Gulf Marine Services Regulatory News (GMS)

August 31, 2023

Gulf Marine Services PLC

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

Listed on the London Stock Exchange

Announcement of Interim results for the six months ended 30 June 2023

GMS, a leading provider of advanced self-propelled, self-elevating support vessels serving the offshore oil, gas and renewables industries, is pleased to announce its Interim results for the six months ended 30 June 2023 (H1 2023).

Overview

H1 Financial and Operational Highlights:

· Net leverage ratio on June 30, 2023 at 3.75:1 (31 December 2022: 4.42:1).

· The company achieved revenue of US$ 74.3 million for the first half of 2023, reflecting an increase of 12% compared to the same period last year (H1 2022: US$ 66.4 million). The increase in revenue is driven by:

o An increased utilisation for H1 2023 to 93% (H1 2022: 89%) with notable improvements in K-Class vessels at 95% (H1 2022: 85%).

o An increased H1 2023 average day rates to $30.3k (H1 2022: US$ 27.2k) driven mainly by our E-Class vessels.

· Gross profit margin improved to 47% (H1 2022: 41%) as cost of sales and G&A remained relatively flat.

· H1 2023 EBITDA increased 19% to US$ 44.3 million (H1 2022: US$ 37.3 million) driven by the increase in revenue.

· Net profit attributable to shareholders for the first half of 2023 amounted to US$ 8.7 million, reflecting a reduction of 34% year-on-year, (H1 2022 US$ 13.1 million), as increase in financing costs of US$ 10.9 million more than offset the results obtained from operations.

· Basic Earnings Per Share (EPS): The Basic earnings per share for the period stood at US$ 0.82, as compared to US$ 1.29 in the first half of 2022.

· Net debt1 lowered by US$ 21.5 million to US$ 294.3 million (31 December 2022: US$ 315.8 million) as the Group continues its focus on deleveraging.

1 This represents an Adjusted Performance Measure (APM) as defined in the Glossary which is included in Note 23 to the interim consolidated Financial Statements.

2 This represents an Adjusted Performance Measure (APM) as defined in the Glossary.

Outlook:

· EBITDA guidance for 2023 is projected to be in the range of US$ 77 - 85 million, being USD 2.0 million higher on both the lower and the higher ends of the previous estimate, supported by an improved forecasted utilisation for H2.

· Demand in the market remains strong due to a combination of high market activity and limited vessel availability. As such, The Group anticipates utilisation levels to improve in the second half of 2023.

· Secured backlog was US$ 301.4 million on 30 June 2023 (30 June 2022: US$ 163.3 million), which reflects the additional contract awards announced over the last 12 months.

· Contract awards announced in H1 2023 have a combined total charter period of 2.4 years (H1 2022: 2.6 years), the Group is currently working on new potential contracts to improve the backlog.

Mansour Al Alami, Executive Chairman, GMS said:

"We are pleased to forecast an increased EBITDA guidance for the current year, driven by robust utilization, enhanced rates and a solid performance in the first half of the year. It is worth noting that these positive prospects coexist with the risks we face daily, being operational challenges, inflationary pressures, and the burden of debt service charges, all of which are being monitored closely. The Group reiterates its commitment to continue its deleveraging journey."

Alex Aclimandos

Chief Financial Officer

Gulf Marine Services PLC

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 a world leading provider of advanced self-propelled self-elevating support vessels (SESVs). The fleet serves the oil, gas and renewable energy industries from its offices in the United Arab Emirates, Saudi Arabia and Qatar. The Group's assets are capable of serving clients' requirements across the globe, including those in the GCC, Southeast Asia, West Africa, North America, the Gulf of Mexico and Europe.

The GMS fleet of 13 SESVs is amongst the youngest in the industry, with an average age of eleven years. The vessels support GMS's 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), as well as offshore oil and gas platform installation and decommissioning and offshore wind turbine installation (which are capex-led activities).

The SESVs are categorised by size - K-Class (Small), S-Class (Mid) and E-Class (Large) - with these capable of operating in water depths of 45m to 80m depending on leg length. The vessels are four-legged and are self-propelled, which means they do not require tugs or similar support vessels for moves between locations in the field; this makes them significantly more cost-effective and time-efficient than conventional offshore support vessels without self-propulsion. They have a large deck space, crane capacity and accommodation facilities (for up to 300 people) that can be adapted to the requirements of the Group's clients.

Gulf Marine Services PLC's Legal Entity Identifier is 213800IGS2QE89SAJF77

www.gmsplc.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.

Chairman's Review

Group performance

Revenue for the period increased 12% to US$ 74.3 million (H1 2022: US$ 66.4 million), driven by an 11% increase in average day rates to US$ 30.3k/day (H1 2022: US$ 27.2k/day) and by an increase in overall utilisation to 93% (H1 2022: 89%).

Vessel operating expenses increased to US$ 24.7 million (H1 2022: US$ 23.5 million), mainly driven by increased utilisation during the period. Cost of sales marginally decreased by US$ 0.1 million to US$ 39.0 million (H1 2022: US$ 39.1 million), as a reduction in depreciation and amortisation expense to US$ 14.8 million (H1 2022: US$ 15.5 million) offset increase in operating expenses.

General and administrative expenses were at US$ 6.1 million (H1 2022: US$ 5.8 million).

We were able to deliver a 19% increase in H1 2023 EBITDA to US$ 44.3 million (H1 2022: US$ 37.3 million), which was driven by an increase in utilisation and improved day rates.

Profit after tax during H1 2023 was US$ 8.7 million (H1 202 2: US$ 13.1 million) as the increase in interest expense of US$ 10.9 million more than offset the increase in EBITDA.

During H1 2023, contract awards were announced by the Group for both E-Class and K-Class vessels reflecting the continuing demand for our vessels.

Capital structure and liquidity

The net leverage ratio on 30 June 2023 again declined to 3.75 times (31 December 2022: 4.42 times), driven by a reduction in the net debt to US$ 294.3 million (31 December 2022: US$ 315.8 million) combined with improved trailing twelve months EBITDA. The Group remains dedicated to its deleveraging journey.

As described in the 2022 Annual Report, as the Group elected not to raise US$ 50.0 million of equity by the end of 2022, it issued on 2 January 2023 87.6 million warrants giving potential rights to 137 million shares if exercised, as per the terms of its agreement with the Lenders. The strike price was determined by an external Calculation Agent to be at 5.75 pence per share.

Outlook

The Group anticipates continued strong demand for its vessels in the second half of the year. Secured backlog increased to US$ 301.4 million on 30 June 2023 (30 June 2022: US$ 163.3 million). 

We are now projecting a higher EBITDA than previously indicated and we are changing the EBITDA guidance for 2023 to be in the range of US$ 77 - 85 million.

Mansour Al Alami

Executive Chairman

30 August 2023

Financial Review

Summary

Revenue increased 12% to US$ 74.3 million, (H1 2022: US$ 66.4 million), driven by an increase in both utilisation and average day rates.

EBITDA increased by 19% to US$ 44.3 million, (H1 2022: US$ 37.3 million), with the EBITDA margin increasing to 60% (H1 2022: 56%) driven by the increase in utilisation and day rates.

Pressure on Net profit remained high in H1 2023. Despite a 19% growth in EBITDA, net profit was down 34% to US$ 8.7 million (H1 2022: US$ 13.1 million), attributable to increase in finance expenses. Interest expense increased firstly due to an increase in LIBOR rates on our bank loan, secondly due to PIK interest costs that was an obligation to our Lenders due to the net leverage ratio exceeding 4.0 times as at 31 December 2022, and also due to an increase in margin rate on the loan from 3% to 4% effective from the first quarter of 2023. As of the second quarter of 2023, PIK ceased to accrue.

Net debt1 was reduced by US$ 21.5 million to US$ 294.3 million (31 December 2022: US$ 315.8 million) as the Group continues its journey of deleveraging.

Cash generated from operating activities of US$ 42.1 million remained almost flat versus the same period a year ago (H1 2022: US$ 42.2 million). Net cash outflows from financing activities saw an increase of 27% to US$ 46.7 million (H1 2022: US$ 36.7 million) due to higher interest paid on borrowings, higher quarterly repayment of the loan, along with prepayments made towards the bank loan.

1 This represents an Adjusted Performance Measure (APM) as defined in the Glossary which is included in Note 23 to the interim consolidated Financial Statements

2 This represents an Adjusted Performance Measure (APM) as defined in the Glossary

Revenue and segmental profit

The table below shows the contribution to revenue and segment gross profit made by each vessel class during the period.

* Before depreciation and amortization

Revenue in H1 2023 increased by 12% to US$ 74.3 million (H1 2022: US$ 66.4 million) following an increase in overall utilisation to 93% (H1 2022: 89%). There was a 22.8% increase in the revenue generated from K-Class vessels achieving 95% utilisation in the period (H1 2022: 85%), which was due to downtime of certain vessels in H1 2022 for contracts that went back-on hire in the second half of 2022. Benefiting from improved day rates, revenue from S-Class increased 4% despite S-Class utilisation marginally decreasing to 96% (H1 2022: 99%), due to off-hire time for scheduled maintenance in H1 2023. Also benefiting from improved day rates, revenue from E-Class increased 8% despite utilisation remaining unchanged at 87% (H1 2022: 87%).

Average charter day rates also saw an increase by 11% in the period to US$ 30.3k (H1 2022: US$ 27.2k). This increase is mainly attributable to a 22% increase in our E-Class average day rate from H1 2022, with 7% and 5% increases in average day rates for our K-Class and S-Class vessels respectively from H1 2022.

Cost of sales and general and administrative expenses

Cost of sales marginally decreased by US$ 0.1 million to US$ 39.0 million (H1 2022: US$ 39.1 million), of which operating expenses comprises US $24.7 million (H1 2022: US$ 23.5 million) which reflects higher utilisation levels in H1 2023. This was mostly offset by the other component of cost of sales being a reduction in depreciation and amortisation expense to US$ 14.8 million (H1 2022: US$ 15.6 million).

Included in operating expenses is an expense provision for expected credit losses of US$ 0.5 million (H1 2022: credit US$ 0.1 million) for some of our GCC based customers.

General and Administration expenses remained steady at US$ 6.1 million (H1 2022: US$ 5.8 million) reflecting the Group's continuous aim to manage its costs.

Other costs

Finance expenses in the period were US$ 18.2 million (H1 2022: US$ 7.3 million). Interest costs on borrowings increased to US$ 16.5 million (H1 2022 US$ 6.8 million), mainly as a result of the increase in LIBOR interest rate from the second half of 2022 to date, PIK interest costs of US$ 2.0 million, and an increase in margin rate on the loan from 3% to 4% effective from the first quarter of 2023. Moving forward, our margin rate is lowered to 3.1% and PIK will not accrue. Finance expenses in the comparative period were reduced by a gain of US$ 1.1 million on changes in fair value of our interest rate swap arrangement on our loan.

A net foreign exchange loss of US$ 0.6 million in H1 2023 (H1 2022: gain of US$ 0.2 million) arose from unfavorable movements in exchange rates of the Pound Sterling against the US Dollar.

Tax expense decreased to US$ 1.3 million (H1 2022: US$ 1.5 million), of which US$ 0.1 million decrease is attributable to a lower withholding tax charge and US$ 0.1 million reduction is attributable to a decrease in activity in taxable jurisdictions.

Cash flow and liquidity

The Group's net cash generated from operating activities remained steady at US$ 42.1 million (H1 2022: US$ 42.2 million). The net cash outflow from investing activities for H1 2023 decreased to US$ 2.6 million(H1 2022: US$ 3.7 million).

The Group's net cash outflow from financing activities during the period increased to US$ 46.7 million(H1 2022: US$ 36.7 million). The Group made debt repayments of US$ 28.6 million (H1 2022: US$ 28.0 million). Interest on bank borrowings during H1 2023 amounted to US$ 16.3 million (H1 2022: US$ 6.9 million), which included US$ 2.0 million for PIK interest. The increase in interest on bank borrowings was due to the increase in LIBOR interest rate compared to the prior period as well as the increase in term margin.

Balance sheet

Total current assets at 30 June 2023 were US$ 52.7 million (31 December 2022: US$ 53.6 million). Trade receivables increased in line with increase in revenue and stood at US$ 37.6m (31 December 2022: US$ 33.2 million), emphasizing our continuing efforts on cash collection. Trade receivables are net of the recognition of a charge during 2022 of US$ 1.9 million for the bankruptcy of a client. The Group has reassessed the position of the client which remains the same as of the prior year end. Prepayments have increased to US$ 5.4m (31 December 2022: US$ 3.1 million). The aggregate increase in trade receivables and prepayments of US$ 6.7 million was offset by the decrease of cash and cash equivalents of US$ 7.2 million.

Total current liabilities increased to US$ 88.7 million (31 December 2022: US$ 69.3 million) partly due to an increase in trade payables, an increase in accrued expenses and deferred revenue. As per our contractual obligation with our Lenders repayment of our bank borrowings due within one year increased by US$ 10.0 million. Further, the Group's derivative financial instrument was revalued to US$ 3.9 million (31 December 2022: US$ 3.2 million). While the current assets are lower than current liabilities, the group expects to honour all its liabilities as they fall due and the accounts have been prepared on a going concern basis. For further details please refer to the Going Concern disclosure within Note 2 of the interim condensed consolidated financial statements.

Total non-current assets as at 30 June 2023 were US$ 596.2 million (31 December 2022: US$ 605.3 million). The decline is due to US$ 15.5 million depreciation and amortisation charges on non-current assets (year ended 31 December 2022: US$ 31.9 million). This was offset by capital expenditure of US$ 5.4 million comprising expenses for equipment upgrades for the vessels and dry-docking expenditure. Total non-current liabilities reduced to US$ 263.3 million (31 December 2022: US$ 301.9 million) primarily due to the repayment of US$ 28.6 million (H1 2022: US$ 28.0 million) towards bank borrowings and US$ 10.0 million (H1 2022: US$ nil) reclassified to current liabilities as per our contractual obligation with our Lenders for repayment of our bank borrowings.

As of June 30, 2023, net leverage ratio reached 3.75 times (31 December 2022: 4.42 times).

Going concern

The Group's Directors have assessed the Group's financial position for a period of not less than 12 months from the date of approval of the half year results and have a reasonable expectation that the Group will be able to continue in operational existence for the foreseeable future.

The Group was in a net current liability position as 30 June 2023 amounting to US$ 36.0 million(31 December 2022: US$ 15.8 million). The Group is aware that the increase in debt servicing will continue to be a hurdle, closely monitors its liquidity and expects to meet its short-term obligations. During the period, the Group made a loan prepayment of US$ 23.2 million which reduced the current assets (cash) and the non-current liabilities (bank loan) at the period end, leading to a reduction in the current ratio. The loan prepayment was made after taking into account the forecast net cashflows in the foreseeable future.

The Group's forecasts, having taken into consideration reasonable risks and downsides, indicate that its current bank facilities along with the secured backlog and a strong pipeline of near-term opportunities for additional work will provide sufficient liquidity for its requirements for the foreseeable future and accordingly these condensed consolidated financial statements for the Group for the current period have been prepared on a going concern basis. For further details please refer to the Going Concern disclosure within Note 2 of the interim condensed consolidated financial statements.

Related party transactions

During the period there were related party transactions with National Catering Company Limited WLL, an affiliate of a significant shareholder of the Company, for Catering services totaling US$ 0.4 million (H1 2022: US$ 0.3 million) and with Sigma Enterprise Company LLC, an affiliate of a significant shareholder of the Company, for the provision of equipment and overhaul services totaling US$ 0.2 million (H1 2022: nil).

Risks and uncertainties

There are a number of risks and uncertainties which could have a material impact on the Group's performance over the remaining six months of 2023. The Directors do not consider that the principal risks and uncertainties have materially changed since the publication of the Annual Report for the year ended 31 December 2022. A detailed explanation of the risks summarised below, and how the Group seeks to mitigate the risks, can be found on pages 26 to 30 of the 2022 Annual Report which is available at www.gmsplc.com.

· Utilisation and Local content requirement - The Group relies on a limited number of clients that may expose it to losses if these relationships breakdown. GCC region NOCs have local content requirements as part of their tender processes designed to giving preference to suppliers that commit to improving their local content and levels of spend which may prevent GMS from winning contracts or lead to financial loss and/or a reduction in margins on existing contracts, which will ultimately impact operating cash flows and net profitability.

· Inability to secure an appropriate capital structure - The Group is subject to increasing cost of debt due to increase in interest rates global benchmark which will impact the liquidity in the business and the ability to deleverage. This can impact the share price.

· Inability to deliver safe and reliable operations - The Group may suffer commercial and reputational damage from an environmental or safety incident involving employees, visitors or contractors. Inadequate preparation for situations, such as sudden equipment failure, inability to fulfil client requirements and unpredictable weather could have a negative impact on the business.

Risks and uncertainties (continued)

· Liquidity and covenant compliance - The business is exposed to short-term liquidity management risks due to potential increases in interest rates and inflation, which could impact the debt service obligations and the Group's bank facilities' covenants. The increase in interest charges will lead to reduced liquidity in the business as more cash will be required to meet our banking requirements. Reduced liquidity could impact future operations and lead to an event of default. This would give lenders the right to accelerate repayment of the outstanding loans, and then exercise security over the Group's assets. All bank covenants are closely monitored as the headroom remains narrow, which is due to the Group's performance being very sensitive to many internal and external factors such as utilisation, operational downtime, interest rates and other variables.

· People - Losing skilled workforce or failing to attract new talent into our business has the potential to undermine performance.

· Legal, economic and political conditions - Political instability in the regions in which GMS operates (and recruit from) may adversely affect its operations in terms of recruitment, retention and deployment of personnel. The business is exposed to sudden changes in tax compliance requirements or changes in legislation which could lead to fines, financial loss or adversely impact liquidity. Economic conditions such as interest rate and inflation increases will also have an impact on the Groups' liquidity and profitability.

· Compliance and Regulation - Failure to appropriately identify and comply with laws and regulations, and other regulatory statutes in new and existing markets, could lead to regulatory investigations. Non-compliance with laws and regulations could be detrimental to stakeholder relations leading to reputational and financial loss.

· Cyber-crime - security and integrity - Phishing attempts result in inappropriate transactions, data leakage and financial loss. The Group is at risk of loss and reputational damage through financial cyber-crime.

· Climate change - Climate change poses both transition and physical risks to the Group. Transition risks come from the decarbonisation of the global economy which could result in changing investor sentiment making new investors harder to find. It may bring changing client preferences leading to reduced demand for our services. New legislation could require us to increase reporting and possibly substitute our products and vessels for greener alternatives. Physical risks include rising temperatures, which could further impact working hours, and rising sea levels, which could affect where our vessels can operate.

RESPONSIBILITY STATEMENT

Financial information for the period ended 30 June 2023.

We confirm to the best of our knowledge:

a) the condensed set of financial statements, which has been prepared in accordance with the applicable set of accounting standards, gives a true and fair view of the assets, liabilities, financial position and profit or loss of Gulf Marine Services plc and its undertakings, included in the consolidation as a whole as required by DTR 4.2.4R;

b) the interim management report includes a fair review of the information required by DTR 4.2.7R; and

c) the interim management report includes a fair review of the information required by DTR 4.2.8R.

By order of the Board

Mansour Al Alami Alex Aclimandos

Executive Chairman Chief Financial Officer

30 August 2023 30 August 2023

Independent Review Report to Gulf Marine Services PLC ("the Entity")

Conclusion

We have been engaged by the Entity to review the Entity's condensed set of consolidated financial statements in the half-yearly financial report for the six months ended 30 June 2023 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, a summary of significant accounting policies and other explanatory notes.

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 2023 is not prepared, in all material respects in accordance with International Accounting Standard 34 Interim Financial Reporting ("IAS 34") as contained in the UK adopted International Accounting Standards and the Disclosure Guidance and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA").

Basis for conclusion

We conducted our review in accordance with International Standard on Review Engagements (UK) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity ("ISRE (UK) 2410") issued for use in the UK. A review of interim financial information consists of making enquiries, 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 International Standards on Auditing (UK) 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. 

We read the other information contained in the half-yearly financial report to identify material inconsistencies with the information in the condensed set of consolidated financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the review. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Conclusions relating to going concern

Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis for conclusion section of this report, nothing has come to our attention that causes us to believe that the directors have inappropriately adopted the going concern basis of accounting, or that the directors have identified material uncertainties relating to going concern that have not been appropriately disclosed.

This conclusion is based on the review procedures performed in accordance with ISRE (UK) 2410. However, future events or conditions may cause the Entity to cease to continue as a going concern, and the above conclusions are not a guarantee that the Entity will continue in operation.

INDEPENDENT REVIEW REPORT TO GULF MARINE SERVICES PLC (THE "ENTITY") (continued)

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 DTR of the UK FCA.

The directors are responsible for preparing the condensed set of consolidated financial statements included in the half-yearly financial report in accordance with IAS 34 as adopted for use in the UK. 

As disclosed in note 1, the annual financial statements of the Entity for the year ended 31 December 2022 are prepared in accordance with UK-adopted international accounting standards. 

In preparing the condensed set of consolidated financial statements, the directors are responsible for assessing the Entity's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Entity or to cease operations, or have no realistic alternative but to do so.

Our responsibility

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

Our conclusion, including our conclusions relating to going concern, are based on procedures that are less extensive than audit procedures, as described in the Basis for conclusion section of this report.

The purpose of our review work and to whom we owe our responsibilities

This report is made solely to the Entity in accordance with the terms of our engagement to assist the Entity in meeting the requirements of the DTR of the UK FCA. Our review has been undertaken so that we might state to the Entity those matters we are required to state to it in this 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 Entity for our review work, for this report, or for the conclusions we have reached.

KPMG 30 August 2023

Chartered Accountants

1 Harbourmaster place,

IFSC,

Dublin 1,

Ireland.

GULF MARINE SERVICES PLC

Condensed Consolidated Statement of Comprehensive Income

for the period ended 30 June 2023

All results are derived from continuing operations in each period/year. There are no discontinued operations in either period/year.

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

GULF MARINE SERVICES PLC

Condensed Consolidated Balance Sheet

as at 30 June 2023

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

GULF MARINE SERVICES PLC

Condensed Consolidated Statement of Changes in Equity

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

·

GULF MARINE SERVICES PLC

Condensed Consolidated Statement of Cash Flows

for the period ended 30 June 2023

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

GULF MARINE SERVICES PLC

Notes to the Condensed Consolidated Financial Statements

for the period ended 30 June 2023

1 Corporate information

Gulf Marine Services PLC ("GMS" or the "Company") is a Company which is registered and was incorporated in England and Wales on 24 January 2014. The Company is a public limited liability company with operations mainly in the Gulf Cooperation Council (GCC) and Europe. The address of the registered office of the Company is 107 Hammersmith Road, London, W14 0QH. The registered number of the Company is 08860816.

The principal activities of GMS and its subsidiaries (together referred to as the "Group") are chartering and operating a fleet of specially designed and built vessels. All information in the notes relate to the Group, not the Company unless otherwise stated.

The Group is engaged in providing self-propelled, self-elevating support vessels (SESVs) that present a stable platform for delivery of a wide range of services throughout the total lifecycle of offshore oil, gas and renewable energy activities, and which are capable of operations in the GCC and other regions.

The condensed consolidated financial statements of the Group for the six-month period ended30 June 2023 were authorised for issue on 30 August 2023. The condensed consolidated financial statements do not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. The condensed consolidated financial statements have been reviewed, not audited.

The Group issued statutory consolidated financial statements for the year ended 31 December 2022, which were prepared in accordance with UK adopted International Accounting Standards in conformity with requirements of the Companies Act 2006. Those consolidated financial statements were approved by the Board of Directors on 23 April 2023. The report of the auditor on those consolidated financial statements did not contain any statement under section 498(2) or 498(3) of the Companies Act 2006. A copy of the statutory consolidated financial statements for year ended 31 December 2022 has been delivered to the Registrar of Companies.

2 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 2022 as disclosed in the Annual Report, except for the adoption of new standards and interpretations effective as of 01 January 2023, which are described in more details below.

The condensed consolidated financial statements have been prepared on the historical cost basis, except for certain financial instruments that are measured at fair values at the end of each reporting period. The Group's management considers that the fair value of financial assets, financial liabilities and lease liabilities approximates their carrying amounts.

GULF MARINE SERVICES PLC

Notes to the Condensed Consolidated Financial Statements

for the period ended 30 June 2023 (continued)

2 Significant accounting policies (continued)

Basis of preparation

The annual consolidated financial statements of the Group will be prepared in accordance withUK adopted International Accounting Standards in conformity with requirements of the Companies Act 2006. The interim set of condensed consolidated financial statements included in this half-yearly financial report has been prepared in accordance with the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority and with International Accounting Standard (IAS) 34 Interim Financial Reporting as adopted by the United Kingdom.

The condensed consolidated financial statements do 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 2022. In addition, results for the six-month period ended 30 June 2023 are not necessarily indicative of the results that may be expected for the financial year ending 31 December 2023. The condensed consolidated statement of comprehensive income for the six-month period ended 30 June 2023 is not affected significantly by seasonality of results.

Going concern

The Group's Directors have assessed the Group's financial position for a period of not less than12 months from the date of approval of the half year results and have a reasonable expectation that the Group will be able to continue in operational existence for the foreseeable future.

The Group was in a net current liability position as at 30 June 2023 amounting to US$ 36.0 million(31 December 2022: US$ 15.8 million). The Group closely monitors its liquidity and is expected to meet its short-term obligations. During the period, the Group made a loan prepayment ofUS$ 23.2 million. The loan prepayment was made after taking into account the forecast cashflows in the second half of 2023.

The Group has US$ 5.1 million of available resources comprising cash and cash equivalents at the reporting date and it has an available undrawn working capital facility of US$ 15.0 million(31 December 2022: US$ 20.0 million) as at the at the reporting date. During the period, the working capital facility was reduced by US$ 5 million. The working capital facility expires alongside the main debt facility in June 2025 (refer Note 15).

The Group has been successful in achieving a drop in net leverage ratio to below 4.0 and the PIK has stopped to accrue as of the second quarter of 2023. Consequently, going forward, the cost of bank borrowings will witness a reduction of 340 basis points. The interest cost savings and improved profitability resulting from the lower interest expenses will positively impact the Group's financial position. Further, with enhanced cash flow and debt servicing capability, the Group can meet its financial obligations more efficiently, reducing the risk of liquidity constraints.

GULF MARINE SERVICES PLC

Notes to the Condensed Consolidated Financial Statements

for the period ended 30 June 2023 (continued)

2 Significant accounting policies (continued)

Going concern (continued)

GMS continues to remain cognisant of the wider context in which it operates and the impact that climate change could have on the financial statements of the Group. The impact of climate change is expected to be insignificant in the going concern assessment period.

The Group's forecasts, having taken into consideration reasonable risks and downsides, indicate that its current bank facilities along with the secured backlog and a strong pipeline of near-term opportunities for additional work will provide sufficient liquidity for its requirements for the foreseeable future and accordingly these condensed consolidated financial statements for the Group for the current period have been prepared on a going concern basis.

New and amended standards adopted by the Group

The following new and revised IFRSs have been adopted in these condensed consolidated financial statements.

· Classification of liabilities as current or non-current (Amendments to IAS 1), effective for annual periods beginning on or after 1 January 2023.

· IFRS 17 Insurance Contracts, effective for annual periods beginning on or after 1 January 2023.

· Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality Judgements - Disclosure of Accounting Policies, effective for annual periods beginning on or after 1 January 2023.

· Amendments to IAS 8 Accounting Policies Changes in Accounting Estimates and Errors-Definition of Accounting Estimates, effective for annual periods beginning on or after 1 January 2023.

· Amendments to IAS 12 Income Taxes - Deferred Tax related to Assets and Liabilities arising from a Single Transaction, effective for annual periods beginning on or after 1 January 2023.

The application of these new and revised IFRSs has not had any material impact on the amounts reported for the current and prior periods and did not require any retrospective adjustments but may affect the accounting for future transactions or arrangements. The full revised accounting policies applicable from 1 January 2023 will be provided in the Group's annual financial statements for the year ending 31 December 2023.

At the date of the condensed consolidated interim financial statements, the following other standards, amendments and Interpretations have not been effective and have not been early adopted by the Group:

· Amendments to IAS 1 Presentation of Financial Statements - Classification of Liabilities as Current or Non-current, , effective for annual periods beginning on or after 1 January 2024.

· Amendments to IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures - Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

These new and amended standards are not expected to have a significant impact on the Group's condensed consolidated interim financial information.

GULF MARINE SERVICES PLC

Notes to the Condensed Consolidated Financial Statements

for the period ended 30 June 2023 (continued)

3 Segment reporting

The segment information provided to the chief operating decision makers for the operating and reportable segments for the period include the following:

*See Glossary. 

Segment revenue reported above represents revenue generated from external customers. There were no inter-segment sales in either of the periods. Segment assets and liabilities, including depreciation, amortisation and additions to non-current assets, are not reported to the chief operating decision maker on a segmental basis and, therefore, are not disclosed.

GULF MARINE SERVICES PLC

Notes to the Condensed Consolidated Financial Statements

for the period ended 30 June 2023 (continued)

4 Presentation of non-GAAP results

The following table provides a reconciliation between the statutory and non-statutory financial results:

1Please see Glossary for definition.

GULF MARINE SERVICES PLC

Notes to the Condensed Consolidated Financial Statements

for the period ended 30 June 2023 (continued)

5 Taxation

Tax is calculated at the rates prevailing in the respective jurisdictions in which the Group operates. The overall effective rate is the weighted average of the expected taxes to be paid in each jurisdiction. Income is subject to tax including withholding tax on Revenue and Corporation tax on Profit for the year in each taxable jurisdiction (being principally Qatar, the United Kingdom and Saudi Arabia). The Group effective tax rate was 12.6% for the period ended June 2023 (Six months ended June 2022: 14.8%).

The current tax charge of US$ 1.3 million (six-month period ended June 2022: US$ 1.5 million) included withholding tax amounting to US$ 1 million (six-month period ended June 2022: US$ 0.9 million).

A subsidiary of the Group received a tax assessment from the Saudi tax authorities (ZATCA) for an amount of US$ 7.3 million related to the transfer pricing of our inter-group bareboat agreement, for the period from 2017 to 2019. The Group has filed an appeal with the Tax Violations and Dispute Resolution Committee (TVDRC) against the assessment raised by ZATCA. The Directors have considered the claim, including consideration of third-party tax advice received. Noticing the claim retrospectively applied from 2010 in respect of a law which was issued in 2019, which applied a "tested party" assessment different to that supported by their tax advisors and using an approach which the Directors (supported by their tax advisors) consider to be inconsistent with the principles set out in the KSA transfer price guidelines, the Directors believe that the Group has complied with the relevant tax legislation. On that basis, the Directors have not made a provision for the current or any future potential assessments of a similar nature.

On 9 December 2022, the UAE Ministry of Finance released the Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (the Law) to enact a Federal corporate tax (CT) regime in the UAE. The CT regime will become effective for accounting periods beginning on or after 1 June 2023.

The Cabinet of Ministers Decision No. 116/2022 effective from 2023, specifies the threshold of income over which the 9% tax rate would apply and accordingly, the Law is now considered to be substantively enacted. A rate of 9% will apply to taxable income exceeding AED 375,000, a rate of 0% will apply to taxable income not exceeding AED 375,000 and a rate of 0% on qualifying income of free zone entities.

GMS has considered deferred tax implications in the preparation of these condensed consolidated financial statements in respect of property, plant and equipment and potential timing differences that could give rise to a deferred tax liability. There are currently no UAE tax laws that would impact treatment of depreciation and amortization of property, plant and equipment, that would result in such a timing difference.

GULF MARINE SERVICES PLC

Notes to the Condensed Consolidated Financial Statements

for the period ended 30 June 2023 (continued)

6 Earnings per share

Basic earnings per share is calculated by dividing the earnings attributable to equity holders of the Company for the period (as disclosed in the condensed consolidated statement of comprehensive income) by the weighted average number of ordinary shares in issue during the period. For the comparative period/year, the deferred shares were not included in any of the Earnings per share calculations as they did not have a right to dividends.

Adjusted earnings per share is calculated on the same basis as basic earnings but uses the adjusted profit attributable to equity holders of the Company for the period (refer Note 4). 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 earnings attributable to owners 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 LTIP's during the period.

Adjusted diluted earnings per share is calculated on the same basis but uses adjusted profit (refer Note 4) attributable to the equity shareholders of the Company.

GULF MARINE SERVICES PLC

Notes to the Condensed Consolidated Financial Statements

for the period ended 30 June 2023 (continued)

6 Earnings per share (continued)

The following table shows a reconciliation between basic and diluted average number of shares:

The warrants are excluded from the calculation due to their anti-dilutive nature, which stems from the fact that the Group's average share price over the six-month period has remained lower than the warrants' exercise price.

7 Revenue