2 Mar 2011 07:00
Goldenport Holdings Inc.
Athens, 2 March 2011
Final Results for the Year Ended 31 December 2010
Goldenport Holdings Inc. ("Goldenport" or "the Company"), (LSE: GPRT) the international shipping company that owns and operates a fleet of container and dry bulk vessels, today announces the results for the year ended 31 December 2010 reporting a final dividend for 2010 of 3.6 pence per share, which including the interim dividend results in a total dividend for the year of 5.4 pence per share, a significant increase compared to last year.
Financial Highlights (amounts in '000 except per share data)
§ Revenue of US$ 88,180, (2009: US$ 94,011)
§ EBITDA of US$ 42,199, (2009: US$ 46,481)
Underlying net income (excluding non-recurring items)
§ Net income of US$ 3,298 (2009: US$ 3,894)
§ Earnings per Share of US$ 0.04 calculated on 80,215,088 shares (2009: US$ 0.06 calculated on 70,404,878 shares)
As reported
§ Net loss of US$ 152 (2009 net loss: US$ 1,362)
§ Earnings per Share of US$ (0.00) calculated on 80,215,088 shares (2009: US$ (0.02) calculated on 70,404,878 shares)
§ Available cash of US$ 52,683 (31 December 2009: US$ 24,618)
§ Net debt to book capitalisation as of 31 December 2010, 38% (31 December 2009: 36%)
§ No impairment losses incurred on any vessel of the fleet
§ In full compliance with debt covenants
§ Final dividend of 3.6 pence per share or £ 3,282 in total with scrip alternative (2009 final dividend: 3.0 pence per share)
§ Total dividend for 2010 of 5.4 pence per share (2009: 3.7 pence per share)
CEO Statement (amounts in US$'000):
Captain Paris Dragnis, Founder and Chief Executive Officer of the Company commented:
"We are pleased to report healthy operational results for 2010 despite the continued market volatility over the last twelve months. In 2010, we continued with the implementation of our strategy of prudent growth, while seeking stable cash flows with upside potential through the employment of our fleet under period time charters.
"In the present environment of weak market conditions in the bulk carrier segment, we are pleased to report strong forward coverage for our operational bulk carrier fleet where, 67% of the available days for 2011 are already fixed under period employment, assuming earliest charter expiration. We have also secured strong forward coverage for the majority of our operational fleet of containers with 99% of the fleet available days for 2011 already fixed under period employment. This translates into strong and visible cash flows.
"As testimony of Goldenport's financial strength, confidence in the future and commitment to our shareholders, the Board proposed a final dividend of 3.6 pence per share which when added to the interim dividend of 1.8 pence per share provides a full year dividend for 2010 of 5.4 pence which compares favourably to the 2009 full year dividend of 3.7 pence per share.
"Our Company is in a strong financial condition as of 31 December 2010 with net debt of US$ 165,818 and a net debt to book capitalisation of only 38%, a moderate figure for our industry. Our unrestricted cash balance on 31 December 2010 was US$52,683.
"Looking into 2011 and beyond, we expect significant contribution to our earnings from the completion of our new building program. Within the next few months the current phase of our organic growth will be completed with the deliveries of the four remaining vessels from their respective shipyards.
"Including the delivery of these new buildings, our fleet consists of 26 vessels, of which 12 are containers and 14 are dry-bulk carriers. Out of these, 9 vessels were built after 2009, lowering the average age profile of the fleet and thus expanding the future revenue generation capacity.
"Our strong cash flow visibility based on the forward time charter coverage in both segments in which we operate, our new-building program which progresses on schedule and our healthy balance sheet enable us to be confident about the future growth prospects of our Company and put us in a strategic position to benefit from accretive fleet expansion opportunities as they occur.
"We continue to monitor both segments in which we operate in order to identify assets that fit to our next growth phase. The improvement in freight rates in the containers segment allows us to be optimistic about sourcing acquisitions which can be matched with accretive employment. On the other hand the market weakness in the bulk carriers may lead to opportunities to acquire good specification vessels at attractive prices, thus replicating the successful acquisition strategy we applied in the 2009 and 2010 containers' segment downturn."
Fleet Developments:
New-building Deliveries:
Ø On 25 October 2010 the Company took delivery of the 57,000 DWT new-building geared bulk carrier 'Milos', which was constructed in Cosco Zhousan shipyard of China. Upon delivery the vessel commenced its pre-agreed three-year time charter.
Ø On 3 November 2010 the Company took delivery of the 57,000 DWT new-building geared bulk carrier 'Sifnos', which was constructed in Cosco Zhousan shipyard of China. Upon delivery the vessel commenced its pre-agreed three-year time charter.
Ø On 3 December 2010 the Company took delivery of the 59,000 DWT new-building geared bulk carrier 'Eleni D', which was constructed in SPP Shipbuilding Co. shipyard of Korea. Upon delivery the vessel commenced its pre-agreed three-year time charter.
Vessel Acquisitions (amounts in US$ '000):
Ø On 6 May 2010, the Company took delivery of the M/V Grand Vision, a container vessel of 2,986 TEU built in 1991, which was acquired for U.S.$6,750.
Ø On 11 May 2010, the Company took delivery of the M/V Arctic Trader (renamed to Golden Trader), a bulk carrier of 48,170 DWT built in 1994, which was acquired for U.S.$17,250.
Ø On 1 November 2010 the Company entered into an agreement to acquire M/V Clifton Bridge, a 3,720 TEU container vessel built in 1988 that was delivered in February 2011 for a total consideration of U.S.$8,100.
Profitable Vessel disposal (amounts in US$ '000):
Ø On 12 February 2010, the company agreed the sale of the 962 TEU, 1978-built vessel "MSC Mekong", to an unaffiliated third party for demolition. The sale was concluded at a gross consideration of US $1,989 in cash and the vessel was delivered to the new owners on 4 March 2010. The gain resulting from the sale of the vessel was U.S.$868.
The fleet as of today consists of 26 vessels, of which 12 are containers and 14 are dry-bulk carriers. Out of the total, 4 vessels (1 container and 3 bulk-carriers) are new-building orders with expected deliveries in 2011.
Final dividend:
The Board of Directors of Goldenport believes it is prudent to maintain a conservative dividend payout ratio but understands that it also needs to reward the shareholders who have consistently supported the Company. Therefore the Board proposes a final dividend of 3.6 pence per share in respect of the financial year ending 31 December 2010 (3.0 pence per share final dividend in 2009). Including the interim dividend of 1.8 pence per share already paid, the total dividend for 2010 will be 5.4 pence per share (2009: total dividend was 3.7 per share). This final dividend will be accompanied by a scrip dividend alternative, arrangements for which will be mailed to shareholders on or about 30 March 2011 with elections required to be made by 15 April 2011. Assuming that the dividend proposal will be approved at the AGM that will be held on 11 May 2011, the dividend will be payable on 16 May 2011 to the shareholders on the register as at close of business on 11 March 2011. The ex-dividend date is 9 March 2011.
Operational Fleet Forward Coverage
The percentage of available days of the fleet already fixed under contracts as of 1 March 2011, assuming the earliest charter expiration and excluding the new-building vessels not yet delivered, is as follows:
| 2011(1) (2) | 2012 (1) (2) | 2013 (2) |
Total Fleet | 83% (83%) | 39% (40%) | 16% (17%) |
Containers | 99% (99%) | 47% (47%) | 5% (5%) |
Bulk Carriers | 67% (65%) | 32% (32%) | 26% (28%) |
(1) Percentage of available days of the fleet fixed under contract as reported on 7 February 2011, being the date of the previous trading update, is given in brackets
(2) The percentages above include the current operational fleet and the vessel 'Pistis' but exclude the three other new-build vessels for which we expect delivery in 2011
Compliance with Debt Covenants
§ The Company is in full compliance with the covenants of the existing bank debt.
Impairment
§ No impairment loss was incurred on any vessels of the fleet.
2011 Financial Calendar
Ex-dividend date: | 9 March 2011 |
Record date: | 11 March 2011 |
Calculation period for scrip dividend: | 9-15 March 2011 |
Despatch Annual Report and Scrip Election Documentation: | 30 March 2011 |
Last day of elections for the scrip dividend: | 15 April 2011 |
Annual General Meeting | 11 May 2011 |
Dividend payment: | 16 May 2011 |
Enquiries
Goldenport:
Christos Varsos, Chief Financial Officer: +30 210 8910 500
John Dragnis, Commercial Director +30 210 8910 500
Investor Relations Co-ordinators:
Capital Link:
Annie Evangeli - London +44 203 206 1320
Nicolas Bornozis - New York +1 212 661 7566
E-mail: goldenport@capitallink.com
info@goldenport.biz
Market Outlook:
Containers:
At the beginning of 2010, the industry was at a low point with all major liner companies announcing heavy losses for 2009. At the same time a record number of vessels (close to 580) were laid up. Whilst market conditions were difficult no major bankruptcies materialized either from operators or from independent owners. The wide application of "slow steaming" and "super slow steaming" from the operators of long distance routes, the unprecedented level of scrapping in 2009 which continued in 2010 (107 vessels of 170,000 TEU capacity were scrapped in 2010) and the significant delays in new buildings deliveries combined with the impact of stronger demand from the developed countries for finished products allowed the market to make a substantial recovery from early March 2010.
Twelve months on, and the container charter market is still below the historical average rates for all sizes, however, current freight rates allow owners to cover not just their operating costs (as was the case in 2009 and in the first quarter of 2010) but also interest expense and part if not all of their capital repayments. Most importantly for this sector almost every liner company has announced substantial profit levels for 2010 and the future now looks more promising.
Market outlook depends on the balance of supply and demand and in this respect there is reason for optimism for 2011. In 2010 global container trade grew by approximately 12% (although this growth was from a low base in 2009). At the same time, the supply side grew by around 8.5%. For 2011 the global container trade is expected to grow by 8% whereas container capacity is expected to grow by about 6% (after making allowances for scrapping). For the second consecutive year demand growth should outpace the growth in supply.
2011 should be another year of recovery for both liner companies and independent owners. The recovery in the charter rates that is already apparent, lead to an accretive relationship between the acquisition price and the employment arranged and makes investments in the segment more appealing. In this respect Goldenport tends to focus in strengthening the fleet with further container investments given also the established presence and relationships in the segment.
Bulk-Carriers:
For 2011 dry bulk shipping capacity is expected to grow at an accelerated pace (especially in the larger vessel sizes) despite potential delays and cancellations of up to one third of the new-building vessels on order.
Whilst the supply side of the dry-bulk sector will show a large increase, so should demand. About 50% of the total seaborne dry bulk trade is connected with the steel industry (iron ore, coking coal, steel products, scrap, etc). In 2010, global steel production increased by 15% reaching a new all time high record of 1.4 billion tons. For 2011 global steel production is set to continue to grow by at least another 100 million tons with demand from Asian countries leading the way. Considering the strong correlation between freight earnings and performance of the steel industry, as well as the positive underlying environment in the grains trade with China increasing its level of imports, the outlook for the dry cargo market may not be as gloomy as seems at first glance.
Traditionally the dry bulk market has been much more sensitive to changes in demand rather than that of supply. Therefore the expectation of strong demand in 2011 is pivotal for the development of the market. Whether that pattern will apply in the near future, remains to be seen.
Charter rate volatility was certainly a key feature during 2010 and this is expected to continue into 2011. The spot market reached very low levels in early February however the view from the derivatives' market (FFA market) for the rest of the year is more positive.
Goldenport continues to be well placed to maintain the visibility of its cash flows with 67% of the operating dry-bulk fleet available days for 2011 already fixed under period employment. This figure excludes the two new building vessels which are expected to be delivered within 2011.
Recent Events in Chartering Market:
Korea Line Corporation, a charterer of dry-bulk vessels has filed a petition with Korean courts for rehabilitation proceedings. The Company is constantly monitoring the progress of the court process and will be able to provide additional information as the case develops.
Summary of Selected Financial and Operating Data
Year ended | ||||||
Income Statement Data (in US$ thousand): | 31-Dec-10 | 31-Dec-09 | ||||
Revenue | 88,180 | 94,011 | ||||
EBITDA | 42,199 | 46,481 | ||||
Excluding non recurring items | ||||||
Net Income | (1) | 3,298 | 3,894 | (2) | ||
Weighted average number of shares | 80,215,088 | 70,404,878 | ||||
Adjusted EPS | 0.04 | 0.06 | ||||
As reported | ||||||
EBIT | 3,270 | 2,643 | ||||
Net Loss | (152) | (1,362) | ||||
Weighted average number of shares | 80,215,088 | 70,404,878 | ||||
Basic EPS | (0.00) | (0.02) | ||||
Gain from vessels' disposals | 868 | 13,540 | ||||
Cancellation of new building contacts | (353) | (18,796) | ||||
FLEET DATA: | ||||||
Average number of vessels | 18 | 19 | ||||
Number of vessels at end of period | 25 | 24 | ||||
-Operating | 21 | 15 | ||||
-Laid-up | - | 2 | ||||
-New Buildings under construction | 4 | 7 | ||||
Ownership days | (4) | 6,529 | 6,803 | (3) | ||
Available days | (4) | 6,319 | 6,503 | (3) | ||
Operating days | (4) | 6,110 | 5,982 | (3) | ||
Fleet utilisation | (5) | 97% | 92% | (5) | ||
AVERAGE DAILY RESULTS (in US$) | ||||||
Time Charter Equivalent (TCE) rate | 13,058 | 13,424 | ||||
Average daily vessel operating expenses | (4) | 4,969 | 5,082 | (3) | ||
(1): Non-recurring items for 2010 consist of US$1,973 and US$608 of accelerated amortisation for the vessels 'Vasos' and 'MSC Accra' respectively, US$1,300 of out of court settlement, US$84 non-cash item relating to the Executive option valuation, US$868 of gain from vessel disposal and US$353 of loss from cancellation in 2009 of new building contracts | ||||||
(2): Non recurring items for 2009 consist of US$18,796 of loss from cancellation of new buildings and US$13,540 of profit from vessel disposals | ||||||
(3): Ownership days and average daily vessel operating expenses exclude the new building orders not delivered that will be delivered in a future date, but include the vessels sold in 2009 up to their respective sale dates | ||||||
(4): Ownership days and average daily vessel operating expenses exclude the new building orders not delivered, but include the new-building vessels delivered in the year from their respective delivery dates and the vessels sold in 2010 up to their respective sale dates | ||||||
(5): Fleet utilization includes the two laid-up vessels as of 31 December 2009 which commenced operation in January and May 2010 respectively. | ||||||
See Appendices, for Notes on the Summary of Selected Financial and Operating Data, for detailed Fleet Employment profile, for Notes on the Summary of Selected Financial and Operating Data, for forward looking statements and for full set of financial statements.
Financial review (amounts in US$ '000, except the per day OPEX data)
Time and Voyage Charter Revenues: Revenues decreased by US$ 5,831 or 6.2% to US$ 88,180 for 2010 (2009: US$ 94,011). The main reasons for this decrease were: (i) a decline in freight rates during 2010, in both sectors in which we operate, compared with the rates in 2009, (ii) two container vessels being laid-up for one and five months respectively and (iii) the difference in the number of operating vessels between the two periods, due to the disposal of vessels during 2009 and early 2010 which were only replaced by the deliveries of new buildings in the last quarter of 2010 and by the acquisition of two vessels in mid-2010.
The vessels 'Athos', 'MSC Emirates', the old 'MSC Socotra', 'MSC Himalaya', 'Gianni D' and 'Howrah Bridge' were sold in different times throughout 2009 so they did not contribute in full in 2009 revenue. The vessel 'MSC Mekong' was sold in February 2010. The vessels 'MSC Anafi' and 'Gitte' were laid-up most of the second half of 2009 and for one month and five months respectively in 2010 so they did not contribute to the revenue during the laid-up period.
The new building vessels 'Sifnos', 'Milos' and 'Eleni D' became operational in the last quarter of 2010 and the second hand vessels 'Grand Vision' and 'Golden trader' were acquired and became operational in the second quarter of 2010.
Voyage expenses total: The voyage expenses decreased by US$ 1,039 or 15.5% to US$ 5,668 for 2010 (2009: US$ 6,707) mainly due to the decreased revenue figure to which commission rates applied and a change in the mix of the revenue between containers and bulk carriers.
Vessel operating expenses: Vessel operating expenses decreased by US$ 2,128 or 6.2% to US$ 32,442 for 2010 (2009: US$ 34,570). The decrease in absolute numbers is attributable to the decrease of the fleet in terms of numbers of vessels, but also to the change of mix as the vessels sold were older compared to the existing vessels.
On a per day basis operating expenses decreased by US$ 113 per day or 2.2% to US$ 4,969 per day (2009: US$ 5,082 per day) reflecting the change in mix of the fleet after the sale of specific older vessels in 2009 and the delivery of younger vessels.
General and administrative expenses: The General and administrative expenses increased by US$ 1,691, or 47.3% to US$ 5,265 (2009: US$ 3,574) mainly due to an out-of-court settlement of a dispute for US$ 1,300 and due to non-cash item of US$ 84 relating to the valuation of the Executive Board's option scheme that was activated within 2010.
Depreciation: The vessels' depreciation charge increased by US$ 2,686 or 9.6% to US$ 30,686 for 2010 (2009: US$ 28,000) due to the incremental depreciation of the newly acquired vessels 'Grand Vision' and 'Golden trader' and the delivery of the new-building vessels 'Sifnos', 'Milos' and 'Eleni D'. Part of the increase can also be attributable to the operation for a full year of the vessels 'MSC Fortunate', 'Marie-Paule', 'MSC Socotra (ex. Procyon)' and 'Alpine Trader' that became operational during the course of 2009 but were operating for the full year in 2010. The majority of vessels sold in 2009 were fully depreciated.
Depreciation of dry-docking costs: Depreciation of dry-docking costs decreased by US$ 1,824 or 17.2% to US$ 8,758 for 2010 (2009: US$ 10,582) mainly due to the sale during 2009 of a number of vessels that had performed scheduled dry-dockings and had unamortized balances at the date of their respective sales.
Gain from vessel disposals: In 2010 the Company realised US$ 868 of profit from the sale of the fully depreciated vessel 'MSC Mekong'; during 2009 the Company realised profit of US$ 13,540 from the sale of one fully depreciated bulk carrier, one other bulk carrier and four fully depreciated container vessels.
Loss from cancellation of new building contracts: In 2010 the Company wrote off an additional US$ 353 relating to the cancellation of the Qingshan contracts that was reflected in the 2009 results.
Financing costs: Interest expense increased by US$ 1,192 or 26.8% to US$ 5,640 for 2010 (2009: US$ 4,448), reflecting the net increase of debt due to i) draw-downs of debt in order to finance new-building milestone payments and ii) draw-down of debt for the acquisition of the two second hand vessels 'Grand Vision' and 'Golden-Trader'.
Finance income: Finance income increased by US$ 295 to US$ 803 (2009: US$ 508) due to higher cash balances available during the period, notably following the capital-raising in July 2010.
Cash and cash equivalents: As of 31 December 2010, the Company had US$ 52,683 of unrestricted cash and cash equivalents (2009: US$ 24,618). The Company is expected to utilise these to strengthen the balance sheet, cover remaining equity instalments for the new building program and to acquire additional vessels when the right opportunities arise.
Restricted Cash: The Company as of 31 December 2010 had US$10,100 of restricted cash (2009: US$15,100) representing the amount drawn in December 2009 from a bank as part of a new loan facility for the future acquisition of a vessels. During the year the Company used US$ 5,000 for the acquisition of the vessel 'Grand Vision'. Part of the remaining amount was utilised in February 2011 with US$ 5,200 released to finance the delivery of the second-hand vessel 'Clifton-Bridge' and the remaining US$ 4,900 prepaid to the financing bank.
APPENDIX 1:
Fleet Employment Profile
Operational fleet | ||||||
Vessel | Type | Capacity | Built | Rate (US$) per day | Earliest | |
Expiration (1) | ||||||
Containers | TEU | |||||
1 | MSC Fortunate (2) | Post Panamax | 5,551 | 1996 | 28,500 | Feb-13 |
2 | MSC Socotra | Post Panamax | 4,953 | 1995 | 12,350 | Apr-13 |
3 | Bosporus Bridge | Sub Panamax | 3,720 | 1993 | 14,750 | Feb-12 |
4 | POS Yantian (3) | Sub Panamax | 3,720 | 1988 | 10,750 | Sep-12 |
5 | MSC Finland | Sub Panamax | 3,032 | 1986 | 9,000 | Apr-12 |
6 | MSC Scotland (4) | Sub Panamax | 3,007 | 1992 | 14,500 | Mar-11 |
6,800 | Mar-12 | |||||
7 | Grand Vision | Sub Panamax | 2,986 | 1991 | 9,000 | Nov-11 |
8 | MSC Anafi | Sub Panamax | 2,420 | 1994 | 9,000 | Jan-12 |
9 | MSC Accra | Sub Panamax | 1,889 | 1985 | 14,200 | Jun-12 |
10 | Gitte | Handy | 976 | 1992 | 7,350 | May-12 |
11 | Brilliant | Handy | 976 | 1992 | 6,000 | Jun-12 |
Dry Bulk | DWT | |||||
12 | Vasos | Capesize | 152,065 | 1990 | 23,950 | Mar-11 |
13 | Eleni D | Supramax | 59,000 | 2010 | 23,000 | Dec-13 |
14 | Milos | Supramax | 57,000 | 2010 | 15,650 + 50% profit share of 105% BSI(8) | Oct-13 |
15 | Sifnos | Supramax | 57,000 | 2010 | 17,700 + 50% profit share of 105% BSI(8) over 18,200 | Jan-14 |
16 | Marie-Paule (6) | Supramax | 53,800 | 2009 | 18,000 | Jan-12 |
17 | Alpine-Trader (6) | Supramax | 53,800 | 2009 | 15,300 | Oct-11 |
18 | Alex D | Supramax | 52,315 | 1989 | 10,900 | Apr-11 |
19 | Limnos | Supramax | 52,266 | 1992 | 14,500 | May-11 |
20 | Lindos | Supramax | 52,266 | 1990 | 9,500 | Mar-11 |
21 | Tilos | Supramax | 52,266 | 1991 | 11,000 | Apr-11 |
22 | Golden-Trader | Handymax | 48,140 | 1994 | 18,600 | Nov-11 |
Vessels under construction | ||||||
Vessel / Yard name | Type | Capacity | Scheduled Delivery | |||
Container | TEU | |||||
23 | Jiangsu Yangzijiang | Sub Panamax | 2,500 | 2011 | ||
Vessel / Yard name | Type | Capacity | Scheduled Delivery | Rate (US$) per day | Expiration (1) | |
Dry Bulk | DWT | |||||
24 | Jiangsu Yangzijiang | Post Panamax | 93,000 | 2011 | ||
25 | Pistis (5) | Supramax | 57,000 | 2011 | 14,250 | Mar-12 |
26 | COSCO (7) | Supramax | 57,000 | 2011 | 25,000 | |
(1) Represents earliest day on which the charterer may redeliver the vessel | ||||||
(2) The rate stated is the average rate per day over the duration of the time charter | ||||||
(3) The previous name of the vessel was 'Clifton-Bridge'. The charter will commence in early March 2011 | ||||||
(4) The vessel will continue with the same charterer with the rates as stated in direct continuation | ||||||
(5) The vessel is expected to be delivered from COSCO shipyard in April 2011 at which time it will commence the time charter | ||||||
(6) Both vessels owned under a 50:50 joint venture with Glencore International AG | ||||||
(7) The charter term is for three years from delivery | ||||||
(8) BSI: Baltic Supramax Index | ||||||
APPENDIX 2:
Notes on Summary of Selected Financial and Operating Data:
(1) Average number of vessels is the number of vessels that constituted our fleet for the relevant period, as measured by the sum of the number of days each vessel was a part of our fleet during the period divided by the number of calendar days in the period.
(2) Ownership days are the aggregate number of days in a period during which each vessel in our fleet has been owned by us. Ownership days are an indicator of the size of our fleet over a period and affect both the amount of revenues and the amount of expenses that we record during a period.
(3) Available days are the number of our ownership days less the aggregate number of days that our vessels are off-hire due to scheduled repairs or repairs under guarantee, vessel upgrades or special surveys and the aggregate amount of time that we spend positioning our vessels. The shipping industry uses available days to measure the number of days in a period during which vessels should be capable of generating revenues.
(4) Operating days are the number of available days in a period less the aggregate number of days that our vessels are off-hire due to any reason other than scheduled repairs or repairs under guarantee, vessel upgrades or special surveys, including unforeseen circumstances. The shipping industry uses operating days to measure the aggregate number of days in a period during which vessels actually generate revenues.
(5) We calculate fleet utilisation by dividing the number of our operating days during a period by the number of our available days during the period. The shipping industry uses fleet utilisation to measure a company's efficiency in finding employment for its vessels and minimising the amount of days that its vessels are off-hire for reasons other than scheduled repairs or repairs under guarantee, vessel upgrades, special surveys or vessel positioning.
(6) Daily vessel operating expenses, which include crew wages and related costs, the cost of insurance, expenses relating to repairs and maintenance, the costs of spares and consumable stores, tonnage taxes and other miscellaneous expenses, are calculated by dividing vessel operating expenses by ownership days for the relevant period.
(7) TCE rates are defined as our time and voyage charter revenues less voyage expenses during a period divided by the number of our available days during the period, which is consistent with industry standards. Voyage expenses include port charges, bunker (fuel oil and diesel oil) expenses, canal charges and commissions. TCE rate is a standard shipping industry performance measure used primarily to compare daily earnings generated by vessels on time charters with daily earnings generated by vessels on voyage charters, because charter hire rates for vessels on voyage charters are generally not expressed in per day amounts while charter hire rates for vessels on time charters are generally expressed in such amounts.
(8) Net debt to book capitalisation is defined as total debt minus cash (both net of any restricted cash) divided by the carrying amount of vessels and vessels under construction.
APPENDIX 3:
Forward-Looking Statement
Matters discussed in this release may constitute forward-looking statements. Forward-looking statements reflect the current views of Goldenport Holdings Inc. ("the Company") with respect to future events and financial performance and may include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts.
The forward-looking statements in this release are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management's examination of historical operating trends, data contained in our records and other data available from third parties. Although the Company believes that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, the Company cannot assure you that it will achieve or accomplish these expectations, beliefs or projections.
Important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include the strength of world economies and currencies, general market conditions, including changes in charter hire rates and vessel values, changes in demand that may affect attitudes of time charterers to scheduled and unscheduled dry-docking, changes in the Company's operating expenses, including bunker prices, dry-docking and insurance costs, or actions taken by regulatory authorities, potential liability from pending or future litigation, domestic and international political conditions, potential disruption of shipping routes due to accidents and political events or acts by terrorists. The Company does not assume, and expressly disclaims, any obligation to update these forward-looking statements.
This press release is not an offer of securities for sale in the United States. The Company's securities have not been registered under the U.S.Securities Act of 1933, as amended, and may not be offered or sold in the United States or to a U.S. person absent registration pursuant to, or an applicable exemption from, the registration requirements under U.S. securities laws.
APPENDIX 4:
Financial Statements
GOLDENPORT HOLDINGS INC.
Consolidated Financial Statements
31 December 2010
The consolidated financial statements are presented in US dollars and all financial values are presented and rounded to the nearest thousand ($000), except for the per share information.
INDEPENDENT AUDITORS' REPORT
To the Shareholders of Goldenport Holdings Inc.
We have audited the accompanying financial statements of Goldenport Holdings Inc. and its subsidiaries ("the Group"), which comprise the consolidated statement of financial position as at 31 December 2010 and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards as adopted by the European Union and for such internal controls as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate for the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements presents fairly in all material respects the financial position of the Group as of 31 December 2010, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards, as adopted by the European Union.
Ernst & Young (Hellas) Certified Auditors - Accountants S.A.
1 March 2011.
GOLDENPORT HOLDINGS INC.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2010
Notes | 2010 U.S.$'000 | 2009 U.S.$'000 | ||||
Revenue | 88,180 | 94,011 | ||||
Expenses: | ||||||
Voyage expenses | 3 | (5,668) | (6,707) | |||
Vessel operating expenses | 3 | (32,442) | (34,570) | |||
Management fees - related party | 21 | (2,606) | (2,679) | |||
Depreciation | 7 | (30,686) | (28,000) | |||
Depreciation of dry-docking costs | 7 | (8,758) | (10,582) | |||
General and administrative expenses | 4 | (5,265) | (3,574) | |||
Operating profit before disposal of vessels | 2,755 | 7,899 | ||||
Gain from disposal of vessels and loss from cancellation of new building contracts | 515 | (5,256) | ||||
Operating profit including disposal of vessels | 3,270 | 2,643 | ||||
Finance expense | 5 | (5,640) | (4,448) | |||
Finance income | 803 | 508 | ||||
Foreign currency gain, net | 1,415 | (65) | ||||
Loss for the period attributable to Goldenport Holdings Inc. shareholders | (152) | (1,362) | ||||
Total comprehensive income for the period attributable to Goldenport Holdings Inc. shareholders | (152) | (1,362) | ||||
Earnings per share (U.S.$): | ||||||
- Basic EPS for the period | (0.00) | (0.02) | ||||
- Diluted EPS for the period | (0.00) | (0.02) | ||||
Weighted average number of shares for basic EPS | 6 | 80,215,088 | 70,404,878 | |||
Weighted average number of shares adjusted for the effect of dilution | 6 | 80,219,687 | 70,410,356 | |||
The accompanying notes 1 to 24 are an integral part of these consolidated financial statements.
GOLDENPORT HOLDINGS INC.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2010
Notes | 2010 U.S.$'000 | 2009 U.S.$'000 | ||||
ASSETS | ||||||
Non-current assets | ||||||
Vessels at cost, net | 7 | 368,164 | 271,242 | |||
Advances for vessel acquisition | 8 | 2,432 | - | |||
Advances for vessels under construction | 9 | 71,021 | 97,010 | |||
Other non-current assets | 11 | 1,770 | 6,549 | |||
443,387 | 374,801 | |||||
Current assets | ||||||
Inventories | - | 267 | ||||
Trade receivables | 3,744 | 1,382 | ||||
Insurance claims | 12 | 433 | 2,153 | |||
Due from related parties | 21 | 3,668 | 2,079 | |||
Receivable from cancellation of new building contracts | 9 | - | 9,360 | |||
Prepaid expenses and other assets | 1,247 | 1,451 | ||||
Other current assets | 11 | 401 | - | |||
Restricted cash | 14 | 10,100 | 15,100 | |||
Cash and cash equivalents | 13 | 52,683 | 24,618 | |||
72,276 | 56,410 | |||||
TOTAL ASSETS | 515,663 | 431,211 | ||||
SHAREHOLDERS' EQUITY AND LIABILITIES | ||||||
Equity attributable to equity holders of the parent | ||||||
Issued share capital | 15 | 911 | 708 | |||
Share premium | 15 | 145,204 | 108,865 | |||
Other capital reserves | 84 | - | ||||
Retained earnings | 119,981 | 125,909 | ||||
TOTAL EQUITY | 266,180 | 235,482 | ||||
Non-current liabilities | ||||||
Long-term debt | 16 | 187,134 | 140,690 | |||
Deferred revenue | 17 | 43 | 3,04 | |||
Other non-current liabilities | 11 | 68 | 663 | |||
188,250 | 144,394 | |||||
Current liabilities | ||||||
Trade payables | 8,706 | 10,476 | ||||
Current portion of long-term debt | 16 | 41,467 | 31,559 | |||
Accrued liabilities and other payables | 18 | 5,902 | 4,885 | |||
Other current liabilities | 11 | 345 | 414 | |||
Deferred revenue | 17 | 4,813 | 4,001 | |||
61,233 | 51,335 | |||||
TOTAL LIABILITIES | 249,483 | 195,729 | ||||
TOTAL EQUITY AND LIABILITIES | 515,663 | 431,211 | ||||
The accompanying notes 1 to 24 are an integral part of these consolidated financial statements.
GOLDENPORT HOLDINGS INC.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2010
Number of shares | Par value U.S.$ | Issued share capital U.S.$'000 | Share premium U.S.$'000 | Other capital reserves U.S.$'000 | Retained earnings U.S.$'000 | Total Equity U.S.$'000 | ||||||||
At 1 January 2009 | 69,937,345 | 0.01 | 699 | 107,354 | - | 130,264 | 238,317 | |||||||
Loss for the year | - | - | - | - | - | (1,362) | (1,362) | |||||||
Share based payments- AIP (Annual Incentive Plan) shares | 175,014 | 0.01 | 2 | 235 | - | - | 237 | |||||||
Dividends to equity shareholders | 708,252 | 0.01 | 7 | 1,276 | - | (2,993) | (1,710) | |||||||
At 31 December 2009 | 70,820,611 | 0.01 | 708 | 108,865 | - | 125,909 | 235,482 | |||||||
Loss for the year | - | - | - | - | - | (152) | (152) | |||||||
Share based payments- AIP (Annual Incentive Plan) shares | 116,196 | 0.01 | 1 | 176 | - | - | 177 | |||||||
Follow on offering proceeds, gross | 18,496,010 | 0.01 | 185 | 35,528 | - | - | 35,713 | |||||||
Follow on offering transaction costs | - | - | - | (2,034) | - | - | (2,034) | |||||||
Share based payment transactions | - | - | - | - | 84 | - | 84 | |||||||
Dividends to equity shareholders | 1,737,656 | 0.01 | 17 | 2,669 | - | (5,776) | (3,090) | |||||||
At 31 December 2010 | 91,170,473 | 0.01 | 911 | 145,204 | 84 | 119,981 | 266,180 | |||||||
The accompanying notes 1 to 24 are an integral part of these consolidated financial statements.
GOLDENPORT HOLDINGS INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2010
Notes | 2010 U.S.$'000 | 2009 U.S.$'000 | |||
Operating activities | |||||
Loss for the year | (152) | (1,362) | |||
Adjustments to reconcile loss for the year to net cash inflow from operating activities: | |||||
Depreciation | 7 | 30,686 | 28,000 | ||
Depreciation of dry-docking costs | 7 | 8,758 | 10,582 | ||
Gain from disposal of vessels | 7 | (868) | (13,540) | ||
Loss from cancellation of new building contracts | - | 18,796 | |||
Finance expense | 5 | 5,640 | 4,448 | ||
Finance income | (803) | (508) | |||
Annual Incentive Plan shares | 21 | 195 | 168 | ||
Share-based payment transactions | 21 | 84 | - | ||
Foreign currency gain/(loss), net | (1,415) | 65 | |||
Operating profit before working capital changes | 42,125 | 46,649 | |||
Decrease/(Increase) in inventories | 267 | (1) | |||
Decrease/(Increase) in trade receivables, prepaid expenses & other assets | 2,425 | (7,254) | |||
Decrease/(Increase) in insurance claims | 12 | 1,720 | (141) | ||
Receivable from cancellation of new building contracts | 9 | 9,360 | - | ||
Increase/(Decrease) in trade payables, accrued liabilities & other payables | 1,560 | (7,124) | |||
(Decrease) in deferred revenue | (1,795) | (3,519) | |||
Net cash flows from operating activities before movement in amounts due from related parties | 55,662 | 28,610 | |||
Due from related parties | 21 | (1,589) | 1,263 | ||
Net cash flows provided by operating activities | 54,073 | 29,873 | |||
Investing activities | |||||
Acquisition/improvements of vessels | 7 | (23,828) | (10,665) | ||
Proceeds from disposal of vessels net of commissions | 7 | 1,912 | 35,515 | ||
Payments for other costs relating to disposals of vessels | 7 | - | (758) | ||
Proceeds relating to initial expenses | 7 | - | 84 | ||
Dry-docking costs | (7,290) | (5,455) | |||
Advances for vessel acquisition | 8 | (2,432) | - | ||
Advances for vessel under reconstruction | (1,000) | (4,031) | |||
Advances for vessels under construction | 9 | (80,732) | (54,569) | ||
Interest received | 446 | 151 | |||
Net cash flows used in investing activities | (112,924) | (39,728) | |||
Financing activities | |||||
Proceeds from follow on offering, net of transaction costs | 15 | 33,679 | - | ||
Proceeds from issue of long - term debt | 16 | 89,076 | 108,290 | ||
Repayment of long-term debt | (33,097) | (85,510) | |||
Restricted cash | 14 | 5,000 | (15,100) | ||
Interest paid | 16 | (5,778) | (4,896) | ||
Dividends paid | 19 | (3,090) | (1,710) | ||
Net cash flows provided by financing activities | 85,790 | 1,074 | |||
Net increase/(decrease) in cash and cash equivalents | 26,939 | (8,781) | |||
Exchange gains on cash and cash equivalents | 1,126 | 142 | |||
Cash and cash equivalents at beginning of year | 24,618 | 33,257 | |||
Cash and cash equivalents at end of year | 52,683 | 24,618 | |||
The accompanying notes 1 to 24 are an integral part of these consolidated financial statements.
GOLDENPORT HOLDINGS INC.
NOTES TO THE FINANCIAL STATEMENTS
1. FORMATION, BASIS OF PRESENTATION AND GENERAL INFORMATION
Goldenport Holdings Inc. ('Goldenport' or the 'Company') was incorporated under the laws of Marshall Islands, as a limited liability company, on 21 March 2005. On 5 April 2006 Goldenport Holdings Inc. was admitted in the Official List and started trading at the London Stock Exchange ("LSE").
The address of the registered office of the Company is Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH 96960. The address of the Head Office of the Company is Status Center, 41 Athinas Avenue, 166-71 Vouliagmeni, Greece.
Goldenport as at 31 December 2010 is the holding Company for nineteen intermediate holding companies, each in turn owning a vessel-owning company, as listed in the table below. Goldenport is also the holding Company of four more intermediate holding companies, owning Moonglade Maritime S.A., Cheyenne Maritime Company, Loden Maritime Co. and Shila Maritime Corp., which will be the vessel-owning companies of two new built bulk carriers ordered at Cosco Zhoushan Shipyard, one new built container vessel and one new built bulk carrier ordered at Jiangsu Yangzijiang Shipyard upon delivery of the vessels. Also, as at 31 December 2010 Goldenport is the holding Company of a fully owned subsidiary named Goldenport Marine Services, which provides the Company and its affiliates a wide range of shipping services, such as insurance consulting, legal, financial and accounting services, quality and safety, information technology (including software licences) and other administrative activities in exchange for a daily fixed fee, per vessel. Goldenport Marine Services has been registered in Greece under the provisions of Law 89/1967. As at 31 December 2010 Black Rose Shipping Ltd., the vessel-owning company of the disposed vessel "MSC Mekong" (see note 7), has become dormant.
Goldenport and its subsidiaries will be hereinafter referred to as the 'Group'.
The annual consolidated financial statements comprising the financial statements of the Company and its wholly owned subsidiaries (see (a) below) and the proportionally consolidated financial statements of the jointly controlled entity (see (b) below) were authorised for issue in accordance with a resolution of the Board of Directors on 1 March 2011. The shareholders of the Company have the right to amend the financial statements at the Annual General Meeting to be held on 11 May 2011.
a) The wholly owned subsidiaries of the Company are:
Intermediate holding company | Vessel - owning company | Country of Incorporation of vessel-owning company | Name of Vessel owned by Subsidiary | Year of acquisition of vessel | Type of Vessel |
Aloe Navigation Inc. | Karana Ocean Shipping Co. Ltd. | Malta | Alex D | 1999 | Bulk Carrier |
Carrier Maritime Co. | Black Diamond Shipping Ltd. | Malta | Lindos | 2003 | Bulk Carrier |
Medina Trading Co. | Carina Maritime Co. Ltd. | Malta | Tilos | 2004 | Bulk Carrier |
Savannah Marine Inc. | Serena Navigation Ltd. | Malta | Limnos | 2004 | Bulk Carrier |
Sirene Maritime Co. | Alvey Marine Inc. | Liberia | MSC Scotland | 2006 | Container |
Kariba Shipping SA | Kosmo Services Inc. | Marshall Islands | MSC Fortunate | 2006 | Container |
Muriel Maritime Co. | Ipanema Navigation Corp. | Marshall Islands | Vasos | 2006 | Bulk Carrier |
Baydream Shipping Inc. | Hinter Marine S.A. | Marshall Islands | MSC Finland | 2007 | Container |
Knight Maritime S.A. | Mona Marine S.A. | Liberia | MSC Anafi | 2007 | Container |
Foyer Marine Inc. | Ginger Marine Company | Marshall Islands | MSC Accra | 2007 | Container |
Genuine Marine Corp. | Breaport Maritime S.A | Panama | Bosporus Bridge | 2007 | Container |
Jaxon Navigation Ltd. | Hampson Shipping Ltd. | Liberia | Gitte | 2007 | Container |
Tuscan Navigation Corp. | Longfield Navigation S.A. | Liberia | Brilliant | 2007 | Container |
Oceanrace Maritime Limited | Seasight Marine Company | Marshall Islands | MSC Socotra | 2009 | Container |
Moyet Maritime Ltd. | Anemone Maritime S.A. | Liberia | Grand Vision | 2010(1) | Container |
Aleria Navigation Company | Melia Shipping Limited | Liberia | Golden Trader (ex.Arctic Trader) | 2010(2) | Bulk Carrier |
Alacrity Maritime Inc. | Giga Shipping Ltd. | Marshall Islands | Milos (ex.ZS07039) | 2010(10) | Bulk Carrier |
Seaward Shipping Co. | Valaam Incorporated | Liberia | Sifnos (ex.ZS07037) | 2010(11) | Bulk Carrier |
Lativa Marine Co. | Dionysos Ship. Carrier Co. | Liberia | Eleni D (ex.S-5087) | 2010(8) | Bulk Carrier |
Abyss Maritime Ltd. | Moonglade Maritime S.A. | Liberia | ZS07036 | 2011(4) | Bulk Carrier |
Jubilant Marine Company | Cheyenne Maritime Company | Marshall Islands | ZS07038 | 2011(4) | Bulk Carrier |
Chanelle Shipping Company | Loden Maritime Co. | Marshall Islands | YZJ-815 | 2011(5) | Container |
Clochard Maritime Limited | Shila Maritime Corp. | Marshall Islands | YZJ-917 (ex. YZJ-816) | 2011(6) | Bulk Carrier |
Intermediate holding company | Vessel - owning company | Country of Incorporation of vessel-owning company | Name of Vessel owned by Subsidiary | ||
Bacaro Services Corp. | Accalia Navigation Limited | Liberia | Dormant Company(9) | ||
Sycara Navigation S.A. | Prunella Shipholding S.A. | Marshall Islands | Dormant Company(12) | ||
Oates Trading Corp. | Risa Maritime Co. Ltd. | Malta | Dormant Company | ||
Nemesis Maritime Inc. | Samos Maritime Ltd. | Malta | Dormant Company | ||
Meredith Trading Corporation | Guilford Marine S.A. | Panama | Dormant Company | ||
Marta Trading Co. | Superb Maritime S.A. | Panama | Dormant Company | ||
Royal Bay Marine Ltd | Opal Maritime Limited | Malta | Dormant Company | ||
Daphne Marine Corp. | Dancing Waves Co. Ltd. | Malta | Dormant Company | ||
Portia Navigation Co. | Borealis Shipping Co. Ltd. | Malta | Dormant Company | ||
Audrey Marine Corp. | Wild Orchid Shipping Ltd. | Malta | Dormant Company | ||
Sicuro Shipmanagement SA | Hampton Trading S.A. | Liberia | Dormant Company | ||
Rawlins Trading Ltd | Fairland Trading S.A. | Panama | Dormant Company | ||
Platinum Shipholding SA | Coral Sky Marine Ltd. | Malta | Dormant Company | ||
Blaze Navigation Corp. | Nilwood Comp. Inc. | Panama | Dormant Company | ||
Dumont International Inc. | Black Rose Shipping Ltd. | Malta | Dormant Company(3) | ||
Dryades Maritime Limited | Ingle Trading Co. | Liberia | Dormant Company(7) | ||
Leste Shipholding Inc. | Sundown International Inc. | Liberia | Dormant Company(7) | ||
Daysailer Navigation Co. | Platax Shipholding Carrier S.A. | Liberia | Dormant Company | ||
Goldenport Marine Services | - | Marshall Islands | - | ||
(1)Vessel Grand Vision was delivered on 6 May 2010 | |||||
(2)Vessel Golden Trader was delivered on 11 May 2010 | |||||
(3) Black Rose Shipping Ltd. was the ship owning company of MV "MSC Mekong", which was disposed of on 4 March 2010 (note 7) | |||||
(4) New building bulk carriers (note 9) with delivery dates between the first and second quarter of 2011. | |||||
(5) New building container vessel (note 9) with delivery date in second quarter 2011 (according to amended contract). | |||||
(6) New building bulk carrier (note 9) with delivery date in first quarter 2011 (according to amended contract). | |||||
(7) Ship owning companies, which signed the contracts for the construction of two new building bulk carriers, initially arranged in August 2008 and cancelled on 8 January 2010. | |||||
(8) Vessel Eleni D was delivered on 3 December 2010. | |||||
(9) Accalia Navigation Limited will be the vessel owning company of a bulk carrier, which is planned to be acquired in the future. | |||||
(10) Vessel Milos was delivered on 25 October 2010. | |||||
(11) Vessel Sifnos was delivered on 3 November 2010. | |||||
(12) Prunella Shipholding S.A. will be the vessel owning company of the container vessel Clifton Bridge upon delivery of vessel (note 8) | |||||
b) Proportionally consolidated the 50% Joint Venture (Note 10)
Intermediate holding company | Vessel-owning company | Country of Incorporation of vessel-owning company | Name of Vessel owned by Subsidiary | Year of acquisition of vessel | Type of Vessel |
Sentinel Holdings Inc. | Citrus Shipping Corp. | Marshall Islands | Marie-Paule | 2009 | Bulk Carrier |
Sentinel Holdings Inc. | Barcita Shipping S.A. | Marshall Islands | Alpine Trader | 2009 | Bulk Carrier |
3. VOYAGE AND VESSEL OPERATING EXPENSES
The amounts in the accompanying consolidated statement of comprehensive income are analysed as follows:
Voyage expenses
2010 U.S.$'000 | 2009 U.S.$'000 | |||
Port charges | (220) | (552) | ||
Bunkers (fuel costs), net | (260) | (881) | ||
Commissions | (3,550) | (3,464) | ||
Total voyage expenses: | (4,030) | (4,897) | ||
Voyage expenses - related party | ||||
Commissions (note 21(a)) | (1,638) | (1,810) | ||
Total voyage expenses | (5,668) | (6,707) |
Vessel operating expenses
2010 U.S.$'000 | 2009 U.S.$'000 | |||
Crew expenses | (13,295) | (14,057) | ||
Stores & Consumables | (1,275) | (1,102) | ||
Spares | (2,548) | (3,355) | ||
Repairs & Maintenance | (2,510) | (3,033) | ||
Lubricants | (5,018) | (5,448) | ||
Insurance | (3,992) | (4,554) | ||
Taxes (other than income tax) | (532) | (575) | ||
Other operating expenses | (3,272) | (2,446) | ||
Total vessel operating expenses | (32,442) | (34,570) |
4. GENERAL AND ADMINISTRATIVE EXPENSES
2010 U.S.$'000 | 2009 U.S.$'000 | |||
Directors and Management team Remuneration and Annual Incentive Plan (note 21(b)) | (1,439) | (1,343) | ||
Share-based payment transactions (Note 21(b)) | (84) | - | ||
Payroll cost (Goldenport Marine Services) | (1,115) | (946) | ||
Out of court settlement of claim | (1,300) | - | ||
Rents | (274) | (237) | ||
Audit fees | (269) | (316) | ||
Legal fees | (61) | (100) | ||
Other | (723) | (632) | ||
(5,265) | (3,574) | |||
The Executive Directors' and Management team's Annual Incentive Plan ("AIP") consists of a non cash bonus, which will be settled in the form of shares under the terms of AIP (note 21(b)).
5. FINANCE EXPENSE
2010 U.S.$'000 | 2009 U.S.$'000 | |||
Interest expense | (5,538) | (4,048) | ||
Loss on fair value of derivatives | (102) | (400) | ||
(5,640) | (4,448) |
6. EARNINGS PER SHARE
Basic earnings per share ("EPS") are calculated by dividing the loss for the year attributable to Goldenport Holdings Inc. shareholders (U.S.$152 and U.S.$1,362 for the years ended 31 December 2010 and 2009, respectively) by the weighted average number of shares outstanding (80,215,088 for the year ended 31 December 2010 and 70,404,878 for the year ended 31 December 2009).
Diluted EPS reflects the potential dilution that could occur if share options or other contracts to issue shares were exercised or converted into shares. Accordingly, in respect of the restricted stock granted to the Company's directors under the Annual Incentive Plan (note 21 (b)), diluted EPS for the years ended 31 December 2010 and 2009 includes such shares granted but not issued. Diluted EPS was calculated based on the weighted average number of shares that would derive if these shares were issued on the grant date. Such number is calculated by dividing the fair value of the directors' services exchanged for Company's shares with the average market value of the Company's stock during the respective year.
7. VESSELS
Vessels consisted of the following at 31 December:
2010 U.S.$'000 | 2009 U.S.$'000 | |||
Cost | ||||
At 1 January | 338,576 | 260,110 | ||
Additions | 23,828 | 10,665 | ||
Transfer from vessels under construction/ reconstruction | 107,621 | 94,171 | ||
Initial expenses deduction | - | (84) | ||
Disposals | (1,420) | (26,286) | ||
At 31 December | 468,605 | 338,576 | ||
Depreciation | ||||
At 1 January | (78,022) | (58,841) | ||
Depreciation charge for the year | (30,686) | (28,000) | ||
Disposals | 610 | 8,819 | ||
Accumulated depreciation | (108,098) | (78,022) | ||
Net carrying amount of vessels | 360,507 | 260,554 | ||
Cost of dry-dockings | ||||
At 1 January | 39,706 | 42,981 | ||
Additions | 5,960 | 4,702 | ||
Disposals | (1,015) | (7,977) | ||
At 31 December | 44,651 | 39,706 | ||
Depreciation | ||||
At 1 January | (29,018) | (22,663) | ||
Depreciation charge for the year | (8,758) | (10,582) | ||
Disposals | 782 | 4,227 | ||
Accumulated depreciation | (36,994) | (29,018) | ||
Net carrying amount of dry-docking costs | 7,657 | 10,688 | ||
Total net carrying amount at 31 December | 368,164 | 271,242 |
The gross carrying amount of vessels, which have been fully depreciated to their residual value and were still in use as at 31 December 2010, was nil (2009: U.S.$810).
All of the Company's operating vessels having a total carrying value of U.S. $368,164 as at 31 December 2010 (U.S.$271,242 as at 31 December 2009), have been provided as collateral to secure the loans discussed in note 16.
Operational vessel acquisitions
On 6 May 2010, the Company took delivery of the M/V Grand Vision, a container vessel of 2,986 TEU built in 1991, which was acquired for U.S.$6,750.
On 11 May 2010, the Company took delivery of the M/V Arctic Trader (renamed to Golden Trader), a bulk carrier of 48,170 DWT built in 1994, which was acquired for U.S.$17,250 (including U.S.$195 of unamortized dry-docking component).
Delivery of new build bulk carriers
On 25 October 2010 the Company took delivery of the 57,000 DWT new build bulk carrier 'Milos', which was constructed in Cosco Zhousan shipyard of China. The total construction cost of vessel amounted to U.S.$37,001.
On 3 November 2010 the Company took delivery of the 57,000 DWT new build bulk carrier 'Sifnos', which was constructed in Cosco Zhousan shipyard of China. The total construction cost of vessel amounted to U.S.$37,570.
On 3 December 2010 the Company took delivery of the 59,000 DWT new build bulk carrier 'Eleni D', which was constructed in SPP Shipbuilding Co. shipyard of Korea. The total construction cost of vessel amounted to U.S.$33,050.
Disposals
On 12 February 2010, the company agreed the sale of the 962 TEU, 1978-built vessel "MSC Mekong", to an unaffiliated third party. The sale was concluded at a gross consideration of US $1,989 in cash and the vessel was delivered to the new owners on 4 March 2010. As of delivery date, M/V MSC Mekong had a net carrying value of U.S.$1,043, which was equal to her scrap value along with the unamortized balance of the latest dry-docking. A commission of 3% on the gross consideration was paid for this disposal. The gain resulting from the sale of the vessel was U.S.$868 and is included in the consolidated statement of comprehensive income for the year ended 31 December 2010.
Dry-docking costs
During 2010 seven vessels of the Group underwent scheduled dry-dockings at a cost of U.S.$5,015 (U.S.$ 4,357 as at 31 December 2009 for dry docking of five vessels). The total cost of dry dockings includes also a cost of U.S.$945 (U.S.$345 as at 31 December 2009) relating to the dry docking components of the new vessels.
8. ADVANCES FOR VESSEL ACQUISITION
On 1 November 2010 the Group entered into an agreement to acquire M/V Clifton Bridge, a 3,720 TEU container vessel built in 1988 that is expected to be delivered in February 2011 for a total consideration of U.S.$8,100. On 3 November 2010, under the terms of the agreement, the Group paid U.S.$2,432 representing the 30% deposit on the purchase price of the vessel (note 24).
9. Advances for vesselS UNDER construction
The balances as at 31 December were as follows:
2010 U.S.$'000 | 2009 U.S.$'000 | |||
2 Bulk Carriers (Cosco Zhousan Shipyard, China -ZS07036 & ZS07038) | 31,507 | 15,794 | ||
1 Container (Jiangsu Yangzijiang Shipbuilding Co. Ltd, China) | 19,507 | 19,231 | ||
1 Bulk Carrier (Jiangsu Yangzijiang Shipbuilding Co. Ltd, China) | 20,007 | 19,300 | ||
71,021 | 54,325 | |||
2 Bulk Carriers (Cosco Zhousan Shipyard, China - ZS07039 & ZS07037) | 74,571 | 37,746 | ||
1 Bulk Carrier (SPP Shipbuilding Co.) | 33,050 | 4,939 | ||
JV - 2 Bulk Carriers (Jiangsu Eastern Shipyard, China) | - | 31,905 | ||
Transfer to cost of vessels | (107,621) | (31,905) | ||
2 Bulk Carriers (Qingshan Shipyard, China) | - | 28,156 | ||
Write off due to cancellation of new building contracts | - | (18,796) | ||
Transfer to current assets | - | (9,360) | ||
71,021 | 97,010 | |||
4 Bulk Carriers (Cosco Zhousan Shipyard)
Vessel Milos - Vessel Sifnos
On 4 January 2010 the Group paid to the shipyard an amount of US$6,425 representing the third instalment for M/V Sifnos. On 7 June 2010 the Group paid to the shipyard an amount of US$7,550 representing the fourth instalment for M/V Milos. On 21 June 2010 the Group paid to the shipyard an amount of US$7,550 representing the fourth instalment for M/V Sifnos. On 25 October 2010 the Group paid to the shipyard an amount of US$6,996 representing the delivery instalment of M/V Milos. On 3 November 2010 the Group paid to the shipyard an amount of US$7,387 representing the delivery instalment of M/V Sifnos. The total construction cost amounted to US$37,001 and US$37,570 for M/V Milos and M/V Sifnos respectively has been reclassified to vessels in the consolidated statement of financial position.
Hull No. ZS07036 - Hull No. ZS07038
On 5 August 2010 the Group paid to the shipyard an amount of US$15,100 representing the second and third instalment for Hull No. ZS07036. The remaining payments will be made to the yard based on the construction process schedule (note 24).
1 Container - 1 Bulk Carrier
Amendment of new building contract at Jiangsu Yangzijiang Shipbuilding Co. Ltd
On 24 March 2010 an amendment to the initial shipbuilding contract was signed between the Group and Jiangsu Yangzijiang shipyard, providing the conversion of one of the two container vessels ordered on 7 August 2007 with hull number YZJ-816 into one bulk carrier (with hull number YZJ-917) with carrying capacity of 93,000 DWT and estimated delivery date in March 2011.
2 Bulk Carriers (Qingshan Shipyard of China)
On 8 January 2010, the Company received U.S.$9,360 from the Qingshan Shipyard representing the refund of the initial deposit following the cancellation agreement. U.S.$8,540 were used to repay in full the existing loan facility.
During 2010 the Group paid an additional amount of U.S.$353 for the cancellation of the Qingshan vessels, which is included in the statement of comprehensive income.
1 Bulk Carrier (SPP Shipbuilding Co.) - Eleni D
On 21 January 2010 the Group paid to the shipyard an amount of US$4,763 representing the second instalment for the vessel. On 28 June 2010 the Group paid to the shipyard an amount of US$4,763 representing the third instalment for the vessel. On 13 September 2010 the Group paid to the shipyard an amount of US$4,763 representing the fourth instalment for the vessel. On 2 December 2010 the Group paid to the shipyard an amount of US$12,953 representing the delivery instalment for the vessel. The total construction cost for M/V Eleni D amounted to US$33,050 has been reclassified to vessels in the consolidated statement of financial position.
Thebank that was financing the two Qingshan contracts that have been cancelled, agreed to transfer part of the loan commitment to the SPP contract for an amount of U.S.$21,700.
Total borrowing costs capitalised during 2010 amount to U.S.$1,588 (U.S.$1,726 during 2009).
10. JOINT VENTURE
The Group's 50% portion in the stand alone financial statements of Sentinel Holdings Inc., as at 31 December and for the year then ended were as follows:
Consolidated Statement of Financial Position | 2010 U.S.$'000 | 2009 U.S.$'000 | ||
ASSETS | ||||
Non-current assets | ||||
Vessels | 30,126 | 31,429 | ||
30,126 | 31,429 | |||
Current assets | ||||
Prepaid expenses and other assets | 515 | 353 | ||
Cash and cash equivalents | 2,390 | 2,426 | ||
2,905 | 2,779 | |||
TOTAL ASSETS | 33,031 | 34,208 | ||
SHAREHOLDERS' EQUITY AND LIABILITIES | ||||
Equity attributable to equity holders of the parent | ||||
Retained earnings | 3,069 | 984 | ||
TOTAL EQUITY | 3,069 | 984 | ||
Non-current liabilities | ||||
Long-term debt | 20,552 | 21,949 | ||
20,552 | 21,949 | |||
Current liabilities | ||||
Current portion of long-term debt | 1,412 | 1,412 | ||
Other liabilities | 7,998 | 9,863 | ||
9,410 | 11,275 | |||
TOTAL LIABILITIES | 29,962 | 33,224 | ||
TOTAL EQUITY AND LIABILITIES | 33,031 | 34,208 |
Consolidated Statement of Comprehensive Income | 2010 U.S.$'000 | 2009 U.S.$'000 | ||
Revenue | 5,911 | 3,389 | ||
Expenses | ||||
Voyage expenses | (302) | (170) | ||
Vessel operating expenses | (1,465) | (1,043) | ||
Management fees - related party | (256) | (141) | ||
Depreciation | (1,203) | (670) | ||
Depreciation of dry-docking costs | (100) | (58) | ||
Operating profit | 2,585 | 1,307 | ||
Finance expense | (525) | (318) | ||
Foreign currency loss, net | 25 | (5) | ||
Profit for the period attributable to Sentinel Holdings Inc. shareholders | 2,085 | 984 | ||
11. OTHER ASSETS - LIABILITIES
The amounts in the accompanying statement of financial position are analysed as follows:
ASSETS
2010 U.S.$'000 | 2009 U.S.$'000 | |||
Non current: | ||||
Receivables from charterers | - | 5,325 | ||
Non-level charters | 1,770 | 1,224 | ||
1,770 | 6,549 | |||
Current: | ||||
Non-level charters | 196 | - | ||
Fair value of foreign currency forward - current | 205 | - | ||
| 401 | - |
The amount of U.S.$5,325 in 2009 relates to receivables from charterers from services rendered during 2009, which was initially agreed to be settled after January 2011. However during 2010 the charterer repaid an amount of U.S.$4,243 and the remaining amount is included in trade receivables of the accompanying consolidated statement of financial position as at 31 December 2010.
The amount of U.S.$1,966 as at 31 December 2010 (U.S.$1,224 as at 31 December 2009) relates to the asset created upon accounting for charter agreements with specified rate increases over the charter term (non-level charters).
LIABILITIES
The amounts in the accompanying statement of financial position are analysed as follows:
2010 U.S.$'000 | 2009 U.S.$'000 | |||
Fair value of interest rate swaps- non current(1) | (682) | (663) | ||
Fair value of interest rate swaps- current(1) | (345) | (414) | ||
(1): interest rate swaps for the loan of vessel Bosporus Bridge and the loan of vessels MSC Socotra | ||||
and MSC Finland. | ||||
Variability can appear in floating rate assets, floating rate liabilities or from certain types of forecasted transactions, and can arise from changes in interest rates or currency exchange rates.
During 2010, the Group entered into a foreign currency forward contract to purchase the amount of EUR3,000,000 at a EUR/USD exchange rate of 1.2740 with value date 15 March 2011, a foreign currency forward contract to purchase the amount of EUR1,000,000 at a EUR/USD exchange rate of 1.3366 with value date 11 April 2011 and a foreign currency forward contract to purchase the amount of EUR1,000,000 at a EUR/USD exchange rate of 1.3063 with value date 1 June 2011. The Group did not designate these forwards as hedging instruments, therefore gains or losses arising from changes in the fair value of the forwards are taken to the statement of comprehensive income as finance income or finance expense respectively. The fair value of the specific derivative financial instrument as at 31 December 2010 was an asset of U.S.$205, which is included in Other current assets in the accompanying consolidated statement of financial position.
During 2009, the Group entered into an interest rate swap for the loan of vessels MSC Finland and MSC Socotra. The initial notional amount of this contract amounted to U.S.$11,900 amortising in accordance with the loan repayment schedule. Under the swap agreement, the Group exchanged variable to fixed interest rate at 3.23%. The fair value of the specific derivative financial instrument as at 31 December 2010 and 31 December 2009 was a liability of U.S.$240 and U.S.$392 respectively which is included in other non-current and current liabilities in the accompanying consolidated statement of financial position and gains or losses arising from changes in the fair value of the interest rate swap are taken to the statement of comprehensive income as finance income or finance expense respectively.
During 2007, the Group entered into an interest rate swap for the loan of vessel Bosporus Bridge. The initial notional amount of this contract amounted to U.S.$12,166 amortising in accordance with the loan repayment schedule. Under the swap agreement, the Group exchanged variable to fixed interest rate at 4.64%. The fair value of the specific derivative financial instrument as at 31 December 2010 and 31 December 2009 was a liability of U.S.$787 and U.S.$685 respectively, which is included in other non-current and current liabilities in the accompanying consolidated statement of financial position and gains or losses arising from changes in the fair value of the interest rate swap are taken to the statement of comprehensive income as finance income or finance expense respectively.
All financial instruments carried at fair value are categorised in three categories defined as follows:
Level 1 - Quoted market prices
Level 2 - Valuation techniques based on market observable inputs
Level 3 - Valuation techniques based on non- market observable inputs.
Both of the interest rate swaps of the Group were assessed as Level 2 and the foreign currency forward contracts were assessed as Level 1.
As the Group did not designate the derivatives agreements as accounting hedge, net losses resulting from these derivative instruments, which approximated U.S.$255 gain and U.S.$19 loss for the years ended 31 December 2010 and 2009, were recorded in finance income and finance expense respectively, in the consolidated statement of comprehensive income.
12. INSURANCE CLAIMS
2010 U.S.$'000 | 2009 U.S.$'000 | |||
Balance as at 1 January | 2,153 | 2,012 | ||
Additions | 91 | 2,072 | ||
Collections | (1,384) | (1,916) | ||
Amounts written off | (427) | (15) | ||
Balance as of 31 December | 433 | 2,153 |
13. CASH AND CASH EQUIVALENTS
2010 U.S.$'000 | 2009 U.S.$'000 | |||
Cash at banks | 31,086 | 3,493 | ||
Short term deposits at banks | 21,597 | 21,125 | ||
52,683 | 24,618 |
Cash at banks earns interest at floating rates based on daily bank deposit rates. Short term deposits are made for varying periods of between one day and three months, depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates.
The Group's loan agreements contain minimum liquidity clauses requiring available cash balances of at least U.S.$11,479 throughout the year.
14. RESTRICTED CASH
The restricted cash of U.S. $10,100 as at 31 December 2010 (U.S.$15,100 as at 31 December 2009) concerns part of the amount drawn on 16 December 2009 under a new loan facility for the future acquisition of a vessel.
15. SHARE CAPITAL AND SHARE PREMIUM
Share capital consisted of the following at 31 December:
2010 U.S.$'000 | 2009 U.S.$'000 | |||
Authorised | ||||
Shares of $0.01 each | 2,000 | 1,000 | ||
Issued and paid | ||||
Shares of $0.01 each | 911 | 708 | ||
Total issued share capital | 911 | 708 |
Authorised share capital: According to the resolution of the Extraordinary General Meeting ('EGM') dated 19 July 2010, the authorised number of shares has been increased to 200 million (with par value of U.S.$0.01 each) and consequently the authorised share capital of the Company has been increased to U.S.$2,000.
Placing and Open offer: According to the resolution of the EGM, dated 19 July 2010 the shareholders of the Company approved the Capital Raising through the Placing and Open Offer of 18,496,010 New Shares at an Issue Price of 127 pence per New Share. The proceeds, net of expenses amounted to US$33,679 and were received on 21 July 2010.
Annual Incentive Plan (AIP):
The Remuneration Committee on its meeting on 15 December 2010 proposed and the Board of Directors approved the base award for each participant under the terms of the AIP. Two of the participants selected the full shares award (FSA).
On 19 March 2010, 116,196 shares (175,014 shares were issued in 2009 for 2008 FSA) were issued to the participants that selected the FSA for the performance of the year 2009. On the same date an amount of U.S.$177 (U.S.$237 for 2008 FSA), representing the fair value of the award as of the grant date, was transferred from Current Liabilities into equity.
The analysis of the share premium is as follows:
|
| U.S. $'000 |
Balance 31 December 2008 |
| 107,354 |
AIP shares issued in 2009 |
| 235 |
Scrip dividend shares |
| 1,276 |
Balance 31 December 2009 |
| 108,865 |
AIP shares issued in 2010 |
| 176 |
Follow on offering, net of transaction costs |
| 33,494 |
Scrip dividend shares |
| 2,669 |
Balance 31 December 2010 |
| 145,204 |
16. LONG-TERM DEBT
The amounts in the accompanying statement of financial position are analysed as follows:
2010 | 2009 | ||||
U.S.$'000 | U.S.$'000 | ||||
Bank Loan | Vessel(s) | Amount | Rate % | Amount | Rate % |
a. Issued 26 June 2006, maturing 26 September 2011 | MSC Scotland | 4,300 | 2.80% | 6,700 | 2.75% |
b. Issued 19 July 2006, maturing 16 July 2011 | Vasos | 6,400 | 1.21% | 9,300 | 1.24% |
c. Issued 16 December 2008, maturing 29 July 2013 | MSC Fortunate | 20,485 | 2.79% | 24,325 | 2.78% |
d. Issued 19 July 2007, maturing 19 July 2014 | Anafi | 10,950 | 2.79% | 12,950 | 2.78% |
e. Issued 17 August 2007, maturing 17 August 2012 | MSC Accra | 2,835 | 2.78% | 4,455 | 2.77% |
f. Issued 18 October 2007 | Bosporus Bridge YZJ-815, YZJ-917 | 17,295 | 2.54% | 18,630 | 2.53% |
g. Issued 11 November 2007, maturing 11 November 2014 | Gitte, Brillinat | 11,850 | 2.79% | 14,150 | 2.78% |
h. Issued 16 January 2009, maturing 16 January 2019 | Marie-Paule | 10,715 | 2.29% | 11,421 | 2.03% |
i .Issued 26 October 2009, maturing 26 October 2019 | Alpine Trader | 11,294 | 2.04% | 12,000 | 2.28% |
j. Issued 18 August 2008 | QS20060384 | - | - | 4,270 | 1.88% |
k. Issued 18 August 2008 | QS20060385 | - | - | 4,270 | 1.88% |
l. Issued 6 March 2009 maturing 25 October 2020 | Milos (ex. ZS07039) | 24,976 | 2.05% | 10,200 | 1.98% |
m. Issued 22 April 2009, maturing 3 November 2020 | Sifnos (ex. ZS07037) | 25,200 | 2.04% | 3,775 | 2.03% |
n. Issued 22 April 2009, maturing 10 years after delivery | ZS07036 | 11,325 | 2.04% | - | - |
o. Issued 16 December 2009, maturing 16 March 2015 | MSC Finland,MSC Socotra, Tilos, Limnos, Grand Vision | 31,550 | 3.30% | 37,000 | 3.25% |
p. Issued 10 May 2010, maturing 10 November 2017 | Golden Trader, Lindos, Alex D | 18,700 | 3.29% | - | - |
q. Issued 10 May 2010, maturing 1 December 2022 | Eleni D | 21,700 | 2.14% | - | - |
Total | 229,575 | 173,446 | |||
Less: initial financing costs | (974) | (1,197) | |||
Less: current portion | (41,467) | (31,559) | |||
Long-term portion | 187,134 | 140,690 | |||
Use of credit facilities:
·; Loan o: On 23 June 2010 the Group agreed with the financing bank to use an amount of U.S.$5,000 from the restricted amount of U.S.$15,100 to refinance the acquisition of the container vessel 'Grand Vision'.
·; Loan p: On 10 May 2010 and as part of the loan agreement, signed on 21 August 2009, between the Company and the bank, the Company proceeded with the drawdown of U.S.$20,000, to finance the acquisition cost of U.S.$17,250 of the bulk carrier 'Golden Trader' and the remaining amount to be maintained for working capital purposes.
Drawdown of loans:
·; Loan l: On 7 June 2010 and as part of the loan agreement concluded between the vessel owning company of the new-built bulk carrier 'ZS07039' and a bank, the vessel owning company proceeded with the drawdown of U.S.$7,550, representing the forth instalment paid directly to the shipyard as per the contract. On 25 October 2010 and as part of the loan agreement concluded between the vessel owning company of the new-built bulk carrier 'ZS07039' and a bank, the vessel owning company proceeded with the drawdown of U.S.$7,226, representing the delivery instalment paid directly to the shipyard as per the contract.
·; Loan m: On 4 January 2010 and as part of the loan agreement concluded between the vessel owning company of the new-built bulk carrier 'ZS07037' and a bank, the vessel owning company proceeded with the drawdown of U.S.$6,425, representing the third instalment paid directly to the shipyard as per the contract. On 21 June 2010 and as part of the loan agreement concluded between the vessel owning company of the new-built bulk carrier 'ZS07037' and a bank, the vessel owning company proceeded with the drawdown of U.S.$7,550, representing the fourth instalment paid directly to the shipyard as per the contract. On 3 November 2010 and as part of the loan agreement concluded between the vessel owning company of the new-built bulk carrier 'ZS07037' and a bank, the vessel owning company proceeded with the drawdown of U.S.$7,450, representing the delivery instalment paid directly to the shipyard as per the contract.
·; Loan n: On 2 August 2010 and as part of the loan agreement concluded between the vessel owning company of the new-built bulk carrier 'ZS07036' and a bank, the vessel owning company proceeded with the drawdown of U.S.$11,325, representing the aggregate of the bank's portion of the second instalment, which was paid to the shipyard along with the Group's equity portion of U.S.$3,775 and the fourth instalment paid directly to the shipyard as per the contract.
·; Loan p: On 28 June 2010 and as part of the loan agreement concluded between the vessel owning company of the new-built bulk carrier 'S-5087' and a bank, the vessel owning company proceeded with the drawdown of U.S.$4,150 representing the bank's portion of the third instalment, which was paid along with the Group's equity portion of U.S.$613, as per contract. On 13 September 2010 and as part of the loan agreement concluded between the vessel owning company of the new-built bulk carrier 'S-5087' and a bank, the vessel owning company proceeded with the drawdown of U.S.$4,763 representing the fourth instalment paid directly to the shipyard as per the contract. On 1 December 2010 and as part of the loan agreement concluded between the vessel owning company of the new-built bulk carrier 'S-5087' and a bank, the vessel owning company proceeded with the drawdown of U.S.$12,788 representing the delivery instalment paid directly to the shipyard as per the contract.
Repayment of loans due to cancellation:
·; On 8 January 2010 the Group proceeded with the full repayment of the outstanding amount of loans j and k amounted to U.S.$8,540 due to the cancellation of the two new-build bulk carrier contracts.
Upcoming repayment terms:
The upcoming repayment terms of loans with balances outstanding at 31 December 2010 are:
Loan a: This loan is repayable in two quarterly instalments of U.S.$600 each, the first one being due on 26 March 2011 and the final one being due on 26 June 2011, along with a balloon payment of U.S.$3,100.
Loan b: This loan is repayable in two semi-annual instalments of U.S.$1,450 each, the first one being due on 16 January 2011 and the final one being due on 16 July 2011, along with a balloon payment of U.S.$3,500.
Loan c: This loan is repayable in eleven quarterly instalments of U.S.$960 each, the first one being due on 29 January 2011 and the last one being due on 29 July 2013 along with a balloon payment of U.S.$9,925.
Loan d: This loan is repayable in fifteen quarterly instalments of U.S.$500 each, the first one being due on 19 January 2011 and the final one on 19 July 2014 along with a balloon payment of U.S.$3,450.
Loan e: This loan is repayable in seven quarterly instalments of U.S.$405 each, the first one being due on 16 February 2011 and the final one on 17 August 2012.
Loan f: The portion of the loan relating to the vessel 'Bosporus Bridge' of U.S.$8,495 is repayable in sixteen quarterly instalments of U.S.$333.75 each, the first one being due on 18 January 2011 and the final one on 18 October 2014 along with a balloon payment of U.S.$3,155. The portion of the loan relating to the two new building vessels YZJ-815 and YZJ-917 of U.S.$8,800 will be repayable in ten years after the delivery of the vessels in 2011 and the final draw-down of the respective loan.
Loan g: This loan is repayable in sixteen quarterly instalments of U.S.$575 each, the first one being due on 11 February 2011 and the final one on 11 November 2014 along with a balloon payment of U.S.$2,650.
Loan h: This loan is repayable in thirty three quarterly instalments of U.S.$176.5 each, the first one being due on 16 January 2011 and the final one on 16 January 2019 along with a balloon payment of U.S.$4,890.
Loan i: This loan is repayable in thirty six quarterly instalments of U.S.$176.5 each, the first one being due on 16 January 2011 and the final one on 26 October 2020 along with a balloon payment of U.S.$4,940.
Loan j&k: These loans were fully repaid in January 2010 through the proceeds from the cancellation of the Qingshan new built bulk carriers and subsequently all the refund and performance guarantees were cancelled.
Loan l: This loan is repayable in forty quarterly instalments of U.S.$437.1 each, the first one being due on 25 January 2011 and the final one on 25 October 2020 along with a balloon payment of U.S.$7,493.
Loan m: This loan is repayable in forty quarterly instalments of U.S.$441 each, the first one being due on 3 February 2011 and the final one on 3 November 2020 along with a balloon payment of U.S.$7,560.
Loan o: This loan is repayable as follows: i) the amount of U.S.$22,250 is repayable in seventeen quarterly instalments of U.S.$950 each, the first one being due on 16 March 2011 and the final one on 16 March 2015 along with a balloon payment of U.S.$6,100 and ii) the amount of U.S.$9,300 is repayable in two quarterly instalments of U.S.$650 the first one being due on 16 March 2011 and the final one on 16 June 2011 and fourteen quarterly instalment of U.S.$350 each the first one being due on 16 September 2011 and the last one on 16 March 2015 along with a balloon payment of U.S.$3,100.
Loan p: This loan is repayable in eighteen quarterly instalments of U.S.$650 each, the first one being due on 10 February 2011 and the final one on 10 May 2015 along with a balloon payment of U.S.$7,000.
Loan q: This loan is repayable in forty eight quarterly instalments of U.S.$362 each, the first one being due on 28 February 2011 and the final one on 1 December 2022 along with a balloon payment of U.S.$4,324.
All loans discussed above are denominated in U.S. dollars, and bear interest at LIBOR plus a margin. In addition, the Company has entered into an interest rate swap agreement for loan (f) and loan (o), to exchange variable to fixed interest rate at 4.64% and 3.23%, respectively.
The remaining loans have margins between 0.90% and 3.00% above LIBOR.
Total interest paid was U.S.$5,778 and U.S.$4,896 for the year ended 31 December 2010 and 31 December 2009, respectively.
The loans are secured with first priority mortgages over the borrowers' vessels. The loan agreements contain covenants including restrictions as to changes in management and ownership of the vessels, additional indebtedness and mortgaging of vessels without the bank's prior consent as well as minimum requirements regarding corporate liquidity and hull cover ratio and corporate guarantees of Goldenport Holdings. The hull cover ratio requirement for loans a, c, d, e & g was waived by the lender until 28 February 2011.
17. DEFERRED REVENUE
Deferred revenue as of 31 December 2010 includes an amount of U.S.$3,041 (U.S.$5,649 as of 31 December 2009), which represents the unamortized difference between the market value of the vessel charter free and the amount actually paid to acquire MV Bosporus Bridge in the secondhand market in 2007. This amount will be recognized to income for the remaining of the charter period. The amount of U.S.$2,608 was recognized to income in the current year (U.S.$2,608 in 2009). The remaining balance in deferred revenue represents cash received from charterers prior to 31 December 2010, which relates to revenue earned after that date.
18. ACCRUED LIABILITIES AND OTHER PAYABLES
The amounts in the accompanying statement of financial position at 31 December are analysed as follows:
2010 U.S.$'000 | 2009 U.S.$'000 | |||
Interest | 788 | 532 | ||
Insurance supplementary calls | 56 | 299 | ||
Wages | - | 135 | ||
Annual incentive plan | 195 | 168 | ||
Dry-docking costs | 135 | 115 | ||
Other accrued expenses | 1,254 | 1,382 | ||
Other payables | 3,474 | 2,254 | ||
5,902 | 4,885 |
19. DIVIDENDS DECLARED
The Board of Directors of the Company will propose to the Annual General Meeting for approval, a final dividend for 2010 of 3.6 pence per share or total GBP 3,282 (3 pence per share or GBP 2,125 for 2009). The dividend that will be proposed which, is expected to be approved by the AGM to be held in Athens on 11 May 2011 has a share alternative allowing the shareholders to select between cash and shares for the respective amount of 3.6 pence.
Dividend rights: Under the Company's by-laws, each ordinary share is entitled to dividends if and when dividends are declared by the Board of Directors. There are no restrictions on the Company's ability to transfer funds in and out of Marshall Islands. The payment of final dividends is subject to the approval of the Annual General Meeting ("AGM") of Shareholders. The final dividend proposed by the Board of Directors for 2009, was approved by the AGM held on 12 May 2010. The final dividend was 3 pence per share and included a share alternative resulting in a total dividend amount of GBP2,125 or U.S.$3,229. On 14 May 2010 the cash payment was made for the shares that elected cash totalling GBP 571 or U.S.$867 and on 17 May 2010 1,537,091 shares with reference price of 101.1 pence were issued and admitted to the official list representing the share element of the dividend. On 30 August 2010 the Board of Directors approved an interim dividend of 1.8 pence per share amounting in total to GBP 1,637 or U.S.$2,548. On 26 October 2010 the cash payment was made for the shares that elected cash totalling GBP 1,397 or U.S.$2,223 and on 4 November 2010 200,565 shares with reference price of 119.7 pence were issued and admitted to the official list representing the share element of the dividend. The payment of dividends was U.S.$1,710 in 2009 (3.13 cents per share or 2 pence per share as final dividend for 2008 and 1.14 cents per share or 0.7 pence per share as interim dividend for 2009).
20. COMMITMENTS AND CONTINGENCIES
a. Various claims, suits, and complaints, including those involving government regulations and product liability, arise in the ordinary course of the shipping business. In addition, losses may arise from disputes with charterers, agents, insurance providers and from other claims with suppliers relating to the operations of the Group's vessels. Currently, management is not aware of any such claims or contingent liabilities, which should be disclosed, or for which a provision should be established in the consolidated financial statements.
b. Goldenport Holdings Inc. entered into agreement with Cosco (Zhousan) Shipyard Co. for the construction of four new build bulk carriers of 57,000 DWT each. Two of these bulk carriers were delivered in 2010 (note 9) and the other two are expected to be delivered in 2011 (note 9). Two of the payments to the shipyard for vessel ZS07036 and four for vessel ZS07038 are committed and will be paid in accordance with the milestones, as described in the contract. One of these payments for vessel ZS07036 and three for vessel ZS07038 are secured through letter of guarantee from the financing bank.
c. On 7 August 2007, the Company entered into agreement with Jiangsu Yangzijiang Shipbuilding Co. Ltd and Anhui Technology Imp. & Exp. Co. for the construction of two new build geared container vessels of 2,500 TEU nominal capacity each. On 19 December 2009, the Group requested from Jiangsu Yangzijiang shipyard the amendment of the existing shipbuilding contract signed on 7 August 2007 in principle providing for the conversion of the container vessel with hull number YZJ-816 into one bulk carrier with carrying capacity of 93,000 DWT (new hull number YZJ-917) and delivery date in March 2011. The total cost is estimated to be approximately U.S.$47,000 for each vessel, which is payable in 5 (five) and 4 (four) instalments for vessels YZJ-815 and YZJ-917 respectively (note 9). Three of these instalments for vessel YZJ-815 and two instalments for vessel YZJ-917 are committed and will be paid in accordance with the milestones, as described in the contract. Two of these instalments for vessel YZJ-815 and one instalment for vessel YZJ-917 are secured through letter of guarantee from the financing bank.
d. The Group has entered into time charter arrangements for all its vessels. These arrangements have remaining terms between 1-40 months as of 31 December 2010 (2-54 months as of 31 December 2009). Future minimum charters receivable (based on earliest delivery dates) upon time charter arrangements as at 31 December 2010, are as follows (it is noted that the vessel off-hires and dry-docking days that could occur but are not currently known are not taken into consideration; in addition early delivery of the vessels by the charterers is not accounted for; with regard to vessels Milos and Sifnos (note 7) the calculation is based on the floor rate without taking into account any profit share scheme; for the vessels into Joint Venture (see note 10) 50% of revenue is included):
| 2010 U.S.$'000 |
| 2009 U.S.$'000 |
|
|
|
|
Within one year | 88,513 |
| 64,318 |
1-5 years | 87,536 |
| 151,923 |
| 176,049 |
| 216,241 |
21. RELATED PARTY TRANSACTIONS
Transactions with related parties consisted of the following for the years ended 31 December:
(a) Goldenport Shipmanagement Ltd. ("GSL"): All vessel operating companies included in the consolidated financial statements have a management agreement with GSL, a Liberian corporation directly controlled by Captain Paris Dragnis, to provide, in the normal course of business, a wide range of shipping managerial and administrative services, such as commercial operations, chartering, technical support and maintenance, engagement and provision of crew for a monthly management fee of U.S.$12.5 per vessel. In addition to the monthly fee GSL charges a commission equal to 2% of time and voyage revenues relating to charters it organises. On 15 December 2010 the Board of Directors of the Company approved an increase in monthly management fee from U.S.$12.5 to U.S.$14.5 per vessel, the first increase since the IPO in April 2006. The increase is effective from 1 January 2011.
2010 U.S.$'000 | 2009 U.S.$'000 | |||
Voyage expenses - related Party | ||||
Goldenport Shipmanagement Ltd (Note 3) | 1,638 | 1,810 | ||
Management fees - related party | ||||
Goldenport Shipmanagement Ltd | 2,606 | 2,679 | ||
Total | 4,244 | 4,489 |
2010 U.S.$'000 | 2009 U.S.$'000 | |||
Due from related parties - Current | ||||
Goldenport Shipmanagement Ltd | 3,668 | 2,079 | ||
Total | 3,668 | 2,079 |
The amounts receivable from GSL, shown in the table above, represent the vessel operating companies' cash surplus handled by GSL.
(b) Share-based payment transactions, Annual Incentive Plan and other remuneration of Directors and Management team
Annual incentive plan: The Remuneration Committee believes that a significant proportion of total remuneration should be performance-related. In addition, performance-related rewards should be deliverable largely in shares to more closely align the interests of shareholders and all Executive Directors and Management. In order to achieve this, the Board decided to terminate the 2006 Annual Cash Bonus arrangements and to replace them with a new plan called the Annual Incentive Plan ('AIP'), which will be administrated by the Remuneration Committee.
It was decided that under the terms of the AIP the eligible employees (i.e Executive Directors and Management) can elect to have their annual cash bonus delivered in the form of restricted shares in the Company. The performance criteria remained same as for the Annual Cash Bonus. Again, it is intended that the maximum limit for each participant will be 40% of annual base salary. The Remuneration Committee may select in future years, to adjust the maximum but it will not in any event exceed 75% of annual base salary. The Board (after a proposal by the Remuneration Committee) reserves the right to award shares in other circumstances which could include, without being limited to, subsequent offers of shares (primary or secondary). In each year the Remuneration Committee will propose to the Board the percentage of base salary applicable to each participant for the purposes of the AIP ("Base Award").
Under the AIP, a participant may apply his Base Award in one of three ways:
·; Full Cash Award ('FCA'): If the participant selects the FCA, then the AIP will pay cash but only at 90% of the Base Award.
·; Full Shares Award ('FSA'): If the participant selects the FSA, then under the AIP 110% of Base Award will be given in the form of shares.
·; Half Cash-Half Shares Award ('HCHS'): If the participant selects the HCHS, then on 50% of Base Award the 90% rule will apply and will be paid cash and on the other 50% the 110% rule will apply and will be paid in shares.
The Remuneration Committee at its meeting on 15 December 2010 proposed to the Board of Directors under the terms of AIP the base award for each participant. The Board of Directors on 15 December 2010 approved the Remuneration Committee proposal, subject to finalisation of the financial statements for 2010, and announced the base award to each participant. Two of the participants voluntarily selected the full shares award and two the full cash award.
As per the terms of AIP the FCA is 90% of the base award, whereas FSA is 110% of the base award. The total of FSA amounts to U.S.$195 (2009: U.S.$168) and the FCA amounts to U.S.$92 (2009: nil) is included in General and administrative expenses in the accompanying consolidated statements of comprehensive income.
On 1 March 2011, the Board of Directors approved the financial statements and authorised the issuance of the shares relating to the full share award under the provisions of the AIP. Under these provisions the AIP shares will be calculated by reference to the closing market value of the Company's shares on the date of announcement of full year results for 2010. The AIP shares will be allotted and then registered in the participants name after the record date (11 March 2011).
The participant shall have the right to receive dividends for 2011 and the right to vote in respect of AIP shares but during a restricted period of one calendar year from registration the participant is not allowed to sell, assign, exchange, transfer, pledge, hypothecate or otherwise dispose of or encumber any of the AIP shares. There are no other choices for the participants.
Share-based payment transactions: On 1 September 2010, the Company granted the Discretionary Share Option Plan (the "DSOP"), with eligibility for executive directors and employees, and the Group Share Award Plan (the "Plan"), with eligibility for all employees and Directors. The total shares under option and award amount to 1,520,000 (DSOP shares: 1,020,000 & Plan: 500,000) and there are no cash settlement alternatives.
Performance Period and Vesting Date
Options granted pursuant to the DSOP and awards granted pursuant to the Plan will vest over a three year period (the "Performance Period") commencing on the date of grant (the
"Start Date"). The extent to which options and awards vest will be determined by reference to the date that falls on the third anniversary of the Start Date (the "Vesting Date"). Options granted pursuant to the DSOP will lapse on the tenth anniversary of the Start Date, or earlier in accordance with the rules of the DSOP.
Performance Conditions
Options granted in 2010 pursuant to the DSOP and the Plan will vest subject to the
performance conditions as follows:
• 100% of the option or award will vest if the Total Shareholder Return (the "TSR")
Ø over the five dealing days prior to the Vesting Date or
Ø over any continuous 60 calendar day period during the Performance Period is either equal to or greater than 65% over and above the Issue Price (GBP1.27 or U.S.$1.982).
• 75% of the option or award will vest if the Total Shareholder Return (the "TSR")
Ø over the five dealing days prior to the Vesting Date or
Ø over any continuous 60 calendar day period during the Performance Period is either equal to or greater than 60% over and above the Issue Price (GBP1.27 or U.S.$1.982).
• 50% of the option or award will vest if the Total Shareholder Return (the "TSR")
Ø over the five dealing days prior to the Vesting Date or
Ø over any continuous 60 calendar day period during the Performance Period is either equal to or greater than 55% over and above the Issue Price (GBP1.27 or U.S.$1.982).
Total Shareholder Return (the "TSR") calculation is based on share price plus dividend per share.
The fair value of the share options is estimated at the grant date using a binomial option pricing model, taking into account the terms and conditions upon which the share option were granted.
The assumptions on which the price tree was constructed are summarized as follows:
Parameters | Value | |||
Current Stock Price | GBP 1.200 (U.S.$1.874) | |||
Exercise Price of Option | GBP 1.270 (U.S.$1.982) | |||
Vesting Period | 3 years | |||
Risk Free Interest Rate | 2.25% | |||
Expected Dividend Yield | 2.84% | |||
Volatility of Stock Price | 35.46% |
Ø The Current Stock Price is the stock price at the grant date of the option (1 September 2010).
Ø The Risk Free Interest Rate is the 3y U.K. Government Bonds rate.
Ø The Expected Dividend Yield is the annualized dividends divided by the Current Stock Price.
Ø The Volatility of Stock Price is the average annual stock price volatility on a historical period 2006 - 2010 except 2008 volatility.
The amounts included in the financial statements under AIP, DSOP, the Plan and other remuneration of Directors and Management team as of 31 December are as follows:
2010 U.S.$'000 | 2009 U.S.$'000 | |||
Directors and management team remuneration | 1,152 | 1,175 | ||
Share based payment transactions | 84 | - | ||
AIP | 287 | 168 | ||
1,523 | 1,343 |
(c) The Interests of the Directors, the Senior Management and their respective immediate families in the share capital of the Company (all of which are beneficial unless otherwise stated), were as at 31 December 2010 as follows:
Name | Number of shares as at 31 Dec 2009 | Shares issued under AIP 2009 | Shares issued under the scrip alternative of final dividend 2009 | Shares issued under placing and open offer 2010 | Shares issued under the scrip alternative of interim dividend 2010 | Number of shares as at 31 December 2010 | Percentage of shares as at 31 December 2010 | ||||||||
Captain Paris Dragnis | 42,540,879 | 47,076 | 1,262,339 | 7,237,388 | 191,762 | 51,279,444 | 56.25% | ||||||||
Chris Walton | 2,180 | - | 64 | 16,320 | 42 | 18,606 | 0.02% | ||||||||
John Dragnis | 489,201 | 14,711 | 14,515 | 74,100 | 2,603 | 595,130 | 0.65% | ||||||||
Christos Varsos | 50,834 | 18,389 | 1,508 | 9,269 | 1,203 | 81,203 | 0.09% | ||||||||
Konstantinos Kabanaros | 30,651 | 36,020 | 909 | 17,247 | 1,276 | 86,103 | 0.09% | ||||||||
(d) Rental of office space: A monthly rental of EUR17.8 was agreed to be charged by the owner of the building (a related party under common control) to Goldenport Marine Services for the rental of the head offices. Total rent expense for the year ended 31 December 2010 amounted to U.S.$274 (U.S.$237 in 2009) and is included in General and administration expenses in the accompanying financial statements.
The future minimum lease (rental) payments under the above agreement as at 31 December are as follows:
2010 U.S.$'000 | 2009 U.S.$'000 | |||
Within one year | 289 | 306 | ||
After one year but not more than five years | 812 | 1,058 | ||
More than five years | 199 | 333 | ||
1,300 | 1,697 |
22. INCOME TAXES
Under the laws of the Republic of Marshall Islands and the respective jurisdictions of the Consolidated Companies the Group is not subject to tax on international shipping income. However, the Consolidated Companies are subject to registration and tonnage taxes, which have been included in vessel operating expenses in the accompanying consolidated statement of income.
Pursuant to the United States Internal Revenue Code of 1986, as amended (the ''Code''), U.S. source income derived by a foreign corporation from the international operation of ships generally is exempt from U.S. tax if the company operating the ships meets both of the following requirements, (a) the company is organised in a foreign country that grants an equivalent exception to corporations organised in the United States and (b) either (i) more than 50% of the value of the company 's shares is owned, directly or indirectly, by individuals who are ''residents'' of the company's country of organization or of another foreign country that grants an ''equivalent exemption'' to corporations organised in the United States (50% Ownership Test) or (ii) the company's shares are ''primarily and regularly traded on an established securities market'' in its country of organization, in another country that grants an ''equivalent exemption'' to United States corporations, or in the United States (Publicly-Traded Test). Under the regulations, company's shares will be considered to be ''regularly traded'' on an established securities market if (i) one or more classes of the its shares representing more than 50% of its outstanding shares, by voting power and value, is listed on the market and is traded on the market, other than in minimal quantities, on at least 60 days during the taxable year; and (ii) the aggregate number of shares traded during the taxable year is at least 10% of the average number of shares outstanding during the taxable year. Notwithstanding the foregoing, the regulations provide, in pertinent part, that each class of the company's shares will not be considered to be ''regularly traded'' on an established securities market for any taxable year in which 50% or more of the vote and value of the outstanding shares of such class are owned, actually or constructively under specified stock attribution rules, on more than half the days during the taxable year by persons who each own 5% or more of the value of such class of the company's outstanding shares, (''5 Percent Override Rule''). In the event the 5 Percent Override Rule is triggered, the regulations provide that the 5 Percent Override Rule will nevertheless not apply if the Company can establish that among the closely-held group of 5% Stockholders, there are sufficient 5% Stockholders that are considered to be "qualified stockholders" for purposes of Section 883 to preclude non-qualified 5% Stockholders in the closely-held group from owning 50% or more of each class of the Company's stock for more than half the number of days during the taxable year.
Treasury regulations under the Code were promulgated in final form in August 2003. These regulations apply to taxable years beginning after September 24, 2004. As a result, such regulations are effective for calendar year taxpayers, like the Company, beginning with the calendar year 2005. All the Company's ship-operating subsidiaries currently satisfy the 50% Ownership Test. In addition, the management of the Company believes that by virtue of a special rule applicable to situations where the ship operating companies are beneficially owned by a publicly traded company like the Company, the 50% Ownership Test can also be satisfied based on the trading volume and the widely-held ownership of the Company's shares. Regarding the 2007, 2008, 2009 and 2010 tax years, the Company believes that it satisfies the Publicly-Traded Test and all of its United States source shipping income will be exempt from U.S. federal income tax.
23. FINANCIAL INSTRUMENTS
Risk management objectives and policies
The Group's principal financial instruments are bank loans. The main purpose of these financial instruments is to finance the Group's operations and further fleet expansion. The Group has various other financial instruments such as cash and cash equivalents, trade receivables and trade payables, which arise directly from its operations.
From time to time, the Group also uses derivative financial instruments, principally interest rate swaps.
The main risks arising from the Group's financial instruments are interest rate risk and credit risk. The majority of the Group's transactions are denominated in U.S. dollars therefore its exposure to foreign currency risk is minimal.
Cash flow interest rate risk
Cash flow interest rate risk arises primarily from the possibility that changes in interest rates will affect the future cash outflows from the Group's long-term debt. The sensitivity analysis presented in the table below demonstrates the sensitivity to a reasonably possible change in interest rates (libor), with all other variables held constant, on the Group's profit for the year (fluctuations in interest rates do not impact the Groups equity). The sensitivity analysis has been prepared using the following assumptions:
·; A rise or fall in interest rates will impact interest expense on floating rate borrowings.
·; Although the fair value of the derivatives, and therefore the statement of comprehensive income will be impacted by movements in interest rates, the fair value impact of the derivatives have been excluded from the sensitivity analysis as not significant.
·; One interest rate swap entered into in 2007 and one in 2009 economically hedge the respective loans and the interest payments/receipt almost fully offset, therefore these two loans have not been included in the sensitivity analysis.
|
Increase/Decrease (%) | U.S.$'000 Effect on profit |
2010 | +0.5% | -789 |
-0.5% | +789 | |
2009 | +0.5% | -654 |
-0.5% | +654 |
Credit risk
The Group's maximum exposure to credit risk in the event the counterparties fail to perform their obligations as of 31 December 2010 in relation to each class of recognised financial assets, other than derivatives, is the carrying amount of those assets as indicated in the statement of financial position.
Concentration of Credit Risk
Financial instruments, which potentially subject the Group to significant concentrations of credit risk, consist principally of cash and cash equivalents, and trade accounts receivables. The Group places its cash and cash equivalents, consisting mostly of deposits, with financial institutions. The Group performs annual evaluations of the relative credit standing of those financial institutions. Credit risk with respect to trade accounts receivable is generally managed by the chartering of vessels to major trading houses (including commodities traders), established container-line operators, major producers and government-owned entities rather than to more speculative or undercapitalised entities. The vessels are normally chartered under time-charter agreements where as per the industry practice the charterer pays for the transportation service in advance, supporting the management of trade receivables.
Fair Values
Derivatives are recorded at fair value while all other financial assets and financial liabilities are recorded at amortised cost which approximates fair value.
Foreign currency risk
The majority of the Group's transactions are denominated in U.S. dollars therefore its exposure to foreign currency risk from operations is minimal.
Liquidity risk
The Group aims to mitigate liquidity risk by managing cash generation by its operations, applying cash collection targets throughout the Group. The vessels are normally chartered under time-charter agreements where as per the industry practice the charterer pays for the transportation service in advance, supporting the management of cash generation. Investment is carefully controlled, with authorisation limits operating up to Group's board level and cash payback periods applied as part of the investment appraisal process. In this way the Group aims to maintain a good credit rating to facilitate fund raising.
In its funding strategy, the Group objective is to maintain a balance between continuity of funding and flexibility through the use of bank loans. The Group's policy in new investments for second-hand vessels is that not more than 70% of the value of each investment will be funded through borrowings, whereas for the new buildings the respective limit is 80%. In all the acquisitions within 2010 the bank financing was in line with the Group's policy.
The Group normally meets its working capital needs through cash flows from operating activities and available credit lines. Management prepares cash flow projections in order to forecast its short term working capital position.
Excess cash used in managing liquidity is only invested in financial instruments exposed to insignificant risk of changes in market value, being placed on interest-bearing deposit with maturities fixed at no more than 3 months. Short term flexibility is achieved if required by credit line facilities.
The table below summarises the maturity profile of the Group's financial liabilities at 31 December 2010 and 2009, based on contractual undiscounted payments (including interest to be paid, which is calculated using the last applicable rate for each loan, as of 31 December 2010 and 2009):
31 December 2010 | 3-12 months | 1- 2 years | 2- 5 years | >5 years | Total | ||||||
U.S.$000 | U.S.$000 | U.S.$000 | U.S.$000 | U.S.$000 | U.S.$000 | ||||||
Interest bearing loans | 15,025 | 32,048 | 30,229 | 98,038 | 81,028 | 256,368 | |||||
Trade payables | 8,706 | - | - | - | - | 8,706 | |||||
Other payables | 3,474 | - | - | - | - | 3,474 | |||||
Derivative instrument liability | 93 | 252 | 286 | 396 | - | 1,027 | |||||
27,298 | 32,300 | 30,515 | 98,434 | 81,028 | 269,575 | ||||||
31 December 2009 | 3-12 months | 1- 2 years | 2- 5 years | >5 years | Total | ||||||
U.S.$000 | U.S.$000 | U.S.$000 | U.S.$000 | U.S.$000 | U.S.$000 | ||||||
Interest bearing loans | 16,371 | 20,338 | 37,991 | 86,887 | 27,834 | 189,421 | |||||
Trade payables | 10,476 | - | - | - | - | 10,476 | |||||
Other payables | 2,254 | - | - | - | - | 2,254 | |||||
Derivative instrument liability | 111 | 303 | 334 | 329 | - | 1,077 | |||||
29,212 | 20,641 | 38,325 | 87,216 | 27,834 | 203,228 | ||||||
Capital Management
The primary objective of the Group's capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximize shareholder value.
The Group monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Group's policy is to keep the gearing ratio below 75% on average (also Group's funding policy in Liquidity Risk section). Excess capital represented by a low gearing ratio, is used to fund further expansion plans. The Group includes within net debt, interest bearing loans, less cash and cash equivalents. Capital includes issued share capital, share premium and retained earnings.
2010 | 2009 | |||
U.S.$000 | U.S.$000 | |||
Interest bearing loans | 229,575 | 173,446 | ||
Less: cash and short term deposits (including restricted cash) | (62,783) | (39,718) | ||
Net debt | 166,792 | 133,728 | ||
Issued share capital | 911 | 708 | ||
Share premium | 145,204 | 108,865 | ||
Other capital reserves | 84 | - | ||
Retained earnings | 119,981 | 125,909 | ||
Total capital | 266,180 | 235,482 | ||
Capital & Net debt | 432,972 | 369,210 | ||
Gearing ratio | 39% | 36% | ||
24. EVENTS AFTER THE REPORTING DATE
Increase in management fee: On 15 December 2010 the Board of Directors of the Company approved an increase in monthly management fee from U.S.$12.5 to U.S.$14.5 per vessel, the first increase since the IPO in April 2006. The increase is effective from 1 January 2011.
Drawdown of loan & payment to the shipyard for Hull No.YZJ-917: On 7 January 2011 and as part of the loan agreement concluded between the vessel owning company of the new building bulk carrier 'YZJ-917' and a bank (note 9) the vessel owning company proceeded with the drawdown of U.S.$10,340, representing the bank's portion of the third and fourth instalment, which was paid along with the Group's equity portion of U.S.$7,895 directly to the shipyard as per contract.
Drawdown of loan & payment to the shipyard for Hull No.ZS07038: On 18 January 2011 and as part of the loan agreement concluded between the vessel owning company of the new building bulk carrier 'ZS07038' and a bank (note 9) the vessel owning company proceeded with the drawdown of a) U.S.$3,775, representing the bank's portion of the second instalment, which was paid along with the Group's equity portion of U.S.$3,775 directly to the shipyard as per contract and b) U.S.$7,550, representing the third instalment paid directly to the shipyard as per contract.
Drawdown of loan & payment to the shipyard for Hull No.ZS07036: On 18 January 2011 and as part of the loan agreement concluded between the vessel owning company of the new building bulk carrier 'ZS07036' and a bank (note 9) the vessel owning company proceeded with the drawdown of U.S.$7,550, representing the fourth instalment paid directly to the shipyard as per contract.
Drawdown of loan & delivery of M/V Clifton Bridge: On 15 February 2011 the vessel owning company of the container vessel Clifton Bridge paid to the owners of vessel an amount of U.S.$5,670, representing the delivery instalment (note 8) under the terms of the agreement signed on 1 November 2011 and took delivery of vessel. A portion of the delivery instalment amounts to U.S.$5,200 was financed through the credit facility of U.S.$10,100 and the remaining amount of U.S.$470 was paid from cash reserves. The outstanding balance of the credit facility amounts to U.S.$4,900 was fully repaid to the bank upon delivery of vessel reducing the amortisation of loan o (note 16) on a prorata basis. After prepayment the outstanding balance of loan amounts to U.S.$17,350 and is repayable in seventeen quarterly instalments of U.S.$741 each, the first one being due on 16 March 2011 and the final one on 16 March 2015 along with a balloon payment of U.S.$4,753. The vessel was renamed to Pos Yantian upon delivery and commencement of charter.
Dividends: On 1 March 2011 the Board of Directors of the Company decided to propose to the Annual General Meeting for approval, a final dividend for 2010 of 3.6 pence per share or total GBP 3,282 (3 pence per share or GBP 2,125 for 2008). The dividend proposed which, is expected to be approved by the AGM to be held in Athens on 11 May 2011 has a share alternative allowing the shareholders to select between cash and shares for the respective amount of 3.6 pence.
Foreign currency forward agreement: On 10 January 2011, the Group entered into a foreign currency forward contract to purchase the amount of EUR1,500,000 at a EUR/USD exchange rate of 1.292 with value date 1 June 2011