Gulf Marine Services Regulatory News (GMS)

For Immediate Release 28 August 2014

Gulf Marine Services PLC

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

Interim results for the six months ended 30 June 2014

Good start to 2014: major fleet expansion on track

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

Financial Results Summary

Financial Highlights

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

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

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

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

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

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

· Maiden dividend of 0.41 pence per share.

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

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

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

Operational Highlights

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

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

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

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

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

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

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

Duncan Anderson, Chief Executive Officer for GMS, commented:

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

-ENDS-

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

Enquiries

For further information please contact:

Notes to Editors:

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

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

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

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

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

www.gmsuae.com 

Disclaimer

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

Cautionary note

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

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

Chief Executive's Review

Good start for 2014

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

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

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

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

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

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

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

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

Operational Review

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

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

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

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

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

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

Market Commentary

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

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

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

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

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

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

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

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

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

New Build Programme 

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

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

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

Outlook 

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

Duncan Anderson

Chief Executive Officer

Financial Review

Introduction

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

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

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

Revenue and Segment Profit

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

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

Cost of sales and General and administrative expenses

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

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

EBITDA

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

Finance costs

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

Taxation

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

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

Adjusted net profit and earnings per share

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

Dividends

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

Capital expenditure

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

Cash flow and liquidity

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

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

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

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

Balance sheet

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

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

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

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

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

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

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

Adjusting Items

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

Risks and uncertainties

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

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

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

Independent review report TO GULF MARINE SERVICES PLC

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

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

Directors' responsibilities

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

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

Our responsibility

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

Scope of review

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

Independent review report TO GULF MARINE SERVICES PLC (Continued)

Conclusion

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

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

Deloitte LLP

Chartered Accountants and Statutory Auditor

27 August 2014

London, United Kingdom

Responsibility Statement

Financial information for the period ended 30 June 2014

We confirm that to the best of our knowledge:

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

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

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

By order of the Board

Condensed consolidated statement of comprehensive income

for the period ended 30 June 2014

 *May be reclassified subsequently to profit or loss.

 Results in each period are derived from continuing operations.

Condensed consolidated balance sheet

as at 30 June 2014

Condensed consolidated balance sheet

as at 30 June 2014 (continued)

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

Condensed consolidated statement of changes in equity

For the period ended 30 June 2014

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

Condensed consolidated statement of cash flows

for the period ended 30 June 2014

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

Notes to the condensed consolidated financial statements

for the period ended 30 June 2014

Corporate information

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

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

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

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

Basis of preparation

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

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

Notes to the condensed consolidated financial statements

for the period ended 30 June 2014 (continued)

2 Basis of preparation (continued)

Group restructuring

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

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

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

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

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

Going concern

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

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

Basis of consolidation

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

Notes to the condensed consolidated financial statements

for the period ended 30 June 2014 (continued)

2 Basis of preparation (continued)

Significant accounting policies

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

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

· IFRIC 21 Levies

· Amendments to IAS 32 Financial Instruments: Presentation

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

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

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

Notes to the condensed consolidated financial statements

for the period ended 30 June 2014 (continued)

1 Segment reporting

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

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

Notes to the condensed consolidated financial statements

for the period ended 30 June 2014 (continued)

2 Presentation of adjusted results

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

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

Notes to the condensed consolidated financial statements

for the period ended 30 June 2014 (continued)

3 General and administrative expenses

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

4 Taxation

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

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

5 Earnings per share

Notes to the condensed consolidated financial statements

for the period ended 30 June 2014 (continued)

7 Earnings per share(continued)

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

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

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

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

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

Notes to the condensed consolidated financial statements

for the period ended 30 June 2014 (continued)

6 Property, plant and equipment

Notes to the condensed consolidated financial statements

for the period ended 30 June 2014 (continued)

8 Property, plant and equipment (continued)

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

7 Cash and bank balances

8 Trade and other receivables

Notes to the condensed consolidated financial statements

for the period ended 30 June 2014 (continued)

9 Share capital

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

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

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

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

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

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

Notes to the condensed consolidated financial statements

for the period ended 30 June 2014 (continued)

10 Group restructuring reserve

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

11 Capital contribution

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

12 Share option reserve

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

13 Bank borrowings

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

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

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

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

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

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

Net debt during the period was as follows:

Notes to the condensed consolidated financial statements

for the period ended 30 June 2014 (continued)

14 Related parties

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

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

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

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

Notes to the condensed consolidated financial statements

for the period ended 30 June 2014 (continued)

15 Notes to the cash flow statement