 2013 |
31 December 2012 | ||||
Bank Loan | Vessel(s) | Amount | Rate % | Amount | Rate % |
a. Issued 21 January 2013, maturing 15 November 2015 | MSC Fortunate, Brilliant, Thira, Golden Trader | 20,500 | 4.74% | 30,255 | 2.94% |
b. Issued 18 December 2009, maturing 6 May 2021 | D Skalkeas | 22,110 | 2.49% | 24,146 | 2.56% |
c. Issued 14 August 2009, maturing 22 October 2021 | Erato | 25,447 | 2.49% | 27,737 | 2.57% |
d. Issued 16 January 2009, maturing 16 January 2019 | Ermis | 8,597 | 2.00% | 9,303 | 2.08% |
e. Issued 26 October 2009, maturing 26 October 2019 | Alpine Trader | 8,594 | 2.24% | 9,600 | 2.35% |
f. Issued 6 March 2009, maturing 29 March 2019 | Milos | 20,250 | 2.99% | 21,479 | 2.07% |
g. Issued 22 April 2009, maturing 29 March 2019 | Sifnos | 20,437 | 2.99% | 21,672 | 2.06% |
h. Issued 2 August 2010, maturing 31 March 2020 | Pisti | 20,081 | 3.00% | 21,376 | 2.07% |
i. Issued 18 January 2011, maturing 31 March 2020 | Sofia | 19,342 | 2.99% | 20,440 | 2.09% |
j. Issued 10 May 2010, maturing 1 December 2022 | Eleni D | 17,356 | 1.84% | 18,804 | 2.16% |
k. Issued 1 August 2011, maturing 19 September 2014 | Thasos | 2,224 | 3.04% | 8,500 | 3.11% |
Total | 184,938 | 213,312 | |||
Less: initial financing costs | (917) | (644) | |||
Less: current portion | (18,763) | (24,115) | |||
Long-term portion | 165,258 | 188,553 | |||
Interest rates included in the table above are based on last roll over statements received from the lending banks.
17. LONG-TERM DEBT (continued):
Changes in long term agreements:
· Loans b&c: On 13 June 2013 the Group signed a supplemental agreement with the financing bank, which provided for the progressive release of the restricted cash through its pro-rata application towards the outstanding balance of loans b and c (see also note 15) and the relaxation of specific required covenants' ratios. In addition, Vessel MSC Socotra has been provided as collateral to the financing bank.
· Loans d&e: On 20 August 2013, the Group had agreed in principle with the financing bank to amend the loan agreements and provide as additional security vessel Paris JR, in order to cover its portion of the shortfall to the Minimum Security Cover ratio ("the MSC shortfall"), thus rectifying the covenant breach. The remaining 50% of the shortfall had been agreed to be covered with a cash pledge of equal value from the JV partner.
Due to the substantial market recovery experienced in the beginning of the fourth quarter 2013, which was evidenced by a corresponding increase of vessel values, the amount of the MSC shortfall decreased significantly resulting in the decision of both partners to cancel this loan amendment with the consent of the lender and to proceed with a prepayment of U.S.$600 towards the outstanding balance of loan e to rectify the remaining MSC shortfall. Final ratification of the documentation for the satisfaction of the MSC shortfall was still pending at the time of the prepayment.
· Loan f: On 29 April 2013 the Group signed a Deed of Amendment to the loan facility with the financing bank for the deferral of 40% of the next eight principal instalments effective from April 2013. Subject to this amendment and following the prepayment of U.S. $530 effected in July 2013 (also refer to note 15), the repayment schedule was amended and this loan is now repayable in one instalment of U.S. $256.3 due on 25 January 2014, four quarterly instalments of U.S.$262.2 each, the first one being due on 25 April 2014 and the final one on 25 January 2015, four quarterly instalments of U.S. $524.5 each, the first one being due on 25 April 2015 and the final one on 25 January 2016, eight quarterly instalments of U.S. $568.2 each, the first one being due on 25 April 2016 and the final one on 25 January 2018 and four quarterly instalments of U.S. $437 each, the first one being due on 25 April 2018 and the final one on 25 January 2019 and a balloon payment of U.S. $10,553 being due on 29 March 2019.
· Loan g: On 29 April 2013 the Group signed a Deed of Amendment to the loan facility with the financing bank for the deferral of 40% of the next eight principal instalments effective from April 2013. Subject to this amendment and following the prepayment of U.S.$760 in May 2013 (also refer to note 15), the repayment schedule was amended and this loan is now repayable in five quarterly instalments of U.S. $264.6 each, the first one being due on 3 February 2014 and the last one being due on 3 February 2015, four quarterly instalments of U.S. $529.2 each, the first one being due on 3 May 2015 and the final one on 3 February 2016, eight quarterly instalments of U.S. $573.3 each, the first one being due on 3 May 2016 and the final one being due on 3 February 2018 and four quarterly instalments of U.S. $441 each, the first one being due on 3 May 2018 and the final one on 3 February 2013 and a balloon payment of U.S. $10,647 being due on 29 March 2019.
17. LONG-TERM DEBT (continued):
· Loan h: On 29 April 2013 the Group signed a Deed of Amendment to the loan facility with the financing bank for the deferral of 40% of the next eight principal instalments effective from April 2013. Subject to this amendment and following the prepayment of U.S.$326 effected in July 2013 (also refer to note 15), the loan is now repayable in five quarterly instalments of U.S.$277.5 each, the first one being due on 18 January 2014 and the final one on 18 January 2015, four quarterly instalments of U.S.$555 each, the first one being due on 18 April 2015 and the final one on 18 January 2016, eight quarterly instalments of U.S.$601.2 each, the first one being due on 18 April 2016 and the final one being due on 18 January 2018 and eight quarterly instalments of U.S.$462.4 each, the first one being due on 18 April 2018 and the final one on 18 January 2020 and a balloon payment of U.S.$7,965 being due on 31 March 2020.
· Loan i: On 29 April 2013 the Group signed a Deed of Amendment to the loan facility with the financing bank for the deferral of 40% of the next eight principal instalments effective from April 2013. Based on this amendment, the repayment schedule was amended. The loan is repayable in five quarterly instalments of U.S.$235.2 each, the first one being due on 12 January 2014 and the final one on 12 January 2015, four quarterly instalments of U.S.$470.4 each, the first one being due on 12 April 2015 and the final one on 12 January 2016, eight quarterly instalments of U.S.$509.6 each, the first one being due on 12 April 2016 and the final one being due on 12 January 2018 and eight quarterly instalments of U.S.$392 each, the first one being due on 12 April 2018 and the final one on 12 January 2020 and a balloon payment of U.S.$9,072 being due on 31 March 2020.
· Loan k: During May 2013, the Group provided vessel Thasos as collateral to the financing bank following the release of the mortgage on vessel MSC Scotland.
Prepayments:
· Loan a: During December 2013, the Group proceeded with a prepayment of loan of U.S.$4,555 to the financing bank following to the disposal of vessel MSC Anafi which had been provided as collateral under the loan agreement.
· Loan k: During August 2013, the Group proceeded with a prepayment of loan of U.S.$2,680 to the financing bank following to the disposal of vessel Vasos which had been provided as collateral under the loan agreement. In addition, the Group proceeded with a voluntary prepayment of U.S.$1,098.
17. LONG-TERM DEBT (continued):
Upcoming repayment terms/ Changes in existing repayment terms:
· Loan a: This loan is repayable in eight quarterly instalments of U.S.$1,300 each, the first one being due on 15 February 2014 and the final one on 15 November 2015 along with a balloon payment of U.S.$10,100.
· Loan b: This loan is repayable in thirty quarterly instalments of U.S.$509 each, the first one being due on 6 February 2014 and the final one on 6 May 2021 along with a balloon payment of U.S.$6,840.
· Loan c: This loan is repayable in thirty- two quarterly instalments of U.S.$572.7 each, the first one being due on 22 January 2014 and the final one on 22 October 2021 along with a balloon payment of U.S.$7,120.6.
· Loan d: This loan is repayable in twenty-one quarterly instalments of U.S.$176.5 each, the first one being due on 16 January 2014 and the final one on 16 January 2019 along with a balloon payment of U.S.$4,890.5.
· Loan e: This loan is repayable in twenty-four quarterly instalments of U.S.$176.5 each, the first one being due on 26 January 2014 and the final one on 26 October 2019 along with a balloon payment of U.S.$4,358.
· Loan j: This loan is repayable in thirty-six quarterly instalments of U.S.$362 each, the first one being due on 1 March 2014 and the final one on 1 December 2022 along with a balloon payment of U.S.$4,324.
· Loan k: This loan is repayable in three quarterly instalments of U.S.$305 each, the first one being due on 19 March 2014 and the final one on 19 September 2014 along with a balloon payment of U.S.$1,309.
All loans discussed above are denominated in U.S. dollars, and bear interest at LIBOR plus a margin.
The loans have margins between 1.60% and 4.5% above LIBOR.
Total interest paid was U.S.$6,054 and U.S.$7,349 for the year ended 31 December 2013 and 31 December 2012, respectively.
The fair value of long term debt amounts to U.S.$154,138.
All loans are secured with first priority mortgages over the borrowers' vessels. The loan agreements contain covenants including restrictions as to changes in management and ownership of the vessels; additional indebtedness and mortgaging of vessels without the bank's prior consent as well as minimum requirements regarding corporate liquidity and hull cover ratio and corporate guarantees of Goldenport Holdings Inc.
Certain amendments of loans b, c, f, g, h and i effected in 2013 provide for relaxation of basic financial covenants through 31 December 2014.
17. LONG-TERM DEBT (continued):
i) Minimum security cover has been restated to a range from 90%-100% (previous: 125%).
ii) Maximum leverage ratio has been restated to a range from 75%-85% (previous: 70-75%).
iii) Interest Cover ratio has been restated to a maximum 2:1 ratio (previous: 3-4:1).
iv) Minimum net worth has been restated to U.S.$50 million in terms of market values of assets or U.S.$ 170 million in terms of book values of assets (previous: within the range from U.S.$100-200 million in terms of market value).
18. ACCRUED LIABILITIES AND OTHER PAYABLES:
The amounts in the accompanying statement of financial position at 31 December are analysed as follows :
2013 U.S.$'000 | 2012 U.S.$'000 | |||
Interest | 867 | 894 | ||
Other accrued expenses | 2,012 | 1,354 | ||
Other payables | 4,465 | 4,663 | ||
7,344 | 6,911 |
Other payables represent obligations that will be settled within twelve months, and bear no interest.
19. DIVIDENDS DECLARED:
The Board of Directors of the Company will propose to the Annual General Meeting for approval, the non payment of a dividend for 2013 (non payment for 2012). The proposal for the non payment of dividend is expected to be approved by the AGM to be held in Athens in May 2014.
Dividend rights: Under the Company's by-laws, each ordinary share, except for the company's treasury shares, is entitled to dividends if and when dividends are declared by the Board of Directors. There are no restrictions on the Company's ability to transfer funds in and out of Marshall Islands. The payment of final dividends is subject to the approval of the Annual General Meeting ("AGM") of Shareholders. The final dividend proposed by the Board of Directors for 2011, was approved by the AGM held on 11 May 2012. The final dividend was 4 pence per share and included a share mandate scheme of 2 pence per share resulting in a total dividend amount of GBP 3,634 or U.S.$5,822. On 15 May 2012 the cash payment was made for the cash portion totalling GBP 1,817 or U.S.$2,911 and on 18 May 2012 2,331,091 shares with reference price of 77.95 pence were issued and admitted to the official list representing the share element of the dividend. On 29 August 2013 the Board of Directors having reviewed market fundamentals proposed and approved a zero interim dividend. (On 31 August 2012 a zero interim dividend was approved by the Directors). The payment of dividend was U.S. $2.911 for 2011. Within 2013, no payment of dividends was made.
20. COMMITMENTS AND CONTINGENCIES:
a. Various claims, suits, and complaints, including those involving government regulations and product liability, arise in the ordinary course of the shipping business. In addition, losses may arise from disputes with charterers, agents, insurance providers and from other claims with suppliers relating to the operations of the Group's vessels. Currently, management is not aware of any such claims or contingent liabilities, which should be disclosed, or for which a provision should be established in the consolidated financial statements.
b. The Group has entered into time charter arrangements for all its vessels. These arrangements have remaining terms between 1-9 months as of 31 December 2013 (1-48 months as at 31 December 2012). Future minimum charters receivable (based on earliest delivery dates) upon time charter arrangements as at 31 December 2013, are as follows (Vessel off-hires and dry-docking days that could occur but are not currently known are not taken into consideration. In addition early delivery of the vessels by the charterers is not accounted for. For the joint venture vessels (see note 9) 50% of revenue is included):
2013 U.S.$'000 | 2012 U.S.$'000 | |||
Within one year | 9,272 | 20,505 | ||
1-5 years | - | 15,330 | ||
9,272 | 35,835 |
c. Cheyenne Maritime Company, the vessel owing company of M/V Sofia, Dionysus Shipholding Carrier Co. the vessel owing company of M/V Eleni D and Ermis Trading S.A. (previously Citrus Shipping Corp.), the vessel owing company of M/V Marie Paule, were registered as unsecured creditors in the Rehabilitation proceedings that were commenced by Korea Line Corporation with respect to unpaid hire and/or damages amounting to U.S.$10,300, U.S.$8,028 and U.S.$643, for the aforementioned companies, respectively.
The Rehabilitation plan was approved by the majority of creditors at the meeting held on 14 October 2011. According to the plan all unsecured creditors may recover the acknowledged claim as follows: i) 37% of the claim in cash over 10 years (2012-2021) which will be non-interest bearing and ii) 63% in Korea Line's shares, bearing no voting rights for the rehabilitation period.
During December 2012 and subject to the repayment schedule according to the rehabilitation plan, Cheyenne Maritime Company, Dionysus Shipholding Carrier Co. and Citrus Shipping Corp. received U.S.$19, U.S.$14 and U.S.$2 respectively.
20. COMMITMENTS AND CONTINGENCIES (continued):
On 28 March 2013 the Korea Line's creditors meeting approved an amended rehabilitation plan, under which the following shares were provided to the Group:
· Cheyenne Maritime Company 43,094 shares
· Dionysus Shipholding Carrier Co. 33,589 shares
· Ermis Trading SA. 4,252 shares
In addition, on 28 October 2013 the Company received an amount of U.S.$495 in cash representing the net present value of the outstanding rehabilitation claim (calculated at an annual interest rate of 6.12% over the nine years period) in settlement of all outstanding claims from Korean Line.
21. RELATED PARTY TRANSACTIONS:
(a) Goldenport Shipmanagement Ltd. ("GSL") and Goldenport Marine Cyprus ("GMC"):
All vessel operating companies included in the consolidated financial statements have a management agreement with either GSL or GMC, corporations directly controlled by the Dragnis family, to provide, in the normal course of business, a wide range of shipping managerial and administrative services, such as commercial operations, chartering, technical support and maintenance, engagement and provision of crew, for a monthly management fee of U.S. $15.6 per vessel (U.S. $15.2 in 2012). GSL is a Liberian corporation and has a branch office registered in Greece under the provisions of Law 89/1967. GMC is a Cypriot corporation and has a branch office registered in Cyprus under the relevant Cypriot companies' laws and provisions. On 24 January 2014 the Board of Directors of the Company gave the Audit Committee the authority to negotiate with GSL in relation to the 2014 management fee. Following those negotiations the Audit committee agreed an increase in monthly management fee from U.S.$15.6 to U.S.$16 per vessel. The increase is effective from 1 January 2014. In addition to the monthly fee GSL and GMC charge a commission equal to 2% of time and voyage revenues relating to charters they organise.
2013 U.S.$'000 | 2012 U.S.$'000 | |||
Voyage expenses - related parties (GSL & GMC) | 1,153 | 1,504 | ||
Management fees - related parties (GSL & GMC) | 3,548 | 4,321 | ||
Total | 4,701 | 5,825 |
2013 U.S.$'000 | 2012 U.S.$'000 | |||
Due from related parties -Current (GSL) | 5,627 | 4,560 | ||
Total | 5,627 | 4,560 |
21. RELATED PARTY TRANSACTIONS (continued):
2013 U.S.$'000 | 2012 U.S.$'000 | |||
Due to related parties -Current (GMC) | 974 | - | ||
Total | 974 | - |
Commission charged for the year ended 31 December 2013 by both GSL and GMC amounted to U.S.$1,153 ( 2012: U.S.$1,504, by GSL) and is included in "Voyage expenses".
The amounts receivable from related parties, shown in the table above, represent the vessel operating companies' cash surplus handled by GSL. The amounts payable to related parties represent commissions and management fees payable to GMC for the 12 month period ended 31 December 2013.
(b) Share-based payment transactions, Annual Incentive Plan and other remuneration of Directors and Management team
Annual incentive plan: The Remuneration Committee believes that a significant proportion of total remuneration should be performance-related. In addition, performance-related rewards should be deliverable largely in shares to more closely align the interests of shareholders and all Executive Directors and Management. In order to achieve this, the Board decided to terminate the 2006 Annual Cash Bonus arrangements and to replace them with a new plan called the Annual Incentive Plan ('AIP'), which is administrated by the Remuneration Committee.
It was decided that under the terms of the AIP the eligible employees (i.e Executive Directors and Management) can elect to have their annual cash bonus delivered in the form of restricted shares in the Company. The performance criteria remained the same as for the Annual Cash Bonus. Again, it is intended that the maximum limit for each participant will be 40% of annual base salary. The Remuneration Committee may select in future years, to adjust the maximum but it will not in any event exceed 75% of annual base salary. The Board (after a proposal by the Remuneration Committee) reserves the right to award shares in other circumstances which could include, without being limited to, subsequent offers of shares (primary or secondary). In each year the Remuneration Committee will propose to the Board the percentage of base salary applicable to each participant for the purposes of the AIP ("Base Award").
21. RELATED PARTY TRANSACTIONS (continued):
Under the AIP, a participant may apply his Base Award in one of three ways:
· Full Cash Award ('FCA'): If the participant selects the FCA, then the AIP will pay cash but only at 90% of the Base Award.
· Full Shares Award ('FSA'): If the participant selects the FSA, then under the AIP 110% of Base Award will be given in the form of shares.
· Half Cash-Half Shares Award ('HCHS'): If the participant selects the HCHS, then on 50% of Base Award the 90% rule will apply and will be paid cash and on the other 50% the 110% rule will apply and will be paid in shares.
The Remuneration Committee at its meeting on 13 December 2013 proposed nil amount (2012: nil amount) as base award for all the participants. The Board of Directors on 13 December 2013 approved the Remuneration Committee proposal.
Share-based payment transactions: On 1 September 2010, the Company made grants under the Discretionary Share Option Plan (the "DSOP"), with eligibility for executive directors and employees, and the Group Share Award Plan (the "Plan"), with eligibility for all employees and Directors. The total shares under option and award amounted initially to 1,520,000 (DSOP shares: 1,020,000 & Plan: 500,000) and there were no cash settlement alternatives. The final vesting date for these awards was in September 2013. The performance targets were not met therefore the options lapsed. As at 31 December 2013, an amount of U.S.$678 (U.S$531 as at 31 December 2012 and U.S.$147 recognised within 2013) was de-recognised.
The amounts included in the financial statements under AIP, DSOP, the Plan and other remuneration of Directors and Management team as of 31 December are as follows:
2013 U.S.$ '000 | 2012 U.S.$ '000 | |||
Directors and management team remuneration | 1,090 | 1,163 | ||
Share based payment transactions | (531) | 192 | ||
559 | 1,355 |
(c) The Interests of the Directors, the Senior Management and their respective immediate families in the share capital of the Company (all of which are beneficial unless otherwise stated), were as at 31 December 2013 as follows:
Name | Number of shares as at 31 December 2012 | Acquisition of shares 16 September 2013 | Number of shares as at 31 December 2013 | Percentage of shares as at 31 December 2012 | ||||
Dragnis family | 53,287,939 | 1,500,000 | 54,787,939 | 58.79% | ||||
Chris Walton | 19,704 | - | 19,704 | 0.02% | ||||
Konstantinos Kabanaros | 120,754 | - | 120,754 | 0.13% |
21. RELATED PARTY TRANSACTIONS (continued):
(d) Rental of office space: A monthly rental of EUR18.5 (EUR 18.2 in 2012) was agreed to be charged by the owner of the building (a related party under common control) to Goldenport Marine Services for the rental of the head offices. Total rent expense for the year ended 31 December 2013 amounted to U.S.$328 (U.S.$314 in 2012) and is included in General and administration expenses in the accompanying financial statements.
The future minimum lease (rental) payments under the above agreement as at 31 December are as follows:
2013 U.S.$'000 | 2012 U.S.$'000 | |||
Within one year | 330 | 293 | ||
After one year but not more than five years | 1,193 | 413 | ||
1,523 | 706 |
22. INCOME TAXES:
Under the laws of the Republic of Marshall Islands and the respective jurisdictions of the Consolidated Companies the Group is not subject to tax on international shipping income. However, the Consolidated Companies are subject to registration and tonnage taxes, which have been included in vessel operating expenses in the accompanying consolidated statement of comprehensive income.
On 11 January 2013 the new tax law 4110/2013 was ratified by the Greek parliament. Under article 24 of this law tonnage tax regime is imposed on vessels operating under foreign flags, which are managed by Greek or foreign companies established in Greece on the basis of L.27/1975. The application of this provision commenced from 1 January 2013 onwards.
The Ministry of Finance issued guidance on the imposition of tonnage tax on vessels operating under foreign flags and managed through an office established in Greece under article 26 of Law 27/1975. The deadline for filing the first tonnage tax return and payment of 25% of the tonnage tax was set on 29 March 2013.
The Ministry of Finance and the Ministry of Maritime issued a Joint Circular (POL 1050/2013) communicating that the deadline for the filing of the annual list, provided for by art. 24 of Law 4110/2013 was extended until 15 April 2013. The said Circular grants also an extension until 29 April 2013 for the filing of the tonnage tax return and the payment of the twenty five per cent of the tax due.
An obligation of the liable parties for submitting before the Ministry of Mercantile Marine an annual statement indicating the name, flag, total tonnage and age of vessels under the foreign flag is also established.
For calculating the tonnage tax (tax rates and tax brackets, criteria) and the special tax return and payment of tax, the provisions on the tonnage tax payable for Greek flagged vessels apply by analogy.
As of 31 December 2013, tonnage taxation under the new law, amounted to U.S. $99 and is included in operating expenses in the consolidated statement of comprehensive income for the year ended 31 December 2013.
23. FINANCIAL INSTRUMENTS:
Risk management objectives and policies
The Group's principal financial instruments are bank loans. The main purpose of these financial instruments is to finance the Group's operations and further fleet expansion. The Group has various other financial instruments such as cash and cash equivalents, trade receivables and trade payables, which arise directly from its operations.
From time to time, the Group also uses derivative financial instruments, principally interest rate swaps.
The main risks arising from the Group's financial instruments are interest rate risk and credit risk. The majority of the Group's transactions are denominated in U.S. dollars therefore its exposure to foreign currency risk is minimal.
Cash flow interest rate risk
Cash flow interest rate risk arises primarily from the possibility that changes in interest rates will affect the future cash outflows from the Group's long-term debt. The sensitivity analysis presented in the table below demonstrates the sensitivity to a reasonably possible change in interest rates (libor), with all other variables held constant, on the Group's profit for the year (fluctuations in interest rates do not impact the Group's equity). The sensitivity analysis has been prepared using the following assumptions:
· A rise or fall in interest rates will impact interest expense on floating rate borrowings.
· Although the fair value of the derivatives, and therefore the statement of comprehensive income will be impacted by movements in interest rates, the fair value impact of the derivative has been excluded from the sensitivity analysis as not significant.
· One interest rate swap entered into in 2007 economically hedges the respective loan and the interest payments/receipts almost fully offset, therefore this loan has not been included in the sensitivity analysis.
Increase/Decrease (%) | U.S.$'000 Effect on profit | |||
2013 | +0.5% | -1,017 | ||
-0.5% | +1,017 | |||
2012 | +0.5% | -1,179 | ||
-0.5% | +1,179 |
Credit risk
The Group's maximum exposure to credit risk in the event the counterparties fail to perform their obligations as of 31 December 2013 in relation to each class of recognised financial assets, other than derivatives and financial assets through profit and loss, is the carrying amount of those assets as indicated in the statement of financial position.
23. FINANCIAL INSTRUMENTS (continued):
Concentration of Credit Risk
Financial instruments, which potentially subject the Group to significant concentrations of credit risk, consist principally of cash and cash equivalents, trade accounts receivable and financial assets through profit and loss. The Group places its cash and cash equivalents, consisting mostly of deposits, with financial institutions. The Group performs annual evaluations of the relative credit standing of those financial institutions and assesses the credit standing of its investments. Credit risk with respect to trade accounts receivable is generally managed by the chartering of vessels to major trading houses (including commodities traders), established container-line operators, major producers and government-owned entities rather than to more speculative or undercapitalised entities. The vessels are normally chartered under time-charter agreements where as per the industry practice the charterer pays for the transportation service in advance, supporting the management of trade receivables.
Fair Values
Derivatives and financial assets through profit and loss are recorded at fair value while all other financial assets and financial liabilities are recorded at amortised cost which approximates fair value.
Foreign currency risk
The majority of the Group's transactions are denominated in U.S. dollars therefore its exposure to foreign currency risk from operations is minimal.
Liquidity risk
The Group aims to mitigate liquidity risk by managing cash generation by its operations, applying cash collection targets throughout the Group. The vessels are normally chartered under time-charter agreements where as per the industry practice the charterer pays for the transportation service in advance, supporting the management of cash generation. Investment is carefully controlled, with authorisation limits operating up to Group's Board level and cash payback periods applied as part of the investment appraisal process. In this way the Group aims to maintain a good credit rating to facilitate fund raising.
In its funding strategy, the Group's objective is to maintain a balance between continuity of funding and flexibility through the use of bank loans. The Group's policy regarding potential new investments in second-hand vessels is that not more than 60% of the value of each investment will be funded through borrowings, whereas for the new buildings the respective limit is 70%.
The Group normally meets its working capital needs through cash flows from operating activities and available credit lines. Management prepares cash flow projections in order to forecast its short term working capital position.
Excess cash used in managing liquidity is only invested in financial instruments exposed to insignificant risk of changes in market value, being placed on interest-bearing deposit with maturities fixed at no more than 3 months. Short term flexibility is achieved if required by credit line facilities.
23. FINANCIAL INSTRUMENTS (continued):
The table below summarises the maturity profile of the Group's financial liabilities at 31 December 2013 and 2012, based on contractual undiscounted payments (including interest to be paid, which is calculated using the last applicable rate for each loan, as of 31 December 2013 and 2012) :
31 December 2013 | <3 moths U.S.$000 | 3-12 months U.S.$000 | 1- 2 U.S.$000 | 2- 5 U.S.$000 | >5 U.S.$000 | Total U.S.$000 | |||||
Interest bearing loans | 4,568 | 18,451 | 34,302 | 56,007 | 92,798 | 206,126 | |||||
Trade payables | 4,754 | - | - | - | - | 4,754 | |||||
Due to related parties | 974 | - | - | - | - | 974 | |||||
Accrued liabilities and other payables | 7,344 | - | - | - | - | 7,344 | |||||
Derivative instrument liability | 60 | 117 | - | - | - | 177 | |||||
17,700 | 18,568 | 34,302 | 56,007 | 92,798 | 219,375 |
31 December 2012 | <3 mo n ths U.S.$000 | 3-12 months U.S.$000 | 1- 2 U.S.$000 | 2- 5 U.S.$000 | >5 U.S.$000 | Total U.S.$000 | |||||
Interest bearing loans | 9,729 | 19,796 | 28,719 | 77,673 | 106,627 | 242,544 | |||||
Trade payables | 7,282 | - | - | - | - | 7,282 | |||||
Accrued liabilities and other payables | 6,911 | - | - | - | - | 6,911 | |||||
Shipyard Credit | - | 1,400 | - | - | - | 1,400 | |||||
Derivative instrument liability | 6 7 | 177 | 1 59 | - | - | 403 | |||||
23,989 | 21,373 | 28,878 | 77,673 | 106,627 | 258,540 |
Capital Management
The primary objective of the Group's capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximize shareholder value.
The Group monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Group's policy is to keep the gearing ratio below 75% on average (also Group's funding policy in Liquidity Risk section). Excess capital represented by a low gearing ratio, is used to fund further expansion plans. The Group includes within net debt, interest bearing loans, less cash and cash equivalents. Capital includes issued share capital, share premium and retained earnings.
Financial covenants connected with the Group's long-term debt agreements are discussed in Note 17.
23. FINANCIAL INSTRUMENTS (continued):
2013 U.S.$000 | 2012 U.S.$000 | |||
Interest bearing loans | 184,021 | 212,668 | ||
Less: cash and short term deposits (including restricted cash) | (18,111) | (22,789) | ||
Net debt | 165,910 | 189,879 | ||
Issued share capital | 932 | 932 | ||
Share premium | 148,307 | 148,307 | ||
Other capital reserves | - | 531 | ||
Retained earnings | 30,642 | 42,819 | ||
Treasury stock | (483) | (483) | ||
Non-controlling interest | 1,001 | 955 | ||
Total capital | 180,399 | 193,061 | ||
Capital & Net debt | 346,309 | 382,940 | ||
Gearing ratio | 47.9% | 49.6% |
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