Global Ports Holding PLC (GPH)
Global Ports Holding Plc
Full year results for the twelve months ended 31st December 2019
Global Ports Holding Plc ("GPH" or "Group"), the world's largest independent cruise port operator, today announces its audited results for the twelve months ending 31 December 2019.
Mehmet Kutman, Co-Founder and Chairman said:
"Our strong performance in Cruise in 2019 has unfortunately been overshadowed by recent events. The Covid-19 crisis that has engulfed the world is causing unprecedented disruption to both global economies and the global travel sector. But most importantly, it is affecting the lives of people all over the world on a previously unimaginable scale. Our thoughts are with those people that have been directly impacted by the virus and the health workers around the world that are battling to save so many lives.
In light of the impact of this crisis on the global travel industry, the board and senior management of GPH have taken immediate action to significantly reduce costs and conserve cash to protect the Group's balance sheet and help steer the company through the crisis. We believe that the actions taken to date will mean that even under a severe downside scenario of no cruise ships calling at our ports for the remainder of 2020 and a modest recovery at only our Caribbean ports thereafter, as well as a significant decline in container volumes at Port Akdeniz, the Group will have sufficient cash resources to remain in operation and within covenant requirements at the end of April 2021."
Covid-19 crisis management and actions
At the end of December 2019, GPH had cash and cash equivalents of $63.8m, as at the end of March 2020 this figure was $53.5m, including a debt repayment of $6.5m. Available headroom in our credit lines was $20m at the end of March 2020.
In light of the exceptional circumstances that are currently engulfing the cruise industry and with such uncertainty over when cruise travel might return to normal, the board and management have taken several significant actions to protect the balance sheet and long term future of the business.
The Board believe that the actions been taken to date will mean that even under a severe downside scenario the Group will have sufficient cash resources to remain in operation and within covenant requirements at the end of April 2021. This scenario includes our Caribbean ports handling no cruise ships for the remainder of 2020, with a recovery in Caribbean passenger volumes in the first four months of 2021 to 50% of previous expectations, while it assumes the rest of our cruise port portfolio does not welcome any cruise ships until after the end of April 2021.
In terms of our Commercial operations, the severe downside scenario assumes a fall in marble exports in Port Akdeniz to China of 75% based on the forecasted container cargo of marble for both loading and unloading until September 2020 followed by a moderate improvement but remaining at least 25% below original management expectations. Under this scenario Port Akdeniz container volumes would fall by 35% in 2020 compared to 2019 and by 25% compared to management's previous expectations for the period to end April 2021.
The inherent flexibility in GPH's business model, including the extensive use of outsourced service providers, means that many of our costs expand and contract in line with cruise traffic or cargo volumes. Clearly in the current circumstances such costs in our Cruise operations have dropped to almost zero.
In terms of the costs that are more fixed in nature, $12.1m has been taken out of the cost base in the Group's Cruise operations. This reflects a combination of actions and measures including all board members suspending their salaries and fees, salary deferrals across the Group and significantly reduced marketing costs and consultancy fees.
Capital expenditure and new port capital commitments
Across our portfolio, all but essential maintenance capex has been suspended and will remain suspended until the cruise industry starts to return towards normal. Capex at our new ports in the Caribbean is expected to continue as planned.
The Group signed two new concession agreements in 2019, Nassau Cruise Port and Antigua Cruise Port, both of which require future capital investment. GPH's share of this investment over the next two years, totals over $160 million.
In Antigua, the Group's cash investment was paid from the Group's cash resources in 2019 and the balance of the required investment will be funded through an already committed bank loan from a syndicate of lenders.
In Nassau, the design and engineering of the marine components of the project has been completed and the construction is expected to commence in June 2020, with an expected completion date of April 2022. The scheduled capex over the next 12 months of up to $130m is to be fully financed by bond issuance in both local and international markets and the remaining portion of $30m of the existing bridge loan of $50m is to be converted into a long term loan on the same terms of the bond. Issuance of the remaining $40m bond and $50m finance through operational cash flows is expected to be between late 2021 and the middle of 2022. Despite the current uncertainty, Nassau Cruise Port's bond issuance into the local and international markets remains on schedule and management are confident in the levels of demand. GPH does not currently expect the Nassau operations to require any further direct cash contribution from GPH Plc.
While the board believes that there is still considerable scope for future expansion of the business over the medium to long term, the planned new cruise port project expenses have effectively been suspended. The Group incurred costs of $5.1m in respect of project expenses in 2019.
While our scenario analysis includes a significant fall in container volumes at Port Akdeniz, with this port currently performing in line with the board's expectations, no cost saving or cash preservation measures have currently been taken at this port, or at Port of Adria. However, should volumes drop significantly, the business models of our commercial operations also have an inherent flexibility which should help to protect margins. This can be seen in the strong margin performance at Port Akdeniz in 2019, despite significant volume declines.
Financing and concession fees
Our current plans, with the exception of an interest holiday on one loan, assume no deferral or postponement of financial liabilities, both interest and repayment. However, management are in active discussion with a number of the Group's lenders over potential deferrals or postponements which if agreed would further strength the Group's forecast cash position.
A number of our ports pay guaranteed minimum concession payments and current plans include an agreed $2.6m total reduction in these payments. The Group remains in productive and positive discussions with relevant authorities over further potential deferrals or suspensions of minimum concession payments. If agreed these would strength the Group's cash position still further.
Governments around the world continue to announce measures to ease the significant economic impact of this global crisis. Many of the announced measures include policies and facilities to support companies and the incomes of employees during these very challenging times. While management continue to explore these government support packages, our current plans do not include the utilisation of such policies. Clearly the utilisation of such facilities could provide further support to the Company's balance sheet during this crisis.
As announced on 11 March 2020, in light of the unprecedented level of disruption to global trade and the cruise industry and the associated short term uncertainty, the Board of GPH decided that it was is prudent and in the best interests of all stakeholders to temporarily suspend the dividend for full year 2019, until the situation becomes clearer. It will therefore not be recommending the payment of a final dividend for 2019 at the Company's forthcoming AGM.
Eurobond and Strategic Review
The Group's $250m 2021 Eurobond has a covenant of five times Gross Debt to EBITDA. As an incurrence covenant and not a maintenance covenant, if this is breached, the impact would be that cash outflow from Global Liman to other subsidiaries and dividend distributions will become restricted until such time as the Gross Debt to EBITDA leverage falls below five times.
Management have commenced discussions with a number of investment banks to assess several options for the Eurobond refinancing including but not limited to issuing a new Eurobond. So far considering the stage of these discussions, there is no indication that suggests that a refinancing cannot be obtained or an appropriate lender would not be found.
Parallel to these discussions, the final outcome of the exclusive negotiations with a potential buyer of Port Akdeniz will have a material impact on the refinancing structure. To date, the Covid-19 outbreak has had no meaningful impact on the exclusive negotiations over the potential sale of Port Akdeniz. A final decision on the sale process is expected in Q3 2020, after which the Group will decide on the most appropriate refinancing structure.
Outlook & current trading
Before the outbreak of Covid-19, 2020 was going to be the year when the strategy we have been delivering on since IPO really started to deliver operational and financial results, with our successful expansion into the Caribbean driving a step change in our Cruise operations.
However, while 2020 began well and operational results were in line with management expectations at both the Cruise and Commercial divisions, the outbreak of the Covid-19 virus has had a significant impact on our cruise operations. With travel restrictions implemented across the world, cruise itineraries have been cancelled for a number of weeks or months and it is currently unclear when cruise activity will resume at normal levels. Our Commercial operations have as yet not seen any negative impact and continue to track broadly in line with management expectations.
At Port Akdeniz, Container Throughout volumes are down year on year against a relatively strong Q1 2019 but importantly volumes are in line with management expectations. General & Bulk cargo volumes have been very strong, driven by the introduction of a number of initiatives to help drive volumes.
Providing financial guidance for the year ending 31 December 2020 is impossible in the current environment pending further certainty over the length and extent of the current circumstances.
The inherent flexibility in GPH's business model, including the extensive use of outsourced service providers, means that many of our costs expand and contract in line with cruise traffic. The board have taken immediate cost saving and cash preservation measures to protect the balance sheet and preserve the Group's liquidity position.
While there is a high level of uncertainty over the trading outlook for 2020, the Board and Senior Management are confident in GPH's long-term strategy and its ability to navigate through this crisis.
Notes- For full definitions and explanations of each Alternative Performance measures in this statement please refer to the Glossary of Alternative Performance Measures.
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2019 Financial Results Overview
Group - Strong delivery on strategic objectives
$77.0m (down 8.0% ccy), in line with management expectations
$13.3m (FY 2018: $13.0m) and one off adjustments $8.4m (FY 2018: -$2.5m). These one off adjustments were primarily made up of project expenses of $5.1m and $2.5m of provision expenses. The total IFRS 16 impact on operating profit was $0.8m increase
Cruise - A year of marquee additions to the portfolio, overshadowed by recent developments
$44.4m (23.1% ccy)
Commercial - weak full year performance, driven by volume weakness
Please refer to Footnotes above for full definitions and explanations of each measure in this statement please refer to the Glossary of Alternative Performance Measures
Chief Executive's 2019 Operational Review
2019 saw a year of 'marquee' additions to the cruise port portfolio and a good Cruise performance, which has unfortunately now been overshadowed by the Covid-19 virus outbreak.
While there has been no significant impact from Covid-19 on our Commercial operations, the Cruise industry and our Cruise operations are now expected to experience a significant impact in 2020.
We are taking actions to address the financial impact and I am confident in our ability to weather this storm. While not the circumstances we would have chosen, I believe how we successfully navigate this crisis will stand as a testament to the strength of our business. However, our thoughts at this time are very much with those who have been directly impacted by the Covid-19 outbreak.
2019 saw a mixed year of operating performance from GPH. The parts that were good, were very good and most significantly GPH successfully delivered on our plans to grow our physical reach. During the year we added our second and third Caribbean cruise ports in the prime cruising locations of Nassau and Antigua. Both of these ports are expected to shortly be in our top five by EBITDA.
Towards the end of the year, we also grew our presence in Asia by welcoming Ha Long Bay Cruise Port, Vietnam into our portfolio. And in the Mediterranean, our 50:50 joint venture with MSC acquired the operator of La Goulette Cruise Port, Tunisia.
In the summer, the Board announced a strategic review to maximise shareholder value. The review process is ongoing, however, we have recently entered into exclusive negotiations with a potential buyer of Port Akdeniz.
In our day-to-day operations, our Cruise port business continued to perform well, with a number of our ports welcoming record passenger numbers or winning industry awards. However, our Commercial business came up against challenges posed by trade tariffs, global trading uncertainty and issues in key markets such as China. This led to an overall Group operating performance below our original expectations, with EBITDA falling in the year.
Our full year revenue was $117.9m compared to $124.8 million in 2018. Adjusted EBITDA fell 6.1% to $77.0 million (2018: $83.7 million). With the Group generating a loss before tax of $13.4m (2018: Profit before tax of $8.6m).
In a year that had promised more, we are nevertheless pleased to have delivered very much in line with the long-term strategy we set out at the time of our IPO. Indeed, the addition of such high-quality cruise ports transforms the Group, and makes Cruise our largest business segment.
Our cruise business once again delivered record passenger numbers and record Segmental EBITDA in the year.
Cruise Revenue increased 14.8% to $63.0m (FY 2018: $54.9m), while Cruise segmental EBITDA rose to $44.1m, a growth rate of 17.2%. The revenue from our cruise ports in 2019 was almost exclusively generated in USD and Euros. Our Turkish ports and Nassau and Antigua generated all of their revenues in USD, while our other ports generated their revenues in Euros and incur most of their costs in Euros.
We welcomed 5.3m cruise passengers to our consolidated and managed portfolio in 2019, a growth rate of 17.7%. The headline growth rate was driven by the first time contribution from the new ports in the Caribbean, excluding these, cruise passenger volumes grew 3.4%. When we include passenger volumes from our equity accounted associate ports of La Goulette, Lisbon, Singapore and Venice, total passenger volumes rose 8.5% to 9.3m (FY 2018: 8.5m).
Of particular note is the strong passenger growth at both Valletta and Ege. Valletta reported passenger growth of 27%, recovering strongly from a subdued performance in 2018. While Ege, after a few years of subdued passenger volumes started to see volumes recover, with very strong passenger growth of 33%.
Our ancillary services offering evolved further during the year. We refurbished and transformed our travel retail areas in Barcelona and we also made further progress with our key priority of offering an integrated services package at our ports, which we have started rolling out at our ports in Iberia.
But the most important development in our Cruise business in 2019 was the expansion and strengthening of our portfolio. In a series of selective additions, we welcomed three new cruise port concessions and a further management agreement port into the GPH family and our JV in Singapore successfully secured an extension out to 2027. The number
- and, of equal significance, the quality - of these arrivals takes our cruise port portfolio to the next level, enhancing our presence in the cruise sector's core markets.
In the Caribbean, we signed a 25-year concession agreement for the redevelopment and management of Nassau Cruise Port in the Bahamas, which is one of the largest of its kind in the world. We also signed a 30-year concession agreement for cruise operations in Antigua & Barbuda.
Towards the end of the year, we added our second port in Asia with the signing of a 15-year management services agreement for Ha Long Bay Cruise Port in Vietnam. And in the Mediterranean, our 50:50 joint venture acquired the operating company of La Goulette cruise port in Tunisia.
The addition of these four new ports to our portfolio was a clear highlight of the year. Nassau and Antigua, having become part of the Group in Q4 2019 contributed $2.5m and $1.8m of revenue respectively for the year. Ha Long Bay and La Goulette joined at the end of December so there was no meaningful impact from these ports during the year.
Excluding the impact of Covid-19, the effect of these additions will be significant, more than doubling our passenger volumes from 2019 levels.
The performance of our Commercial business in 2019 was disappointing, with Commercial Segmental EBITDA declining by 26.4%
The primary drivers behind the depressed volumes were macro-economic factors such as trade tariffs and the general uncertainty around global trade, particularly involving China. This impact was felt most at Port Akdeniz, where container throughput volumes fell by 19.0% and general & bulk cargo volumes fell by 54.9%. The container decline was driven by a decrease in marble volumes to China, the largest market for Antalya marble, while general & bulk cargo volumes were mainly affected by weak cement volumes.
Port Akdeniz's significant direct exposure to China meant it felt this impact more acutely than Port Adria where, excluding project cargo volumes, underlying trading was broadly unchanged.
Despite the sharp decline in volumes, it is testament to the strength and flexibility of our business model that Commercial EBITDA margins were still above 70% in the year.
Following a competitive sales process conducted in the second half of 2019, GPH has entered exclusive negotiations with a potential buyer of Port Akdeniz. A further announcement will be made when it is appropriate to do so.
In Q1 2020 some changes were announced to GPH's Board. Thierry Edmond Déau and Thomas Josef Maier, having both decided not to stand for re-election as Independent Non-Executive Directors at the next AGM, agreed to step down early to allow new board members to join as soon as practically possible.
As a result, Andy Stuart, until recently President and Chief Executive Officer of Norwegian Cruise Line, the largest cruise line of Norwegian Cruise Line Holdings Ltd, joined the board. Andy brings vast experience of the cruise industry, gained over a period of more than 30 years, and he will be a valuable addition to the team.
The process of appointing a further Non-Executive Director, with a strong background within the UK Plc environment, is well underway. A further announcement in this regard will be made when it is appropriate to do so.
Revenue for the year was $117.9m, down 5.6% (-5.0% in constancy currency) and Adjusted EBITDA fell 8.0% (-7.7% in constant currency) to $77.0m, with underlying profit falling 53% to $27.3m and loss after tax of $13.4m.
Full year growth in consolidated and managed portfolio passengers was 17.7% to 5.3m, driven by the pro rata contribution from Nassau and Antigua in the year, while total passenger volumes in our portfolio volumes grew 8.5% to 9.3m, with our equity accounted associate ports (Venice, Lisbon and Singapore) welcoming 4.0m passengers.
Cruise Revenue increased 14.8% to $63.0m (FY 2018: $54.9m), and Cruise segmental EBITDA increased by 18.0% to
$44.4m (FY 2018: $37.6m). Our equity accounted associate ports (La Goulette, Lisbon, Singapore and Venice) performed in line with last year, with their pro-rata net income contributing at the Segmental and Adjusted EBITDA level $5.6m, (FY 2018: $5.6m). Excluding the impact of our equity accounted associates, Cruise EBITDA growth was 20.4%. On a constant currency basis, full year cruise revenue was $63.3m and Cruise segmental EBITDA was $44.5m.
Commercial revenue fell 21.5% in the period to $54.8m (FY 2018: $69.9m). Port Akdeniz revenue fell by 20.7% to $47.5m (FY 2018: $59.9m), while Port Adria revenues fell by 26.3% to $7.4m (FY 2018: $10.0m). General & Bulk Cargo volumes fell 49.7% in the year, while in Containers volumes fell 15.9% in the year.
Commercial Segmental EBITDA fell by 26.4% to $39.1m in the year. EBITDA at Port Akdeniz fell by 24.0%, driven by the previously disclosed significant fall in volumes during the year. Port Adria EBITDA declined by 56.5%, largely as a result of the non-recurrence of project cargo in the year. Commercial Segmental EBITDA margin of 71.2% was a sharp decline vs 2018 but in the face of such a significant drop in volumes, this performance stands as testament to the flexibility within the business model.
Unallocated expenses or central costs fell by 8.3% yoy to $6.4m, reflecting the annualising of our previous investment into our central functions in 2018 as well as some benefit from the weaker Turkish Lira compared to 2018 as well as a modest IFRS 16 impact.
Depreciation and Amortisation Costs
Depreciation and amortisation costs increased to $47.8m in the year from $44.6 million in 2018. This increase is primarily due to IFRS 16 - Leases impact, an additional $2.4m was expensed as a result of the depreciation associated with capitalising all operational leases.
Specific Adjusting Items in Operating Profit
During 2019 specific adjusting items of -$8.4m comprised Project expenses amounting to -$5.1m a decrease on the -$9.6m in 2018, -$2.5 million provisions, and -$0.8m other expenses. The decrease in project expenses is mostly related to reimbursement of incurred project expenses for Antigua and Nassau Cruise Ports. The increase in provisions is mostly related to management's decision to fully provide for certain legal cases during 2019
On a statutory (IFRS) basis operating profit fell by 57.4% to $15.3m which was primarily driven by the 5.6% decline in revenues and most significantly the absence of the $12.2m positive impact from the reversal of replacement provision for the Spanish cruise ports in 2018. Share of profit of equity-accounted investees was effectively flat on the year, at $5.6m (FY 2018: $5.6m), with Net Finance Cost rising to $34.3m (FY 2018: $32.9m) driven the $2.4m impact of IFRS 16 on the treatment of operating leases. There was therefore a loss before tax of $13.4m compared to a profit before tax of $8.6m in 2018.
Net Finance Costs
The Group's net finance charge in the period was $3.1m, a slight increase on the $32.9 million charge in 2018. The increase was primarily the result of IFRS 16 application, interest impact on operational leases, partly offset by the decrease in foreign exchange losses.
The Finance charge decreased to $42.3m compared to a $60.9m charge in 2018, this was primarily due to the decrease in TL fluctuation against other currencies; which resulted significant non-cash losses, when revaluing the Eurobond debt as this is issued by a Turkish Lira denominated, 100% owned entity within the group, along with non-cash revaluations on Turkish entities foreign currency dominated liabilities.
Finance income also decreased to $8.1m as a result of a stable year in currency movement of TL against other currencies, due to non-cash revaluations on Turkish entities foreign currency dominated assets.
Net interest expense increased by $3.1m to $28.4m (2018: $25.2m). This is due to the IFRS 16 - Leases application, an additional $64.8m lease liability was recognised on Balance Sheet, as a result of long term concession contracts capitalisation.
The Group's effective tax rate was 26.34% in the year compared to 25.56% in prior year. Global Ports Holding is a multinational group and as such is liable for taxation in multiple jurisdictions around the world. The Group's tax charge for the period was $1.9m compared to $1.5m in 2018.
The Group is paying corporate tax due to specific components being profitable however due to group tax relief restrictions, losses created on other components (mostly sub-holding companies) cannot be utilised. On a cash basis, the Group's income taxes paid amounted to $7.2m in line with the $7.3m paid in 2018.
Earnings Per Share
The Group's Basic earnings per share was a loss of -29.54c (FY 2018: 1.23c), this decrease is in line with the decreases in loss/profit for the year attributable to owners of the company to -$18.6m (2018: $0.8m).
Underlying earnings per share is underlying profit divided by weighted average number of shares. Underlying earnings per share of 43.5c (FY 2018: 94.0c), was primarily driven by the adding back of the amortisation of port operating rights of
$34.5m (FY 2018: $31.6m), non-cash charge of provisional expenses $2.5m (FY 2018: $0.5m) and charge of unrealised portion of unhedged portion of GLI Eurobond of $5.2m (FY 2018: 17.6m).
Cash Flow and Investment
Operating cash flow was $37.1m (FY 2018: $61.1m). Capital expenditure during the period was $24.0m, an increase on the $14.8m incurred in FY 2018. The increase is mostly related to expenses made on new project development amounting
$8.2 million and $5.7 million for the new Pier construction in Antigua. $21 million included in the consolidated cash flow statement is related to the repayment of a bond on behalf of the Government of Antigua as part of signing the concession agreement. Other areas of investment included $1.5 million on office and terminal improvement in Barcelona, $1.6 million in port operating rights for the extension in Bodrum, $3.1 million on enhancements to superstructure in Port Akdeniz, $1.6 million on enhancements to superstructure in Port of Adria. Dividends paid to equity owners totals $29.2m during the year, comprising the final dividend in respect of 2018 of $16.7 million and the interim dividend in respect of 2019 of $12.5 million.
Pre-IFRS 16 Gross debt at 31 December 2019 was $388.6 million compared to $347.1 million at 31 December 2018. Post IFRS 16 Gross debt at period end was $453.0m (31st December 2018: $347.1m), the increase was mainly driven by recognition of lease liabilities of the concession agreements in line with IFRS 16 - Leases resulted in an increase of $65.4m in financial statements. New loans received in Antigua and Nassau amounting $15.2m and $16.0m, respectively, for financing of the investment and construction of Port facilities. Capital expenditure requirements were financed through non-recourse drawdowns, partially offset by partial repayment of loans in Barcelona and Valletta Cruise Port.
The Leverage Ratio as per GPH's Eurobond covenant requirement increased to 4.65x at 31st December 2019 (31st December 2018: 4.2x), vs a restrictive covenant requirement of 5.0x.
At 31 December 2019 pre IFRS net debt was $324.3m compared to $267.2m at 31 December 2018. Post IFRS 16 net debt at the end of year was $389.1m. This increase was mainly driven by the change in gross debt described above and cash used for investments and capex activity the year. The group's pre IFRS 16 Net Debt/Adjusted EBITDA ratio was 4.3x times as at 31 December 2019 compared to 3.2x at 31 December 2018.
The Company paid a $12.5m interim dividend (15.5 pence per share) in November 2019. In terms of a full year dividend payment, in light of the unprecedented level of disruption to global trade and the cruise industry and the associated short term uncertainty, the Board of GPH decided that it was prudent and in the best interests of all stakeholders to temporarily suspend the dividend for full year 2019, until the situation becomes clearer.
GLOSSARY OF ALTERNATIVE PERFORMANCE MEASURES (APM)
These financial statements includes certain measures to assess the financial performance of the Group's business that are termed "non-IFRS measures" because they exclude amounts that are included in, or include amounts that are excluded from, the most directly comparable measure calculated and presented in accordance with IFRS, or are calculated using financial measures that are not calculated in accordance with IFRS. These non-GAAP measures comprise the following;
Segmental EBITDA calculated as income/(loss) before tax after adding back: interest; depreciation; amortisation; unallocated expenses; and specific adjusting items.
Management evaluates segmental performance based on Segmental EBITDA. This is done to reflect the fact that there is a variety of financing structures in place both at a port and Group-level, and the nature of the port operating right intangible assets vary by port depending on which concessions were acquired versus awarded, and which fall to be treated under IFRIC 12. As such, management considers monitoring performance in this way, using Segmental EBITDA, gives a more comparable basis for profitability between the portfolio of ports and a metric closer to net cash generation. Excluding project costs for acquisitions and one-off transactions such as project specific development expenses as well as unallocated expenses, gives a more comparable year-on-year measure of port-level trading performance.
Management is using Segmental EBITDA for evaluating each port and group-level performances on operational level. As per management's view, some specific adjusting items included on the computation of Segmental EBITDA.
Specific adjusting items
The Group presents specific adjusting items separately. For proper evaluation of individual ports financial performance and consolidated financial statements, Management considers disclosing specific adjusting items separately because of their size and nature. These expenses and income include project expenses; being the costs of specific M&A activities and the costs associated with appraising and securing new and potential future port agreements which should not be considered when assessing the underlying trading performance, the replacement provisions, being provision created for replacement of fixed assets which does not include regular maintenance, employee termination expenses, income from insurance repayments, income from scrap sales, gain/loss on sale of securities, other provision expenses, redundancy expenses and donations and grants.
Specific adjusting items comprised as following,
Adjusted EBITDA calculated as Segmental EBITDA less unallocated (holding company) expenses.
Management uses Adjusted EBITDA measure to evaluate Group's consolidated performance on an "as-is" basis with respect to the existing portfolio of ports. Notably excluded from Adjusted EBITDA, the costs of specific M&A activities and the costs associated with appraising and securing new and potential future port agreements. M&A and project development are key elements of the Group's strategy in the Cruise segment. Project lead times and upfront expenses for projects can be significant, however these expenses (as well as expenses related to raising financing such as IPO or acquisition financing) do not relate to the current portfolio of ports but to future EBITDA potential. Accordingly, these expenses would distort Adjusted EBITDA which management is using to monitor the existing portfolio's performance.
A full reconciliation for Segmental EBITDA and Adjusted EBITDA to profit before tax is provided in the Segment Reporting Note 2 to these financial statements.
Management uses this measure to evaluate the profitability of the Group normalised to exclude the specific non- recurring expenses and income, non-cash foreign exchange transactions, and adjusted for the non-cash port intangibles amortisation charge, giving a measure closer to actual net cash generation, which the directors' consider a key benchmark in making the dividend decision. Underlying Profit is also consistent with Consolidated Net Income (CNI), as defined in the Group's 2021 Eurobond, which is monitored to ensure covenant compliance.
Underlying Profit is calculated as profit / (loss) for the year after adding back: amortization expense in relation to Port Operation Rights, non-cash provisional income and expenses, non-cash foreign exchange transactions and specific non-recurring expenses and income.
Adjusted earnings per share
Adjusted earnings per share is calculated as underlying profit divided by weighted average per share.
Management uses these measures to evaluate the profitability of the Group normalised to exclude the gain on reversal of provisions, non-cash provisional income and expenses, gain or loss on foreign currency translation on equity, unhedged portion of investment hedging on Global Liman, adjusted for the non-cash port intangibles amortisation charge, and adjusted for change in accounting policies, giving a measure closer to actual net cash generation, which the directors' consider a key benchmark in making the dividend decision. Underlying Profit is also consistent with Consolidated Net Income (CNI), as defined in the Group's 2021 Eurobond, which is monitored to ensure covenant compliance. Management decided this year that in the light of a more meaningful presentation of the underlying profit, the unhedged portion of the investment hedge on Global Liman and any gain or loss on foreign currency translation on equity as explained in note 7 have been excluded.
Underlying profit and adjusted earnings per share computed as following;
Net debt comprises total borrowings (bank loans, Eurobond and finance leases net of accrued tax) less cash, cash equivalents and short term investments.
Management includes short term investments into the definition of Net Debt, because these short term investment are comprised of marketable securities which can be quickly converted into cash.
Net debt comprised as following;
Leverage ratio is used by management to monitor available credit capacity of the Group. Leverage ratio is computed by dividing gross debt to Adjusted EBITDA.
Leverage ratio computation is made as follows;
* As per Eurobond definition on note 13, Cruceros, NCP, GPH Antigua and GPH PLC Gross Debt (net off ifrs 16 impact amounted to USD 35,635 thousand) and adjusted EBITDA (USD 391 thousand) figures should be excluded from above computation of leverage ratio in order to arrive at the covenant ratio as per Eurobond memorandum. This will result to a 4.8x leverage ratio, which is below 5x covenant threshold.
CAPEX represents the recurring level of capital expenditure required by the Group excluding M&A related capital expenditure.
CAPEX computed as 'Acquisition of property and equipment' and 'Acquisition of intangible assets' per the cash flow statement.
* Acquisition of intangible assets doesnot include port operating rights.
Cash conversion ratio
Cash conversion ratio represents a measure of cash generation after taking account of on-going capital expenditure required to maintain the existing portfolio of ports.
It is computed as Adjusted EBITDA less CAPEX divided by Adjusted EBITDA.
Management uses the term hard currency to refer to those currencies that historically have been less susceptible to exchange rate volatility. For the year ended 31 December 2019 and 2018, the relevant hard currencies for the Group are US Dollar, Euro and Singaporean Dollar.
the accompanying notes form part of these financial statements
the accompanying notes form part of these financial statements
The Group has initially applied IFRS 16 at 1 January 2019, using the modified retrospective approach. Under this approach, comparative information is not restated and the cumulative effect of initially applying IFRS 16 (if any) is recognised in retained earnings at the date of initial application. See Note 1.
the accompanying notes form part of these financial statements
(*) The Group has initially applied IFRS 16 at 1 January 2019, using the modified retrospective approach. Under this approach, comparative information is not restated and the cumulative effect of initially applying IFRS 16 (if any) is recognized in retained earnings at the date of initial application. See Note 1.
the accompanying notes form part of these financial statements
the accompanying notes form part of these financial statements
For the years ended 31 December 2019 and 2018
(*) The Group has initially applied IFRS 16 at 1 January 2019, using the modified retrospective approach. Under this approach, comparative information is not restated and the cumulative effect of initially applying IFRS 16 (if any) is recognised in retained earnings at the date of initial application. See Note 1.
the accompanying notes form part of these financial statements
Global Ports Holding PLC is a public company incorporated in the United Kingdom and registered in England and Wales under the Companies Act 2006. The address of the registered office is 34 Brook Street 3rd Floor, London W1K 5DN, United Kingdom. Global Ports Holding PLC is the parent company of Global Liman Isletmeleri A.S. and its subsidiaries (the "Existing Group"). The majority shareholder of the Company is Global Yatırım Holding.
The financial information for the year ended 31 December 2019 contained in this News Release was approved by the Board on 13 April 2020. These condensed Financial Statements for the year ended 31 December 2019 have been prepared in accordance with the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority. They have been prepared in accordance with EU endorsed International Financial Reporting Standards ("IFRSs") but do not comply with the full disclosure requirements of these standards. The financial information set out above does not constitute the company's statutory accounts for the years ended 31 December 2019 or 2018.
Statutory financial statements for the year ended 31 December 2019, which have been prepared on a going concern basis, will be delivered to the Registrar of Companies in due course. The auditor has reported on those financial statements. Their report was not qualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006.
With the exception of those changes described below the accounting policies adopted of these Condensed Financial Statements are consistent with those described on pages 172 - 185 of the Annual Report and Financial Statements for the year ended 31 December 2018.
In the year ended 31 December 2019, the Group applied a number of amendments to IFRSs issued by the International Accounting Standards Board (IASB) that are mandatorily effective for an accounting period that begins on or after 1 January 2019. The Group has adopted IFRS 16 Leases and IFRS 2 Share-based payment arrangements from 1 January 2019. A number of other new standards are effective from 1 January 2019 but they do not have a material effect on the Group's financial statements.
The effect of initially applying these standards is mainly attributed to the following:
The Group applied IFRS 16 using the modified retrospective approach, under which the cumulative effect of initial application is recognised in retained earnings at 1 January 2019. Accordingly, the comparative information presented for 2018 is not restated - i.e. it is presented, as previously reported, under IAS 17 and related interpretations. The details of the changes in accounting policies are disclosed below. Additionally, the disclosure requirements in IFRS 16 have not generally been applied to comparative information.
Definition of a lease
Previously, the Group determined at contract inception whether an arrangement was, or contained, a lease under IFRIC 4 Determining Whether an Arrangement contains a Lease. The Group now assesses whether a contract is or contains a lease based on the new definition of a lease as explained in note 3I of the Annual report and financial statements. Under IFRS 16, a contract is, or contains, a lease if the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration.
On transition to IFRS 16, the Group elected to apply the practical expedient to grandfather the assessment of which transactions are leases. The Group applied IFRS 16 only to contracts that were previously identified as leases. Contracts that were not identified as leases under IAS 17 and IFRIC 4 were not reassessed for whether there is a lease under IFRS 16. Therefore, the definition of a lease under IFRS 16 has been applied only to contracts entered into or changed on or after 1 January 2019.
As a lessee
As a lessee, the Group leases many assets including land, property, and cars. The Group previously classified leases as operating or finance leases based on its assessment of whether the lease transferred significantly all of the risks and rewards incidental to ownership of the underlying asset to the Group. Under IFRS 16, the
Group recognises right‑of‑use assets and lease liabilities for most of these leases - i.e. these leases are on‑balance sheet.
Lease payments linked to an index or rate are included in the initial measurement of the lessee's lease liability and ROU asset using the index as at the commencement date or transition date for existing lease agreements. For any subsequent changes in those indices, the lease liability needs to be measured with the corresponding increase/decrease to be accounted in the ROU assets.
Leases classified as operating leases under IAS 17
Previously, the Group classified lease payments under concession agreements which do not fall within IFRIC 122, as operating leases under IAS 17. On transition, for these leases, lease liabilities were measured at the present value of the remaining lease payments, discounted at the related Subsidiary's incremental borrowing rate as at 1 January 2019. Right-of-use assets are measured at:
The Group has tested its right-of-use assets for impairment on the date of transition as part of the relevant CGU and has concluded that there is no indication that the right-of-use assets are impaired.
The Group used a number of practical expedients when applying IFRS 16 to leases previously classified as operating leases under IAS 17. In particular, the Group:
Leases classified as finance leases under IAS 17
The Group leases a number of items of machinery and equipment. These leases were classified as finance leases under IAS 17. For these finance leases, the carrying amount of the right-of-use asset and the lease liability at 1 January 2019 were determined at the carrying amount of the lease asset and lease liability under IAS 17 immediately before that date.
As a lessor
The accounting policies applicable to the Group as a lessor are not different from those under IAS 17. The Group is not required to make any adjustments on transition to IFRS 16 for leases in which it acts as a lessor.
Impacts on transition
On transition to IFRS 16, the Group recognised right-of-use assets including investment propoerty and additional lease liabilities. For the annual year starting at 1 January 2019, the Right-of-use assets have been measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments. The impact on transition is summarized below.
For the impact of IFRS 16 on segment information and EBITDA, see Note 2.
When measuring lease liabilities for leases that were classified as operating leases, the Group discounted lease payments using its incremental borrowing rate at 1 January 2019. The weighted- average rate applied is 3.4%.
The Group presents right-of-use assets are presented as a line item on the face of financials. The carrying amounts of right-of-use assets are as below.
The Group presents lease liabilities in 'loans and borrowings' in the statement of financial position. The adoption of IFRS 16 does not impact the ability of the Group to comply with its Gross debt to EBITDA covenant. Details described on Note 13.
On 1 January 2019, the Group established share option program that entitles key management personnel to receive shares in the Company based on the performance of the Company during the vesting period. Under this program, holders of vested option are entitled to receive shares of the Company at the grant date. Currently, this program is limited to key management personnel and other senior employees.
The option will be settled by physical delivery of shares.
On 1 January 2019, the Group granted 204,000 Restricted Stock Units (RSUs) to employees that entitle them to a share issued after three years of service. The RSUs will be granted at the end of three-year vesting period and issued after two year holding period. Shares issued under the LTIP are subject to a dilution limit of up to 3% over 10 years, which will be monitored by the Committee. Upon vesting of an RSU, Employees must pay the par value in respect of each share that vests. Employees are also responsible to declare and pay the tax related to gains from RSUs to the authorities.
The grant-date fair value of equity-settled share-based payment arrangements granted to employees is generally recognised as an expense, with a corresponding increase in equity, over the vesting period of the awards. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognised is based on the number of awards that meet the related service and non-market performance conditions at the vesting date.
The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Commercial and Cruise business models on pages 14 to 17 of the Annual report and financial statements. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the financial review on pages 22 to 23 of the Annual report and financial statements. In addition, notes 3 and 32 of the Annual report and financial statements to the financial statements include the Group's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk.
The Group's portfolio consists of investments in or management of 19 cruise ports and two commercial ports in 13 countries which diversifies economic and political risks. As a consequence, the directors believe that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook.
The principal events and conditions identified by Management that have the most significant impact on the going concern of the Group are:
The uncertainty caused by the recent COVID-19 outbreak has been considered by the Group. The Group's main cruise port portfolio is located in Mediterranean region. Peak season for the cruise business in Mediterranean region starts in early May, due to the seasonality of the cruise business, with passenger numbers during the first Q1 budgeted and observed to be low. However, as at the approval date of these Annual Report and Accounts, the Group has experienced a significant level of cancellations for the April-May 2020 period from cruise line customers.
One of the major export products in Port Akdeniz is marble exports to China. After the closing of borders in China due to the spread of COVID-19, there were several delays in marble exports experienced in Q1. Management does not expect these delays to cause significant impact on the business and the fall in container volumes the Port is experiencing during the first months of 2020 is partly offset by an increase in general and bulk cargo volumes. A recovery of marble export is expected in 2020.
Management has considered the potential impact of COVID-19 outbreak on the Group's results and financial position. The following key, base case, assumptions were used in preparing this analysis:
Under this scenario the Group expects to have sufficient cash resources to remain in operation and remain within covenant requirements for a period of not less than 12 months from the date of approval of these Annual Report and Accounts. Management has also assessed the impact of the above scenario on the Group's covenants. Barcelona Ports Investments and Valetta Cruise Port Limited covenants are projected to remain above the required level. The Group's Eurobond has a consolidated leverage ratio limit of 5x which is only required to be calculated when there is a change in the ratio due to additional indebtedness or acquisition or disposals of entities within the sub-group of the Eurobond covenant perimeter.
However, in order to stress test the financial position of the Group, management has also considered a plausible but, highly unlikely, severe downside scenario whereby the current passenger levels and commercial trade volumes due to the COVID-19 related circumstances persist for a period of 12 months. The following key, severe but plausible, assumptions were used in preparing this analysis:
Under this scenario the Group still expects to have sufficient cash resources and remain within covenant requirements for a period of not less than 12 months from the date of approval of these Annual Report and Accounts having taken into account: committed, undrawn credit lines, covenant waivers that have been received, and potential mitigating actions within the control of the Group including the application of a number of contractual Force Majeure clauses.
In the circumstances of this severe downside scenario management are of the view that there may be a number of further mitigating actions that could be executed to reduce the depletion of cash resources but that are not within the control of Group at the date of approval of these Annual Report and Accounts and thus not included in the assessment. These includes being eligible for and receiving certain Governmental reliefs currently being discussed by various Governments and negotiated deferral or waiver of concession payments due to concessionaires.
Management has also commenced discussions with a number of investment banks to assess several options for the Eurobond refinancing including but not limited to re-issuing a new Eurobond. With Port Akdeniz being a significant guarantor of the bond, the outcome of the Group's exclusive negotiations with a potential buyer of this port may have a material impact on the appropriate refinancing structure. A final decision on the sale process is expected in Q3 2020, after which the Group will pursue the most appropriate refinancing structure.
So far considering the stage of these discussions, there is no indication that suggests that a refinancing cannot be obtained or an appropriate lender would not be found. The impact of COVID-19 has also been considered in relation to the Eurobond refinancing. Noting that the refinancing is only due by November 2021, Management does not currently expect any negative impact on its fundamental ability to secure financing by that time and has performed the Going Concern analysis on this basis.
The Group has arranged the required finance for the investment requirements of GPH Antigua while for Nassau Cruise Port an initial bridge financing arrangement of $50m has been agreed which will cover the first year's requirements. (Note 13).
The Group is not expecting any significant impact on its operations from the UK decision to leave the European Union.
The directors have considered the information described herein and have a reasonable expectation that the Group and its subsidiaries have adequate resources to continue in operational existence. Thus, they continue to adopt the going concern basis of accounting in preparing the consolidated financial statements.
a) Products and services from which reportable segments derive their revenues
The Group operates various cruise and commercial ports and all revenue is generated from external customers such as cruise liners, ferries, yachts, individual passengers, container ships and bulk and general cargo ships.
b) Reportable segments
Operating segments are defined as components of an enterprise for which discrete financial information is available that is evaluated regularly by the chief operating decision-maker, in deciding how to allocate resources and assessing performance.
The Group has identified two main segments as commercial and cruise businesses. Under each main segment, Group had presented its operations on port basis as an operating segment, as each port represents a set of activities which generates revenue and the financial information of each port is reviewed by the Group's chief operating decision-maker in deciding how to allocate resources and assess performance. Spanish Ports are aggregated due to the Group's operational structure. The Group's chief operating decision-maker is the Chief Executive Officer ("CEO"), who reviews the management reports of each port at least on a monthly basis.
The CEO evaluates segmental performance on the basis of earnings before interest, tax, depreciation and amortisation excluding the effects of specific adjusting income and expenses comprising project expenses, bargain purchase gains and reserves, board member leaving fees, employee termination payments, unallocated expenses, finance income, finance costs, and including the share of equity-accounted investments which is fully integrated into GPH cruise port network ("Adjusted EBITDA" or "Segmental EBITDA"). Adjusted EBITDA is considered by Group management to be the most appropriate profit measure for the review of the segment operations because it excludes items which the Group does not consider to represent the operating cash flows generated by underlying business performance. The share of equity-accounted investees has been included as it is considered to represent operating cash flows generated by the Group's operations that are structured in this manner.
The Group has the following operating segments under IFRS 8:
Investimenti Srl. ("Venice Investment" or "Venice Cruise Port") and La Spezia Cruise Facility Srl. ("La Spezia") which fall under the Group's cruise port operations.
The Group's reportable segments under IFRS 8 are BPI, VCP, Ege Liman, Nassau Cruise Port, Ortadoğu Liman (Commercial port operations) and Port of Adria (Commercial port operations).
Bodrum Cruise Port, Italian Ports, Ortadoğu Liman (Cruise operations), Port of Adria (Cruise Operations), and GPH Antigua, [that just started its operations at the end of 2019] are not exceeding the quantitative threshold, have been included in Other Cruise Ports.
Global Depolama does not generate any revenues and therefore is presented as unallocated to reconcile to the consolidated financial statements results.
Assets, revenue and expenses directly attributable to segments are reported under each reportable segment. Any items which are not attributable to segments have been disclosed as unallocated.
The Group has initially applied IFRS 16 at 1 January 2019, using the modified retrospective approach. Under this approach, comparative information is not restated (see Note 2). In order to account for the application of IFRS 16, management has presented as separate reconciling items the impact of IFRS 16 on segmental and adjusted EBITDA, segment assets, segment liabilities, depreciation, finance costs.
As a result, the Group recognised USD 82,381 thousand of right-of-use assets and USD 64,828 thousand of liabilities from those lease contracts. These assets and liabilities are included in BPI, VCP, Other Cruise Ports, Ortadoğu Liman and Port of Adria segments as at 31 December 2019. The Group recognises depreciation and interest costs, instead of operating lease expense (see Note 2a). During the year ended 31 December 2019, in relation to those leases, the Group recognised USD 2,319 thousand of depreciation charges and USD 2,385 thousand of additional interest costs from leases.
2 Segment reporting (continued)
b) Reportable segments (continued)
The following is an analysis of the Group's revenue, results and reconciliation to profit before tax by reportable segment:
(*) Please refer to glossary of alternative performance measures (APM).
The Group did not have inter-segment revenues in any of the periods shown above.
2 Segment reporting (continued)
b) Reportable segments (continued)
The following is an analysis of the Group's assets and liabilities by reportable segment for the years ended: