GULF MARINE SERVICES PLC Annual Report 2022
Annual Report 2022
In this report
Strategic Report
Highlights IFC
2022 Financial Highlights IFC
2022 Operational Highlights 1
2023 Highlights and Outlook 1
Non-Financial Information Statement 1
Chairman’s Review 2
People and Values 4
Business Model and Strategic Objectives 16
Section 172 Statement 20
Market Analysis 22
Risk Management 24
Key Performance Indicators 32
Financial Review 34
Long-term Viability Statement 36
Governance
Chairman’s Introduction 38
Board of Directors 40
Report of the Board 42
Audit and Risk Committee Report 47
Nomination Committee Report 50
Remuneration Committee Report 53
Directors’ Remuneration Policy Report 55
Annual Report on Remuneration 63
Directors’ Report 68
Statement of Directors’ Responsibilities 72
Financial Statements
Independent Auditor’s Report 73
Group Consolidated
Financial Statements 80
Company Financial Statements 127
Glossary 139
Other Definitions 141
Corporate Information 143
Also online at
https://www.gmsplc.com/Results-and-
Presentations.aspx
HIGHLIGHTS
Our Vision
To be the best SESV operator
in the world
2022 Overview
Revenue
US$ 133.2m
(2021: US$ 115.1m)
Adjusted EBITDA
US$ 71.5m
(2021: US$ 64.1m)
Adjusted net profit for the year
US$ 17.6 m
(2021: US$ 18.0m)
2022 Financial Highlights
— Revenue increased by 15.7% to US$ 133.2 million (2021: US$ 115.1 million)
driven by increased utilisation mainly on E-class vessels and higher average
day rates across all vessel classes.
— Increased adjusted EBITDA
1
to US$ 71.5 million (2021: US$ 64.1 million)
driven by an increase in revenue. Adjusted EBITDA margin decreased
to 54% (2021: 56%), which is due to the recognition of a charge for the
bankruptcy of a client as well as other one-off costs and an increase
in professional fees.
— Cost of sales excluding depreciation, amortisation and the reversal of
impairment/impairment charge was US$ 51.2 million (2021: US$ 41.2 million)
driven by increase in utilisation, the recognition of a charge for the
bankruptcy of a client, as well as other one-off costs.
— General and administrative expenses increased to US$ 13.2 million (2021:
US$ 12.3 million), driven by an increase in professional fees; however
underlying general and administrative costs
5
as a percentage of revenue
had decreased to 10% (2021: 11%).
— US$ 7.8 million net reversal of impairment compared to US$ 15.0 million
in 2021.
— For a second year in a row, the Group generated profit: US$ 25.4 million
in 2022 (2021: US$ 31.2 million). Adjusted net profit
2
of US$ 17.6 million
(2021: US$ 18.0 million).
— Finance expenses have increased to US$ 20.1 million (2021: US$ 14.5
million) during the year. This is driven by an increase in LIBOR rates from
0.2% in 2021 to 4.7% during the year, as well as an increase in the fair value
of the embedded derivatives of US$ 2.5 million (2021: US$ 0.3 million).
— Net bank debt
3
reduced to US$ 315.8 million (2021: US$ 371.3 million).
Net leverage ratio
4
reduced to 4.4 times (2021: 5.8 times).
Utilisation
88%
(2021: 84%)
Underlying G&A as
percentage of revenue
10%
(2021: 11%)
1Annual Report 2022
Strategic Report
2023 Highlights and Outlook
— Utilisation for 2023 currently stands at 95% (84% being
secured) against actual utilisation of 88% in 2022.
— Anticipate continued improvement on day rates as our
vessel demand outstrips supply on the back of a strong
pipeline of opportunities.
— Average secured day rates of over 6% higher than 2022
actual levels.
— Reversal of impairment recognised with a value of
US$ 7.8 million indicative of continuing to improve
long-term market conditions.
— Group anticipates net leverage ratio to be below
4.0 times before the end of 2023.
See Glossary.
1 Represents operating profit/(loss) after adding back depreciation, amortisation
and the reversal of impairment in 2022 and 2021. This measure provides
additional information in assessing the Group’s underlying performance that
management can more directly influence in the short term and is comparable
from year to year. A reconciliation of this measure is provided in Note 31.
2 Represents net profit after adding back depreciation, amortisation the reversal
of impairment and adjusting items in 2022 and 2021. This measure provides
additional information in assessing the Group’s total performance that
management can more directly influence and is comparable from year to year.
A reconciliation of this measure is provided in Note 31.
3 Represents total bank borrowings less cash.
4 Represents the ratio of net bank debt to adjusted EBITDA.
5 Represents general and administrative costs excluding depreciation and
amortisation expenses.
2022 Operational Highlights
— Average fleet utilisation increased by 4 percentage points to 88% (2021: 84%) with a notable improvement in
E-Class vessels at 82% (2021: 72%). Average utilisation for K-Class vessels improved marginally to 87% (2021: 86%),
whilst there was a small decrease in average utilisation for S-Class vessels to 97% (2021: 98%).
— Average day rates increased notably to US$ 27.5k (2021: US$ 25.7k) with improvements across all vessel classes,
particularly for E-class and K-class vessels.
— New charters and extensions secured in the year totalled 19.4 years (2021: 9.6 years).
— Operational downtime increased to 2.2% (2021: 1.5%).
NON-FINANCIAL INFORMATION STATEMENT
The Group has complied with the requirements of s414CB of the Companies Act 2006 by including certain non-financial information within
the strategic report.
The table below sets out where relevant information can be found within this report*:
Reporting requirement and policies and standards which govern our approach: Information necessary to understand our business and its impact,
policy due diligence and outcomes:
Environmental matters
• Greenhouse Gas (GHG) Emissions Policy
• Climate change strategy
• Carbon emission reporting
• Taskforce on Climate-related Financial Disclosures (TCFD)
• GHG emissions, page 11
• People and values section, page 4
• Carbon emission reporting, page 11
• TCFD, page 4
Employees
• Anti-Corruption and Bribery Policy
• Social Responsibility Policy
• Whistleblowing Policy
• Health and safety standards
• Diversity and equal opportunities
• Employee engagement and welfare
• Ethical practises, page 12
• Ethical practises, page 12
• Ethical practises, page 12, and Audit and
Risk Committee report page 47
• Health and safety, page 13
• Diversity, page 11, Directors’ Report, page 68
• Employee engagement and welfare, page 12
Human rights
• Disability Policy
• Anti-Slavery Policy
• Code of Conduct Policy
• Employees and policies, Directors’ Report, page 70
• Ethical practises, page 12
• Ethical practises, page 12, Risk management page 29
Principal risks and impact on business activity • Risk management, pages 24 to 31
Remuneration Policy • Remuneration Policy, page 55
Description of the business model • Our business model, page 16
Key Performance Indicators (KPIs) • KPIs, page 32
* Further details on policies and procedures are available on our corporate website: www.gmsplc.com
2 Gulf Marine Services PLC
CHAIRMAN’S REVIEW
Group Performance
Revenue increased by 15.7% to US$ 133.2
million (2021: US$ 115.1 million) with an
increase in utilisation of 4 percentage points
to 88% (2021: 84%). There was a notable
improvement in E-Class vessels utilization
at 82% (2021: 72%), while both S-Class
and K-Class utilization remained stable at
97% (2021: 98%) and 87% (2021: 86%)
respectively. Average day rates across the
fleet increased by 7% to US$ 27.5k (2021:
US$ 25.7k). As these are averages for the
fleet with some contracts carried over from
previous years at lower rates, the actual
increase for new contracts was higher than
the average.
Vessel operating expenses increased by
24.3% to US$ 51.2 million (2021: $41.2 million),
as a result of the increase in utilisation, and
the recognition of a charge for the bankruptcy
of a client, as well as other one-off costs.
General and administrative expenses as a
percentage of revenue decreased from 11%
to 10% despite an increase of US$ 0.9 million
to US$ 13.2 million, driven by an increase in
professional fees.
Adjusted EBITDA was US$ 71.5 million,
increasing 11.5% from the previous year
(2021: US$ 64.1 million) mainly driven by
improved utilisation and the increase in
daily rates.
During the year there was a net reversal
of previous impairment charges of US$ 7.8
million (2021: US$ 15 million), indicative of
further improvement to long-term market
conditions despite an increase in the
weighted average cost of capital driven
by a higher cost of debt.
The Group continued to be profitable for the
year at US$ 25.4 million (2021: US$ 31.2
million) and an adjusted net profit of US$ 17.6
million (2021: US$ 18.0 million) as the increase
in financial costs from US$ 14.5 million in
2021 to US$ 20.1 million in 2022 wiped out
the gains from other operational metrics.
Benefiting from stronger demand for our vessels at increased rates and recognising the strategic
importance to lower its debt, the Group maintained its focus on de-leveraging during the year.
Capital Structure and Liquidity
Net bank debt reduced to US$ 315.8 million
(2021: US$ 371.3 million). During the year,
the Group repaid US$ 51.5 million towards
its debt, of which US$ 26.0 million were an
obligation as per the agreement with the
Lenders. This combination of reduced
debt and improved adjusted EBITDA led
to a reduction in the net leverage ratio from
5.8 times at the end of 2021 to 4.4 times at
the end of 2022. The Group will continue its
focus on reducing its leverage going forward.
As the Group didn’t raise US$ 50.0 million
of equity by the end of 2022, it issued,
on 2 January 2023, 87.6 million warrants
giving potential rights to 137 million shares if
exercised, as per the terms of its agreement
with the Lenders. The strike price was
determined by an external Calculation Agent
to be at 5.75 pence per share.
During the year, the interest rates on the
loan went up from 3% at end of 2021 to 7.7%
at the end of 2022 (being 3% plus LIBOR)
and as LIBOR increased from 0.2% to 4.7%.
Going forward, the interest rates will go up to
4.0% + LIBOR and a PIK margin of 2.5% will
apply for as long as leverage remains above
4.0 times EBITDA.
Commercial and Operations
The Group secured six new contracts in
the year, worth US$ 271.0 million (2021: nine
contracts worth US$ 66.0 million). The revenue
recognised for these new contracts during
the year was US$ 7.4 million.
The Group continued to be profitable for
a second consecutive year. In 2022, the
Group achieved its best year for financial
performance for many years. Average
utilisation, particularly for K-Class vessels,
has remained at its highest level since 2016.
New charters and extensions secured in
the year totalled 19.4 years in aggregate.
Operational downtime increased slightly
to 2.2% (2021: 1.5%).
Governance
As a board, we have continued to put
emphasis on the development of effective
risk management and internal control
systems, including regular audits and
reporting to ensure accountability and
transparency. Demonstrated by over
50 meetings with investors and other
stakeholders, we had open lines of
communication on relevant information
coupled with active listening to feedback.
We conducted sessions on transparent and
ethical business practices, including a code
of conduct review for employees and
stakeholders, and ensuring compliance with
relevant regulations and laws. As an example
of our continuous commitment towards
environmental, social, and governance (ESG)
initiatives, including sustainability practices
and community engagement, we organized
our annual offsite meeting in the Al Jubail
Mangroves where every share-based
employee present had the opportunity to
plant a tree.
I currently hold the position of Chairman
and Chief Executive, leading the business
and the Board. Whilst holding the positions
of both Chairman and Chief Executive is not
recommended by the 2018 UK Corporate
Governance Code (the Code), the Board has
concluded that, at this stage in the Group’s
turnaround process, this continues to be
appropriate. This recognises both the level
and pace of change necessary for the Group
and its relatively small scale. This will be
regularly assessed by the Board as the Group
progresses through its turnaround process.
Removal of Material Uncertainty
The Group is again operating as a Going
Concern without any material uncertainties.
Value Transfer
to Shareholders
3Annual Report 2022
Strategic Report
Outlook
We started 2023 with a backlog level not
seen in many years at US$ 369m. The Group
anticipates seeing continued improvements
in day rates and utilisation levels in 2023,
even though most of its vessels are already
under contract for the remainder of the year.
Secured utilisation for 2023 currently stands
at 86% (equivalent in 2022: 80%).
Secured backlog stands at US$ 341.7 million
as at 1 April 2023, of which US$ 258.6 million
are firm (US$ 179.2 million as at 1 April 2022
of which US$ 122.2 million were firm). The
average of secured day rates for 2023 are
US$ 29.9k, which is over 6% higher than
2022 actual average day rates. Given the
current high levels of utilisation secured,
combined with higher day rates, the Group
expects the financial performance to
continue to improve and reiterates its
Adjusted EBITDA guidance of between
US$ 75-US$ 83 million for 2023.
Mansour Al Alami
Executive Chairman
23 April 2023
Safety
The Group maintained the same loss injury
of 0.1 in 2022 vs 2021 as there was only one
Lost Time Injury which happened in the
middle of the fourth quarter of the year with
no other recordable injuries. However,
because there was no other recordable
injury, our Total Recordable Injury Rate (TRIR)
improved from 0.2 (2021) to 0.1 (2022). These
levels continue to be significantly below
industry average and in both cases have
since returned to zero in early 2023. We
continue to look at areas of improvement in
our systems and processes and engaging
our employees to ensure that our offshore
operations continue to be as safe as possible
in line with the expectations of our customers
and stakeholders.
Taskforce on Climate-related
Financial Disclosures
In 2021 we committed to complying with
LR 9.8.6(8)R requirements by including
climate-related financial disclosures
consistent with Task Force on Climate
related Financial Disclosures (TCFD)
recommendations and recommended
disclosures. This is a new requirement for
premium listed companies on the London
Stock Exchange. This 2022 TCFD report
explains how GMS now complies with all
eleven of the recommendations.
The TCFD recommendations focus on
how companies respond to the risks and
opportunities associated with climate change.
Consistent with the recommendations,
climate scenario analysis was used to
understand the potential climate-related
transition and physical risks to our operations
over the short, medium, and long term.
Climate change is now integrated into our
enterprise risk assessment process. Risk
management workshops are held at least
bi-annually between myself, as Executive
Chairman, and the senior management
team. Full details are provided in our TCFD
report on page 4.
2022
US$m
2021
US$m
2020
US$m
Revenue 133.2 115.1 102.5
Gross profit/(loss) 60.5 60.6 (55.5)
Adjusted EBITDA
1
71.5 64.1 50.4
Impairment reversal/(impairment) 7.8 15.0 ( 87. 2)
Net profit/(loss) for the year 25.4 31.2 (124.3)
Adjusted net profit/(loss)
2
17.6 18.0 (15.3)
1 Represents operating profit/(loss) after adding back depreciation, amortisation and the reversal of impairment in 2022, 2021 and 2020.This measure provides additional
information in assessing the Group’s underlying performance that management can more directly influence in the short term and is comparable from year to year.
A reconciliation of this measure is provided in Note 31.
2 Represents net profit/(loss) after adding back depreciation, amortisation the reversal of impairment and adjusting items in 2022, 2021 and 2020. This measure provides
additional information in assessing the Group’s total performance that management can more directly influence and is comparable from year to year. A reconciliation of
this measure is provided in Note 31.
4 Gulf Marine Services PLC
PEOPLE AND VALUES
Delivering on
our Responsibility for
a Sustainable Future
Environmental, Social
and Governance Factors
Recognising the Group’s principal activities
continues to be the provision of vessels to the
offshore oil, gas and renewable energy sectors.
We are continuously seeking methods to
reduce our impact on the environment. Below
are some of the most recent initiatives that
we have implemented to reduce emissions
across the business, refer to page 10 for
further details.
In 2022, GMS measured itself against the
“The global standards for sustainability
reporting” or “GRI Standards” to enable it
to report consistently and transparently on
progress. As a premium listed FTSE firm, the
Group is required under the UK Listing Rules
to adopt the Task Force on Climate-related
Financial Disclosures (TCFD) and included
below the assessment and plan going forward.
The mandatory report of Greenhouse Gas
Emissions is also provided below.
Environment
TCFD Compliance Statement
Gulf Marine Services (GMS) plc has complied
with LR 9.8.6(8)R requirements by including
climate-related financial disclosures
consistent with the Taskforce on Climate-
Related Financial Disclosures (TCFD)
recommendations and recommended
disclosures. The current regulations require
reporting on a ‘comply or explain’ basis.
This year we have complied with all eleven
of the recommendations.
Introduction – About TCFD
TCFD provides a framework for assessing
and reporting how climate change will impact
our business. Its recommendations are
divided into four areas, aligned with existing
business processes (governance, strategy,
risk management and metrics and targets).
We welcome the introduction of LR 9.8.6(8)
R, which requires premium companies like
GMS, to include TCFD statements in their
annual reports. It provides a structure to
assess and report our climate-related risks.
We classified climate change as an
emerging risk in 2019 and moved it to a
principal risk in 2021.
As a business focused on supporting the
offshore oil, gas and renewable energy
sectors, we are aware of our impact on the
environment and the potential risks of climate
change to our operations. We believe we
have a responsibility to ensure a sustainable
future. GMS are constantly researching
opportunities to reduce our impact on the
environment. To date, this has focused on
Scope 1 and 2 emissions, which are within
our direct control. In 2022, we calculated
our Scope 3 emissions for the first time,
which are associated with our value chain.
Based on this, we are proud to have set an
ambitious net-zero target of 2050 and interim
targets to guide our progress (refer to the
Metrics & Targets section for further details).
Governance – Integrating
Climate Change Into Our
Governance Processes
Climate change is an area of interest and
importance for our Board, Executive Team
and stakeholders. Our overall climate-related
risks are assessed as low likelihood and low
impact. We do not believe climate change
will significantly impact demand for our
vessels in the near term. This is because
demand for oil and gas production in the
Group’s core market of the Gulf Cooperation
Council (GCC) is forecasted to continue. We
can mobilise more of the fleet in offshore
renewables, without significant additional
capital expenditure. However, we want to
ensure that we are aware of future
developments in the potential risks and
opportunities posed by climate change.
Therefore, we have designated it a
principal risk.
The Board and Its Committees
The Board has overall responsibility for
ensuring that all risks are effectively
managed. It discusses the risk profile at
every principal meeting and formally reviews
it annually. Climate change has been
integrated into the regular risk assessment
procedures since 2019, when climate
change was classified as an emerging risk.
Since 2021 (when climate change was
classified as a principal risk), the Board has
been presented with annual climate scenario
analysis and climate-related risk assessment
updates in a workshop session.
Responsibility for reviewing the effectiveness
of the Group’s system of internal control and
procedures has been delegated to the Audit
and Risk Committee. It meets throughout the
year to discharge its duties, including before
any Board meetings where financial
documentation must be approved. Where
appropriate, it receives reports from external
advisors to ensure it has the required level of
insight on specific business matters,
including engaging a third party to assess
the Group’s climate-related risks. A climate
risk workshop was held in September 2022
to present and discuss the risks. This two
hour workshop was presented by a third
party who specialised in ESG and attended
by the Executive Team and relevant
senior managers.
The Remuneration Committee is responsible
for designing remuneration policies and
practices for the Chair of the Group,
executive directors, company secretary and
senior executives. The remuneration plan
must support the Group’s long-term strategy,
purpose, and values. The Committee
ensures that the incentive structure does not
inadvertently undermine the Group’s
climate-related ambitions.
Executive Team
The Executive team consists of the Executive
Chairman, Chief Financial Officer, Chief
Operations Officer, Business Development
Director and Chief Shared Services Officer.
Together, they are responsible for identifying,
managing and mitigating potential risks,
including those associated with climate
change and the transition to a low-carbon
economy. The Executive team provides
reports to the Board and the Audit and Risk
Committee. It meets with the Executive
Chairman at least twice a year to conduct
risk management workshops.
5Annual Report 2022
Strategic Report
Figure 1: Structure of risk management within GMS
Board of Directors
The Board has overall responsibility for the Group’s strategy
and ensuring effective risk management.
Internal Audit
There are clear reporting lines from
the internal audit function to the
Audit and Risk Committee and
the Senior Management team.
The Audit and Risk Committee
Responsibilities include reviewing the Group’s internal control and risk management
systems as well as monitoring the effectiveness of the Group’s internal audit function.
Senior Management
The Senior Management team implements the risk management process
from risk identification to management and mitigation.
Figure 1 below provides an overview of the delegation of responsibilities between the Board, the Audit and Risk Committee and the
Executive team.
Strategy – Ensuring Our Strategy
is Resilient to Climate Change
GMS wants to ensure the long-term
sustainable success of the Group, which
requires responding appropriately to all
relevant risks and adapting our business
strategy, as necessary. As the risks of
climate change become more apparent and
are of increasing interest to our stakeholders,
we have developed how we assess
climate-related risks. We have added climate
change to our principal risk register and
have a separate climate risk register, which
provides detail on the nineteen associated
risks, guided by the TCFD recommendations.
Climate Scenario Analysis
To understand the risks associated with
climate change risks, both physical and
transitional, we conduct an annual climate
scenario analysis. Physical risks are those
associated with the physical impacts of climate
change, for example, increased average
temperatures and rising sea levels. Transitional
risks arise from the shift to a lower carbon
economy, including increased regulation,
moving to lower emissions technology and
changing consumer demands.
Climate scenario analysis uses possible
future outlooks, to model these potential
impacts and the changes that will need to
be made to limit global warming and reach
net zero. We have rerun the climate scenario
analysis on our key sites and operations this
financial year and have started to consider
their financial impacts. Further financial
modelling will be conducted during the
next financial year, as we research the
medium and long-term actions in our
net-zero strategy.
The Scenarios
Three warming pathways were modelled
using data from several established models,
including CORDEX (Coordinated Regional
Climate Downscaling Experiment), CLIMADA
(Climate Adaptation) and IAM (Integrated
Assessment Models). The pathways
represent a broad range of potential
futures, to ensure that all risks are
considered. Ten climate indicators were
modelled for each site and scenario, for
example, precipitation, aridity, temperature
and water stress. Outlined below are the
three-warming pathways.
<2°C by 2100: aligned with the Paris
Agreement target of a maximum 1.5°C of
warming above pre-industrial levels. This
scenario requires coordinated efforts by
governments and businesses, to rapidly
reduce carbon emissions through policy
and operational changes, leading to high
levels of transitional risks, but limited
physical risks.
6 Gulf Marine Services PLC
PEOPLE AND VALUES
continued
2-3°C by 2100: this scenario is envisaged
as the outcome of reactive action from
governments, with policies being introduced
on an ad-hoc basis, whilst only the most
committed businesses take serious action.
It is associated with the highest level of
transitional risks, due to the uncoordinated
approach, and some physical risks.
>3°C by 2100: this scenario will occur if
limited action is taken over the next few
decades. Although, this limits the transitional
risks, particularly in the short and medium
term, it has the highest degree of physical
risk, due to increased global temperature
rise. Under this scenario, climate tipping
points are projected to be breached, leading
to irreversible damage to our planet.
The Time Horizons
The impacts of climate change expand
beyond our traditional risk scope. Therefore,
to align with our net zero strategy, we have
decided to use the time horizons outlined in
table 1, to assess our climate-related risks
and opportunities. The long-term deadline
aligns with our net-zero target and those of
the UK and UAE governments.
Table 1: Time Horizons Used for
Climate Scenario Analysis
Short-term: Medium-term: Long-term:
2022-2025 2025-2035 2035-2050
The Results
Overall, the risk level is considered low for
GMS offices and vessels. As most of the
Group’s operations are already in extreme
climate conditions, the infrastructure that
we own and use has been built accordingly.
Our office buildings and vessels in the Gulf
region, are already exposed to temperatures
above 40°C for consecutive days. Therefore,
the region’s infrastructure design and our
working schedules, already consider these
extreme weather conditions.
Our risk management process, categorises
risks with an overall rating of red, amber
or green. This is based on a combination of
the inherent risk and the associated control
rating. Across all timelines and scenarios,
there are no red ratings assigned to
climate-related risks in table 2. Most risks
were determined to have a green rating.
The number of risks rated amber increases
over time. Table 2 highlights the scenario
and timeline, when an Amber rating is first
assigned. No physical risks were assigned
an amber risk rating.
Further details on all the risks assessed and
our mitigation actions are provided in our
2022 TCFD Report. We submitted our first
Carbon Disclosure Project (CDP) in 2022,
which provides information on our response
to climate change.
Transitional Risks
In the short term, GMS has identified three
key risks to the business: increasing UK
policy requirements, changing investor
sentiment, and wider stakeholder concern.
As a premium listed company on the London
Stock Exchange, we are subject to UK
reporting regulations, including anything related
to climate change and the environment. The
UK government has set a target of reaching
net zero by 2050 and is introducing
regulations to help it achieve this. Therefore,
we foresee increasing reporting obligations
in the short term under the <2°C and 2-3°C
scenarios. We have engaged an external
consultancy, to help us manage and monitor
this risk. We do not expect a substantial
increase in climate-related requirements
in the GCC in the short term, but we
continuously monitor legislative changes
to ensure compliance.
Climate change is of increasing interest to
investors and wider stakeholders, particularly
those outside the GCC region. This TCFD
summary and our 2022 TCFD Report, provide
the information these stakeholders require to
assess our response to the challenges and
opportunities associated with climate change.
Based on even the most ambitious energy
transition scenario, demand for oil and gas is
expected to continue to account for over half
of the energy mix by 2040 (Westwood Global
Energy Group report, issued in February
2022). Additionally, all but one of our clients
are based in the GCC region, which produces
a considerable amount of the world’s oil
production. Therefore, the board considers
the risk of investor and stakeholder sentiment
changing within this region as relatively low
(table 2) in the short term. However, we
recognise the likelihood of this risk will
increase in the medium to long-term, under
the <2°C and 2-3°C scenarios. We will
continue to monitor this risk and provide
relevant disclosures. For example, this
summary, our TCFD Report and CDP
disclosure, to inform our stakeholders, about
how we are responding to climate change.
A climate-related opportunity for GMS,
is the ability to use our existing vessels
to support the renewable sector. We are
pleased to announce that we have signed
a six-year contract for one of our vessels,
on a long-term renewables project,
commencing in 2023. This option provides
versatility to GMS’s strategy, as the Board
reviews the potential impacts of the transition
to a low-carbon global economy.
Physical Risks
All the physical risks considered have been
assigned a green rating, due to our existing
controls. Therefore, the impact is expected
to be low. Although physical impacts are
expected from climate change, our offices
and most vessels are in the Gulf region, which
is already adapted to an extreme climate with
high temperatures, low precipitation, and
high-water stress. Infrastructure and workers’
rights regulations have already been designed
to manage this.
The climate scenario analysis suggests
that more frequent sandstorms will occur,
due to increased temperatures and
decreased precipitation. Our vessels are
prepared for sandstorms. They are equipped
with specialised filtration devices that
reduce the risk of sediment damaging the
vessels’ engines.
Decreased precipitation will exacerbate
water stress in the region. Our vessels are
equipped with desalination equipment, to
mitigate water stress. Two vessels have
been fitted with two air-to-water machines,
which can produce water from the air.
In 2024 we intend to install these machines
in more vessels.
Climate-related Opportunities
Responding to climate change offers two
major opportunities to GMS. From an
operational perspective, improving our
efficiency reduces our operating costs,
improves our resilience to potential new laws
around energy use and carbon emissions
and demonstrates our commitment to being
a sustainable business. In terms of business
strategy, there is the opportunity to mobilise
our vessels in the renewables sector. We
already have a proven track record in this
area and are keen to maintain an ongoing
presence in Europe to enable us to continue
accepting offshore wind farm contracts.
Engaging with Our Clients
and Supply Chain
We need to engage with our clients and
supply chain in the future, to manage our
climate-related risks and reduce our carbon
emissions. For example, we will start
engaging with our suppliers on their carbon
footprint, initially asking whether they
already collect data on their Scope 1 and 2
emissions. This will feed into our Scope 3
emissions. In the medium term, we could
consider introducing additional social and
environmental screening criteria for our
suppliers and, subsequently, work with our
suppliers to reduce these emissions.
We must collaborate with our clients,
to reduce the emissions associated with
our vessels. For example, during 2022,
we conducted a trial on two vessels, to
determine the effectiveness of installing
7Annual Report 2022
Strategic Report
an atmospheric water generator (AWG). This
has been implemented to reduce the number
of plastic water bottles used on board. It was
used for our staff, who form about 10% of
the crew on our vessels. At this use level,
there is not a sufficient return on investment,
to justify further rollout of this technology.
However, in the next financial year, we will
liaise with our clients, to reduce onboard
environmental impacts. We will begin
engaging with our top supplier, a caterer who
supplies food to our vessels, and our client in
the European renewables market. These will
provide a framework that can be rolled out to
our other clients and suppliers. This will be
key to managing our Scope 3 emissions and
climate-related risks within our supply chain.
In 2023, we will start considering the risks
associated with our largest suppliers. These
will cover three key areas: food, fuel and
vessel parts. As part of our commitment
to local sourcing and due to the in-country
value schemes endorsed by our major
clients, our top suppliers are all located
in the GCC region. They are subject to
similar transitional and physical risks as
the Group. As with GMS, they are already
prepared to cope with extreme conditions
and transitional risks are expected to be
limited in the short to medium term.
Our largest supplier by spend is a caterer,
with a global supply chain. Severe weather
events, which are predicted to increase due
to climate change, could have various
impacts on this supplier, and its supply
chain, including price fluctuations and
supply chain disruptions. However, being
part of a global corporation with a large,
geographically diverse supply chain, enables
us to be resilient and to minimise impacts.
Where our supplies are delivered from
abroad, this is primarily delivered by air. We
are assessing the feasibility of increasing the
amount of product delivered by sea, as this
will assist in reducing our carbon footprint
and meeting our net-zero targets. We are
aware of the potential impacts of climate
change on both delivery methods. In the
GCC region, sandstorms can cause airport
disruption, and our climate modelling shows
an increase in frequency in the long term.
Shipping ports can be damaged or disrupted
by extreme weather events (for example,
storms), which climate modelling indicates
may increase in severity over the long term.
Increasing the proportion of deliveries by
ship, would diversify our supply chain and
reduce our operational costs.
Planning for Net-zero
In 2022 we established our net-zero strategy
and targets. This is an important part of
mitigating our climate-related risks. It ensures
that we prepare for a lower carbon economy,
including potential future legislation, the
transition to reduce emissions technology
and responding to our investor and
stakeholder concerns.
Our strategy includes actions we will
implement immediately and further options
requiring more research and financial
modelling. During 2023, we will start
factoring in carbon emissions when booking
flights for business travel. For example,
where multiple flights are available for a
comparable price, the lower carbon option
will be used, unless this requires an overnight
stay, which is associated with additional
carbon emissions and would negate the
difference. We will research whether we can
increase the number of deliveries received by
ship, rather than by air. Approximately 95%
of our deliveries are by air. We will assess if it
is possible to reduce this to 80% in the next
few years. Together, these actions could
save us around 1,331 tCO
2
e (gross carbon
emissions) per year, approx. 2% of our
annual carbon footprint (Scope 1, 2 and 3).
8 Gulf Marine Services PLC
PEOPLE AND VALUES
continued
Table 2: Transitional Risks with an Amber Rating, with the Scenario and Timeline in Which an Amber Rating
Is First Assigned.
Risk
Category
Climate-related
Risk Scenario
Potential
Likelihood
and Impact Context
Short-term risks
Policy &
Legal
Increased policy and
reporting requirements
in the UK
<2°C Almost certain,
Moderate
GMS is listed on the London Stock Exchange and is subject to UK
climate change and environmental reporting regulations. Changes to
policy and reporting requirements are almost certain to occur in the
short term. However, along with it’s employees, most of the Group’s
vessels are in the GCC region (with only one of the Group’s vessels
currently located in Europe). Therefore, the potential operational/
financial impact of these changes would be limited to Moderate.
The Group aims to mitigate this risk, by carefully monitoring
legislative developments, to minimise instances of non-compliance
with all relevant laws in the UK and the GCC region.
Reputation Changing investor
sentiment
<2°C Possible, Significant There is an increasing concern over fossil fuel use in the UK/EU,
as the demand for oil and gas is predicted to grow. As a result,
new investors may become more challenging to find. However,
current shareholders are heavily invested in the Group’s existing
strategy and business model. Therefore, the likelihood of a
Significant impact is only considered Possible in the short term.
Our TCFD Report informs investors about our response to
climate-related risks and opportunities.
Reputation Wider stakeholder
concern; reduced
revenue from negative
impacts on workforce
management and
planning (for example,
employee attraction
and retention)
<2°C;
2-3°C
Possible, Significant;
Possible, Significant
In the short term, stakeholder concern regarding company
environmental action and preparedness may increase. This
could impact the Group’s revenue and employee retention.
This concern would be greater in a <2°C scenario, where there
is great awareness, and more action is required. It would be lower
in a 2-3°C scenario, where action is sporadic. However, given that
the Group’s workforce requirement is concentrated in its core
market in the GCC, where the expectation is that the economy
will continue to be reliant upon and supportive of oil and gas
production for many years, it is not anticipated that the Group
will be unable to attract suitably experienced/qualified employees
to avoid any operational disruption.
Our TCFD Report informs stakeholders about our response
to climate-related risks and opportunities.
Medium-term risks
Policy &
Legal
Increased policy
and reporting
requirements
in the GCC
<2°C;
2-3°C
Possible, Significant;
Possible, Significant
Fewer climate-related policy obligations are anticipated for
operational Gulf sites (as compared to the UK reporting regulations
noted above), in the short term. Hence, the potential likelihood of this
risk is deemed to be lower (Possible as compared to Almost certain)
than that noted above for the UK. However, if such policies and
increased regulations were to be introduced over a longer time
period, then the concentration of GMS’ fleet in the GCC, would
result in a higher (Significant) potential impact.
9Annual Report 2022
Strategic Report
Risk
Category
Climate-related
Risk Scenario
Potential
Likelihood
and Impact Context
Technology Costs to transition to
lower emissions
technology
<2°C;
2-3°C
Possible, Major;
Unlikely, Major
It is possible in the medium term, under a <2°C scenario, that a
transition to lower emissions technology becomes a requirement
which could increase the costs for GMS. The cost impact would
be the same in a 2-3°C scenario, but this is considered unlikely.
The likelihood of this risk will increase over time.
In the future, we will be researching the options for upgrading
vessels’ engines and other equipment, using lower carbon
emission alternatives.
Policy &
Legal
Introduction of carbon
pricing and taxes
<2°C;
2-3°C
Likely, Significant;
Possible, Major
It is likely that in a <2°C scenario, carbon pricing and taxes could
be introduced in the medium term, and the potential cost impacts
could be significant. The likelihood is considered Possible for a
2-3°C scenario, and the impact could be Major, as pricing may
be introduced more gradually. Changes in tax legislation will be
closely monitored, and internal models can be used to factor this
into the business strategy.
Market Changing consumer
preference, reduced
demand for goods and
services due to a shift
in consumer
preferences
<2°C Possible, Significant In a <2°C scenario, where urgent action is being taken, it is
possible that there could be changing customer preferences,
resulting in reduced demand for goods and services. This could
have a significant impact in the medium term. The Group will
continue to monitor any shift in consumer demand across the
regions it operates. However, oil & gas has always been the
mainstay of our business, and in recent years, the percentage of
revenue brought in from the GCC region has increased (from 75%
in 2019 to 89% in 2021).
GMS has a proven track record in the renewables sector, which
provides versatility in our business model. In 2022, it constituted
11% of Group revenue, and vessels are suitable for use in this
sector, without major additional capital expenditure. We are
pleased to have signed a six-year contract, for one of our vessels
on a renewables project in Europe. The Board is therefore
confident that the Group will not face any significant impact
on the demand for its vessels, due to climate change implications,
beyond the extent reflected in management’s assumptions
and sensitivities.
Long-term risks
Policy &
Legal
Increased costs and/or
reduced demand for
products and services
resulting from fines
and judgments
2-3°C Likely, Significant Given that the Group’s core market is in the GCC region,
management does not expect this to have a major impact in the
short or medium term. Oil & gas has always been the mainstay
of our business, and in recent years, the percentage of revenue
brought in from the GCC region has increased (from 86% in 2019
to 89% in 2022).
However, if legislative developments are not carefully monitored to
ensure full compliance, it is possible that there may be increased
costs, due to fines and potentially reduced demand for products.
This is considered likely in the long term of the 2-3°C scenario, and
the impact could be significant. The Group mitigates this risk, by
closely monitoring compliance with current and future legislation,
to reduce the likelihood of receiving fines for non-compliance.
Market Additional abrupt and
unexpected shifts in
energy costs as a result
of climate policies
<2°C Almost certain, Minor This is considered low risk with only minor financial impact for the
Group as our clients pay for fuel costs.
However, we are always working to improve the efficiency of our
vessels to meet our clients' expectations, as they expect value for
money in the services received.
10 Gulf Marine Services PLC
PEOPLE AND VALUES
continued
Risk Management –
Embedding
Climate-related Risks Into Our
Enterprise Risk Assessment
Process
The Group must be aware of business risks
and opportunities, to manage them
appropriately. GMS has an established
enterprise risk assessment process, which
climate-related risk management has been
integrated. This is in response to the
increasing importance placed on climate
change by the public, clients, investors
and employees.
The first step in the risk management
process, is identifying and assessing risks,
which is generally conducted through
reviews by individual departments. Mitigating
controls are then determined. In the case of
climate-related risks, we have engaged with
a third party to ensure a thorough and
informed understanding of the potential
risks and opportunities, guided by the
TCFD framework.
The Executive team consolidates identified
risks, into an overall heatmap for principal
risks. The Audit and Risk Committee, review
the risk profile at least quarterly. The Board
discusses the Group’s risk register at its
principal meetings and formally reviews
the risk profile on an annual basis.
The following steps were taken to assess
climate-related risks through climate
scenario analysis:
Step 1 – Identifying the Risks:
External specialists used climate scenario
analysis to assess sixteen potential
transitional and physical risks to the
business, over three climate warming
pathways and three timelines. These
were presented to the Executive team
and the Board in September 2022 for
their input on the potential impact on the
business operations and strategy.
Step 2 – Assessing the Risks:
These provisional risks were presented
to the Executive team and the Board. The
provisional risks were presented at Group
and site levels. Following our existing
enterprise risk assessment process and
drawing on the relevant expertise of the
Executive team, each provisional climate-
related risk and opportunity was given a
likelihood and impact rating, which were
combined to provide the inherent risk
rating for each scenario and timeline.
Step 3 – Addressing the Risks:
Each potential risk is appraised to determine
the current mitigation measures and the
most appropriate approach for managing
residual risk. A provisional control
effectiveness rating was assigned, combined
with the inherent risk rating, allowed each
provisional risk to be given an overall rating
of Red, Amber or Green for each scenario
and timeline. There were no changes to
this assessment from last year’s ratings.
Therefore, there are currently ten risks
assigned as an Amber rating in at least
one scenario and timeline. Risk management
workshops are held at least bi-annually
between the Executive Chairman and the
Executive team, where principal risks,
including climate change, are assessed,
and monitored for impact and likelihood.
This year, we have developed our net-zero
strategy which will help mitigate some of
the transitional risks as outlined in Table 2.
See our full TCFD report for more details.
Metrics & Targets
While we anticipate the oil and gas sector will
continue to grow over the next few decades,
we still have a responsibility to reduce our
environmental impact, as far as possible,
while delivering sustainable business growth.
In 2022, we engaged external specialists to
calculate our full Scope 3 emissions for the
first time. This was conducted for 2021 and
2022 and will be recalculated annually in the
future. These are the emissions associated
with our value chain, including purchased
goods and services, waste and business
travel. Data were collected for categories
1-8, which are those applicable to GMS.
Our data collection for 2022 improved,
providing a more accurate representation
of our impacts, including more precise data
on flights taken as business travel. Overall,
our Scope 3 emissions have reduced by
22.5% since 2021, which aligns with the
Group’s commitment to reaching net-zero
Scope 3 emissions by 2035.
Our metrics currently focus on our carbon
emissions. During 2022, we have developed
a carbon balance sheet, which classifies
emissions into Scope 1 and 2 and the
15 categories of Scope 3. This level of
granularity allows us to be targeted in
our approach to reducing emissions.
Our net-zero targets and strategy have
considered our largest emissions categories
and determined how we can begin to
reduce these, allowing for current limitations,
particularly around vessel fuels.
We are proud to have set an ambitious
target to be net zero by 2050. This requires
us to reduce our CO
2
emissions by 90%
or more from our baseline year of 2021.
To track our progress, we have set the
following short-term targets:
• 2025: engage with the top 10 suppliers
by spend on their carbon emissions
and reporting.
• 2030: assessing the feasibility of
upgrading vessels’ engines and other
equipment, with lower carbon emission
alternatives. This will form an important
part of our long-term strategy, as it is
essential to reducing our Scope 1
emissions (those associated directly with
our operations, primarily vessel fuel).
• 2035: net-zero in Scope 3 emissions from
purchased goods and services, upstream
transport and distribution, waste
generated in operations, business travel
and employee commuting.
• 2050: net-zero in Scope 1 and Scope 3
(for emissions from capital goods and
fuel-related emissions).
Reducing our Scope 1 emissions will depend
on decarbonising the bunker fuel we use and
upgrading vessels. Since jack-up barges
have long natural lifetimes, upgrading the
equipment onboard all 13 vessels will be
capital-intensive and occur slowly. Therefore,
a net-zero Scope 1 target of 2050 is
reasonable. Given that Scope 3 Category 2
(Capital Goods) and Category 3 (Fuel-related
Emissions) are dependent on upgrading
the equipment onboard vessels and
decarbonisation of fuel, these categories will
reach net-zero in 2050, rather than the more
ambitious Scope 3 target of 2035. Our
Scope 2 emissions account for 0.04% of
total emissions and are considered de-
minimis. Therefore, Scope 2 emissions have
been excluded from these net-zero targets.
Carbon Emissions
In compliance with the UK government’s
Streamlined Energy and Carbon Reporting,
we have included our emission figures for
this financial reporting year. Understanding
these emissions is vital to our net zero goal
and highlights areas where we can improve.
We have included our emissions from the
previous reporting period to provide a
year-on-year comparison.
Scope 1 emissions result from the direct
combustion of gaseous and transportation fuels
used by the Group during the reporting year.
Scope 2 refers to the emissions associated
with purchased electricity used in our offices.
Scope 3 emissions are the indirect emissions
associated with the products and services
we purchase to deliver our services.
Although we do not have direct control over
these emissions, we are taking steps to work
with our supply chain to develop an emission
reduction strategy.
11Annual Report 2022
Strategic Report
Table 3: GHG Emissions (tCO
2
e) for 2022 and 2021
Emissions Scope Gross Emissions (tCO
2
e) - 2022 Gross Emissions (tCO
2
e) - 2021
Percentage change in total emissions
(vs previous year)
Scope 1 51,860 47,247 9.8%
Scope 2 28 31 9.7%
Scope 3 26,205 33,827 22.5%
Total 78,093 81,105 3.7%
Our carbon emissions have been calculated in line with the GHG Protocol Corporate Value Chain (Scope 3) Reporting Standard and the 2019
UK Government environmental reporting guidance. Our full carbon balance sheet is available in our 2022 TCFD Report.
Carbon Intensity
Our carbon intensity metric is provided as tCO
2
e/$m revenue. Our UK carbon intensity is based on Scope 1 and 2 location-based emissions.
Table 4: Our 2020-2022 Carbon Intensity Metrics
Year 2022 2021 2020
UK Intensity
(Scope 1 & 2 tCO
2
e/$m revenue)
0* 34.76 45.60
Global Intensity
(Scope 1 & 2 tCO
2
e/$m revenue)
389.47 398.78 402.15
Global Intensity
(Scope 1, 2 & 3 tCO
2
e/$m
revenue)
586.48 700.84 **
* Due to the nature of our operations, the vessel locations can mean that there are no UK emissions in a reporting year. This was the case in 2022. The only operational
buildings in the UK were closed in 2020, therefore, there are no Scope 1 or 2 emissions in the UK in 2022. Should a UK base be reopened, this will be recorded as
required.
** Scope 3 emissions were calculated for the first time for our 2021 financial year and therefore a 2020 Scope 1, 2 and 3 intensity metric cannot be provided.
Social
Values
Core values of Responsibility, Excellence
and Relationships are incorporated into
all aspects of the business. GMS is
committed to ensuring the Health and
safety of its employees, subcontractors,
clients and partners and to upholding high
ethical standards.
Responsibility
GMS is committed to the Health and Safety
of its employees, subcontractors, clients
and partners and behave with environmental
responsibility. The Group’s focus is on
ensuring the safety of everything it designs,
constructs, operates and maintains.
The Group believes it has responsibility
across all business relationships. As part of
that, it is continually seeking opportunities
to grow the business and to create value for
shareholders. This includes being cost-
conscious and managing its risks effectively.
Excellence
The Group is always looking for ways to
better meet client needs through continuous
improvement. It aims to build on past
experiences and to embrace innovation.
GMS sets challenging targets to itself to
deliver superior performance and exceed
stakeholder expectations, including clients.
The reputation and integrity of the business
are important. Therefore, GMS works with
rigour and transparency to ensure it is the
preferred contractor of choice.
Relationships
The Group aims to attract and retain
premium staff and ensure they are
empowered to carry out their duties
safely and effectively.
GMS values employee diversity, the
provision of an environment where
employees can perform to their full
potential and be rewarded for
delivering excellence.
Core values of Responsibility, Excellence
and Relationships are incorporated into all
aspects of the business. GMS is committed
to ensuring the Health and Safety of its
employees, subcontractors, clients and
partners and to upholding high
ethical standards.
GMS Organisation Structure
In 2022, a new Shared Services Department
was introduced which consolidated and
centralised common administrative functions
such as human resources, procurement,
and IT to streamline processes, improve
communication, and achieve greater
cost savings. GMS remains committed
to continuously improve the operations,
and the Shared Services Department will
play a pivotal role in supporting our growth
and success in the years to come.
Turnover
Employee turnover increased to 16%
in 2022 versus 14% in 2021. This increase
in the turnover trend was seen post-COVID
and are in line with the pre-COVID levels of
staff turnover.
Diversity
The Group’s workforce consists of 594
personnel recruited from 36 countries.
GMS has expanded its geographical reach
compared to that of 2021 with 545 employees
from 34 countries. The significant experience
and skills of individuals help it conduct
its business globally. GMS recognises
its talented and diverse workforce as
a competitive advantage and ensures that
12 Gulf Marine Services PLC
diversity is maintained across
all areas by implementing an Equal
Opportunities Policy.
The information on page 13 provides details
of the gender diversity and country of origin
of our personnel as of 31 December 2022.
GMS has a zero-tolerance toward
discrimination either directly or indirectly
on the grounds of gender, race, colour,
nationality, ethnic or racial origins, marital
status, religion or disability. GMS is an equal
opportunities employer committed to
seeking out and retaining the calibre of
human talent that is strategically aligned with
our business growth and performance. Our
business success is a reflection of the quality
and skills of our people. Details of our Equal
Opportunities Policy can be found in the
Governance section of our website.
For cultural and legal reasons, the extent
to which the number of offshore female
personnel can be increased is limited.
Local labour laws, for example, in the
countries in which GMS currently operates
in the GCC, stipulate that women cannot
work in an inappropriate environment and
hazardous jobs/industries, meaning the
Group is unable to employ them offshore.
As the provisions of the UK Government’s
Equality Act 2010, relating to gender pay
gap disclosure, are not applicable to GMS,
this information has not been provided.
Employee Engagement
and Welfare
The annual employee engagement survey
was rolled out for the year 2022 for the entire
GMS workforce. The survey had an 82%
completion rate which is consistent with the
last 2 surveys that were conducted in 2019
and 2021. The areas where employees
scored as needing attention are the
frequency of communication, as a Group
and between departments, and lack of
development and training opportunities.
An HSE pulse survey was also rolled out in
2022 for our offshore crew to get insights on
health and safety practices at the workplace.
The results showed that more than 97%
of the survey respondents felt that ‘Safety
is a priority at GMS’. A series of awareness
communications were sent offshore to
reiterate the importance of Safety and
adherence to the Safety protocols.
To improve work-life balance and drive
efficiencies, GMS aligned the working
week in accordance with the UAE ministry
announcement for 4.5 days working week.
This was in addition to the Flexible Working
Hours that was introduced in 2021.
GMS Annual 2022 event was hosted
at Jubail Mangrove Park which is an
educational, nature and leisure destination.
At the event, 2 Teams, 5 onshore employees
and 15 Offshore employees were recognised
for their contributions in 2022 while
15 employees including onshore and
offshore received Long Service Awards
for completing either 10, 15, 20 or 25 years
of service with GMS.
Share Ownership
The Group has operated a long-term
incentive plan since 2014. Please see
pages 64 to 65 in the Remuneration
Report for further details.
Performance
The Short-Term Incentive Plan (STIP)
structure was redesigned during 2019 so
that all participants, including Executive
Directors, are working towards the same
transparent targets. There is no guaranteed
variable pay awards at GMS, with all pay
being performance-based. The 2022 STIP
measures for employees are set out on
page 14.
This aligns with shareholder interests and
encourages a performance-based culture
to achieve Group objectives.
Succession Planning
GMS seeks to promote from within, where
possible and to manage this, the Group has
a succession planning process in place for
employees based on years of experience
and qualifications, however, due to the size
of the business, external hires will be made
where a post cannot be filled internally. The
Group is engaged in fair and transparent
recruitment practices. In 2022, GMS
promoted 37 employees as compared to
22 employees who were promoted in 2021.
In 2022, 23% of our onshore female
employees got promoted and took expanded
roles within the organisation.
Learning and Development
GMS aims to ensure that all employees
maintain the relevant technical and regulatory
training required to fulfil their roles. As
seafarers, all crew maintain their relevant
STCW (Standards of Training, Certification
and Watchkeeping – a worldwide convention
that ensures a lateral standard of training is
achieved across all countries in the world)
qualifications that license them to operate
the Group’s vessels, in accordance with
International Maritime Organisation
requirements. For vessels operating within
the offshore Oil & Gas Sector, all crew also
complete additional training in areas such
as, but not limited to, offshore safety and
awareness and emergency response.
Ethical Practice
The Group operates responsibly, in
accordance with the formal legal and
regulatory disclosure requirements expected
of a UK listed company.
GMS’ Code of Conduct sets out the basic
rules of the Group. The Code’s purpose is
to ensure work is undertaken safely, ethically,
efficiently, and within the laws of the
countries in which GMS operates. All staff
receive Code of Conduct training as part of
their induction, and the Group’s reputation
and success are dependent on staff putting
the Code into practice in all dealings with
stakeholders.
GMS maintains an awareness of human
rights issues, which is reflected in its
suite of Group policies, including the
Anti-Corruption and Bribery Policy,
Anti-Slavery Policy, Social Responsibility
Policy and Whistleblowing Policy.
Whistleblowing Reporting Service
An independent reporting service for
whistleblowing is in place. It operates
confidentially, is available 24 hours a day
and is staffed by highly skilled professional
call handlers. This service:
• gives a voice to employees, contractors,
suppliers and supply chain and
other stakeholders;
• helps maintain a culture of openness;
• demonstrates that GMS takes
malpractice seriously;
• provides the Executive team with an
overall temperature of the business; and
• supports employees who speak up.
The Whistleblowing policy has a strict
non-retaliation commitment to support
any employees who speak up.
PEOPLE AND VALUES
continued
13Annual Report 2022
Strategic Report
21
414
99
5
0
7
32
10
3
3
* Air Travel Emissions for 2019 and 2020 calculated solely in-house.
Nationalities
36
(2021: 34)
Total number of Direct Reports
to Senior Managers
21
(2021: 13)
Total number
of Senior Managers
4
(2021: 3)
Offshore
539
(2021: 490)
Total number of employees
594
(2021: 545)
People As At 31 December 2022
Voluntary turnover
16%
(2021: 14%)
Onshore
55
(2021: 55)
GMS Employees – By Region 2022
Offshore Onshore
MENA Asia Europe Africa Others (Canada, Venezuela, New Zealand)
Health and Safety
The Group operates its vessels to the highest
international health and safety standards.
Management Systems, that govern all
Company activities and operations are
voluntarily accredited to ISO 9001, ISO
14001 and ISO 45001. All vessels operate
in compliance with the International Safety
Management (ISM) Code, meaning the
International Management Code for the
Safe Operation of Ships and for Pollution
Prevention, which is a legal requirement.
Risks arising from operations and activities
are regularly assessed to ensure that
mitigation procedures are implemented
and communicated to all employees.
All employees are made aware of the risks
associated with operations through regular
extensive training and employee engagement.
Training programs are developed annually
and reviewed periodically.
The Group implemented a remote healthcare
system for all of its offshore workforce in
2021, providing access to onshore Doctors
and mental health support 24/7.
In 2022, the Group implemented a company-
wide Marine Enterprise Resources Planning
System to modernise and digitalise its vessel
operations. The system integrates all aspects
of vessel management through one
web-based platform hosted on the cloud
and accessed onshore and offshore.
Management now has access to a
centralised database used to enhance
efficiency and improve decision-making.
There was one Lost Time Injury which
happened in the middle of the fourth quarter
of the year with no other recordable injuries.
As a result, we maintained the same Lost
Time Injury rate of 0.1 since last year (2021 vs
2022). However, because there was no other
recordable injury, our Total Recordable Injury
Rate (TRIR) improved considerably from 0.2
(2021) to 0.1 (2022). These levels continue to
be significantly below industry average and
in both cases have since returned to zero in
early 2023. We continue to look at areas of
improvements in our systems and processes
and engaging our employees to ensure that
our offshore operations continue to be as
safe as possible in line with the expectations
of our customers and stakeholders.
14 Gulf Marine Services PLC
PEOPLE AND VALUES
continued
Number of
work-related fatalities
0
(2021: 0)
Number of
recordable work-related injuries
1
(2021: 1)
Number of
high-consequence work-related injuries
0
(2021: 1)
Number of hours worked
1,934,340
(2021: 1,962,081)
Measure Weighting Performance Range (from zero to full pay-out)
EBITDA 55% Less than US$ 68.7m – Greater than US$ 80.0m
EBITDA margin 15% Less than 50.9% – Greater than 58%
Securing contract % of 2023
budget revenue
15% Less than 60% – Greater than 75%
Securing contract % of 2024
budget revenue
15% Less than 35% – Greater than 50%
Total 100%
1
EBITDA* <US$ 68.7m US$ 68.7m-US$ 74.1m US$ 74.2m-US$ 76.9m US$ 77.0m-US$ 80.0m
Score 0% 0-20%* 20-35%* 35-55%*
1
EBITDA Margin* <50.9% 50.9%-54.2% 54.3%-56.0% 56.1%-58.0%
Score 0 0-5%* 5-10%* 10-15%*
3
Securing contracts % of
2023 budget revenue* <60% 60%-65% 65.1%-70% 70.1%-75%
Score 0 0-5%* 5-10%* 10-15%*
4
Securing contracts % of
2024 budget revenue* <35% 35%-40% 40.1%- 45% 45.1%- 50%
Score 0 0-5%* 5-10%* 10-15%*
* Zero to full pay-out is not linear as bands operate within the performance ranges shown.
Governance
For Governance related considerations, please refer to the Governance section of this Annual Report.
The information below is intended to provide an overview of the Health and Safety performance over the reporting period.
15Annual Report 2022
Strategic Report
16 Gulf Marine Services PLC
BUSINESS MODEL AND STRATEGIC OBJECTIVES
The business model is centred on a commitment
to providing a flexible and cost-effective solution
for customers operating in the offshore oil, gas and
renewable energy sectors using a fleet of self-propelled
Self-Elevating Support Vessels (SESVs).
Safety Culture
Safety is the top priority and is underpinned
by a robust HSEQ management system and
strong safety-focused culture.
A Fleet Designed to
Meet Client Needs
With an average age of twelve years, the
fleet of 13 SESVs are designed to meet the
operating standards our clients require.
This is particularly important whilst tendering
for new contracts, as clients are increasingly
showing a preference for vessels that
significantly reduced cost and improve
operational efficiencies of their projects.
Highly Skilled Workforce
A multi-cultural workforce which has extensive
experience in the global SESV sector. GMS
trains people to the highest standards through
the GMS Training Academy, to enable our
employees to grow, develop and realize their
full potential and contribute to the long-term
success of the business.
Flexibility
GMS works in different industries across
different locations. The flexibility of the fleet
allows the highest quality of service to be
delivered across a broad geographical
footprint to a diverse range of clients.
Maintaining a market footprint within diverse
business sectors and geographies is a key
competitive strength, providing resilience for
the business in times of fluctuating demand.
Operates a Fleet of
Self-propelled SESVs
GMS owns and operates a fleet of SESVs,
which are chartered to global clients,
providing cost-effective and safe offshore
support solutions. With an average age of
twelve years, the fleet are well positioned
within the market. GMS currently supports
oil, gas and renewable energy clients in the
MENA region and North West Europe.
Our Resources Our Operations
Operational
Excellence
GMS strives for excellence in all operations
and offers a broad range of services to clients,
allowing them to achieve greater operational
efficiency and significant time and cost
savings. GMS maintains the highest levels
of safety performance to protect clients,
employees and contractors and minimise the
environmental impact. In order to promote
in-country value, a prerequisite for a number
of our MENA based clients, GMS partners
with local suppliers to maximise in-country
spending, encouraging them to also look
wherever possible to maximise in country
spending through their own supply chains.
Drives Performance
Through Reportable Metrics
GMS assesses productivity across the
Group by ensuring metrics are clear, aligned,
communicated and regularly reported. The
annual Short-Term Incentive Plan incorporates
a scorecard focused on performance, and
thereby productivity, for all employees.
17Annual Report 2022
Strategic Report
Shareholders
Improving revenues and adjusted EBITDA
through maximising utilisation and improving
daily charter rates through contract awards,
reduction in operational cost base, and an
improved capital structure through the
de-leveraging of the Group’s Balance Sheet.
Customers
Safe, reliable and cost-effective services that
allow clients to maximise their operations.
This focus on safety means that GMS has
an excellent record for delivering the highest
quality services to its customers.
People
An engaged workforce focusing on
performance and well-being in a positive
and open environment.
Suppliers
Long-term partnerships focusing on
maximising local content.
What we Deliver
18 Gulf Marine Services PLC
Strategic Priority What it Means 2022 Progress Future Priorities
#1
Maximise
revenue
Maximise utilisation through best-in-class operations.
Explore opportunities to maximise daily charter rates
in an improving market.
Continually enhance operating capability while offering
new and improved offshore support solutions, to anticipate
client needs.
Increased utilisation to 88% (2021: 84%), which is the highest
level since 2015. 84% of vessel utilisation already secured
for 2023.
Actual average day rates increased by 7% during 2022
(2021: 2%).
6 new contracts and extensions awarded, with a combined
charter period of 19.4 years (including options).
Focus on local content requirements demanded by our NOC clients across
the Middle East to ensure we are well placed to secure new contracts.
Maintaining strong relationships with our core customers to win and secure
contracts that add significantly to our backlog.
Renegotiate contractual terms, when existing contracts come to an end
with the precursor to day rate improvement.
Continue to explore new opportunities in other markets.
#2
Cost management
Deliver safe and cost-effective operations.
Restrict Capital expenditure to essential only spend.
Sustaining cost efficiencies throughout the business.
Total Recordable Injury Rate (TRIR) improved from 0.2 (2021)
to 0.1 (2022).
Limiting capital expenditure to maintaining the fleet to a level
that ensures safe operations and meets client requirements.
The adjusted operating profit margin has slightly improved
to 29.7% (2021: 29.0%), through cost control measures.
Ensure key safety KPIs are monitored frequently to allow safe and reliable
operation of fleet.
Managing inflationary pressures through negotiating terms with current
key suppliers.
Focus on maximising cash generation with a continued emphasis on
reducing our leverage to below 4.0 times.
#3
Working capital
management
Improved cash management across the Group to help
reduce debtor days whilst improving credit terms with
our key suppliers.
Maximise cashflows from operations to help reduce
leverage levels.
Reduced Leverage levels from 5.8x at the end of 2021 to
4.4x at the end of 2022, through effective working capital
management as highlighted by a reduction in the Trade
debtors to US$ 33.2 million (2021: US$ 41.9 million).
Group’s effort to de-leverage by paying US$ 51.5 million
towards the working capital facility and principal of the bank
borrowings during the year, of which US$ 26.0 million were
an obligation as per agreement with Lenders. The improved
cash position was further evident as the Group was able to
make payments towards the loan for the first time beyond
the requirements of the loan agreement.
Focus on maximising cash generation with a continued emphasis on
reducing our leverage to below 4.0 times.
Closely monitoring the ageing of receivables to ensure sufficient liquidity
to meet our operational and banking requirements.
Make additional prepayments towards the bank loans to de-leverage and
reduce future interest payments that may arise from an increase in LIBOR.
#4
Controls
To create and sustain an efficient and effective
control environment.
Train our staff to the highest operational standards to
maximise their development to deliver quality results.
Develop and maintain a robust internal controls manual.
Management updated the Group procedure manual during
the year implementing new robust controls. The Group also
engaged Baker Tilly as internal auditors. The internal audit
review will focus on the design and implementation of the
new controls.
The Group has to comply with International Maritime
Organization (IMO) regulations and during the year
undertook Internal Audits Marine training in ISM, ISPS, and
MLC to fulfil IMO compliance. As such all offshore staff have
continued to comply with the training requirements to fulfil
our accreditation.
Maintaining an internal control environment to appropriately mitigate the
operating risks inherent in the sector, whilst allowing the Group to achieve
its strategic objectives and deliver value to shareholders.
Finalise the Internal audit and implementing required controls to ensure
a robust controls environment.
BUSINESS MODEL AND STRATEGIC OBJECTIVES
continued
Generate Long-Term
Shareholder Value
Management ‘s key objective is to deliver value to its shareholders through de-leveraging the
Group as quickly and efficiently as possible. The following strategic priorities are all focussed
on achieving this key objective.
19Annual Report 2022
Strategic Report
Strategic Priority What it Means 2022 Progress Future Priorities
#1
Maximise
revenue
Maximise utilisation through best-in-class operations.
Explore opportunities to maximise daily charter rates
in an improving market.
Continually enhance operating capability while offering
new and improved offshore support solutions, to anticipate
client needs.
Increased utilisation to 88% (2021: 84%), which is the highest
level since 2015. 84% of vessel utilisation already secured
for 2023.
Actual average day rates increased by 7% during 2022
(2021: 2%).
6 new contracts and extensions awarded, with a combined
charter period of 19.4 years (including options).
Focus on local content requirements demanded by our NOC clients across
the Middle East to ensure we are well placed to secure new contracts.
Maintaining strong relationships with our core customers to win and secure
contracts that add significantly to our backlog.
Renegotiate contractual terms, when existing contracts come to an end
with the precursor to day rate improvement.
Continue to explore new opportunities in other markets.
#2
Cost management
Deliver safe and cost-effective operations.
Restrict Capital expenditure to essential only spend.
Sustaining cost efficiencies throughout the business.
Total Recordable Injury Rate (TRIR) improved from 0.2 (2021)
to 0.1 (2022).
Limiting capital expenditure to maintaining the fleet to a level
that ensures safe operations and meets client requirements.
The adjusted operating profit margin has slightly improved
to 29.7% (2021: 29.0%), through cost control measures.
Ensure key safety KPIs are monitored frequently to allow safe and reliable
operation of fleet.
Managing inflationary pressures through negotiating terms with current
key suppliers.
Focus on maximising cash generation with a continued emphasis on
reducing our leverage to below 4.0 times.
#3
Working capital
management
Improved cash management across the Group to help
reduce debtor days whilst improving credit terms with
our key suppliers.
Maximise cashflows from operations to help reduce
leverage levels.
Reduced Leverage levels from 5.8x at the end of 2021 to
4.4x at the end of 2022, through effective working capital
management as highlighted by a reduction in the Trade
debtors to US$ 33.2 million (2021: US$ 41.9 million).
Group’s effort to de-leverage by paying US$ 51.5 million
towards the working capital facility and principal of the bank
borrowings during the year, of which US$ 26.0 million were
an obligation as per agreement with Lenders. The improved
cash position was further evident as the Group was able to
make payments towards the loan for the first time beyond
the requirements of the loan agreement.
Focus on maximising cash generation with a continued emphasis on
reducing our leverage to below 4.0 times.
Closely monitoring the ageing of receivables to ensure sufficient liquidity
to meet our operational and banking requirements.
Make additional prepayments towards the bank loans to de-leverage and
reduce future interest payments that may arise from an increase in LIBOR.
#4
Controls
To create and sustain an efficient and effective
control environment.
Train our staff to the highest operational standards to
maximise their development to deliver quality results.
Develop and maintain a robust internal controls manual.
Management updated the Group procedure manual during
the year implementing new robust controls. The Group also
engaged Baker Tilly as internal auditors. The internal audit
review will focus on the design and implementation of the
new controls.
The Group has to comply with International Maritime
Organization (IMO) regulations and during the year
undertook Internal Audits Marine training in ISM, ISPS, and
MLC to fulfil IMO compliance. As such all offshore staff have
continued to comply with the training requirements to fulfil
our accreditation.
Maintaining an internal control environment to appropriately mitigate the
operating risks inherent in the sector, whilst allowing the Group to achieve
its strategic objectives and deliver value to shareholders.
Finalise the Internal audit and implementing required controls to ensure
a robust controls environment.
20 Gulf Marine Services PLC
SECTION 172 STATEMENT
How GMS Engages
with Stakeholders
Stakeholder
Objectives
How Did Engagement Support
Board Decision Making?
Shareholders
GMS shareholders are institutional investors and private
shareholders located across the world.
The Remuneration Committee Chairman consults with
shareholders on significant executive remuneration
matters, for example, in 2021, conducted consultation
on the Company’s Long-Term Incentive Plan (LTIP) and
in 2022 proceeded with implementation on that basis.
GMS’ website has a dedicated section with a specific
email address for all shareholders to use, which is
monitored daily, and all emails receive a response.
There is also an investor presentation that accompanies
the full and half-year results, which shareholders can
dial into. Our annual AGM provides another forum for
our shareholder base to engage.
Two of our non-executive Directors are nominated by
our two largest shareholders.
Refer to the Board Report on page 44 regarding
protocols to manage information shared with the
Group’s non-independent non-executive Directors.
Investors are interested
in a broad range of
matters including, share
price, financial and
operational performance,
strategic execution,
management of
corporate risk and capital
allocation (including
bonus payments for
management and returns
for investors).
The Directors of GMS regularly received reports
on the Group’s major shareholders from the registrar.
They also received reports on engagements
with shareholders.
The Executive Chairman engaged with major
shareholders throughout the year. The Executive Team
interacted with shareholders on over 50 occasions
during 2022.
The Board continued to have input to the Company’s
communication with its shareholders. There continued
to be a regular flow of trading updates and information
posted on the Company’s website to provide
transparency to all shareholders in the business.
The Board recommended to shareholders a Resolution
which gave Board the authority to allot equity securities
in the capital of the Company. This Resolution was
required to satisfy certain obligations of the Company
under the terms of the 2021 Master Amendment
Agreement with its lenders. The Resolution was passed
by a majority of nearly 100% shareholder votes received.
Clients
GMS works closely with its customers to deliver an
industry-leading offering. The Board is informed
of all tender activity at each Board meeting. Senior
management engage regularly with clients via face-
to-face meetings to ensure GMS fully understands
operational performance; client service and safety are
the key drivers of meetings. Through this engagement,
GMS learns about, immediate, and ongoing tender
requirements and future demand, and changes to
strategy and/or technical or operational requirements.
This informs critical business decisions associated
with fleet deployment, prioritising future business
development activity and resource and local content
investment (HR, Procurement and Local Partnerships).
It also helps with overhead sizing and allocation and
capital expenditure planning, while meeting client needs.
Clients are mainly
concerned with ensuring
value for money in the
services received. They
also wish to ensure that
services meet their
specifications and are
delivered efficiently
and safely.
The Board combines strong relationships with key
clients in the GCC region and a high level of industry
knowledge. Engagement with clients was crucial in
providing the information the Board needed to drive
the Group’s long-term plans, which was key to the
long-term delivery of GMS’ strategy.
Engagement with our clients helped the group to
make informed decisions on capital expenditure,
which remain limited to keeping vessels in class
and equipment in good condition to meet specific
client requirements.
GMS’ focus over the coming years is on delivering
a sustainable capital structure by de leveraging the
Balance sheet. Once this is sufficiently progressed,
capital allocation and resources will be reviewed
assuming resources are available. The Group paid
US$ 6.3 million (2021: US$ 11.5 million) on capital
expenditure in 2022 emphasising the Group’s effort to
limit overall expenditure. Refer to the Financial Review
for more details.
The Directors have acted in a way that they considered, in good faith, to be most likely to promote the success of the Group for the benefit
of its members as a whole and its other stakeholders. The key matters considered by the Board include the following:
• the need to act fairly between members of the Group;
• the need to maintain the Group’s business relationships with suppliers, customers and other stakeholders;
• the interests of the Group’s employees;
• the impact of the Group’s operations on the community and the environment;
• the desirability of the Group maintaining a reputation for high standards of business conduct; and
• the likely consequences of any decision in the long term.
During the year, the Board has maintained an approach to decision-making that promotes the long-term success of the business and is in
line with the expectations of Section 172. The disclosures set out here demonstrate how GMS deals with the matters set out in Section 172(1)
(a) to (f). Cross-references to other sections of the report for more information are also included.
21Annual Report 2022
Strategic Report
How GMS Engages
with Stakeholders
Stakeholder
Objectives
How Did Engagement Support
Board Decision Making?
Lenders
During 2020, 2021, and 2022 there was extensive
interaction between GMS and its lenders and respective
teams, resulting in the borrowings being restructured
in March 2021 and warrants being issued to the lenders
in January 2023.
Lenders are primarily
concerned with ensuring
that the capital value of
their loans are protected,
and that interest is paid.
They also wish to ensure
that other material
provisions of the
lending agreements
are complied with.
The successful equity raised in June 2021 removed the
threat of a potential event of default under the Group’s
loan facilities and signalled to the Group’s lenders that
both existing and new shareholders supported the
Group’s long-term goals.
The increase in adjusted EBITDA and with the Group
paying US$ 51.5 million towards the working capital
facility and principal of the bank borrowing during the
year, both resulted in a significant reduction in leverage
to 4.4 times (2021: 5.8 times).
The banks received the warrants due to be issued to
them in January 2023 as per the terms of its agreement
with the Lenders.
Refer to the Financial Review on pages 34 to 35 for
further details.
Suppliers
GMS’ supply chain is fundamental to the ability to
deliver reliable operations. The Group has a strategy
of long-term partnerships with key suppliers based on
regular and transparent communication with suppliers
through site visits, calls and surveys. The Group
continuously reviews its existing supply chain which
ensures continuity of supply.
The Board received regular updates on this during
the year.
Suppliers are primarily
focused on fair and timely
payment terms as well a
collaborative approach
and open terms of
business.
GMS works to maximise
in-country spending,
which is a requirement
from NOC clients.
The Board tasked senior management with identifying
cost savings initiatives and maximising in-country value.
Renegotiate the terms of major supply contracts to
improve efficiency and reduce costs.
People
The quality of the workforce is crucial to the success
of GMS. 2022 saw regular communication to both on
and offshore staff via weekly email updates and video
communication from the Executive Chairman to all
offshore staff.
All non-executive Directors have visited our offices in
Abu Dhabi and engaged with staff during their visit.
Rashed Al Jarwan is our dedicated Workforce
Engagement Director. GMS organized our annual
offsite meeting in the Al Jubail Mangroves where every
employee present had the opportunity to plant a tree.
Employees are
concerned with job
security, opportunities
for training, a culture
of fairness, inclusion
and communication,
compensation
and benefits.
The Board fully supported management decisions to
provide a safe working environment for our people
through safety measures such as remote working, onsite
COVID-19 testing and other precautionary measures.
Refer to page 12 for more details on engagement with
our people.
Retaining high standards of business conduct is a core goal for the Group. The focus GMS places on ensuring high standards are maintained
is reflected in the strength of its policies, including its Anti-Corruption and Bribery Policy, Anti-Slavery Policy, Social Responsibility Policy and
Whistleblowing Policy. Details are available on our website. In most of our core markets in the Gulf, the promotion of local industries is seen as
a prime community objective. For consideration of the environment, please refer to pages 4 to 11 of the Annual Report. GMS is committed to
responsible environmental policies and is compliant with the globally recognised ISO 14001 (Environment) standard.
22 Gulf Marine Services PLC
MARKET ANALYSIS
Markets
Introduction
The GCC region continues to experience
offshore production growth, leading to
significant investment from major NOCs, in
both greenfield and brownfield developments.
GMS benefits from the existing platform base
that drives significant demand for services,
such as maintenance and well services, in
addition to the EPC services required for new
platform installations. The increased demand
for the services we provide was further
highlighted by the improvement in vessel
utilisation, which increased to 88% (2021: 84%).
The offshore wind industry in Europe is also
expected to continue its growth trend, driven
by increased demand for renewable energy,
leading to substantial investment from
major energy companies. There has been
significant growth in installed capacity, with
a significant number of new projects coming
online. As installed capacity continues to
increase the number of SESV’s required to
carry out maintenance will also increase.
GCC Region
The Oil and Gas industry saw a surge in
capital expenditure commitments by major
NOCs within the GCC during 2022, resulting
in the reactivation of many brownfield and
greenfield projects that had been delayed for
a long time. As a result, multiple multiyear
tenders were issued by NOCs in the region,
leading to a tightening of supply and an
increase in day rates for SESV’s.
In 2022, the GCC region revenue contributed
89% of the total Group revenue, which is
the same proportion as the previous year.
During the year, the Group secured six new
contracts with a total duration of 19.4 years,
when including options. The GCC region saw
an increase in vessel utilization from 84% to
88%, primarily driven by the rise in demand
for E-Class vessels.
Vessel mobilizations reduced compared to
the prior year, with six mobilizations taking
place in 2022 (2021: 9 mobilisations). Four of
the six mobilizations were for NOC contracts,
one was with an EPC client within the GCC
region and one mobilisation took place within
the North Sea for a wind farm related project.
As at 31 December 2022, GMS operated
two vessels in Qatar and three vessels in
KSA, highlighting its strong presence in both
countries. SESV’s are in significant demand
in both countries, making them crucial
markets for GMS.
North-West Europe
GMS saw an improvement in utilization for
the one E-Class vessel that remained in the
North Sea to 84% (2021: 73%). The vessel
has maintained relatively stable offshore wind
farm activity. GMS secured a long-term
contract with one of the largest windfarm
developers in the world, providing the
company with access to the ongoing
windfarm maintenance market. We see
significant growth in this market as offshore
windfarm capacity continues to grow. During
the last two years, vessels were moved from
the North Sea into higher demand markets,
such as Asia and the GCC. This led to an
increase in vessel layups, reducing the
supply in Europe and therefore increasing
the demand for the remaining vessels, which
led to improved utilisation for the vessels
operating there.
Market Outlook
The market is expected to remain stable
in the near future, with growth predicted in
both regions. The GCC region remains a key
market due to the high demand for oil and
gas exploration and production activities,
while Europe is represented by demand on
our vessels and is expected to see growth
in the renewable energy sector. However,
competition in the market is expected to
remain high, leading to continued pressure
on pricing and profitability.
23Annual Report 2022
Strategic Report
E-Class
S-Class K-Class
Map legend
United Kingdom
Endeavour
KSA
Kudeta
Sharqi
Kikuyu
Qatar
Endurance
Enterprise
Evolution
Germany
Endeavour
UAE
Kawawa
Kamikaze
Keloa
Pepper
Shamal
Scirocco
Endurance
24 Gulf Marine Services PLC
Senior Management
The Executive team implements the risk management process from risk identification
to management and mitigation.
RISK MANAGEMENT
The effective identification, management and mitigation of business risks and seizing of
opportunities is crucial to the successful delivery of the Group’s strategic objectives. A rigorous
risk management system is in place to support the identification, analysis, evaluation, mitigation
and ongoing monitoring of risks as shown in the framework below.
Board of Directors
The Board has overall responsibility for the Group’s strategy and ensuring effective risk management.
Audit and Risk Committee
Responsibilities include reviewing the Group’s internal control and risk management systems
as well as monitoring the effectiveness of the Group’s internal audit function.
Internal Audit
There are clear
reporting lines from
the internal audit
function to the Audit
and Risk Committee
and the Executive
team.
The framework incorporates the policies,
culture, organisation, behaviours, processes,
systems and other aspects of the Group that,
when combined, facilitate its effective and
efficient operation. Business risks across the
Group are addressed in a systematic way
through the framework, which has clear lines
of reporting to address the management of
risks, and improvement of internal controls
were considered appropriate.
The Board has overall responsibility for
ensuring that risks are effectively managed.
As part of their regular risk assessment
procedures, the Board considers the
significance of ESG matters to GMS’
business. The Audit and Risk Committee is
responsible for reviewing the effectiveness of
the Group’s system of internal control and
procedures. The Audit and Risk Committee
has reviewed GMS’ system of operational
internal control (including risk management)
for day-to-day operations and concluded
that the controls remain effective.
The Audit and Risk Committee is responsible
for reviewing the effectiveness of the Group’s
financial controls and the financial reporting
process, which include the timely identification
and resolution of areas of accounting
judgement, and the quality and timeliness
of papers analysing those judgements.
The Audit and Risk Committee reviewed
control deficiencies identified during the prior
year end and are satisfied that management
have improved areas where control
deficiencies were identified. There were no
significant weaknesses identified by the
Board as part of their review during the year.
The enterprise risk assessment process
begins with identifying risks through quarterly
reviews by individual departments. This
contains an assessment of the principal risks
facing the Group. Mitigating controls are
then identified.
The departmental reviews are then
consolidated by the Executive team to
identify an overall heatmap. Emerging risks
are also identified through these discussions
and included in reporting to the Audit and
Risk Committee, which reviews the risk
profile at least quarterly. The Board reviews
the risk profile formally on an annual basis
(see page 48 for details of the Board’s
actions as part of their review).
25Annual Report 2022
Strategic Report
IMPACT
LIKELIHOOD
3
4
5
11
8
10
6
7
9
1
2
1 Utilisation
2 Inability to secure appropriate
capital structure
3 GCC local content requirements
4 Inability to deliver safe and
reliable operations
5 Liquidity and covenant compliance
6 People
7 Legal, economic, and political conditions
8 Compliance and regulation
9 COVID-19 pandemic
10 Cyber-crime – security and integrity
11 Climate change
Residual Risk Heat Map
26 Gulf Marine Services PLC
Principal Risks and Uncertainties
Future results are always subject to uncertainty and unpredictable events or factors beyond
our control. While we can make educated guesses based on past trends and current
information, there are always external factors that can impact outcomes in unexpected ways.
The level of uncertainty when operating vessels offshore can vary depending on a range
of factors such as weather conditions, sea state, navigational hazards, project related
uncertainties and other external factors. Even with the most advanced technology and
experienced crew, there is always a degree of uncertainty when operating in open waters.
This is why our operations are subject to strict safety regulations and procedures to minimize
risk and ensure the safety of crew members and client guests. It is important to be aware
of these uncertainties and plan accordingly, while also remaining adaptable to change as
circumstances evolve, as they can have an impact on our results, on our covenants and the
value of the investment. The rating of the principal risks facing the Group in the next five years
are set out below, together with the mitigation measures. These risks are not intended to be
an exhaustive analysis of all risks.
Risk Mitigating Factors and Actions
1 Utilisation
Utilisation levels may be reduced by the
following underlying causes:
• Customer concentration leading to
potential significant changes in our contract
profile and pipeline. Risks of potential
loss of some clients to competitors.
• ADNOC (our client) has changed its
strategy to bring SESVs in house through
the acquisition of Zakher Marine. There
is a risk of other NOCs to follow suit.
• Fleet capabilities may no longer match
with changing client requirements. Clients
may increase the standard specification
required for an SESV, which might require
the Group to upgrade some of its fleet to
be compliant.
Modification Flexibility for Clients
GMS’ vessels are built to be as flexible as possible allowing the Group to compete for a
wide share of the market, which enable the Group maximise utilisation levels and charter
day rates. The Group is capable of modifying assets in order to satisfy client requirements.
To comply with LIMS (Lifting Integrity Management System) the Group have involved
engineering companies to perform technical studies on existing equipment to extend the
life of equipment (time limited).
Continuous Communication with Clients and Encouraging Loyalty
The Group maintains strong relationship with its clients through continuous communication
and a proven track record of providing safe and reliable services.
GMS has developed plans for fleet upgrades based on the expected future requirements
of our clients.
To develop commercial proposals that builds loyalty by incentivising customer for longer
term contracts with a higher number of vessels used.
Business Segment and Geographical Diversity
The Group is continuously looking for opportunities to maximise the utilisation of its
vessels.
It is continually reviewing opportunities looking to diversify its market footprint through
increasing its global client base.
Vessel Monitoring
The Group has procedures in place, such as the Planned Maintenance System, to ensure
that the vessels undergo regular preventative maintenance. The Planned Maintenance
System has been upgraded to a modern ERP enabling overdue maintenance to be tracked
and reported regularly. The Group’s robust operating standards result in minimal
operational downtime.
RISK MANAGEMENT
continued
Key
Drive revenue
Manage cost
Establish and operate within an
appropriate financial framework
Ensure people are in the right
role with the right skills
27Annual Report 2022
Strategic Report
Risk Mitigating Factors and Actions
2 Inability to Secure an Appropriate Capital Structure
The Group is subject to increasing cost of
debt due to increase in interest rates global
benchmark, increase in the margin ratchet to
4% from 3% and introduction of PIK interest
from 1 January 2023. This will impact the
liquidity in the business and could impact the
share price.
As warrants were issued in January 2023, this
may impact the Group’s ability to attract new
investors as there would be a potential dilution
if these warrants are exercised.
Focus on De-leveraging
Leverage levels have significantly reduced to 4.4 times compared to 5.8 times in 2021.
With a continued focus on de-leveraging, the Group aims to have leverage levels below
4.0 times before the end of 2023.
3 GCC Local Content Requirements
GCC NOCs have local content requirements
as part of their tender processes, which varies
for each country, designed to give preference
to suppliers that commit to improving their
local content and levels of spend and
investment in-country. This may prevent GMS
from winning new contracts or lead to financial
loss and/or a reduction in profit margins on
existing contracts, which will ultimately impact
operating cash flows and net profitability.
Local Content Requirements
GMS embraces local content requirements, with a long history of operating for NOCs in
the GCC with offices in each of the GCC countries where the Group operates. The Group
actively manages its supply chain to ensure focus is put on maximising local content and,
where necessary, will collaborate with local partners in specific markets to ensure it positions
itself in the best possible position to win work. Often during the tendering process, companies
with a higher audited local content score are given the offer of first refusal to price match any
lower bids.
Market Knowledge and Operational Expertise
The Group has well established long-term relationships in the GCC region which provides
an understanding of clients’ requirements and operating standards.
Local Content
The Group continues to explore ways to improve its local content scores in all the regions
in which they operate.
4 Inability to Deliver Safe and Reliable Operations
The Group may suffer commercial and
reputational damage from an environmental
or safety incident involving employees, visitors
or contractors.
Inadequate preparation for situations, such
as sudden equipment failure, inability to fulfil
client requirements and unpredictable weather
could have a negative impact on the business.
Incomprehensive insurance coverage may
lead to financial loss.
Safety Awareness
Our highest priority is providing safe and reliable operations. This is achieved through HSEQ
management system and a strong safety-focused culture. Management has appropriate
safety practices and procedures including disaster recovery plans and comprehensive
insurance cover across our fleet.
Training and Compliance
Our employees undergo continuous and rigorous training on operational best practices.
Scheduled Maintenance
The Group adheres to regular maintenance schedules on its vessels to ensure compliance
with the highest safety standard.
Business Continuity Plan
The Group has in place a business continuity management plan which it regularly maintains
to ensure the reliability of its operations.
Management continues to review and improve the current management systems and
monitors the performance of HSEQ.
Insurance
The Group regularly consults with insurance brokers to ensure sufficient coverage is in place.
28 Gulf Marine Services PLC
Risk Mitigating Factors and Actions
5 Liquidity and Covenant Compliance
The business is exposed to short-term liquidity
management risks due to potential increases
in interest rates and inflation, which could
impact the debt service obligations and the
Group’s bank facilities covenants.
The increase in interest charges will lead
to reduced liquidity in the business as
more cash will be required to meet our
banking requirements.
Reduced liquidity could impact future
operations and lead to an event of default.
This would give lenders the right to accelerate
repayment of the outstanding loans, and then
exercise security over the Group’s assets.
Breach of covenant – All covenants are closely
monitored as the headroom remains narrow,
which is due to the Group’s performance
being very sensitive to many internal and
external factors such as utilisation, operational
downtime, interest rates and other variables.
Liquidity Management
The Group continues to manage liquidity carefully through focusing on cash collection from
its customers.
Minimising Capital Expenditure
The Group is focused on restricting capital expenditure to essential spending, but without
jeopardizing the safe and reliable operations of its vessels.
Covenant Compliance
The management team and Board regularly examine future covenant compliance based
on the latest forecasts and take necessary measures to avoid any potential where a future
breach of covenant is at risk. The Group monitors its various covenants throughout the
remaining period of the loan.
Expedite Debt Repayment
Management is focussed on making early repayments of the bank loans to reduce the
interest costs, improve our leverage position and meet our covenant requirements.
6 People
Attracting, retaining, recruiting and developing
a skilled workforce.
Losing skills or failing to attract new talent to
the business has the potential to
undermine performance.
Communication, Training and Engagement
Communication has remained a key practice of management.
Rashed Al Jarwan is the Workforce Engagement Director for the Group, he is explicitly
tasked with monitoring the level of engagement and alignment across the organisation.
During the year, the Group organized an event at Jubail Mangrove Park which is an
educational and leisure destination. At the event, employees were recognised for their
contributions in 2022, while some staff received Long Service Awards for completing
either 10, 15, 20 or 25 years of service.
Remuneration Policy
The Short-Term Incentive Plan (STIP) is based on a single Business Corporate Scorecard to
ensure all staff are aligned and incentivised around delivering a single set of common goals.
Equal Opportunities
GMS is engaged in fair and transparent recruitment practices. It has a zero-tolerance policy
towards discrimination and provides equal opportunities for all employees.
Further, GMS add value through development programs, promotion from within the
organization and focus on growing talent.
Resource Planning
The Group has identified all critical roles held by individuals and have adopted processes to
ensure the smooth transition in the event of changes in those personnel. Also, in the short
term, the Group utilised recruitment specialists and headhunters to fulfil key positions as the
need had arisen.
RISK MANAGEMENT
continued
29Annual Report 2022
Strategic Report
Risk Mitigating Factors and Actions
7 Legal, Economic and Political Conditions
Political instability in the regions in which
GMS operates (and recruit from) may
adversely affect its operations.
As the majority of crew for certain key
positions come from Eastern Europe (Russia/
Ukraine), Indonesia and Philippines, political
instability may hamper the recruitment,
retention and deployment of personnel.
Economic conditions such as interest rate
and inflation increases will have an impact
on the Groups’ liquidity and profitability.
Emergency Response Planning and Insurance
For all our major assets and areas of operation, the Group maintains emergency
preparedness plans. Insurance cover over the Group’s assets is reviewed regularly to ensure
sufficient cover is in place.
Workforce Planning and Monitoring
Workforce planning and demographic analysis is undertaken in order to increase diversity
within the Group.
Tax Advisors
The Group engage with reputable tax advisors who regularly monitor the impacts of changes
to tax legislation across the regions that GMS operates in.
Inflation and Interest Rates
Management is continually monitoring the liquidity position from changes in inflation
and a focus on cost reduction. The key aim of the Group is to deleverage through early
repayments, which will reduce the impact of interest.
8 Compliance and Regulation
Non-compliance with anti-bribery and
corruption regulations could be detrimental to
stakeholder relations and lead to reputational
and financial loss.
GMS’ operations are subject to international
conventions on – and a variety of complex
federal and local laws, regulations and
guidelines relating to – health, safety and the
protection of the environment. Compliance
with these has become increasingly costly,
complex and stringent. Failure to appropriately
identify and comply with laws and regulations,
could lead to regulatory investigations.
Code of Conduct
The Group has a Code of Conduct which includes anti-bribery and corruption policies, and
all employees are required to comply with this Code when conducting business on behalf
of the Group. It is mandatory for employees to undergo in-house training on anti-corruption.
All suppliers are pre-notified of anti-bribery and corruption policies and required to confirm
their compliance with these policies.
Regulations
A central database is maintained which documents all of GMS’ policies and procedures
which comply with laws and regulations within the countries in which GMS operate.
A dedicated Company Secretary is in place to help monitor compliance, in particular
for UK legal and corporate governance obligations.
External Review
The Internal Auditors help ensure compliance with GMS policies, procedures, internal
controls and business processes
9 COVID-19 Pandemic
Despite easing of COVID-19 restrictions the
pandemic still presents some challenges.
There are still strict quarantine requirements
for crew, which could lead to further increased
cost. These measures can change at short
notice, maintaining the risk that offshore staff
will be unable to crew change.
There remains health risk to staff, both
onshore and offshore, who come into contact
with confirmed cases.
The restrictions around COVID-19 have been lifted during the year. The Group has noted
a decrease in the number of cases through better control measures in place.
The Group remains focussed on the following areas to ensure a safe working environment.
Hygiene Measures
GMS maintains hygiene control and prevention measures across the fleet and onshore
offices. The Group has maintained similar precautionary measures across the countries
in which it operates.
Vessel Maintenance
The Group has in place a stringent change management process, which ensures the risk
management process in place is appropriate.
Recovery of COVID-19 Related Costs
The Group is in the process of reclaiming some quarantine and other COVID-19
related expenses.
30 Gulf Marine Services PLC
Emerging Risks
GMS operates an emerging risk framework as
a tool for horizon scanning, with developments
reported to the Audit and Risk Committee on
a routine basis. Emerging risks are defined as
a systemic issue or business practice that has
either not previously been identified, has been
identified but dormant for an extended period
of time (five years); or has yet to arise to an
area of significant concern. There is typically
a high degree of uncertainty around the
likelihood of occurrence, severity and/or
timescales. Emerging risks are identified
and/or monitored through internal debate
by management and the Audit and Risk
Committee, as well as discussions with
key stakeholders (see the Group’s S172
statement), industry-specific journals,
and reviews of reporting published by
peer companies.
Examples of emerging risks include
unexpected changes in the demand for oil,
satisfying the climate change requirements
of our clients, monitoring of suppliers’
performance, changes to tax landscape
in regions GMS operates in and potential
client insolvencies.
Risk Mitigating Factors and Actions
10 Cyber-Crime – Security and Integrity
Phishing attempts result in inappropriate
transactions, data leakage and financial loss.
The Group is at risk of loss and reputational
damage through financial cyber-crime.
Cybersecurity Monitoring and Defence
GMS operates multi-layer cyber-security defences which are monitored for effectiveness
to ensure they remain up to date.
GMS engages with third party specialists to provide security services.
11 Climate Change
Climate change poses both transition and
physical risks to the Group.
The transition risks come from the
decarbonisation of the global economy. This
could result in changing investor sentiment
making new investors harder to find. It may
bring changing client preferences leading to
reduced demand for our services.
New legislation could require us to increase
reporting and possibly substitute our products
and vessels for greener alternatives. Physical
risks include rising temperatures, which could
further impact working hours, and rising sea
levels, which could affect where our vessels
can operate.
The physical risks also interact with Principal
Risk 4 – Our ability to deliver safe and
reliable operations.
Legal & Policy Monitoring
The Group carefully monitors legislative developments to ensure compliance with all
relevant laws both in the UK and the Middle East. The TCFD disclosure in this report
explains our assessment and response to climate-related risks to be transparent with
our stakeholders.
Physical Infrastructure
The Group monitors weather patterns to ensure conditions are suitable for our offshore
employees and vessels. Onshore buildings and offshore vessels are designed to withstand
the heat in the GCC region.
Environmental Impact
GMS aims to minimise its environmental impact by installing energy and water efficiency
measures. We also ensure our machinery and engines are regularly maintained so they
operate efficiently.
In 2022, we have calculated all our scopes emissions and setting targets for the long-term
reduction of our carbon emissions.
Long-term Planning
GMS has a proven track record in the renewables sector which provides versatility in our
business model. Our vessels are built to be as flexible as possible to maximise utilisation.
We are aware that we may need to consider changing sea levels and environmental
legislation when replacing vessels that are being retired in the long term.
RISK MANAGEMENT
continued
31Annual Report 2022
Strategic Report
32 Gulf Marine Services PLC
KEY PERFORMANCE INDICATORS
Key Performance Indicators (KPIs), are used to monitor
our performance against our strategic priorities. The KPIs
comprise financial and operational measures and each links
to the four pillars of our strategy. Refer to the Glossary for the
definition of each Alternative Performance Measure (APM).
KPI Description 2022 Performance
Revenue and utilisation
Revenue reflects the amounts recognised
from operating activities with clients during
the year. It is driven by charter day rates and
utilisation levels.
Utilisation is the percentage of days that
vessels within the fleet of SESVs are chartered
on a day rate out of total calendar days.
Revenue increased by 15.7% to US$ 133 million
mainly attributable to an increase in E-Class
utilisation and average day rates across all
vessel classes.
Utilisation in the year improved to 88% (2021:
84%), E-Class utilisation levels saw an increase
to 82% (2021: 72%). K-Class utilisation
increased marginally to 87% (2021: 86%).
S-Class utilisation slightly decreased from
98% in 2021 to 97% in 2022.
Average day rates in the year improved by
7% to $27.5k (2021: $ 25.7k) across all vessels.
E-class increased by 12% to $ 35.4k (2021:
$ 31.6k), K-class increased by 6% to $ 20.3k
(2021: $ 19.1k), and S-class increased by 2%
to $ 31.6k (2021: $ 31.0k).
US$ 123m
US$ 109m
US$ 102m
US$ 115m
US$ 133m
2022
2021
2020
69%
69%
81%
88%
84%
2019
2018
% – SESV utilisation Bars – Revenue
Adjusted EBITDA and
Adjusted EBITDA margin
Adjusted EBITDA (Earnings before Interest,
Tax, Depreciation and Amortisation), excluding
adjusting items (exceptional costs and
non-cash impairments). It is a key measure of
the underlying profitability of GMS’ operations.
Adjusted EBITDA margin demonstrates the
Group’s ability to convert revenue into cash.
Adjusted EBITDA increased by 11.5% to
US$ 71.5 million, (2021 US$ 64.1 million)
driven by increased utilisation and day rates.
Adjusted EBITDA margin decreased to 54%
(2020: 56%) due to increase in utilisation, the
recognition of a charge for the bankruptcy of
a client, as well as other one-off costs, and an
increase in professional fees.
US$ 58m
US$ 51m
US$ 50m
US$ 64m
US$ 72m
2022
2021
2020 49%
47%
47%
56%
54%
2019
2018
% – Adjusted EBITDA Margin Bars – Adjusted EBITDA
Adjusted profit and Adjusted DLPS/DEPS
Adjusted profit or loss measures the net
profitability of the business adjusted for items
such as restructuring costs and non-cash
transactions such as impairment.
Adjusted DEPS means fully diluted earnings
per share and adjusted DLPS means diluted
loss per share, which measures the level of
net profit/loss, including adjusting items, per
ordinary share outstanding.
The Group reported an adjusted net profit of
US$ 17.6 million (2021: US$18 million), the
reduction was driven by an increase in finance
expenses partially offset by an increase in the
gross profit for the year.
US$ -15m
US$ 18m
US$ 18mADEPS US$ 0.02
ADLPS US$ (0.04)
ADEPS US$ (0.03)
ADLPS US$ (0.06)
ADLPS US$ (0.02)
US$ -20m
US$ -5m
2022
2021
2020
2019
2018
Numbers – Adjusted DLPS/DEPS
Bars – Adjusted profit/loss
Net bank debt to Adjusted EBITDA
Net debt to Adjusted EBITDA is the ratio
of net debt at year end to earnings before
interest, tax, depreciation and amortisation,
excluding adjusting items (see Glossary for
details), as reported under the terms of
our bank facility agreement.
Maintaining this covenant below levels set out
in the Company’s bank facilities is necessary
to avoid an Event of Default.
The net debt to Adjusted EBITDA decreased to
4.4 times compared to 5.8 times in the prior
year primarily as a result of improved adjusted
EBITDA and reduction of the debt beyond the
requirements of the loan agreement.
6.9
7.6
8.0
5.8
4.4
2022
2021
2020
2019
2018
Key
Drive revenue
Manage cost
Establish and operate within an
appropriate financial framework
Ensure people are in the right
role with the right skills
33Annual Report 2022
Strategic Report
KPI Description 2022 Performance
Backlog
Backlog shows the total order book of
contracts (comprising firm and option periods)
at the relevant date. This is a leading indicator
of future revenue and utilisation levels.
Backlog increased in the year driven by new
long-term contracts secured, partially offset by
the unwinding of existing long-term contracts.
US$ 220m
US$ 240m
US$ 199m
US$ 179m
US$ 342m
2022
2021
2020
2019
2018
The backlog figures shown above are as at 1st April
Average FTE retention
(Onshore and Offshore)
Employee retention shows the percentage
of staff who continued to be employees in
the year. The percentages shown do not take
into account retirements or redundancies.
Average FTEs (Full Time Equivalent
employees) throughout the year which
provides an indication of the Group’s service
capacity, scale of operations, and manpower
cost base.
The Group staff retention reduced to 84%
(2021: 86%).
Average onshore FTEs over the year have
increased from 52 in 2021 to 55 in 2022.
While for offshore FTEs, the average number
throughout the year increased from 482
in 2021 to 511. The total Group headcount
increased from 545 at 31 December 2021 to
594 at 31 December 2022, which was driven by
increased utilisation of our vessels, which required
an increase in recruitment of offshore FTEs.
498
482
496
534
567
2022
2021
2020
84%
84%
83%
86%
92%
2019
2018
% – Employee Retention
Bars – Average FTEs
TRIR and LTIR
TRIR is the total recordable injury rate per
200,000 man hours, which provides a measure
of the frequency of recordable injuries.
LTIR is the lost time injury rate per 200,000 man
hours which is a measure of the frequency of
injuries requiring employee absence from work
for a period of one or more days.
Offshore man hours are calculated based on
a 12-hour working period per day.
There was one Lost Time Injury which
happened in the middle of the fourth quarter of
the year. As a result, we maintained the same
Lost Time Injury rate of 0.1 since last year (2021
vs 2022). However, because there was no
other recordable injury, our Total Recordable
Injury Rate (TRIR) improved considerably from
0.2 (2021) to 0.1 (2022).
0
0.10
0.20
0.30
0.29
0.19
0.20
0.10
0.10
0.00 0.00
20222021202020192018
= TRIR = LTIR
Underlying G&A as percentage of revenue
The G&A to revenue expense ratio compares
revenue to the amount of expenses incurred
in onshore support operations.
The G&A expense ratio dropped from
11% in 2021 to 10% in 2022. Underlying
G&A increased by 6% to US$ 10.4 million
(2021: US$ 9.8 million). This was mainly
driven by an increase in professional fees.
US$ 17m
US$ 14m
US$ 10m
US$ 10m
US$ 10m
13%
14%
10%
8%
9%
2022
2021
2020
2019
2018
Underlying General and Administrative (G&A) expenses
excluding depreciation and amortisation, restructuring
and exceptional legal costs.
% – G&A to revenue
Bars – Underlying G&A
Secured utilisation at 1 January after each
reporting date
Secured utilisation at 1 January represents
the level of secured contracts we have in place
for the year ahead across our fleet of vessels.
The position is as at 1 January after each
reporting date and is an important indicator
to management and the Board of the risks to
delivery of the business plan. The higher the
level of secured work, the less reliant the Group
is on identifying and securing future contracts.
Secured utilisation has decreased by
4 percentage points compared to the
prior year. The decrease is due to two
K-class vessel contracts coming to an
end in 2023, which were already secured
in the previous period. These contracts
are in the process of being renewed.
51%
67%
73%
77%
84%
2022
2021
2020
2019
2018
34 Gulf Marine Services PLC
FINANCIAL REVIEW
Introduction
Revenue increased by 15.7% to US$ 133.2
million (2021: US$ 115.1 million). Vessel
utilisation increased to 88% (2021: 84%)
mainly driven by securing long term
contracts for vessels that were off hire in
2021. These long term contracts secured
higher day rates in the current year,
contributing to the increase in revenue.
E-Class utilisation levels increased to 82%
(2021: 72%), while our K-Class and S-Class
utilisation remained also almost flat at 87%
(2021: 86%) and at 97% (2021: 98%)
respectively.
Average day rates increased by 7% to US$
27.5k (2021: US$ 25.7k) across all vessel
classes. This was driven by an increase in
average E-class day rates to US$ 35.4k
(2021: US$ 31.6k), while K-class and S-class
average day rates also improved to US$
20.3k (2021: US$ $19.1k) and US$ 31.6k
(2021: US$ 31.0k) respectively.
Adjusted EBITDA
1
increased to US$ 71.5
million (2021: US$ 64.1 million) while there is
a slight decrease in adjusted EBITDA margin
to 54% (2021: 56%). The increase in Adjusted
EBITDA is mainly driven by the increase in
utilisation particularly in the Group’s higher
earning E-Class vessels described above,
as well as an increase in daily rates across
our vessels.
Vessel operating expenses
3
increased by
24% to US$ 51.2 million (2021: US$ 41.2
million), driven by an increase in utilisation,
the recognition of a charge for the
bankruptcy of a client, as well as other
one-off costs.
General and administrative expenses
3
slightly increased by US$ 0.9 million to
US$ 13.2 million, mainly driven by an
increase in professional fees.
The Group reported a net profit for the year
of US$ 25.4 million (2021: US$ 31.2 million).
The decrease in profit was mainly driven by
higher finance expense of US$ 20.1 million
(2021: US$ 14.5 million), which comprised
the revaluation gain in revision of the debt
facility in 2021 amounting to US$ 6.3 million,
which did not occur during the current year.
This is offset by an increase in the current
year valuation of the embedded derivative,
impacting the net profit by US$ 2.5m (2021:
US$ 0.2m). This is also accompanied by a
net reversal of impairment recognised at
US$ 7.8 million compared to US$ 15.0 million
in the previous year.
Adjusted net profit which excludes net
impairment charge reversals in both 2022
and 2021 and exceptional finance costs in
2021 was US$ 17.6 million (2021: US$ 18.0
million).
Finance expenses have increased to US$
20.1 million (2021: US$ 14.5 million) during
the year. This is driven by an increase in
LIBOR rates from 0.2% in 2021 to 4.7%
during the year, as well as an increase in the
fair value of the embedded derivatives of
US$ 2.5 million (2021: US$ 0.2 million). As
the warrants were issued in January 2023,
the balance is recognised as a current
liability as at 31 December 2022.
Net bank debt
3
reduced to US$ 315.8 million
(2021: US$ 371.3 million). The net leverage
ratio has reduced to 4.4 times compared to
5.8 times in 2021. This is due to the increase
in adjusted EBITDA and a result of the Group’s
effort to de-leverage by paying US$ 51.5 million
towards the working capital facility and
principal of the bank borrowings during the
year, of which US$ 26.0 million were an
obligation as per agreement with Lenders.
Revenue and Segmental
Profit/Loss
The table on page 119 shows the contribution
to revenue, and segment gross profit or loss
made by each vessel class during the year.
Utilisation in 2022 increased to 88% (2021:
84%). This continues to be the highest level
of utilisation achieved since 2015. Our
E-Class utilisation levels have significantly
increased to 82% (2021: 72%). K-Class
utilisation remained relatively flat at 87%
(2021: 86%) and S-Class utilisation was 97%
(2021: 98%).
There was an increase in average day rates
by 7.3% which amounted to US$ 27.5k (2021:
US$ 25.7k). Vessel day rates for E-Class
vessels increased by 12.0% which secured
contracts with higher day rates than
compared to 2021, with increases to K-Class
and S-Class rates of 6% and 2% respectively.
The UAE, Qatar and Saudi Arabia combined
region continue to be the largest geographical
market representing 89% (2021: 89%) of total
Group revenue. The remaining 11% (2021:
11%) of revenue was earned from Offshore
Windfarms in the renewables market in
Europe. National Oil Companies (NOCs)
continue to be the Group’s principal client
representing 76% of 2022 total revenue
(2021: 70%).
2022
US$m
2021
US$m
2020
US$m
Revenue 133.2 115.1 102.5
Gross profit/(loss) 60.5 60.6 (55.5)
Adjusted EBITDA
1
71.5 64.1 50.4
Impairment reversal/(impairment) 7.8 15.0 ( 87. 2)
Net profit/(loss) for the year 25.4 31.2 (124.3)
Adjusted net profit/(loss)
2
17.6 18.0 (15.3)
1 Represents operating profit after adjusting for depreciation, amortisation and impairments / reversal of impairments. This measure provides additional information in
assessing the Group’s underlying performance that management can more directly influence in the short term and is comparable from year to year. A reconciliation of
this measure is provided in Note 31.
2 Represents net profit/(loss) after adjusting for the impairments / reversal of impairments and other non-recurring items. This measure provides additional information
in assessing the Group’s total performance that management can directly influence and is comparable from year to year. A reconciliation of this measure is provided
in Note 31.
3 A reconciliation of this measure is provided in Note 31 and is also defined in APMs section in page 139.
4 Refer to Glossary for definition of Underlying G&A.
35Annual Report 2022
Strategic Report
Cost of Sales, Reversal
of Impairment and
Administrative Expenses
Cost of sales excluding the net reversal of
impairments increased to US$ 80.4 million
(2021: US$ 69.5 million) with operating
expenses increasing by US$ 10.0 million and
depreciation and amortisation increasing by
US$ 0.9 million. In line with the increase in
revenue by 15.7%, cost of sales excluding
depreciation and amortisation increase by
24.3% to US$ 51.2 million (2021: US$ 41.2
million). Total depreciation and amortisation
included in cost of sales amounted to US$ 29.2
million in 2022 (2021: US$ 28.2 million).
Management performed a formal impairment
assessment of the Group’s fleet, comparing
the net book value to the recoverable
amount as at 31 December 2022. Based
on the assessment, the total recoverable
amount of the fleet was computed at
US$ 595.5 million (2021: US$ 631.9 million)
resulting in an impairment charge reversal of
US$ 21.0 million and an impairment charge
of US $13.2 million (2021: impairment charge
reversal of US$ 15.0 million). Refer to Note 5
in the consolidated financial statements for
further details.
Overall general and administrative costs
increased from US$ 12.3 million in 2021
to US$ 13.2 million in 2022. Underlying
G&A (which excludes depreciation and
amortisation) increased to US$ 10.4 million
(2021: US$ 9.8 million).
Adjusted EBITDA
Adjusted EBITDA, which excludes the impact
of net reversal of impairment in both 2022
and 2021, increased to US$ 71.5 million
(2021: US$ 64.1 million), mainly driven by
the increase in utilisation particularly in the
Group’s higher earning E-Class vessels
described above. Adjusted EBITDA is
considered an appropriate, comparable
measure showing underlying performance,
that management are able to influence.
Please refer to Note 31 and Glossary for
further details.
Finance Expense
Finance expense increased from US$ 14.5
million in 2021 to US$ 20.1 million in 2022.
The main component of finance expense
includes US$ 17.2 million (2021: US$ 17.5
million) interest on bank borrowings which
has only reduced marginally from 2021, for
the reasons explained above. The primary
reason for the increase in finance expense
year on year is due to the revaluation gain in
revision of debt facility in 2021 amounting to
US$ 6.3 million, which did not occur during
the current year. This is offset by an increase
in the valuation of the embedded derivative
with a net loss on changes in fair value of
US$ 2.5 million as compared to net gain on
changes of fair value (including recognition
and derecognition of the embedded derivative)
in the prior year of US$ 0.7 million. Finance
expense was also reduced by the net gain on
changes in fair value of interest rate swap of
US$ 1.1 million (2021: US$ 0.3 million).
Earnings
The Group achieved a net profit of US$ 25.4
million (2021: US$ 31.2 million), mainly driven
by an increase in utilisation, increase in
finance expense and the net reversal of
impairment booked in at US$ 7.8 million
(2021: US$ 15.0 million), all described above.
After reflecting for adjusting items (net
impairment reversals in 2022 and 2021
and finance expenses in 2021) the Group
incurred an adjusted profit of US$ 17.6 million
(2021: US$ 18.0 million).
Capital Expenditure
The Group’s capital expenditure during
the year reduced to US$ 9.1 million
(2021: US$ 12.2 million).
Cash Flow and Liquidity
During the year, the Group delivered
significantly higher operating cash flows of
US$ 82.6 million (2021: US$ 40.5 million).
This increase is primarily as a result of the
movement in trade receivables and trade
and other payables described below. The net
cash outflow from investing activities for
2022 decreased to US$ 6.3 million (2021:
US$ 11.5 million).
The Group’s net cash flow from financing
activities was an outflow of US$ 72.3 million
during the year (2021: US$ 24.5 million)
mainly comprising net repayments to the
bank of US$ 51.4 million (US$ 31.0 million)
and interest paid of US$ 17.6 million (US$
13.0 million). Cash outflows in 2021 were
offset primarily by the proceeds from issue
of shares amounting to US$ 27.8m, which
did not reoccur in 2022.
Balance Sheet
Total non-current assets at 31 December 2022
were US$ 605.3 million (2021: US$ 617.2 million),
following a US$ 7.8 million net reversal of
impairment on some of the Group’s vessels
(2021: US$ 15.0 million).
Total current liabilities increased to US$ 69.3
million at 31 December 2022 (2021: US$ 53.0
million). Trade payables, including amounts
due to related parties of US$ 2.8 million
(2021: US$ 0.2 million), increased to US$
15.5 million (2021: US$ 9.0 million) and other
payables increased to US$ 12.5 million
(2021: US$ 10.4 million). There was an
increase in bank borrowings due within
one year to US$ 30.0 million (2021: US$ 26.1
million), this is due to the increase in the
quarterly payments of the bank borrowings
from US$ 6.0 million to US$ 7.5 million,
as per the loan agreement. Further, the
embedded derivative of US$ 3.2 million
was reclassified from non-current liabilities
to current liabilities during the year.
The increase in equity reflects the net profit
achieved during the period. Current assets
have decreased as receivables are converted
into cash that was used to repay the working
capital facility. While current assets are lower
than current liabilities, the Group continues
to monitor the situation and expects to
honour all its short term liabilities.
Revenue
US$’000
Gross profit/(loss)
US$’000
Adjusted gross profit/(loss)
US$’000*
Vessel Class 2022 2021 2022 2021 2022 2021
E-Class vessels 51,135 38,680 18,641 21,277 15,321 11,170
S-Class vessels 33,986 33,420 12,600 15,897 17,231 15,897
K-Class vessels 48,036 43,027 29,409 23,568 20,310 18,716
Other vessels – – (116) (116) (116) (116)
Total 133,157 115,127 60,534 60,626 52,746 45,667
* See Glossary and Note 31 of the consolidated financial statements.
36 Gulf Marine Services PLC
Net Bank Debt and Borrowings
Net bank debt as at 31 December 2022
reduced to US$ 315.8 million (2021: US$
371.3 million) due to payments of US$ 51.5
million during the year. These payments
comprised of US$ 30.0 million towards the
principal loan and US$ 21.5m towards the
Working Capital Facility. The net leverage
ratio has significantly reduced and was 24%
lower at 4.4 times as at 31 December 2022
compared to 5.8 times in 2021, as a result
of improved adjusted EBITDA.
Going Concern
The Group successfully completed the
refinancing of its loan on significantly improved
terms in 2021 thus providing a positive
platform on which the future development
and growth of the business can be based.
Successful negotiations with lenders have
resulted in improved margin interest rates thus
enabling the Group to manage its short-term
liabilities in a better way.
Warrants being granted and vesting is a
non-cash transaction and would not impact
the Groups ability to remain a Going Concern.
If the warrants are exercised, the holders
would be required to pay the Group circa
US$ 9.6 million (GBP 7.9 million).
The Group’s forecasts indicate that its
revised debt facility will provide sufficient
liquidity for its requirements for at least the
next 12 months and accordingly, the
consolidated financial statements for the
Group have been prepared on the Going
Concern basis. For further details please
refer the Going Concern disclosure in
Note 3 of the financial statements.
Related Party Transactions
During the year, there were related party
transactions with our partner in Saudi Arabia
for leases of breathing equipment for some
of our vessels and office space totalling
US$ 0.6 million (2021: US$ 0.5 million).
In addition, there were related party transactions
for catering services on one of our vessels
totalling to US$ 1.2 million (2021: US$ 0.3
million) and overhauling services totalling
US$ 1.9 million (2021: US$ nil), from affiliates
of Mazrui International LLC, the Group’s
second largest shareholder (25.6%).
The Group is not allowed to have any
transactions with its largest shareholder,
Seafox International (29.99%) as agreed with
Lenders. Further details can be found in the
Directors Report on page 70 and Note 24
of the consolidated financial statements.
Adjusting Items
The Group presents adjusted results,
in addition to the statutory results, as
the Directors consider that they provide
a useful indication of performance.
A reconciliation between the adjusted
non-GAAP and statutory results is provided
in Note 31 of the consolidated financial
statements with further information provided
in the Glossary.
Alex Aclimandos
Chief Financial Officer
23 April 2023
FINANCIAL REVIEW
continued
How We Assess Our Prospects
In considering the Group’s long-term
viability prospects, the Directors regularly
assesses the risks to its business model,
strategy, future performance, solvency and
liquidity. These assessments are supported
by the risk management processes and
include a review of the Group’s exposure
to principal risks and uncertainties.
The Group’s customers are principally
involved in the exploration for and
production of Oil and Gas and installation
of Windfarms. The Directors closely
monitors its customers’ operational
plans and related capital expenditure
programmes, particularly in the short term
in which projects will be in progress and
for which requirements for services from
GMS will be more certain.
Assessment Period
In line with Provision 31 of the 2018 UK
Corporate Governance Code, the Directors
have carried out a thorough review of the
prospects of the Group and its ability to
meet its liabilities through to at least the
end of April 2026.
This period was selected with reference
to the current term of the Group’s current
banking facilities (see below), covenant
testing dates, current backlog and
business development pipeline, both of
which offer limited visibility beyond this
point. This period is also aligned with
industry peers. The Directors reviews
annually and on a rolling basis the strategic
plan for the business, which management
progressively implements.
The Group will be required to refinance
its term facility when the bullet payment
(currently estimated to be c.US$ 223
million) falls due in June 2025. Based on
the latest forecast, the Group will not be
able to meet its obligation to repay the
bullet payment as at 30 June 2025.
However, given that the Self-Elevating
Support Vessels (SESVs) market continues
to improve and GMS has witnessed in the
past year a strengthening of the demand
for GMS vessels both the net leverage ratio
and the loan to value ratio are expected to
be lower in June 2025. This is in line with
the current performance forecast and
management are confident that the Group
will be well placed to source new finance
ahead of the bullet payment falling due.
LONG-TERM VIABILITY
STATEMENT
37Annual Report 2022
Strategic Report
Taking these factors into consideration, the
Directors believe that a three-year forward-
looking period, commencing on the date
the annual accounts are approved by the
Directors, is the appropriate length of time
to reasonably assess the Group’s viability.
Consideration of Principal Risks
The nature of the Group’s operations
exposes the business to a variety of risks.
The Directors regularly review the principal
risks to the business and assesses the
appropriate controls and the key mitigating
actions used to address them. The Directors
have further considered their potential impact
within the context of the Group’s viability.
Sensitivity Analysis
To assess the Group’s viability, the
Directors have performed scenario
analysis considering the following
severe but plausible scenarios:
• no work-to-win in 2023;
• a 24 percent and 15 percent reduction
in work to win utilisation in 2024 and
2025 respectively;
• a reduction in day-rates for a K-Class
vessel assumed to have the largest day
rate, by 10 percent commencing from
May 2023; and
• increase in forecast LIBOR by 10 percent
in H1 2024.
Based on the above scenario, the Group
would not be in breach of its term loan
facility. The downside case is considered
to be severe but plausible and would still
leave the Group in compliance with the
covenants under the Group’s banking facility
till its maturity.
Reverse Stress Testing
In addition to the above downside sensitivity,
the Directors have also considered a reverse
stress test, where profit has been sufficiently
reduced to breach the net leverage ratio
as a result of a combination of reduced
utilisation and day rates, as noted below:
• no work-to-win in 2023;
• a 29 percent reduction in advanced
stage negotiation utilisation in 2023;
• no options in 2025;
• a 35 percent and 24 percent reduction in
work to win utilisation in 2024 and 2025
respectively; and
• increase in forecast LIBOR by 10%
percent in H1 2024.
Based on the above scenario there will be
covenant breaches as Finance Service
Cover and Interest Cover ratios would
exceed the permitted levels at 30 June
2024. Finance cover ratio will also exceed
the permitted level at 31 December 2024.
Given the improved market conditions
and strengthening of the demand for GMS
vessels, the above breach scenario is
highly unlikely to occur. However, should
circumstances arise that differ from the
Group’s projections, the Directors believe
that a number of mitigating actions can
be executed successfully in the necessary
timeframe to meet debt repayment
obligations as they become due and in
order to maintain liquidity. Potential
mitigating actions include the following:
• Vessels off hire for prolonged periods
could be cold stacked to minimise
operating costs on these vessels
at the rate of US$ 35,000/ month for
K-Class and US$ 50,000/month for
S-Class/E-Class; and
• Reduction in overhead costs, particularly,
bonus payments estimated at US$ 125k
per month.
GMS continues to remain cognisant of the
wider context in which it operates and the
impact that climate change could have
on the financial statements of the Group.
The impact of climate change is expected
to be insignificant in the going concern
assessment period.
Conclusion
Taking into account the Group’s current
position and its principal risks, the Directors
have reasonable expectations that the
Group will be able to continue its operations
and meet its liabilities as they fall due over
the next three years.
Mansour Al Alami
Executive Chairman
23 April 2023
38 Gulf Marine Services PLC
Aspects of governance over the past year include:
1. We held a full strategy meeting at the Company’s offices in
Abu Dhabi with both directors and members of management
present. This enabled presentations from members of
management, subsequent debate amongst directors, and
feedback from the Board.
2. At strategy meetings, Board meetings, and more generally, we
benefit greatly from the diversity of our Directors who are from
several different countries across three different continents. This
diversity includes their wide experience in the region and across
related industries, helping inform Board debates. We are though
conscious of the lack of gender diversity on the Board which we
are committed to remedying with our next Board appointment
now targeted to be completed over the coming year.
3. This diversity of our Board increases the level of challenge in its
debates and ensures decisions are reached following proper
consideration of alternatives. It also ensures decisions that are
made take account of the interests of different stakeholders in
the Group as well as all shareholders.
4. One key decision was the issue of the Warrants due to the
banks under the Group’s borrowing facilities in the absence of the
US$ 50 million equity raise otherwise required under the Group’s
borrowing facilities. This resolved an uncertainty regarding the
ongoing capital structure of the Group in a way that complied with
the Group’s legal obligations as well as securing the future of the
Group for our stakeholders.
5. Following a tender process overseen by our Audit and Risk
Committee, and in accordance with their recommendations,
KPMG was appointed as the new Auditor of the Group. I would
like to thank Jyrki Koskelo, for his work on this and welcome
KPMG to their new role.
6. Our Remuneration Committee was also particularly active during
the year. The Committee completed an extensive consultation
with our shareholders regarding plans for long term incentive
awards. In line with the vast majority of responses received, these
awards were granted in June. These included three year net profit
and EBITDA targets together with an underpin condition relating
to the Group’s leverage at 31 December 2022. I would like to
thank Anthony St John for his work including in achieving
long-sought consensus amongst shareholders. Due to the
underpin condition not having been met, the awards lapsed and
the Committee has decided to consider future LTIP awards when
this leverage level has been met.
7. Further detail of the work of our Audit and Risk and Remuneration
Committees is included in the reports commencing on pages
47 to 53 respectively. These are important parts of our overall
governance activities underpinning the responsibilities of the
Board in the key areas.
8. The main activity of our Nomination Committee over the past year
has been in review of the results of our Board and Committee
evaluation. This important work reviewed activities during the year
and identified areas that could be improved. It is for a Board on a
whole to take forward such areas of improvement, further details
of which are given in the report of the Nomination Committee on
page 53.
9. Following on from our strategy discussion in 2022, we have now
developed an updated 3-year business plan for the Group. Whilst
the previous years have had more focus on shorter term matters
around capital structure, from 2023 we can turn our attention to
longer term matters.
10. As we move forward, our corporate governance structure will
enable our Board and its Committees to provide the direction,
oversight and control that has helped us successfully navigate
the challenges of the past. Whilst there is no doubt there will be
fresh challenges ahead, we look to the future with confidence
and optimism as we continue to build shareholder value.
As indicated above, the Board and its Committees are diligently
working on behalf of shareholders and other stakeholders in the
Company. This work helps sustain operational excellence to enhance
performance and utilisation of the Group’s assets and explore new
opportunities within the market. The Board’s focus remains wholly on
its management of the Company, the generation of shareholder value
and the governance of the Group in line with the duties of the Board
to all stakeholders.
This Corporate Governance Report, including the sections that follow,
sets out how the Group has applied the main principles of governance
contained in the Code. The Board considers that the Group complied
with the relevant Code provisions that applied during the year, except
the provision set out in the table on page 46, until the dates shown in
that table where applicable. The table also states the reasons where
the Group departed from the provisions of the Code.
We look forward to reporting on further progress next year.
Mansour Al Alami
Executive Chairman
23 April 2023
As I mentioned in the Chairman’s review on page 2, the past year has seen the
Group continue to put emphasis on the development of the Group’s business
within a framework of effective risk management and internal control. Over
the previous two years the Board has focussed on ensuring transparency and
ethical business practices with the support of our diligent and active Audit &
Risk Committee and Remuneration Committee, which are made up solely of
independent non-executive Directors. In the past year, the Board has built on this
foundation now looking longer into the future. In this introduction, and in the Board
and Committee Reports that follow, we seek to give some insight to our work.
CHAIRMAN’S INTRODUCTION
39Annual Report 2022
Governance
Governance Calendar for 2022
The overall calendar of meetings of the Board and its Committees for 2022 is shown below.
Governance Calendar for 2022
Further
Information Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Board Page 40
Audit and Risk Committee Page 47
Nomination Committee Page 50
Remuneration Committee Page 53
General Meeting Page 20
Annual General Meeting Page 38
Meeting Attendance by Directors in 2022
Director Board
Audit and
Risk Committee
Remuneration
Committee
Nomination
Committee
Mansour Al Alami
Hassan Heikal
Rashed Al Jarwan
Jyrki Koskelo
Lord Anthony St John of Bletso
Charbel El Khoury
Attended Attended all or part of meeting as an invitee Apologies Not on Board/Committee
40 Gulf Marine Services PLC
BOARD OF DIRECTORS
Indicates Committee Chair
A
Member of the Audit and Risk Committee
N
Member of the Nomination Committee
R
Member of the Remuneration Committee
Mansour Al Alami
Executive Chairman
Hassan Heikal
Deputy Chairman,
non-executive Director
Rashed Al Jarwan
Senior Independent
non-executive Director
Lord Anthony
St John of Bletso
Independent
non-executive Director
Charbel El Khoury
Non-executive Director
Jyrki Koskelo
Independent
non-executive Director
Appointed to the Board
10 November 2020 as non-executive
Chairman and appointed Executive
Chairman 23 November 2020
25 November 2020
(previously served on the Board
from 4 August to 7 October 2020)
and appointed Deputy Chairman
5 February 2021
10 November 2020
26 May 2021 23 August 2021 5 February 2021
Relevant skills and experience
Mansour Al Alami’s career spans over
40 years in the MENA region and
includes experience in the oil, gas
& energy sector, construction, IT,
transportation, finance and investment.
He served 15 years in various roles
in ADCO, now ADNOC Onshore
(the leading onshore producer within
ADNOC Group), in the areas of drilling
and production for upstream onshore
operations, later becoming Head of
Control & Planning. Mansour also has
served in Senior Management positions
in other companies including Reda
Pump Libya, Al Bawardi Enterprises
and EMDAD. He sits on the boards and
committees of several Amman Stock
Exchange-listed companies.
He brings relevant experience to
GMS including extensive technical
and commercial experience covering
multi-national and multi-site operations
in the oil & gas sector. He has
successfully led businesses in the
MENA region through phases of
operational transition and financial
restructuring and is using his industry
knowledge and leadership skills to
work with the Board to implement the
Company’s re-positioning plan.
Mansour has a BSc in Chemical
Engineering from Newcastle Upon Tyne
University, UK.
Hassan Heikal is the Chairman
of Seafox International Limited, a
significant shareholder in GMS, and
Chairman of Kazyon, a supermarket
chain in Egypt. He is the Co-Founder
of EFG Hermes, a leading investment
bank based in the Middle East where
he served for 18 years, latterly eight
years as Co-Chief Executive Officer.
Prior to EFG Hermes, Hassan worked
in Goldman Sachs, where he served
in the Corporate Finance Division.
His experience in the MENA region,
in the oil, gas & energy sectors as well
as the financial sector, enhance the
expertise of the Board.
Hassan has a BSc from the Faculty
of Economics and Political Science,
Cairo University, Egypt.
Rashed Al Jarwan has served Dana
Gas (from 2006 to present) as General
Manager and Executive Director. He
also acts as the Chairman of the Board
Steering Committee. Prior to joining
Dana Gas, he served in various
technical and general management
roles at ADNOC and its group of
companies over a 28-year period.
He brings energy sector experience
gained in over 40 years in the industry.
His understanding of the energy sector,
technical knowledge and strong
experience serving on other boards
and committees in the MENA region
enable him to bring a high level of
expertise to the GMS Board.
Rashed has a BSc in Petroleum
& Natural Gas Engineering from
Pennsylvania State University, USA.
Anthony is a cross bench peer in the
House of Lords. As a practising lawyer
by training, with his LLM in Maritime
Law, he worked for Shell (South Africa)
and then as an oil analyst and in
specialist sales for several institutions
in the City of London. Through his
subsequent career he has held a
number of executive and advisory
roles in high-growth companies.
Anthony has a BA and a BScoSc in
Psychology from Cape Town University,
a BProc in Law from the University
of South Africa, South Africa and
an LLM from the London School of
Economics, UK.
Charbel El Khoury is Group CEO
of Mazrui International LLC (Mazrui
International), a UAE-based diversified
investment company, with significant
reach in the energy, industrial, real
estate and trading sectors. Charbel
guides Mazrui International’s growth
strategy, taking the lead role in its
investments, operations, mergers and
acquisitions, project finance and joint
ventures. Mazrui International is
affiliated with Mazrui Investments LLC
a significant shareholder in GMS.
He started his career in prominent
legal practices in Lebanon and the UAE
before assuming the role of Chief Legal
Officer at Mazrui International, where
he was responsible for multiple
jurisdictions and industry sectors.
Charbel has a bachelor’s degree in
International Law and Legal Studies,
and a master’s degree in Private Law,
both from La Sagesse University,
Lebanon. In 2021, he also successfully
completed the Harvard Business
School executive education program
at Harvard University, USA.
Jyrki Koskelo currently serves as a
board member of Africa Agriculture and
Trade Investment Fund (Luxembourg)
and as a member of the Supervisory
Boards of Serengeti Energy (Sub-
Saharan Africa) and Fibank (Bulgaria).
He held various senior positions
(between 1987 to 2011) within the
Washington-based International
Finance Corporation (part of the World
Bank Group and the largest global
development institution focused on the
private sector in developing countries).
Jyrki has also previously been a Senior
Advisor to the Al Jaber Group, a Board
member of the African Banking
Corporation and a Board member of
the African Development Corporation.
He brings extensive additional business
advisory experience to the Board,
having had a distinguished career in
public and private finance, across
multiple markets.
Jyrki has an MSc in Civil Engineering
from Technical University, Helsinki,
Finland, and an MBA in International
Finance from MIT, Sloan School of
Management, Boston, USA.
Significant external appointments
None Hassan is the Chairman of Seafox and of
Kazyon, a supermarket chain in Egypt.
Rashed currently serves as Chairman
of the Board Steering Committee of
Dana Gas. He is also a non-executive
Director on the boards of Emirates
General Petroleum Company
(EMARAT), Oman Insurance Co,
MASHREQ Bank and Al Ghurair
Investment Co.
Anthony is currently Non-Executive
Chairman of Integrated Diagnostics
Holdings, and a Non-Executive
Director of Yellow Cake PLC, Smithson
Investment Trust PLC and Strand
Hanson Ltd. He is also a Trustee of a
number of charities, with a strong focus
on education and wildlife conservation.
Charbel holds a number of board
positions across international
organisations in which Mazrui
International has invested including,
Depa PLC, Hilti Emirates, Carbon
Holdings and Gulf Refining Company NV.
Jyrki is currently a Board member
of Africa Agriculture and Trade
Investment Fund, based in
Luxembourg. He is also a member
of the Supervisory Boards of
Serengeti Energy, Sub-Saharan
Africa and Fibank, Bulgaria.
N
RA N RA N N RA N
41Annual Report 2022
Governance
Mansour Al Alami
Executive Chairman
Hassan Heikal
Deputy Chairman,
non-executive Director
Rashed Al Jarwan
Senior Independent
non-executive Director
Lord Anthony
St John of Bletso
Independent
non-executive Director
Charbel El Khoury
Non-executive Director
Jyrki Koskelo
Independent
non-executive Director
Appointed to the Board
10 November 2020 as non-executive
Chairman and appointed Executive
Chairman 23 November 2020
25 November 2020
(previously served on the Board
from 4 August to 7 October 2020)
and appointed Deputy Chairman
5 February 2021
10 November 2020
26 May 2021 23 August 2021 5 February 2021
Relevant skills and experience
Mansour Al Alami’s career spans over
40 years in the MENA region and
includes experience in the oil, gas
& energy sector, construction, IT,
transportation, finance and investment.
He served 15 years in various roles
in ADCO, now ADNOC Onshore
(the leading onshore producer within
ADNOC Group), in the areas of drilling
and production for upstream onshore
operations, later becoming Head of
Control & Planning. Mansour also has
served in Senior Management positions
in other companies including Reda
Pump Libya, Al Bawardi Enterprises
and EMDAD. He sits on the boards and
committees of several Amman Stock
Exchange-listed companies.
He brings relevant experience to
GMS including extensive technical
and commercial experience covering
multi-national and multi-site operations
in the oil & gas sector. He has
successfully led businesses in the
MENA region through phases of
operational transition and financial
restructuring and is using his industry
knowledge and leadership skills to
work with the Board to implement the
Company’s re-positioning plan.
Mansour has a BSc in Chemical
Engineering from Newcastle Upon Tyne
University, UK.
Hassan Heikal is the Chairman
of Seafox International Limited, a
significant shareholder in GMS, and
Chairman of Kazyon, a supermarket
chain in Egypt. He is the Co-Founder
of EFG Hermes, a leading investment
bank based in the Middle East where
he served for 18 years, latterly eight
years as Co-Chief Executive Officer.
Prior to EFG Hermes, Hassan worked
in Goldman Sachs, where he served
in the Corporate Finance Division.
His experience in the MENA region,
in the oil, gas & energy sectors as well
as the financial sector, enhance the
expertise of the Board.
Hassan has a BSc from the Faculty
of Economics and Political Science,
Cairo University, Egypt.
Rashed Al Jarwan has served Dana
Gas (from 2006 to present) as General
Manager and Executive Director. He
also acts as the Chairman of the Board
Steering Committee. Prior to joining
Dana Gas, he served in various
technical and general management
roles at ADNOC and its group of
companies over a 28-year period.
He brings energy sector experience
gained in over 40 years in the industry.
His understanding of the energy sector,
technical knowledge and strong
experience serving on other boards
and committees in the MENA region
enable him to bring a high level of
expertise to the GMS Board.
Rashed has a BSc in Petroleum
& Natural Gas Engineering from
Pennsylvania State University, USA.
Anthony is a cross bench peer in the
House of Lords. As a practising lawyer
by training, with his LLM in Maritime
Law, he worked for Shell (South Africa)
and then as an oil analyst and in
specialist sales for several institutions
in the City of London. Through his
subsequent career he has held a
number of executive and advisory
roles in high-growth companies.
Anthony has a BA and a BScoSc in
Psychology from Cape Town University,
a BProc in Law from the University
of South Africa, South Africa and
an LLM from the London School of
Economics, UK.
Charbel El Khoury is Group CEO
of Mazrui International LLC (Mazrui
International), a UAE-based diversified
investment company, with significant
reach in the energy, industrial, real
estate and trading sectors. Charbel
guides Mazrui International’s growth
strategy, taking the lead role in its
investments, operations, mergers and
acquisitions, project finance and joint
ventures. Mazrui International is
affiliated with Mazrui Investments LLC
a significant shareholder in GMS.
He started his career in prominent
legal practices in Lebanon and the UAE
before assuming the role of Chief Legal
Officer at Mazrui International, where
he was responsible for multiple
jurisdictions and industry sectors.
Charbel has a bachelor’s degree in
International Law and Legal Studies,
and a master’s degree in Private Law,
both from La Sagesse University,
Lebanon. In 2021, he also successfully
completed the Harvard Business
School executive education program
at Harvard University, USA.
Jyrki Koskelo currently serves as a
board member of Africa Agriculture and
Trade Investment Fund (Luxembourg)
and as a member of the Supervisory
Boards of Serengeti Energy (Sub-
Saharan Africa) and Fibank (Bulgaria).
He held various senior positions
(between 1987 to 2011) within the
Washington-based International
Finance Corporation (part of the World
Bank Group and the largest global
development institution focused on the
private sector in developing countries).
Jyrki has also previously been a Senior
Advisor to the Al Jaber Group, a Board
member of the African Banking
Corporation and a Board member of
the African Development Corporation.
He brings extensive additional business
advisory experience to the Board,
having had a distinguished career in
public and private finance, across
multiple markets.
Jyrki has an MSc in Civil Engineering
from Technical University, Helsinki,
Finland, and an MBA in International
Finance from MIT, Sloan School of
Management, Boston, USA.
Significant external appointments
None Hassan is the Chairman of Seafox and of
Kazyon, a supermarket chain in Egypt.
Rashed currently serves as Chairman
of the Board Steering Committee of
Dana Gas. He is also a non-executive
Director on the boards of Emirates
General Petroleum Company
(EMARAT), Oman Insurance Co,
MASHREQ Bank and Al Ghurair
Investment Co.
Anthony is currently Non-Executive
Chairman of Integrated Diagnostics
Holdings, and a Non-Executive
Director of Yellow Cake PLC, Smithson
Investment Trust PLC and Strand
Hanson Ltd. He is also a Trustee of a
number of charities, with a strong focus
on education and wildlife conservation.
Charbel holds a number of board
positions across international
organisations in which Mazrui
International has invested including,
Depa PLC, Hilti Emirates, Carbon
Holdings and Gulf Refining Company NV.
Jyrki is currently a Board member
of Africa Agriculture and Trade
Investment Fund, based in
Luxembourg. He is also a member
of the Supervisory Boards of
Serengeti Energy, Sub-Saharan
Africa and Fibank, Bulgaria.
N
RA N
RA N N RA N
42 Gulf Marine Services PLC
REPORT OF THE BOARD
Dear Shareholders,
The Board’s role is to promote the long-term success of the Company and to enable the generation of value for shareholders as well as
other stakeholders on a sustainable basis over the long term. The Board made and continues to make concerted efforts to achieve results
to enhance the value of GMS. The Board, along with management, has continued to develop the Group at both the business and corporate
levels such that the interests of all its shareholders and stakeholders are appropriately addressed.
Board Calendar for Principal Meetings in 2022
*At Each Principal
Meeting
**Review and discussion of: Review
of reports
from Board
Committees
as relevant
• Health, safety and the environment
• Fleet performance and operational matters
• Discussions regarding the progress of negotiations with
the Group’s banks on re-setting its capital structure
• Competitive landscape and market
• Legal and corporate governance
matters
• Investor relations and feedback
• Finance and accounting matters
• Human resources
• Risk management and key risks facing
the Group
• Trading and forecast updates
***At Specific Meetings
March
• Review and discussion on the impact of the global events
on staff
• Review and discussion of the Board Evaluation
• Review and approval of Modern Slavery Statement
• Review and approval of Terms of Reference for each
of the Board’s standing Committee’s
• Discussions for the appointment of KPMG as the
Group’s auditors
May
• Review and approval of full-year results
August
• Review and discussion of the performance against
the Group scorecard.
• Discussion and review of debt structure agreement
with the banks
• Discussion on the legal opinion regarding PIK
• Review of AGM results
September
• Review and approval of half-year results
• Review and discussion on borrowing arrangements
• Operational review of the Group
• Review and discussion of regional markets and
business development
November
• External Industry Presentation
• Discussion of future financing
• Discussion of abolition of LIBOR and approval
of SOFR in agreement with the banks
• Review of the forecasts for 2023
December
• Review of financing arrangements
• Discussion and approval of the Budget for 2023
• Review and approval of Warrant Issuance
* These are the main agenda items reviewed and discussed at each principal meeting.
** This provides a snapshot of some of the matters discussed at Board meetings during 2022.
*** These were specific items reviewed and discussed at individual meetings.
43Annual Report 2022
Governance
The role of the Board and its Committees is summarised in the table below.
Board of Directors
Responsible for the effective oversight of the Company and management of the Group.
Audit and Risk Committee Remuneration Committee Nomination Committee
Monitors the integrity of the Group’s
financial statements, financial and
regulatory compliance, and the systems
of internal control and risk management.
Reviews the effectiveness of the internal
and external audit processes.
See pages 47 to 49 for the Report of the
Audit and Risk Committee.
Determines the reward strategy for the
Executive Chairman and Senior
Management to attract and retain
appropriate individuals and to align their
interests with those of shareholders.
See pages 53 to 54 for the Report of the
Remuneration Committee.
Considers and recommends
appointments to the Board taking into
account the appropriate skills, knowledge
and experience to operate effectively and
to determine the Group’s strategy.
See pages 50 to 52 for the Report of the
Nomination Committee.
Executive Management
Board Membership
The Board has reviewed the composition, qualifications, experience and balance of skills of the current Directors to ensure there is the right mix
on the Board and its Committees, and that these are working effectively. The current members of the Board have a wide range of appropriate
skills and experience. They are from diverse backgrounds and based in more than one country, both in Europe and in the MENA region. Their
biographies can be found on pages 40 to 41. The Board intends to seek the appointment of an additional independent non-executive Director
to introduce gender diversity on the Board.
Non-Executive Directors and Independence
The non-executive Directors are a key source of expertise and contribute to the effectiveness of the Board. The Board considers and reviews
the independence of each non-executive Director at least annually. In line with the Code, in carrying out the review, circumstances which are
likely to impair or could appear to impair the independence of non-executive Directors are considered. Consideration is also given to qualities
such as character, judgement, commitment and performance on the Board and relevant committees, and the ability to provide objective
challenge to management. Following a review by the Board, the Board concluded that each of non-executive Directors should be proposed
for re-appointment at the Company’s upcoming Annual General Meeting (AGM).
Rashed Al Jarwan, Jyrki Koskelo and Anthony St John are considered by the Board to be fully independent. Charbel El Khoury is considered
to be a non-independent non-executive Director given his nomination by one of the Company’s major shareholders even though he underwent
a similar interview process as the independent other non-executive Directors appointed. Hassan Heikal is also considered a non-independent
non-executive Director due to him having a dual role with one of our other major shareholders, which also operates in the same industry and with
whom he serves as Chairman. Nevertheless, the Board has suitable protocols in place to manage the flow of information in circumstances where
conflicts might arise, which are described in more detail below in the Conflicts of Interest section of this report on page 44.
Rashed Al Jarwan as our Senior Independent Director, along with Jyrki Koskelo and Anthony St John, as our other independent non-executive
Directors, provide strong input to the Board to ensure it is well balanced, in addition to my own role as Chairman. As a group of Directors, our
Board brings strong relationships with key clients and banks, extensive experience in other companies in the MENA region, Europe and beyond
and considerable sector, technical, financial and operational experience. In addition, the Board is wholly committed to promoting the long-term
sustainable success of the Company and generating value for all shareholders taking account of the interests of all stakeholders.
Division of Responsibilities
The Chairman encourages a culture of openness and debate both within the Board’s proceedings and when engaging with management.
Part of this has been the provision of management reporting and briefings to the Board as a whole and this has been embraced by
operational management presenting directly to the Board when appropriate.
As a Board, we aim to operate in a collegiate manner by ensuring that each of the Directors is able to make an active contribution to the
Board’s decision-making. Whilst the roles of Chairman and Chief Executive Officer are held by one individual, which is contrary to the
recommendation of the Code, we are satisfied that the robust debate within the Board ensures that there remains a division between the
responsibilities of the Board and those of management. This is achieved through non-executive Directors devoting adequate time to meet
their Board responsibilities, as well as providing constructive challenge and strategic guidance to both encourage and hold management
to account.
The non-executive Directors all continue to provide significant value in their roles. The combination of the roles of Chairman and Chief
Executive will continue to be kept under review and once a stage is reached when the Board considers it would be appropriate to split
the roles, this will be addressed by the Board.
The Board is assisted by an experienced UK-based Company Secretary, ensuring that the appropriate policies, processes, information,
time and resources are provided for the Board to function efficiently and effectively.
44 Gulf Marine Services PLC
REPORT OF THE BOARD
continued
How the Board Operates
The Roles of the Board and its Committees
The Board determines the strategic direction and governance structure that will help achieve the long-term success of the Company and
maximise shareholder value. The Board takes the lead in areas such as strategy, financial policy, annual budgeting, risk management and the
overall system of internal controls. A summary of some of the Board’s key responsibilities is set out in written matters reserved for the Board.
The Board is assisted in certain responsibilities by its committees which carry out certain tasks on its behalf, so that it can operate efficiently
and give the right level of attention and consideration to relevant matters. The composition and role of each committee is summarised on
page 43 and their full terms of reference are available on the Company’s website.
The Board Processes
The Chairman, along with the Company Secretary, has established processes designed to maximise Board performance. Key aspects of
these are shown below:
• The Chairman and the Company Secretary agree an overall calendar of subjects to be discussed by the Board during the year.
• Board meetings are scheduled to ensure adequate time for open discussion of each agenda item allowing for questions, scrutiny,
constructive challenge and full debates on key matters for decisions to be taken by consensus though any dissenting views would be
minuted accordingly.
• Main Board meetings generally take place at the Company’s headquarters in Abu Dhabi with some or all Directors attending by video.
The development of Group strategy is led by the Chairman, with input, challenge, examination and ongoing testing and review by the
non-executive Directors.
• Members of the Senior Management team are able to draw on the collective experience of the Board, including its non-
executive Directors.
• Reporting packs, which are designed to be clear, accurate and analytical, are distributed in advance of main Board meetings, allowing
sufficient time for their review, consideration and clarification or amplification of reports in advance of the meeting.
• Once goals have been set and actions agreed, the Board receives regular reports on their implementation.
• Management reports with commentary and analysis are distributed to the Board on a regular basis.
• The Board reviews the Group’s risk register and challenges it where appropriate.
• All Directors have open access to the Group’s key advisers, including management and the Company Secretary, and are also entitled to
seek independent professional advice at the Group’s expense where appropriate.
Director Induction and Training
The training needs of the Directors are reviewed as part of the annual evaluation of the Board. The Board and its committees receive briefings
on matters of importance, including corporate governance developments.
Arrangements are in place for any newly-appointed Directors to undertake an induction designed to develop their knowledge and
understanding of the Group. The induction includes briefing sessions during regular Board meetings, visits to the Company’s Head Office,
meetings with members of the wider management team and discussions on relevant business issues. Each Director has received briefings
as well as undertaken induction and training sessions tailored to their individual and general requirements, including presentations by the
Company Secretary and/or the Company’s legal advisors.
Re-Election of Directors
Following recommendations from the Nomination Committee, the Board considers that all Directors continue to be effective, have the required
skills, knowledge and experience, are committed to their roles and have sufficient time available to perform their duties. In accordance with the
provisions of the Code, all Directors are being proposed for re-election at the Company’s 2023 Annual General Meeting (AGM) as set out in the
Notice of AGM to shareholders.
Conflicts of Interest
Directors have a statutory duty to avoid situations in which they have or may have interests that conflict with those of the Company, unless that
conflict is first authorised by the Directors. This includes potential conflicts that may arise when a Director takes up a position with another
company. The Company’s Articles of Association allow the other Directors to authorise such potential conflicts, and a procedure as well as an
information protocol are in place to deal with any actual or potential conflicts of interest. The Board deals with each actual or potential conflict
of interest on its individual merit and takes into consideration all the circumstances.
The information protocol sets out the procedures in relation to the control of certain types of information from the Company to Hassan Heikal,
as a non-independent non-executive Director with an existing relationship with a competitor. As such, in circumstances where information is
required to be provided to all members of the Board, any information stated as restricted in line with the provisions of the information protocol
is not provided to Hassan Heikal. Restricted information includes information that would be commercially sensitive and confidential.
All potential conflicts approved by the Board are recorded in an Interests Register, which is reviewed by the Board at the beginning of each
principal Board meeting to ensure that the procedure is operating at maximum effectiveness.
45Annual Report 2022
Governance
Board Evaluation and Effectiveness
Critical to the success of our Board and its Committees in achieving their aims is the effectiveness with which they operate. The Board
believes that these evaluations can provide a valuable opportunity to highlight recognised strengths and identify any areas for development.
The Board conducted a review of its performance during the past year.
A summary of the internal evaluation undertaken by the Board is included in the Nomination Committee Report on page 51. The Company is
not currently required to conduct an externally facilitated Board evaluation in terms of the Code although the Board will keep this matter under
review as the Group develops.
Engagement with Shareholders and Other Stakeholders
The Chairman is responsible for shareholder relations, ensuring that there is effective communication with shareholders on matters such
as performance, governance and strategy. The Senior Independent Director is also available to any shareholder with concerns on matters
that cannot be addressed through the usual methods. The Senior Independent Director can be contacted through the Company Secretary.
The committee Chairs are also available to shareholders and consult with shareholders, where appropriate, in respect of significant areas
which come within their committees’ remit.
As part of our investor relations programme, a combination of presentations, group calls and one-to-one meetings are arranged to discuss
the Group’s half-year and full-year results with current and prospective institutional shareholders and analysts. Additional meetings may also
be held in the intervening periods to keep existing and prospective investors updated on our latest performance.
The Company’s website provides stakeholders with comprehensive information on our business activities and financial developments,
including copies of our presentations to analysts and regulatory news announcements.
Roles and Responsibilities of Directors
Further details of the division of responsibilities are in the table below.
Division of responsibilities
• The roles of Chairman and CEO are held by the same person, as agreed by the Board. Whilst this is not in compliance with the
division of responsibilities under the Code, the Board ensures enhanced oversight of the Executive Chairman in his dual roles through
the appointment of the Deputy Chairman.
• The Executive Chairman is responsible for the leadership and effectiveness of the Board, chairing Board meetings, ensuring that
agendas are appropriate and is responsible for ensuring that all Directors actively contribute to the determination of the Group’s strategy.
• The Executive Chairman is also responsible for the day-to-day management of the Group and implementing the Group’s strategy,
developing proposals for Board approval and ensuring that a regular dialogue with shareholders is maintained.
• The separation of authority between the Board and management is ensured by key decisions being referred to the Board and
non-executive Directors taking an active role in decision-making between, as well as at main Board meetings.
• The Senior Independent Director acts as a sounding board and confidante to the Executive Chairman and is available to
shareholders.
• The non-executive Directors are primarily responsible for constructively challenging all recommendations presented to the Board,
where appropriate, based on their broad experience and individual expertise.
Summary of individual responsibilities
*Executive Chairman – Board responsibilities *Executive Chairman – Management responsibilities
• Providing strategic insight from wide-ranging business
experience and contacts built up over many years.
• Ensuring that the Board plays a full and constructive role in
the determination and development of the Group’s strategy.
• Agreeing subjects for particular consideration by the Board
during the year at Board meetings, ensuring that adequate
time is available to discuss all agenda items.
• Leading the Board in an ethical manner and promoting
effective relations between the non-executive Directors
and Senior Management.
• Building a well-balanced Board, considering Board
composition and Board succession planning.
• Overseeing the annual Board evaluation process and
acting on its results.
• Representing the Group to its shareholders and other
stakeholders such as its clients and suppliers, and the
general industry.
• Leading the business and the rest of the management team
and ensuring effective implementation of the Board’s decisions.
• Driving the successful and efficient achievement of the
Group’s KPIs and objectives.
• Leading the development of the Group’s strategy with input
from the rest of the Board.
• Working with the other Board members in agreeing subjects
for particular consideration by the Board during the year.
• Providing strong and coherent leadership of the Company
and effectively communicating the Company’s culture, values
and behaviours internally and externally.
* Non-executive Directors can meet independently of the Chairman to consider matters as appropriate. Any such matters can then be discussed with, and addressed by,
the Board as a whole. This process is working well in confirming that no significant issues are arising from the combination of the roles of Chairman and Chief Executive.
46 Gulf Marine Services PLC
Senior Independent Director Company Secretary
• Acting as a sounding board for the Executive Chairman.
• Available to shareholders (and contactable via the Company
Secretary) if they have concerns on matters that cannot be
addressed through normal channels.
• Ensuring a balanced understanding of major shareholder
issues and concerns.
• Meeting with the other non-executive Directors without
the Executive Chairman present, at least annually, in order
to help appraise the Executive Chairman’s performance.
• Serving as an intermediary for the other Directors and the
Executive Chairman if necessary.
• Provides an independent voice on the Board along with
the other Independent non-executive Director.
• Secretary to the Board and each of its committees.
• Assisting in the administration of the Board and its
committees helping to ensure that Board papers are clear,
timely and sufficient to enable the Board to discharge its
duties effectively.
• Providing advice to the Board and each of its committees
regarding governance matters.
Compliance with the 2018 UK Corporate Governance Code (the Code)
The table below shows the provisions of the Code with which the Group was not in compliance during 2022.
Code Provision Period of Non-compliance Reasons for Non-compliance
9.
The roles of Chair and Chief
Executive should not be exercised
by the same individual.
Full-year and ongoing. In view of the degree and pace of change necessary for
the Group and its relatively small scale, the Board considers
that the dual role continues to be appropriate in the Group
at the present time. Further details on how this is managed
are shown earlier in this report. The Board will continue
to keep these arrangements under review to ensure they
operate satisfactorily.
Annual General Meeting in 2023
Notice of the 2023 Annual General Meeting will be issued to shareholders and posted on the Company’s website.
Mansour Al Alami
Executive Chairman
23 April 2023
REPORT OF THE BOARD
continued
47Annual Report 2022
Governance
AUDIT AND RISK COMMITTEE REPORT
Dear Shareholders,
I am pleased to present the annual report of the Audit and Risk Committee for the fiscal year 2022. This is my second report as Chair
of the Audit and Risk Committee (the Committee) and I am pleased to set out in this report an update on the main activities of the
Committee in 2022 and up to the date of this report. As members of the Committee, we have overseen the company’s financial reporting
process, internal control systems, and risk management framework.
Membership
On February 5th, 2021, I became the Chair of the Committee, succeeding Rashed Al Jarwan, who now serves as the Senior Independent
Director on the Committee. Lord Anthony St John of Bletso joined both the Board and Committee on May 26th, 2021, and brings with him
a wealth of financial experience and knowledge. All Committee members are independent non-executive Directors, and our collective
expertise allows us to carry out our duties effectively. This composition adheres to the Corporate Governance Code, which specifies that the
Committee should consist solely of independent non-executive Directors. Further information about the Committee members’ backgrounds
is available in their biographies, located on pages 40 to 41.
As part of my transition onto the Board and Committee, I collaborated with management to review significant areas of judgement and
internally reported information. Additionally, I examined previous Committee documents and minutes and engaged in conversations with the
external auditor that we selected to replace Deloitte.
Meetings
The Committee has played an important governance role and supported the Board in fulfilling its oversight responsibilities relating to financial
reporting, internal control and risk management. The Committee met six times during 2022 with an agenda linked to events in the Company’s
financial calendar and other important events which fall under the remit of the Committee for consideration. The Committee regularly reports
to the Board on how it has discharged its responsibilities. The Company Secretary acts as Secretary to the Committee. Please refer to
page 39 for the number of meetings of the Committee and individual attendance by Committee members.
The Terms of Reference, which are available on the Company’s website, include all the matters required under the Code and are reviewed
annually by the Committee.
The Committee receives reports from external advisers and from the Senior Management team as required, to enable it to discharge its
duties and to be given a deeper level of insight on certain business matters. The finance team routinely attend meetings and the Chairman
of the Board is sometimes invited to attend the meetings. The internal and external auditor attend and present at meetings when required.
The external auditor receives copies of all relevant Committee papers (including papers that were considered at meetings when they were
not in attendance) and minutes of all Committee meetings.
Main Activities
Throughout 2022, the Committee focused on various areas, including financial reporting, internal control and risk management, internal audit,
and external audit. The following sections offer more in-depth insight into our specific endeavours under each of these headings, outlining the
actions we, as a Committee, have taken and the outcomes of our efforts.
A) Financial Reporting
Our primary responsibilities involve advising the Board on whether the Annual Report and Accounts are fair, balanced, and understandable,
and provide shareholders with the information necessary to evaluate the Company and Group’s position, performance, business model,
and strategy.
Significant issues
In this area, we pay close attention to significant issues that we deem important based on their potential impact on the Group’s results
or the level of complexity, judgement, or estimation involved in their application. For 2022 and up to the date of this report, we considered
all significant issues that could be material to the Group’s results for the year and closing balance sheet position.
After careful consideration, we were satisfied that management’s judgements were reasonable, and appropriate disclosures were included in
the 31 December 2022 consolidated financial statements. It is important to note that the Board bears the ultimate responsibility for reviewing
and approving the Annual Reports and half-yearly reports. In making our recommendations on these reports to the Board, we give due
consideration to laws and regulations, the Code’s provisions, and the Listing Rules.
Over the course of 2022, the Committee’s work focused on the following areas: financial reporting, internal control and risk management,
internal audit and external audit. The following sections provide more detail on our specific items of focus under each of these headings,
explaining the work we, as a Committee, have undertaken and the results of that work.
48 Gulf Marine Services PLC
Current Year Items
Area of Focus and Issue How Addressed and Conclusion
Reversal of impairment of property,
plant and equipment
IAS 36 requires that a review for impairment or
reversal of impairment be carried out if events
or changes in circumstances indicate that the
carrying amount of an asset is materially different
to its recoverable amount.
Expected utilisation levels, day rates, current
backlog and the Group’s weighted average cost of
capital may also impact the value in use of vessels.
Reversal of impairment and impairment
assessments are judgemental and careful
consideration of the assumptions used in the
determination of the value in use of the assets
is required.
The Committee evaluated management’s approach in determining the recoverable value
of the Group’s vessels.
The Committee evaluated the validity of the assumptions and variations considered in
computing the vessels’ value in use. The feasibility of the long-term business plan and
the suitability of the weighted average cost of capital, which served as an initial basis for
determining the discount rate, were taken into account.
Discussions were held with the external auditor, and the Committee assessed the audit
testing procedures conducted.
After examining management’s assumptions, the Committee approved the recognition
of a reversal of impairments of the K-Class and E-Class fleet, with a combined value of
US$ 21.0 million. Additionally, an impairment charge of US$ 13.2 million was recognised
across the remaining vessels.
The Committee evaluated the Group’s internal controls regarding impairment, primarily
focusing on the prompt identification and resolution of accounting judgement issues,
as well as the quality and timeliness of documents analysing the Group’s position on
such judgments.
The Committee scrutinized and questioned the impairment calculations formulated by the
management and made sure that there was a rigorous evaluation of internal controls to
evaluate the precision of assumptions and identification of areas requiring enhancement.
Additionally, the Committee assessed the extent of assistance necessary from valuation
experts to endorse intricate judgments and calculations linked with accounting estimates
established by the management.
B) Internal Control and Risk Management
Our internal control systems, including our risk management processes, have been designed to support our strategic and business objectives
while also ensuring adequate control over financial reporting. However, it’s important to note that no system can completely eliminate the risk of
failure to achieve objectives, and our systems can only provide reasonable assurance against material misstatement or loss.
During the year, the Board conducted a comprehensive assessment of the principal and emerging risks facing the Group. The Committee
supports the Board by regularly reviewing the risk heatmap and associated controls to identify and manage risks effectively.
The Committee is also responsible for reviewing the effectiveness of the Group’s internal controls over financial reporting. This is mainly evaluated
based on the timely identification and resolution of accounting judgements, as well as the quality and timeliness of analysis papers. After reviewing
control deficiencies identified during the previous year, the Committee is satisfied that management has improved the majority of areas where
control deficiencies were found. Where there are areas for further improvement, Management continues to address these and communicate these
matters with the Committee. To ensure accurate accounting treatment, the Group has utilized the expertise of various specialists
where appropriate.
The Audit and Risk Committee also reviewed control deficiencies identified during the 2022 year end external audit and the areas of improvement
needed to enhance controls in the following areas: impairment, recognition of withholding tax liabilities, classification of accruals and financial
reporting process. They concluded that in 2022, despite implementing enhanced controls, there were still areas which could be improved further.
As such, the Audit and Risk Committee will ensure there will be an enhanced review of internal controls to identify areas of improvement in 2023.
The Audit and Risk Committee concluded that other than those controls mentioned above, GMS’ system of operational and financial internal
control (including risk management) for day-to-day operations continue to be effective.
C) Internal Audit
In 2021, GMS appointed Baker Tilly as its internal auditors after a competitive tendering process that involved other reputable professional
services firms. The Audit and Risk Committee was satisfied with the quality, experience, and expertise of Baker Tilly’s internal audit practice
and their knowledge of the industry and region in which the Group operates.
Baker Tilly was tasked with reviewing the Group’s documented finance procedures and testing the design of controls, including those
implemented in 2021 and 2022. Whilst work is still ongoing, the Audit and Risk Committee has reported that there were control weaknesses
identified, however these were not significant. Any gaps between the current state and industry best practices are reported to the Committee.
Aside from the internal audit function, the Group is regularly audited by certain clients and industry bodies. The Committee is informed of any
significant findings and assesses these findings to ensure that appropriate action is taken by management as necessary. According to the
reports, there were no significant findings to report to the Committee during the year.
Overall, GMS has taken proactive steps to ensure the effectiveness of its internal controls system, and the Audit and Risk Committee has
played a crucial role in overseeing the Group’s risk management practices.
AUDIT AND RISK COMMITTEE REPORT
continued
49Annual Report 2022
Governance
D) External Audit
Appointment and independence
The Committee considers formally the appointment of the Group’s external auditor each year, as well as assessing the independence of the
incumbent auditor on an ongoing basis. During the financial year, the Company has complied with the mandatory audit processes and the
Committee has complied with the provisions set out in the Competition and Markets Statutory Audit Services Order 2014. KPMG Ireland
(KPMG) were appointed as external auditor in 2022.
In accordance with UK regulations and to help ensure independence, our external auditor adheres to a rotation policy based on the FRC’s
Ethical standard that requires the Group audit partner to rotate every five years.
Provision of Non-audit Services
To preserve the external auditor’s impartiality and autonomy, the Committee mandates specific approval for any non-audit services valued over
US$ 50,000. In the improbable scenario that the cumulative total of non-audit services exceeds 70% of the overall Group audit fee in a fiscal
year, the provision of additional non-audit services by the external auditor will be considered exceptional and necessitate prior approval from the
Committee. The Committee must ascertain that the external auditor’s independence and impartiality will not be compromised in any manner
when performing such services.
Total 2022 audit fees were US$ 620,000 (2021: US$ 693,000). The total non-audit services provided by the Group’s external auditors for the
year ended 31 December 2022 were US$ 167,000 (2021: US$ 410,000) which comprised 21% (2021: 37%) of total audit and non-audit fees.
A non-audit fee of US$ 167,000 (2021: US$ 240,000) was incurred in relation to the interim review. Additionally, a non-audit fee of US$ nil
(2021: US$ 170,000) was incurred on costs to review the prospectus and equity raise related costs. The Committee has confirmed that KPMG’s
provision of non-audit services during the current year has not compromised the external auditor’s objectivity and independence. Note 36 of the
financial statements provides additional information on the remuneration paid to the external auditor for both audit and non-audit services.
Audit and Risk Committee Effectiveness Review
The effectiveness of the Audit and Risk Committee was reviewed as part of the Board evaluation commented on page 45.
Ethical Conduct and Compliance
Our Whistleblowing Policy encourages all employees to report any suspected improprieties related to the Group’s activities. The Group
provides a confidential whistleblowing hotline that is managed externally, and all reports are communicated to the Committee. During the
reporting period, there were no instances of whistleblowing that fell within the scope of the Group’s policy. The Committee is confident that
the Group has established suitable measures for the independent investigation of potential improprieties and for taking appropriate follow-up
action. Our internal audit team or other third-party specialists may be engaged to investigate any issues, and we will be informed of
the outcomes.
As part of the Company induction process, Code of Conduct training is mandatory for all new employees who join the Group.
The Group has a comprehensive set of anti-corruption and bribery policies in place. We are satisfied that we have implemented appropriate
policies and training to ensure that the Group complies with relevant laws and upholds our high ethical standards in business conduct.
Jyrki Koskelo
Audit and Risk Committee Chairman
23 April 2023
50 Gulf Marine Services PLC
Dear Shareholders,
I am pleased to present the report of the Nomination Committee, which summarises the work completed over the course of the past
year. The Committee met in March 2022 when it reviewed matters.
The primary role of the Committee is facilitating recruitment to the Board, to promote effective succession planning for the Board and
Senior Management, and to align the Board composition with the Group’s culture, values and strategy. As part of this role, we ensure the
Board and its committees have the right balance of skills, experience, diversity, independence and knowledge to effectively discharge
their duties.
Membership
Currently, the Committee comprises five members which includes three independent non-executive Directors, Rashed Al Jarwan,
Jyrki Koskelo and Anthony St John, one non-independent non-executive Director, Charbel El Khoury, and myself (Mansour Al Alami)
as Chairman of the Committee.
This composition is in compliance with the 2018 UK Corporate Governance Code (the Code) which provides that independent non-executive
Directors should comprise the majority of the Committee.
Key Responsibilities
The Nomination Committee’s responsibilities include:
• regularly reviewing the composition, structure and size of the Board and its committees;
• evaluating the balance of skills, knowledge, experience, personal attributes and diversity on the Board of Directors;
• reviewing succession planning for the Board and Senior Management; and
• leading the process for Board appointments and making recommendations to the Board in respect of new appointments.
Board
The Board comprises six Directors, including the Chairman, three independent non-executive Directors and two Directors nominated by
shareholders. Each have relevant experience to the Company’s operations. The Board believes this achieves appropriate balance in its
membership with half of the Board being considered fully independent.
Diversity of skills, background and personal strengths are key to a Board’s effectiveness. Each Director brings a wealth of skills, knowledge
and experience which together enable the Board to provide effective leadership to the Company. Consolidating the Board’s strong
relationships with key clients and banks as well as the Board’s extensive sector and market knowledge and experience is beneficial to
the future direction and growth of the business. Further details of the Directors are included in their biographies on pages 40 to 41.
Workforce Engagement
The Committee members and Board discussed and considered the recommendations of the Code in relation to proposals for workforce
engagement. After taking into account the size and structure of the Company, the Committee members and the Board have agreed that the
most effective way of ensuring engagement with the workforce continues to be an independent non-executive Director to oversee workforce
engagement for the Board. Rashed Al Jarwan, the Senior Independent Director, is the appointed Director, a role he has held since May 2021.
As part of this role, a town hall-style meeting has been held with staff emphasising the importance of the contribution of the workforce and
explaining the role and interest of the Board in this. This is followed up with employee engagement surveys covering several areas including,
culture, environment, remuneration, individual roles and development within the Company. The results of surveys were reported to and
discussed by the Board as part of their ongoing considerations around the workforce. An employee action plan for 2022 was also introduced
in response to the results of the previous survey to ensure the required focus on employee interests is sustained. In 2022, we organised
our annual offsite meeting in the Al Jubail Mangroves where every employee present had the opportunity to plant a tree. The variety of
engagement with the workforce provides additional forums for staff to offer their views and any concerns separately than through the normal
management structure. We believe they help foster an open and constructive working environment.
NOMINATION COMMITTEE REPORT
51Annual Report 2022
Governance
Board and Committee Evaluation
In 2022, an internally facilitated evaluation of the Board, its committees, individual Directors and the Executive Chairman was conducted.
The evaluation followed the process set out below:
Questionnaire
Directors completed a questionnaire on a confidential basis. The questionnaire was structured to provide Directors with an opportunity
to express their views on a range of matters including:
• strategy and risk;
• Board dynamics and operation;
• Executive Chairman’s effectiveness;
• effectiveness of the Board and each of its committees;
• Director self-assessment and training needs; and
• other general observations.
Results
The results of the 2022 Board evaluation questionnaire were collectively reviewed by the Nominations Committee and conclusions
discussed by the Board. As a result of the findings, the Board has concluded that the performance of each of the Directors standing for
re-election continues to be effective and that these Directors demonstrate commitment to their roles. The Board concluded that it should
continue to focus on progressing the Group’s business and strategy while monitoring and managing significant risks, sustainable
development and management of the Group in the longer term.
The responses received following the internal evaluation of each of the Board committees confirmed that they continued to be effective
with the right composition of Directors.
Chairman Review
The performance of the Chairman was evaluated by the other non-executive Directors. The evaluation was led by the Chairman of the
Remuneration Committee and was concluded to be satisfactory. The Chairman of the Remuneration Committee also provides relevant
feedback to the Chairman.
Re-election of Directors
The Board has concluded that the performance of each of the Directors standing for re-election continues to be effective and that these
Directors demonstrate commitment to their roles, including commitment of time for Board and where appropriate committee meetings
and any other duties. The biographical details of Directors can be found on pages 40 to 41. All of the Company’s Directors will stand for
re-election at the 2023 Annual General Meeting. The terms and conditions of appointment of the Directors are available for inspection at
the Company’s registered office and at the venue of the Company’s Annual General Meeting during that meeting.
Diversity
The Company is committed to a culture that promotes diversity, including gender diversity, and to achieving a working environment that
provides equality of opportunity. There is currently no female representation on the Board though the Board aspires to diversify through the
appointment of an additional Director. Although this has not yet been practical, it remains the Board’s intention to do so over the coming year.
The Board continues to be diverse in terms of nationalities, background and international experience of its members. The Board has a broad
range of experience and expertise covering relevant technical, operational, financial, governance, legal and commercial expertise, as well as
the valuable experience of operating in the energy industry on an international basis.
The People and Values section on pages 4 to 15 provides further information on the Group’s workforce.
Succession Planning
The Committee noted it was important to ensure business continuity through the ongoing development of the depth of the management
team, including the operational aspects from the marine side and business development.
Succession planning for Senior Management across the Group is reviewed to enable, encourage and facilitate the development of individuals,
including internal career progression opportunities as they have done during the past year. As a practical matter, given the size of the
Company, the Committee recognises that many senior posts are likely to be sourced from external hires.
As well as Committee Chairman, I am Executive Chairman of the Company. The other members of the Nomination Committee have
requested that I continue in the Executive Chairman position during the current period of development of the Group.
52 Gulf Marine Services PLC
Selection Process for Key Board Appointments
Candidate Specification
A specification for candidates is prepared identifying the desired key skills, qualifications and character profile
being sought taking into account the current membership and dynamics of the Board.
Consider Potential Candidates
A range of candidates meeting the specification is identified from a diverse range of backgrounds.
Interviews and Selection
The Nomination Committee selects a shortlist of candidates for interview.
Recommendations and Confirmation of Appointment
The Nomination Committee considers and discusses the shortlisted candidates and recommends the preferred candidates to the Board.
Candidates meet with other Directors on the Board as appropriate prior to Board approval for the appointment to be made.
Mansour Al Alami
Nomination Committee Chairman
23 April 2023
NOMINATION COMMITTEE REPORT
continued
53Annual Report 2022
Governance
REMUNERATION COMMITTEE REPORT
Dear Shareholders,
Having joined the Board as an independent non-executive Director in 2021, this is my first report after a full year as Remuneration
Committee Chairman. On the Committee with me are Jyrki Koskelo, another of our independent non-executive Directors and
Rashed Al Jarwan our Senior Independent Director.
This report covers the work of the Committee during the year. It followed on from shareholders approving the Directors’ Remuneration
Report and Remuneration Policy at our 2021 AGM – the first time shareholders have approved remuneration arrangements in the Company
since 2019. We have since sought to build on this approval to ensure an appropriate remuneration structure is in place for the Group.
The Committee has continued to progress matters in respect of remuneration in line with the policy approved by shareholders, with a focus
on creating appropriate performance parameters as well as structures. This included what we believe to be the most extensive consultation
with shareholders on remuneration matters in the Company’s history, to reach a consensus on implementation of the Company’s Long
Term Incentive Plan (LTIP), in line with our commitment to shareholders in last year’s report.
In this report, we have set out key events that occurred last year along with the rationale for actions since taken and planned to be taken.
(a) Consultation with Shareholders on the LTIP
Part of the support from shareholders has been on implementation of the LTIP. During the second half of 2021 and in early 2022, we
undertook two rounds of consultation on this. This consultation involved 11 shareholders representing 73% of the share capital, together with
the main governance organisations who advise shareholders in connection with annual reporting and general meetings. As part of the first
round of consultations, we received feedback from shareholders representing a majority of the Company’s share capital that they would like
the LTIP to incorporate financial targets linked to the Company’s strategic aims. In the second round, some shareholders requested that
provisions be added to ensure a continued focus on capital efficiency.
(b) Implementation of LTIP
After full and careful consideration, and in line with the feedback from shareholders set out above, the Committee implemented the LTIP
in 2022 on the following bases:
1. Awards were to vest after three years (subject to the performance conditions set out below) and be subject to a subsequent holding
period of two years.
2. Awards were also only vest to the extent that performance conditions are achieved over the three years commencing with the year of
grant as set out below.
3. As regards one-half of the awards, vesting was linked to EBITDA performance. If EBITDA in 2024 fell below the following range, no vesting
would take place. The full entitlement would only vest if Group EBITDA in 2024 meets or exceeds the top end of the following range.
Vesting within this range would be on a straight-line basis between zero at the bottom of the range and 100% at the top of the range.
The range of EBITDA was to be as follows: US$ 78 million–US$ 95 million.
Vesting from the lower end of this range was to increase on a straight-line basis commencing from zero for simplicity and fairness to reflect
fully graduated vesting linked to actual performance rather than the 25% threshold vesting that would be permitted under the Directors’
Remuneration Policy. The performance target was subject to the rules of the LTIP.
4. As regards the other half of the awards, this was linked to performance in terms of net profit. No vesting was to take place if Group net
profit in 2024 fell below the following range. The full amount would only vest if net profit in 2024 met or exceeded the top end of the
following range. Vesting within this range would be on a straight-line basis between zero at the bottom of the range and 100% at the top
of the range. The range of net profit was to be as follows: US$ 38 million-US$ 47 million.
Vesting from the lower end of this range was to increase on a pro-rata basis commencing from zero to the 25% threshold based on actual
performance, as permitted under the Directors’ Remuneration Policy.
This target was to be increased if during the performance period new shares are issued (other than in the normal course for the vesting
of employee share awards). The performance target was subject to the rules of the LTIP.
5. In addition, there was an underpin condition such that no awards would vest if the debt leverage in the Group at 31 December 2022
exceeds 4 times EBITDA. Any amount raised from issue of further equity prior to that date was to be excluded from the calculation.
6. Awards were granted after the announcement of the Group’s results for 2021 in June 2022 equivalent to approximately 1% of the share capital of
the Company. This overall total (valued at the date of award at approximately GBP 600,000 compared with the Remuneration Policy limit
approved by shareholders for the Executive Chairman alone in a single year of GBP 680,000 (based on the share price at the date of this award).
7. Only the most senior executives and management in the Company received awards – The Executive Chairman and other members of
Senior Management.
8. Subject to rules of the LTIP and standard good leaver provisions, awards would lapse if the individual left the Group before the awards
have vested.
54 Gulf Marine Services PLC
REMUNERATION COMMITTEE REPORT
The underpin condition referred to in 5 above was not met and therefore all these awards lapsed as the debt leverage in the Group exceeded
4.0 times EBITDA at 31 December 2022.
The Remuneration Committee has decided to defer consideration of the grant of further LTIP awards until after the net debt leverage of the
Group is below 4 x EBITDA.
(c) Updates to Salary and Annual Bonus
Executive Chairman
The Remuneration Committee determined Mansour Al Alami’s remuneration is at an appropriate level, which includes an annual salary of AED
1,536,000. No annual increase to Mr Al Alami’s salary has been made since his appointment, and he received no bonus in respect of 2022.
Employees
There was an underpin condition that the 2022 annual bonus would not be payable unless the debt leverage in the Group fell below 4.0 times
EBITDA at 31 December 2022. The criteria for the 2022 annual bonus were not met and hence were not paid.
The annual bonus potential for 2023 is 100% of salary for maximum performance and the Committee is not proposing to utilise the full
capacity of up to 150% of salary available for exceptional circumstances under the policy.
This year, the annual bonus payable is as follows:
• 30% weighting on EBITDA;
• 15% weighting on EBITDA margin;
• 15% weighting on securing contracts for 2024 Revenues;
• 15% weighting on securing contracts for 2025 Revenues;
• 25% weighting on achieving target leverage; and
• subject to an over-riding discretion to vary outcomes if a payment is not justified by overall performance and developments in the Group.
Conclusion
I believe the extensive work undertaken over the past two years, including the valuable contributions by shareholders, has stood us in good stead
for the current year and beyond. We are grateful for the support shareholders have shown as we continue to strive for furthering shareholder and
stakeholder interests alike. Following this letter are the detailed Directors’ Remuneration Report and the Directors’ Remuneration Policy approved
by shareholders last year. Part of our aim is to maintain the consensus we have already built with shareholders. I am available to discuss
matters if any shareholder or proxy advisor has any questions and I am contactable through the Company Secretary. I look forward to this
continued engagement and support.
Lord Anthony St John of Bletso
Remuneration Committee Chairman
23 April 2023
55Annual Report 2022
Governance
DIRECTORS’ REMUNERATION POLICY REPORT
(UNAUDITED)
This Remuneration Policy became effective from the date of the 2021 AGM. The Policy is intended to apply for a period of three years from that
date and no changes are being proposed this year. However, the Committee monitors the Remuneration Policy on a continuing basis including:
consideration of evolving market practice and relevant guidance; shareholder views and results of previous voting; policies applied to the wider
employee base; and with due regard to the current economic climate. Should the Committee resolve that the Remuneration Policy should be
revised, such revisions will be subject to a binding shareholder vote.
The overarching aim is to operate a Remuneration Policy which rewards senior executives at an appropriate level for delivering against the
Company’s annual and longer-term strategic objectives. The Policy is intended to create strong alignment between executive Directors and
shareholders through inclusion of a performance-related bonus and LTIP awards.
Policy Overview
The Committee assists the Board in its responsibilities in relation to remuneration, including making recommendations to the Board on the
Company’s policy on executive remuneration.
The Company’s policy is to provide remuneration to executives to reflect their contribution to the business, the performance of the Group,
the complexity and geography of the Group’s operations and the need to attract, retain and incentivise executives.
The Committee seeks to provide remuneration packages that are simple, transparent and take into account best UK and local market
practices in countries where we operate, whilst providing an appropriate balance between fixed and variable pay that supports the delivery
of the Group’s strategy.
In its development of the policy, the Committee took account of the six factors set out in the UK Corporate Governance Code summarised below:
• Clarity
The Policy seeks to be transparent and promote effective engagement with shareholders and the workforce.
• Simplicity
The Policy seeks to follow a standard easy to understand structure for ongoing remuneration with one-off variations only where
appropriate for the Group’s specific circumstances.
• Risk
The Policy seeks to balance opportunity with risk in relation to the specific circumstances of the Group.
• Predictability
The Policy seeks to quantify potential outcomes from achievement of both shorter and longer-term objectives as well as quantifying fixed
remuneration.
• Proportionality
The Policy is structured to incentivise and reward targets to benefit the Group whilst fairly rewarding Directors for working towards those
targets and retaining overriding discretion to override formulaic outturns where it considers appropriate.
• Alignment to culture
The Policy is intended to be aligned with the culture being developed in the Group of empowerment to achieve Group objectives coupled
with reward for doing so within an environment of integrity.
The Committee was able to consider corporate performance on ESG issues when setting executive Directors’ remuneration. The Committee
has ensured that the incentive structure for Senior Management does not raise ESG risks by inadvertently motivating irresponsible behaviour.
56 Gulf Marine Services PLC
REMUNERATION POLICY TABLE FOR EXECUTIVE DIRECTORS
Element of Pay
Purpose and Link
to Strategy Operation
Maximum
Opportunity Performance Criteria
Base salary • To attract and
retain talented
people with the
right range of
skills, expertise
and potential in
order to maintain
an agile and
diverse workforce
that can safely
deliver our flexible
offshore support
services
• Normally reviewed annually by
the Committee or, if
appropriate, in the event of a
change in an individual’s
position or responsibilities
• The level of base salary reflects
the experience and capabilities
of the individual as well as the
scope and scale of the role
• Any increases to base salary
will take into account individual
performance as well as the pay
and conditions in the workforce
• Any increases in base
salary will not take the
level of base salary above
the level justified in the
Committee’s opinion by
the factors set out below
• When determining the
level of any change in
compensation, the
Committee takes into
account:
– Remuneration levels
in comparable
organisations in the
UAE and the GCC
– Remuneration levels
in the international
market
– Increases for the
workforce generally
– Changes to an
individual’s role,
including any
additional
responsibilities
• N/A
Annual Bonus • To encourage and
reward delivery of
the Group’s
annual strategic,
financial and
operational
objectives
• Performance measures and
targets are reviewed annually by
the Committee and are linked to
the Group’s key strategic and
financial objectives
• Annual bonus will normally
be paid wholly in cash up to
100% of base salary
• Annual bonus in excess of
100% of base salary will
normally be deferred in GMS
shares for up to two years
• The Committee has the
discretion to defer a greater
proportion of the annual bonus
in GMS shares
• Deferral will be under the
Deferred Bonus Plan. Any
dividends that accrue during
the deferral period may be paid
in cash or shares at the time of
vesting of the award
• Clawback and/or malus can
be applied for three years from
the end of the financial year to
which a payment relates, in the
event of serious misconduct,
reputational harm, corporate
failure, a material misstatement
of the Company’s financial
results or an error in the
calculation of performance
targets
• Maximum opportunity of
120% or, in exceptional
circumstances, 150%
of base salary (in the
case of the Executive
Chairman calculated
on the uplift base salary)
• The annual bonus will be
based on Group financial
performance, other than
where the Committee
deems appropriate to
include additional specific
measures
• The Committee has
discretion to vary annual
bonus payments
downwards or upwards if
it considers the outcome
would not otherwise be a fair
and complete reflection of
the performance achieved
by the Group and/or the
Executive Director.
Performance below
threshold, as shown in the
Corporate Scorecard,
results in zero payment.
Payments increase from 0%
to 100% of the maximum
opportunity for levels of
performance between
threshold and maximum
performance targets.
If financial and/or (for
a minority of the total)
non-financial or strategic
targets not linked to a set
of annual results are used,
these can straddle more
than one financial year
where considered justified
REMUNERATION COMMITTEE REPORT
continued
57Annual Report 2022
Governance
Element of Pay
Purpose and Link
to Strategy Operation
Maximum
Opportunity Performance Criteria
Long Term
Incentive Plan
(LTIP)
• To incentivise
and reward the
achievement
of key financial
performance
objectives and
the creation of
long-term
shareholder value
• To encourage
share ownership
and provide
further alignment
with shareholders
• Annual awards of nil-cost
options or conditional shares
with the level of vesting
subject to the achievement
of stretching performance
conditions measured over
a three-year period
• Performance targets are
reviewed annually by the
Committee and are set at
such a level to motivate
management and incentivise
out-performance
• If the Committee decides it to
be appropriate at the time,
awards may be cashed out
instead of being satisfied in
shares
• Dividends that accrue during
the vesting period may be paid
in cash or shares at the time of
vesting, to the extent that
shares vest
• Malus and clawback provisions
apply in the event of serious
misconduct, reputational harm,
corporate failure, a material
misstatement of the
Company’s financial results
or an error in the calculation
of performance targets.
Clawback can be applied for
three years from the end of
the financial year in which
an award vests
• A two-year post-vesting
holding period will normally
apply
• Normal maximum
opportunity of 200% of
base salary (exceptional
limit of 300% of base
salary)
• Performance is assessed
against metrics which will
normally include a financial
measure, such as EBITDA,
and/or a net profit
• 25% of an award will vest
for achieving threshold
performance, increasing
pro-rata to full vesting for
achievement of maximum
performance targets
• The Committee has
discretion to vary the level
of vesting downwards or
upwards if it considers
the outcome would not
otherwise be a fair reflection
of the performance achieved
by the Company and/or
to prevent windfall gains
from arising
End of
service gratuity
• To provide an end
of service gratuity
as required under
UAE Labour Law
• End of service gratuity
contributions are annually
accrued by the Company
after an employee served
for more than one year
• The calculation is based
on basic salary, duration
of service and type of the
contract: limited or unlimited.
The Committee has no
discretion on the amount.
It is set and regulated by
UAE Labour Law
• The maximum pay out to
an employee is limited by
UAE Labour Law to two
years’ base salary
• N/A
Benefits • To provide
competitive and
cost-effective
benefits to attract
and retain
high-calibre
individuals
• Private medical insurance
for the executive and close
family, death in service
insurance, disability insurance,
accommodation payment
of children’s school fees and
remote working expenses
(as applicable)
• Actual value of benefits
provided which would
not exceed those
considered appropriate
by the Committee
• N/A
58 Gulf Marine Services PLC
Element of Pay
Purpose and Link
to Strategy Operation
Maximum
Opportunity Performance Criteria
Allowances • Allowances set
to cover living and
travel costs where
the Director
serves outside
their home
country and is
in line with local
market practice
• Any increases to allowances
will take into account local
market conditions as well as
the allowances provided to
the workforce
• Allowances relating to air travel
and transport
• N/A • N/A
Share ownership
guidelines
• To encourage
alignment with
shareholders
• Executive Directors are
required to build and maintain
a shareholding equivalent to
at least 200% salary through
the retention of vested share
awards or through open
market purchases
• A new appointment will be
expected to reach this
guideline in three to five
years post-appointment
• Executive Directors are
required to retain 50% of the
shares (net of tax) vesting
under the incentive schemes
until the guideline has been
achieved
• Executive Directors ceasing in
their role are required to retain
their then shareholding, up to
their minimum in-service
requirement in the first year
and 50% of that in the second
year, subject to the discretion
of the Committee to vary the
level or length of these
requirements if it considers
that to be appropriate in the
circumstances at the time
• N/A • N/A
NOTES TO THE TABLE
Annual Bonus Performance Measures
The annual bonus reflects key financial performance indicators linked to the Group’s strategic goals. Financial targets are set at the start of
the financial year with reference to internal budgets and taking account of market expectations.
LTIP Performance Measures
The LTIP performance measures will reward long-term financial growth and significant long-term returns to shareholders. Targets are set by
the Committee each year on sliding scales that take account of internal strategic planning and external market expectations for the Group.
Only 25% of rewards are available for achieving threshold performance with maximum rewards requiring substantial out-performance of
challenging strategic plans approved at the start of each year.
REMUNERATION COMMITTEE REPORT
continued
59Annual Report 2022
Governance
Discretion
The Committee operates the Company’s annual short-term and long-term incentive arrangements for the executive Directors in accordance
with their respective rules, the Listing Rules and the HMRC rules where relevant. The Committee, consistent with market practice, retains
discretion over a number of areas relating to the operation and administration of the plans. These include the following:
• who participates;
• the timing of the grant of award and/or payment;
• the size of an award (up to Policy and plan limits) and/or a payment;
• the annual review of performance measures, targets and weightings for the annual bonus and LTIP from year to year;
• discretion relating to the measurement of performance and adjustments to performance measures and vesting levels in the event
of a change of control or restructuring;
• determination of a good leaver (in addition to any specified categories) for incentive plan purposes;
• adjustments required in certain circumstances (e.g. rights issues, corporate restructuring and special dividends); and
• the ability to adjust existing performance conditions for exceptional events so that they can still fulfil their original purpose.
Payments Under Previous Policies
Any remuneration payment or payment for loss of office to which a Director became entitled under a previous Directors’ Remuneration Policy
or before the person became a Director (unless the payment was in consideration of becoming a Director) may be paid out even though it
may not be consistent with this Policy.
Remuneration Scenarios for the Executive Chairman
The chart below shows an estimate of the potential future remuneration payable for the Executive Chairman in 2023 at different levels of
performance. The chart highlights that the performance-related elements of the package comprise a significant portion of the Executive
Chairman’s total remuneration at on-target and maximum performance.
The table below sets out notional remuneration of the Executive Chairman to the Executive element of his salary on the basis that he acts as
Executive Chairman for the entire first year of the policy.
$431
$431 $431 $431
$419
$636
$419
$636
$419
$954
$2,000
$1,500
$1,000
$500
$0
Executive Chairman (US$'000)
Minimum
MaximumOn-Target
Annual BonusFixed Pay
1 Mansour Al Alami’s contractual entitlement for fixed pay and annual bonus is expressed in UAE Dirhams and is shown above in US$ using an exchange rate of
US$ 1/AED 3.655. Minimum remuneration represents uplift base salary, allowances and benefits (such as travel) on the basis of a full year of executive service.
2 Minimum performance assumes no award is earned under the annual bonus. At on-target and at maximum, 100% of the annual bonus is earned equivalent to 100%
of basic salary subject to approval by remuneration committee.
3 The table above does not include 7,000,000 options awarded to Mansour Al Alami during the year. The non-market conditions attached to these awards were not met,
thus no part of the award will vest.
For further details see page 54 of the Chairman’s Letter.
How Remuneration of the Executive Directors Differs from Employees Generally, and How Their Views are
Taken Into Account in Setting Remuneration Policy
When considering the structure and levels of executive Director remuneration, the Committee reviews base salary, annual bonus and LTIP
arrangements for the management team, to ensure that there is a coherent approach across the Group. The annual bonus plan and LTIP
operate on a similar basis across the Senior Management team. The key difference in the Remuneration Policy for Executive Directors is that
remuneration is more heavily weighted towards variable pay than that of other employees. This ensures that there is a clear link between the
value created for shareholders and the remuneration received by the executive Directors. Because of the lack of visibility and influence over
achievement of performance measures, the pay of employees outside the management team is much less linked to performance and is
mostly in the form of salary and benefits.
The Committee did not formally consult with employees in respect of the design of the Director’s Remuneration Policy approved by
shareholders last year. Rashed Al Jarwan was appointed as the non-executive Director overseeing workforce engagement on 6 May 2021
and further details regarding workforce engagement can be found on page 50.
60 Gulf Marine Services PLC
Consideration of Shareholder Views
The Committee engages directly with major shareholders and their representative bodies on any major changes planned to the Directors’
Remuneration Policy or how the Policy will be implemented. Further details of shareholder engagement are set out in the Chairman’s letter
on pages 53 to 54.
Shareholder Voting
The binding resolution on the Directors’ Remuneration Policy and the advisory resolution on the annual report on Directors’ remuneration
proposed and passed at AGM received the following votes from shareholders:
Remuneration Policy (2021 AGM) Remuneration Report (2022 AGM)
Votes % Votes %
Votes in favour 394,480,051 90.97% 646,490,272 99.28%
Votes against 39,151,228 9.03% 4,689,278 0.72%
Total votes 433,631,279 100.00% 6 51,179,550 100.00%
Votes withheld 14,539 – 219,560 –
Executive Directors’ Recruitment and Promotions
The policy on the recruitment or promotion of an executive Director takes into account the need to attract, retain and motivate the best person
for each position, while at the same time ensuring a close alignment between the interests of shareholders and management, as follows:
Base salary The base salary for a new appointment will be set taking into account the skills and experience of the
individual, internal relativities and the market rate for the role as identified by any relevant benchmarking
of companies of a comparable size and complexity.
If it is considered appropriate to set the base salary for a new executive Director at a level which is below
market (for example, to allow them to gain experience in the role) their base salary may be increased to
achieve the desired market positioning by way of a series of phased above inflation increases. Any increases
will be subject to the individual’s continued development in the role.
End of service gratuity,
benefits and allowances
End of service gratuity, benefits and allowances will be set in line with the policy above, reflective of typical
market practice and the Labour Law for the UAE.
In the event of an executive Director being recruited to work outside the UAE, alternative benefits, pension
provision and/or allowances may be provided in line with local market practice.
Recognising the international nature of the Group’s operations, where appropriate to recruit, promote or
transfer individuals to a different location of residence, the Committee may also, to the extent it considers
reasonable, approve the payment of one-off relocation and repatriation-related expenses. It may also
approve legal fees appropriately incurred by the individual in connection with their employment by
the Group.
Annual Bonus and LTIP The Company’s incentive plans will be operated, as set out in the Policy table above, albeit with any payment
pro-rata for the period of employment and with the flexibility to use different performance measures and
targets, depending on the timing and nature of the appointment.
Remuneration foregone The Committee may offer cash and/or share-based elements to compensate an individual for remuneration
and benefits that would be forfeited on leaving a former employer, when it considers these to be in the best
interests of the Group (and therefore shareholders).
Such payments would take account of remuneration relinquished and would mirror (as far as possible) the
delivery mechanism, time horizons and performance requirement attached to that remuneration and would
not count towards the limits on annual bonus and LTIP in the Remuneration Policy.
Where possible this will be facilitated through existing share plans as set out in the Policy table above, but if
not, the Committee may use the provisions of 9.4.2 of the Listing Rules.
Internal appointments In the case of an internal appointment, any variable pay element awarded in respect of the prior role will be
allowed to pay out according to its original terms stipulated on grant or adjusted as considered desirable
to reflect the new role.
REMUNERATION COMMITTEE REPORT
continued
61Annual Report 2022
Governance
Directors’ Service Agreements and Payments for Loss of Office and Provision for Change of Control
The Committee seeks to ensure that contractual terms of the executive Director’s service agreement reflects best practice.
Notice period Executive Directors’ service agreements are terminable on no more than 12 months’ notice. The Executive
Chairman’s present service agreement is terminable by either the Company or the Executive Chairman on
three months’ notice although this may be amended if considered appropriate but never to be terminated
on more than 12 months’ notice. In circumstances of termination on notice the Committee will determine
an equitable compensation package, which may be comprised by some or all of the items set out below
together with legal fees and repatriation expenses having regard to the particular circumstances of the
case. The Committee has discretion to require notice to be worked, to make payment in lieu of notice or
to place the Director on gardening leave.
The Company may terminate the appointment summarily with immediate effect if the Director is guilty
of gross misconduct in accordance with relevant provisions of the UAE Labour Law.
Payment in lieu of notice In case of payment in lieu, base salary (ignoring any temporary reduction), allowances, benefits and end
of service gratuity will be paid for the period of notice served or paid in lieu.
If the Committee believes it would be in shareholders’ interests, payments would be made either as one
lump sum or in equal monthly instalments and in the case of payment in lieu will be subject to be offset
against earnings elsewhere.
Annual Bonus Annual bonus may be payable in respect of the period of the bonus year worked by the Director; there is
no provision for an amount in lieu of bonus to be payable for any part of the notice period not worked. In
determining the amount of any annual bonus to be paid, the Committee will have regard both to the extent
to which relevant performance measures have been achieved and to any other circumstances of departure
or the Directors’ performance which the Committee considers relevant. Unless exceptionally the
Committee determines otherwise, the policy provisions in relation to the deferral of bonuses would be
applied. Any annual bonus previously deferred would normally continue to be deferred under the terms
of that plan.
Deferral of bonus under the Deferred Bonus Plan will normally continue for the deferred period after leaving
and will then vest in full but will lapse if the Director has left in circumstances in which their employment
could have been terminated without notice. The deferral will vest in full on death.
LTIP Outstanding share awards under the LTIP normally lapse on leaving employment but are subject to the rules
which contain discretionary provisions setting out the treatment of awards where a participant leaves for
designated reasons (i.e. participants who leave early on account of injury, disability or ill health, death, a sale
of their employer or business in which they were employed, statutory redundancy, retirement or any other
reason at the discretion of the Committee).
In these circumstances, a participant’s awards will not be forfeited on cessation of employment and instead
will continue to vest on the normal vesting date or earlier at the discretion of the Committee, subject to
the performance conditions attached to the relevant awards. The awards will, other than in exceptional
circumstances, be scaled back pro-rata for the period of the incentive term worked by the Director.
Performance and circumstance of departure would be assessed by the Remuneration Committee as part
of any decision to treat a person as a good leaver and/or to vary pro-rating.
Other payments In addition to the above payments, the Committee may make any other payments determined by a court
of law or to settle any legal claim in respect of the termination of a Director’s contract.
Change of control In the event of a change of control or a demerger, special dividend or other similar event affecting the share
price, the Committee shall, in terms of the LTIP in its absolute discretion, determine whether and to what
extent an unvested award will vest (taking into account the satisfaction of the performance conditions).
The Committee may also decide that the award will vest to a greater or lesser extent having regard to the
Director’s or the Group’s performance or such other factors it may consider appropriate. The Committee
may decide that awards will vest pro-rata to take account of early vesting. Alternatively, the award may be
exchanged for equivalent awards over shares in an acquiring company.
The date of the Executive Chairman’s Service Agreement is 7 February 2021, effective 10 November 2020 and is subject to three months’
notice. This Service Agreement is available for inspection by prior appointment at the Company’s registered office and will be available for
inspection at the AGM.
62 Gulf Marine Services PLC
External Appointments
The Committee recognises that an executive Director may be invited to become a non-executive Director in another company and that such
an appointment can enhance knowledge and experience to the benefit of the Group. It is policy that Board approval is required before any
external appointment may be accepted by an executive Director. An executive Director would normally be permitted to retain any fees paid
for such services. The current executive Directors do not hold any such external appointments in public companies.
Non-Executive Directors’ Remuneration Policy and Terms of Engagement
The following table sets out the components of the non-executive Directors’ remuneration package.
Element of Pay Purpose and Link to Strategy Operation Maximum Opportunity Performance Criteria
Non-executive
Directors’ fee
• Set to attract, reward
and retain talented
individuals through the
provision of market
competitive fees
• Reviewed periodically
by the Board or, if
appropriate, in the
event of a change in
an individual’s position
or responsibilities
• Fee levels set by
reference to market
rates, taking into
account the individual’s
experience,
responsibility and time
commitments
• Total non-executive
Director fees must
be within any limit
prescribed by the
Company’s Articles
of Association
(currently GBP
£750,000) and
individual fees will take
account of the factors
set out in this table.
The Board takes into
account external
market practice, pay
increases within the
Group, wider economic
factors and any
changes in
responsibilities when
determining fee
increases
• N/A
Non-executive
Directors’ benefits
• Travel to the
Company’s registered
office and operational
headquarters
• Travel to the
Company’s registered
office and operational
headquarters may in
some jurisdictions be
recognised as a
taxable benefit
• Costs of travel,
grossed-up where
taxable
• N/A
Non-executive Directors are appointed by letter of appointment for an initial period of three years (but are subject to annual re-election),
which are terminable by three months’ notice by the Director or the Company. In relation to a Chairman, the Company retains flexibility
to set a notice period of up to six months.
The dates of the letters of appointment of the non-executive Directors are:
Rashed Saif Al Jarwan Independent non-executive Director 10 November 2020
Charbel El Khoury Non-executive Director 23 August 2021
Hassan Heikal Non-executive Director and Deputy Chairman 25 November 2020
Jyrki Koskelo Independent non-executive Director 5 February 2021
Lord Anthony St John of Bletso Independent non-executive Director 26 May 2021
The letters of appointment are available for inspection by prior appointment at the Company’s registered office. For the appointment of a new
Chairman or non-executive Director, the fee arrangement would be set in accordance with the approved Remuneration Policy in force at
that time.
Lord Anthony St John of Bletso
Remuneration Committee Chairman
23 April 2023
REMUNERATION COMMITTEE REPORT
continued
63Annual Report 2022
Governance
ANNUAL REPORT ON REMUNERATION
This part of the report has been prepared in accordance with Part 3 of the Large and Medium-sized Companies and Groups (Accounts and
Reports) Regulations 2008 and 9.8.6R of the Listing Rules. The Annual Report on Remuneration will be put to an advisory shareholder vote
at the 2023 AGM. Sections of this report that are subject to audit have been indicated.
Shareholder Voting At AGM
The 2022 Annual Report on Remuneration will be subject to an advisory shareholder vote at the 2023 AGM. Votes cast by proxy and at the
2022 AGM in respect of the Directors’ Remuneration Report. At the 2021 AGM the Directors Remuneration Policy was approved with the
following results:
Resolution Votes for % of Votes for Votes Against
% of Votes
Against Votes Withheld Total Votes Cast
To approve the Directors’
Remuneration Report for the year
ended 31 December 2021 646,490,272 99.28% 4,689,278 0.72% 219,560 651,179,550
Directors’ Remuneration Policy
approved at 2021 AGM
1
394,480,051 90.97% 39,151,228 9.03% 14,539 433,631,279
1 The Director’s Remuneration Policy is subject to review every three years
External Advice Received
In carrying out their responsibilities, the Committee seeks external advice as necessary. In 2022, given the continued extensive engagement
with shareholders, the Committee did not seek the advice of external advisors in its deliberations.
Executive Directors’ Single Total Figure of Remuneration Earned in 2022 (Audited)
The table below summarises Directors’ remuneration in respect of 2022.
Fixed Element of Pay Pay for Performance
Base Salary
US$’000
Allowances
and
Benefits
1
US$’000
End of
Service
Gratuity
2
US$’000 Subtotal
Annual
Bonus
3
US$’000
Long–Term
Incentives
4
US$’000
Other
US$’000 Subtotal
Total
Remuneration
US$’000
Executive Chairman
Mansour Al Alami
6
2022 419 12 24 455 – – – – 455
2021 419 30 – 449 210 – – 210 659
Executive Director
Steve Kersley
5
2022 – – – – – – – – –
2021 70 16 7 93 – – – – 93
1 Allowances include fixed cash and reimbursable allowances for air travel and transport. Other benefits include accommodation, private medical insurance for the
executive and immediate family, death in service insurance and disability insurance. The amounts are shown as per actual expenditures.
2 End of service gratuity is the provision accrued for in the year in accordance with UAE Labour Law. Please refer to page 64 for more information. Pension provision
is not a feature of executive Director remuneration packages.
3 Annual bonus for the financial year.
4 Share plans vesting represent the value of LTIP awards where the performance period ends in the year.
5 Steve Kersley was appointed as a Chief Financial Officer effective 9 June 2019. He was removed from the Board on 30 June 2020 and resigned from his role on
10 November 2020. He was placed on gardening leave from 1 January 2021 to 10 May 2021. A final payment was made in UAE Dirhams and reported in US$ using an
exchange rate of US$ 1/AED 3.655.
6 Mansour Al Alami was appointed Executive Chairman effective 23 November 2020. The remuneration was paid in UAE Dirhams and reported in US$ using an exchange
rate of US$ 1/AED 3.655.
64 Gulf Marine Services PLC
Performance Against Annual Bonus Targets for 2022 (Audited)
For 2022 the maximum annual bonus opportunity was set at 100% of base salary. The annual bonus was assessed against the following
financial objectives which produced a formulaic outcome of 40.9% as set out in the table below.
Measure Weighting
Performance Range
(from Zero to Full Pay-out) Result
% of Base Salary
Payable
EBITDA 55%
US$ 68.7 million –
US$ 80.0 million US$ 71.1 million 9.1%
EBITDA margin 15% 50.9% – 58.0% 53.0% 3.8%
Securing contract % of 2023
budget revenue 15% 60% – 75% 84.0% 15.0%
Securing contract % of 2024
budget revenue 15% 35% – 50% 48% 13.0%
Total 40.9%
1
EBITDA* Threshold On Target Maximum
Value <US$ 68.7 million US$ 76.9 million US$ 80.0 million
Score 0 35% 55%
2
EBITDA Margin* Threshold On Target Maximum
Percent <50.9% 56.0% 58.0%
Score 0 10% 15%
3
Securing Contracts % of 2023 Budget Revenue* Threshold On Target Maximum
Percent 60% 70% 75%
Score 0 10% 15%
4
Securing Contracts % of 2024 Budget Revenue* Threshold On Target Maximum
Percent 35% 45% 50%
Score 0 10% 15%
* Zero to full pay-out is not linear as bands operate within the performance ranges shown.
Management has considered the above results and decided no bonus for 2022 would be paid.
LTIP Awards Vesting for 2022 and Directors’ Interests in Share Plan Awards (Audited)
There were no LTIP awards that vested in the year for Directors.
Executive Directors
End of Service Gratuity
As required under UAE Labour Law, the Company accrues for the end of service gratuity entitlement in respect of the Executive Chairman.
The gratuity equates to 21 days’ base salary (excluding fixed cash allowances) for each year of the first five years of employment and 30 days’
wages for each additional year of employment thereafter, up to a limit of two years’ total wages.
Director’s Pension Entitlement (Audited)
The Company does not operate a pension scheme and accordingly no element of remuneration is pensionable.
Statement of Implementation of Directors’ Remuneration Policy in 2022
Base Salary in 2022
Base Salary from
1 January 2023
US$’000
Base Salary from
1 January 2022
US$’000 % Change
Mansour Al Alami 419 419 0%
REMUNERATION COMMITTEE REPORT
continued
65Annual Report 2022
Governance
Statement of Implementation of Directors’ Remuneration Policy in 2022 continued
Allowances and Benefits for 2022
The cash allowances for 2023 comprise payments to cover costs of transport will be as follows:
Base Salary from
1 January 2023
US$’000
Base Salary from
1 January 2022
US$’000 % Change
Mansour Al Alami 12 12 0%
Other benefits to be provided directly include accommodation, private medical insurance for the executive Directors and close family in line
with local legal requirements, death in service insurance and disability insurance.
Annual Bonus for 2023
For 2023 the maximum bonus opportunity will be 100% of base salary. Any proportion determined by the Remuneration Committee will be
deferred into shares under the Deferred Bonus Plan. The annual bonus for executive Directors will be based on Group financial performance,
weighted as follows:
Measure Weighting
EBITDA 30%
EBITDA Margin 15%
2024 Secured revenue 15%
2025 Secured revenue 15%
Achieving target leverage 25%
Total 100%
The targets for the annual bonus are considered commercially sensitive because of the competitive nature of the Company’s market and will
be disclosed in next year’s Annual Report.
Non-executive Directors’ Single Figure Table (Audited)
Fees
2022
US$’000
Fees
2021
US$’000
Total
remuneration
2022
US$’000
Total
remuneration
2021
US$’000
Chairman
Mansour Al Alami – – – –
Chairman total – – – –
Non-executive Directors
1
Rashed Al Jarwan 62 74 62 74
Hassan Heikal – – – –
Jyrki Koskelo
2
62 62 62 62
Lord Anthony St John of Bletso
3
62 39 62 39
Charbel El Khoury
4
– – – –
Saeed Mer Abdulla Al Khoory
5
– 6 – 6
Non-executive Director total 186 181 186 181
1 The Non-executive Directors’ remuneration is paid in Pound Sterling and reported in US$ using an exchange rate of US$ 1.25/£1 for 2022.
2 Jyrki Koskelo was appointed to the Board effective 5 February 2021.
3 Lord Anthony St John of Bletso was appointed to the Board effective 26 May 2021.
4 Charbel El Khoury was appointed as a non-executive Director with effect from 23 August 2021 and waived his entitlement to receive a fee for this role.
5 Saeed Mer Abdulla Khoory died in February 2021.
Directors’ Interests in Ordinary Shares (Audited)
Through participation in performance-linked share-based plans, there is strong encouragement for the executive Directors to build and
maintain a significant shareholding in the business.
As set out in the existing Directors’ Remuneration Policy, from 2019 the Committee requires the CEO to build and maintain an increased
shareholding in the Company equivalent to 200% of base salary. The shareholding requirement for other executive Directors was increased
to 200% of base salary. Until this requirement is achieved, they are required to retain no less than 50% of the net of tax value of any share
award that vests. A new appointment would normally be expected to reach this guideline in three to five years post-appointment. On
cessation of employment, executive Directors will be bound by post-employment shareholding requirements, as set out in the existing
Directors’ Remuneration Policy. The Chairman and non-executive Directors are encouraged to hold shares in the Company but are not
subject to a formal shareholding guideline.
66 Gulf Marine Services PLC
The beneficial interests of the Directors and connected persons in the share capital of the Company at 31 December 2022 were as follows:
At 31 December
2022
At 31 December
2021
Shareholding
Ownership
Requirement
Met?
Outstanding
LTIP Awards
Mansour Al Alami 2,571,000 2,202,000 N/A –
Rashed Al Jarwan – – N/A –
Hassan Heikal – – N/A –
Jyrki Koskelo – – N/A –
Lord Anthony St John of Bletso – – N/A –
Charbel El Khoury – – N/A –
Saeed Mer Abdulla Al Khoory – – N/A –
* Full details of the Directors’ shareholdings and share allocations are given in the Company’s Register of Directors’ Interests, which is open to inspection at the
Company’s registered office during business hours. Full details of LTIP awards are set out on page 64.
Fees for the Executive Chairman and Non-Executive Directors (Audited)
The non-executive Directors’ remuneration is determined by the Board, based on the responsibility and time committed to the Group’s
affairs and appropriate market comparisons. Individual non-executive Directors do not take part in discussions regarding their own fees.
Non-executive Directors receive no other benefits and do not participate in short-term or long-term reward schemes. Hassan Heikal, and
Charbel El Khoury, who joined as a non-executive Director in 2021, waived their entitlements to receive a fee for their roles. A summary of the
fees is set out below. Please note the fees are determined in Pound Sterling. The non-executive Directors do not have any unexpired service
contracts with the Company.
Annual Fee
2022
£’000
Annual Fee
2021
£’000 % Change
Independent non-executive Director base fee 45 45 0%
Additional fees:
Senior Independent Director 5 5 0%
Audit and Risk Committee Chair 5 5 0%
Nomination Committee Chair
1
– – 0%
Remuneration Committee Chair 5 5 0%
1 The Chair of the Nomination Committee is also Executive Chairman and there is no separate pay for this position.
Percentage Change in Remuneration Levels
The table below shows the variance in base salary, allowances and benefits, and Bonus for the Executive Chairman in the 2022 financial year,
compared to that for employees of the Group as a whole:
Measure % Change
Executive Chairman
Base salary 0%
Allowances and benefits -60%
Bonus -100%
All employees
Base salary 4%
Allowances and benefits 12%
Bonus -100%
REMUNERATION COMMITTEE REPORT
continued
67Annual Report 2022
Governance
Annual Percentage Change in Director and Employee Remuneration
The table below shows the annual percentage change in paid fixed remuneration of base salary, allowances and benefits of Directors and
employees in 2022 compared to 2021 and 2021 compared to 2020:
2022 Versus 2021 2021 Compared to 2020
Base Salary Benefits Annual Bonus Base Salary Benefits Annual Bonus
Mansour Al Alami
1
0% -60% -100% 673% 1,238% N/A
Rashed Al Jarwan
2
-16% N/A N/A 643% N/A N/A
Saeed Mer Abdulla Khoory -100% N/A N/A -32% N/A N/A
Jyrki Koskelo 0% N/A N/A N/A N/A N/A
Lord Anthony St John of Bletso
3
61% N/A N/A N/A N/A N/A
Charbel El Khoury N/A N/A N/A N/A N/A N/A
Hassan Heikal N/A N/A N/A N/A N/A N/A
Chief Financial Officer
4
N/A N/A N/A -53% -80% -22%
FTEs 4% 12% -100% 1% 2% 30%
1 Mansour Al Alami was appointed as Executive Chairman on 23 November 2020.
2 Rashed Al Jarwan was appointed to the Board effective 10 November 2020.
3 Lord Anthony St John of Bletso was appointed to the Board effective 26 May 2021.
4 The Chief Executive Officer role was held by three people in 2020 as Duncan Anderson was on gardening leave until August 2020. These amounts are the combined
actual amounts paid.
Relative Importance of the Spend on Pay
The table below shows overall expenditure on pay in the whole Group in 2022 and 2021 financial years, compared to returns to shareholders
through dividends:
2022
US$’000
2021
US$’000 % Change
Overall expenditure on pay 26,845 31,039 -14%
Dividends and share buybacks – – 0%
Committee Remit and Membership
The Terms of Reference of the Committee have been formally adopted by the Board and are available for inspection in the investor relations
section of the Company’s website. The principal responsibilities of the Committee include:
• setting the strategy, structure and levels of remuneration of our executive Directors and Senior Management;
• ensuring that all remuneration paid to our executive Directors is in accordance with the approved Remuneration Policy; and
• aligning the financial interests of the executive Directors and other management and employees with the achievement of the Group’s objectives.
The Committee assists the Board in fulfilling its responsibilities regarding all matters related to remuneration. This includes proposing the
Directors’ Remuneration Policy for shareholder approval and governing the implementation of the Policy. In addition, the Committee monitors
the structure and level of remuneration for the Senior Management team and is aware of pay and conditions in the workforce generally. The
Committee also ensures compliance with UK corporate governance good practice.
The composition of the Committee at 31 December 2022 is in compliance with the Code which provides that all members of the Committee
should be independent non-executive Directors.
I joined the Board as an independent non-executive Director in May 2021, I assumed the role of Remuneration Committee Chairman from
Jyrki Koskelo in October 2021. Rashed Al Jarwan has served as a member of the Committee throughout the year and continues to do so
along with Jyrki and myself.
The Executive Chairman, Chief Financial Officer and HR team were usually invited to attend for at least part of each meeting to allow the
Committee to benefit from their contextual advice. These individuals were not present when the Committee is debating matters concerning
themselves. The Company Secretary acts as Secretary to the Committee. The Committee met on two occasions during 2022. Members’
attendance at those meetings is shown on page 39. The Committee also held informal discussions as required.
Performance Evaluation of the Committee
The performance of the Committee was evaluated, as part of the overall Board evaluations reported on in the report of the Nomination
Committee on page 51.
Approval of the Directors’ Remuneration Report
The Directors’ Remuneration Report, including the Annual Report on Remuneration and the proposed revised Directors’ Remuneration Policy,
was approved by the Board on 23 April 2023 for presentation to shareholders at the AGM.
Lord Anthony St John of Bletso
Remuneration Committee Chairman
23 April 2023
68 Gulf Marine Services PLC
DIRECTORS’ REPORT
This Directors’ Report, prepared in accordance with the requirements of the Companies Act 2006 (the Act), 2018 UK Corporate Governance
Code (the Code) (publicly available on the Financial Reporting Council website), the Financial Conduct Authority’s Listing Rules, and
Disclosure and Transparency Rules, contains certain statutory, regulatory and other information.
The Strategic Report on pages 1 to 37 includes reviews of the Group business model and strategy, an indication of likely future developments
in the Group, and details of important events since the year ended 31 December 2022.
The Corporate Governance Reports on pages 38 to 72 include summaries of the operations of the Board and its committees, and information
regarding the Group’s compliance with the Code during 2022.
The Strategic Report and the Corporate Governance Reports form part of and are incorporated in this Directors’ Report by reference.
Disclosure Requirements of Listing Rule 9.8.4R
The following table provides references to where the information required by Listing Rule 9.8.4R is disclosed:
Listing Rule Requirement Page
Interest capitalised and tax relief Not applicable
Publication of unaudited financial information Not applicable
Details of any long-term incentive schemes Page 64
Waiver of emoluments by a Director Pages 65 to 66
Waiver of future emoluments by a Director Not applicable
Non-pre-emptive issues of equity for cash Not applicable
Non-pre-emptive issues of equity for cash by any unlisted major subsidiary undertaking Not applicable
Parent participation in a placing by a listed subsidiary Not applicable
Contracts of significance Not applicable
Provision of services by a controlling shareholder Not applicable
Shareholder waivers of dividends Not applicable
Board statement in respect of relationship agreement with the controlling shareholder Not applicable
Directors
The Directors who served during the year are as follows:
Mansour Al Alami
Hassan Heikal
Rashed Al Jarwan
Lord Anthony St John of Bletso
Charbel El Khoury
Jyrki Koskelo
There have been no changes to the Board between 31 December 2022 and the date of this report. Biographical details of the current
Directors are set out on pages 40 to 41. The beneficial interests of the Directors and connected persons in the share capital of the Company
are set out on page 66 of the Report of the Remuneration Committee.
Powers of Directors
The Directors’ powers are determined by UK legislation and our Articles of Association (the Articles), which are available on the Company’s
website. The Directors may exercise all of the Company’s powers provided that the Articles or applicable legislation do not stipulate that any
such powers must be exercised by the members (shareholders).
Appointment and Replacement of Directors
Directors may be appointed by ordinary resolution of the members or by a resolution of the Directors. Members may remove a Director by
passing an ordinary resolution of which special notice has been given, in accordance with the Act.
Directors wishing to continue to serve seek re-election annually in accordance with provision 18 of the Code. All Directors are being proposed
by the Board for reappointment at the forthcoming AGM.
Section 172(1) of the Companies Act 2006
For information on how the Directors have engaged with employees, how they have had regard to employee interests, and the effect of that
regard, including on the principal decisions taken by the Company during the financial year, please refer to page 12. Please also refer to pages
20 to 21 in the Strategic Report where GMS’ business relationships with suppliers, customers and others are identified, and the effect of that
regard, including on the principal decisions taken by the Company during the financial year.
A description of the Group’s diversity policy is set out on page 11 and forms part of this report by reference.
69Annual Report 2022
Governance
Amendments to the Articles of Association
The Company may alter its Articles by special resolution passed at a general meeting of shareholders.
Indemnification of Directors
The Company has provided indemnification for Directors in accordance with the Company’s Articles and the Act. As far as is permitted by
legislation, all Officers of the Company are indemnified out of the Company’s own funds against any liabilities and associated costs which
they could incur in the course of their duties for the Company, other than any liability to the Company or an associated company.
Change of Control
As at 31 December 2022, the Company was party to the following significant agreements that take effect, alter or terminate, or have the
potential to do so, on a change of control of the Company:
Share Incentive Schemes
The Company’s share-based employee incentive plans detailed in the Report of the Remuneration Committee on pages 53 to 54 contain
provisions relating to a change of control of the Company. Vesting of outstanding awards and options on a change of control would normally
be at the discretion of the Remuneration Committee, which would, where it considered appropriate, take into account the satisfaction of any
applicable performance conditions at that time and the expired duration of the relevant performance period.
Operational Contracts
The Group is party to a limited number of operational arrangements that have the potential to be terminated or altered on a change of control
of the Company, but these are not considered to be individually significant to the business of the Group as a whole.
Group Banking Facility
Under the terms of the Group’s banking facility agreement, if any person or persons, acting in concert, gains control of the Company by
owning shares which carry 30% or more of the voting rights of the Company, this may result in the repayment or prepayment of total balances
outstanding under the Group banking facility, within 30 days of notification of a change in control.
Share Capital
Details of the Company’s issued share capital as at 31 December 2022 can be found in Note 13 to the consolidated financial statements,
on page 108. The Company’s share capital comprises ordinary shares with a nominal value of 2p each, which are listed on the London
Stock Exchange.
Holders of ordinary shares are entitled to receive dividends (when declared by the Board or approved by members), receive copies of the
Company’s Annual Report, attend and speak at general meetings of the Company, appoint proxies and exercise voting rights.
There are no restrictions on the transfer, or limitations on the holding, of ordinary shares and no requirements to obtain approval prior to any
transfers. No ordinary shares carry any special rights with regard to control of the Company and there are no restrictions on voting rights.
Major shareholders have the same voting rights per share as all other shareholders. There are provisions under the Company’s Articles with
regard to the rights of shareholders and the Company pertaining to ordinary shares.
There are no known arrangements under which financial rights are held by a person other than the holder of the shares and no known
agreements on restrictions on share transfers or on voting rights.
Shares acquired through our share schemes and plans rank equally with the other shares in issue and have no special rights.
At the 2022 GM (“General Meeting”) held on 19 October 2022, the Directors were granted a general authority to allot up to 338,804,850 new
shares equal to approximately one-third of the issued share capital of the Company at the date of the 2022 notice of Annual General Meeting
(“AGM”). The Directors were also then granted an additional authority to allot up to 338,804,850 shares in connection with a rights issue,
representing a further one-third of the issued share capital of the Company at the date of the notice of AGM. These are routine authorities
common amongst listed companies and follow The Investment Association’s share capital management guidelines. The Company believes
adherence to their guidelines to be in the best interests of the Company and its shareholders generally and intends to continue following
these guidelines.
In accordance with the Group’s debt deal, the Company issued Warrants to its lenders on 2 January 2023. The Warrants if fully exercised,
would entitle the Lenders to subscribe for 137,075,773 ordinary shares of 2 pence each in the capital of the Company at an exercise price of
5.75 pence per share. The Warrants are exercisable by the Lenders at any time until 30 June 2025.
In addition to ordinary shares, the Company previously had in issue deferred shares of 8 pence each, issued at the time of the capital
reorganisation in June 2021. These deferred shares had no voting or dividend rights, and on return of capital on a winding up, had no valuable
economic rights.
At the 2022 AGM, an ordinary resolution was passed in relation to the buyback of deferred shares. This resolution approved the terms of an
agreement to be made between the Company and the holders of the deferred shares for the purchase by the Company of all of the deferred
shares in issue for an amount not exceeding £1.00 in aggregate.
That agreement was subsequently attended to and implemented after which the deferred shares were cancelled.
70 Gulf Marine Services PLC
DIRECTORS’ REPORT
continued
Substantial Shareholders
As at 31 December and as at the date of this report, the Company has been notified, in accordance with Chapter 5 of the Disclosure and
Transparency Rules, of voting rights of shareholders of the Company as shown below:
As At 31 December 2022
Number of Shares
As At 31 December 2022
% of Share Capital
As At 21 February 2023
Number of Shares
As At 21 February 2023
% of Share Capital
Seafox International Limited 304,822,732 29.99% 304,822,732 29.99%
Mazrui Investments LLC 260,180,095 25.60% 260,180,095 25.60%
Castro Investments Ltd 34,378,680 3.38% 34,378,680 3.38%
Mr Ivan Lindsay Brunette 32,302,977 3.18% 32,302,977 3.18%
Risk Management
A description of the main features of the Group’s internal control and risk management arrangements in relation to the financial reporting
process are set out on pages 24 to 31 and forms part of this report by reference. The Group’s financial risk management objectives and
policies, including the use of financial instruments, are set out in Note 27 to the consolidated financial statements on pages 113 to 117.
Post Balance Sheet Events
More details can be found in Note 38 to the consolidated financial statements on page 126.
Likely Future Developments
Information in respect of likely future developments in the business of the Company can be found in the Strategic Report on pages 1 to 37
and forms part of this report by reference.
Research and Development
The Group did not undertake any research and development activities during the year (2021: none).
Political Donations
The Group made no political donations and incurred no political expenditure during the year (2021: nil).
The Existence of Branches Outside the UK
The Group has a branch in Qatar.
Employees and Policies
The Group gives full consideration to applications for employment from disabled people where the requirements of the job can be adequately
fulfilled by a disabled person.
Where existing employees become disabled, it is the Group’s policy wherever practicable to provide continuing employment under normal
terms and conditions and to provide training and career development and promotion opportunities to them wherever appropriate.
Further information on employees and the Company’s engagement with them is given in the Strategic Report and Corporate Governance
Report on pages 1 to 37 and pages 38 to 72.
Greenhouse Gas Emissions/Streamlined Energy and Carbon Reporting
Information on the Group’s greenhouse gas emissions/Streamlined energy and carbon reporting is set out on pages 10 to 11 and forms part
of this report by reference.
Dividends
No dividend is to be paid or proposed for 2022 (2021: nil).
Going Concern
The Group’s Directors have assessed the Group’s financial position for a period through to June 2024 and have a reasonable expectation that
the Group will be able to continue in operational existence for the foreseeable future.
The Group has reported a profit for the second consecutive year and is expected to continue to generate positive operating cash flows for the
foreseeable future especially considering a better market outlook.
The Group was in a net current liability position as at 31 December 2022 amounting to US$ 15.8 million (31 December 2021: net current
assets of US$ 4.2 million). Despite the reduction in the current asset ratio from 31 December 2021 to 31 December 2022, the Group closely
monitors its liquidity and is confident to meet its short term liabilities obligations. The Group made a loan prepayment of US$3.8 million in Q4
2022 which reduced the current assets (Cash) and the non-current liabilities (Bank loan) at the year end, leading to a reduction in the current
ratio. The loan prepayment was made after taking into account the forecast cash inflows in Q1 2023, being sufficient to meet Group’s
short-term obligations.
The Group has also fully repaid its Working Capital Facility (Non-Current Liability) during the year, with payments of US$21.5 million. The
Working Capital Facility is still available for short term needs. It expires alongside the main debt facility in June 2025 and was accordingly
classified as non-current liability in the prior period.
71Annual Report 2022
Governance
The forecast used for Going Concern reflects management’s key assumptions including those around utilisation and vessel day rates on a
vessel-by-vessel basis. Refer to the Going Concern section in Note 3 of consolidated financial statements for details of assumptions used.
A downside case was prepared by management. Based on this scenario, the Group would not be in breach of its term loan facility. The downside
case is considered severe but plausible and would still leave the Group with US$ 15.5 million of liquidity and in compliance with the covenants
under the Group’s banking facilities throughout the assessment period.
In addition to the above reasonably plausible downside sensitivity, the Directors have also considered a reverse stress test, where profit has
been sufficiently reduced to breach the net leverage ratio as a result of a combination of reduced utilisation and day rates. Refer to the Going
Concern section in Note 3 of consolidated financial statements for assumptions around the downside case and the reverse stress test.
Based on the reverse stress test there would be covenant breaches as Finance Service Cover and Interest Cover ratios would exceed the
permitted levels at 30 June 2024. Should low/mild impact circumstances arise that differ from the Group’s projections, the Directors plan
a number of mitigating actions that can be executed successfully in the necessary timeframe to meet debt repayment obligations as they
become due (refer Note 21 for maturity profiles) and in order to maintain liquidity. Needless to say, should the front winds described in the risk
section be of high magnitude, potential mitigating measures may not be sufficient. Potential mitigating actions are disclosed in Note 3 of the
consolidated financial statements.
GMS continues to remain cognisant of the wider context in which it operates and the impact that climate change could have on the financial
statements of the Group. The impact of climate change is expected to be insignificant in the going concern assessment period.
During January 2023, a customer of the Group entered administration. Management has ascertained that the impact of their administration
is not going to affect the ability of the Group to operate as a Going Concern. As at the reporting date, the Group has provided for 50% of the
receivable balance amounting to US $1.92 million. See Note 38.
The Group’s forecasts, having taken into consideration reasonable risks and downsides, indicate that its current bank facilities along with
higher utilisation secured at increased day rates and a strong pipeline of near-term opportunities for additional work will provide sufficient
liquidity for its requirements for the foreseeable future and accordingly the consolidated financial statements for the Group for the current
period have been prepared on a going concern basis.
Statement on Disclosure to the External Auditor
Each of the Directors of the Company at the time when this report was approved confirms that:
• so far as the Director is aware, there is no relevant audit information of which the Company’s auditor is unaware; and
• they have taken all the steps that they ought to have taken as a Director in order to make himself or herself aware of any relevant audit
information and to establish that the Company’s auditor is aware of that information.
This confirmation is given in accordance with Section 418(2) of the Act.
Appointment of New External Auditor
In 2022 the Board, on the recommendation of its Audit and Risk Committee, appointed KPMG following the audit tender process as external
auditor of the Company. They were subsequently reappointed at the 2022 AGM. KPMG will again be proposed for reappointment by
shareholders at the forthcoming AGM.
Annual General Meeting
Details of the Company’s 2023 AGM are included in the Notice of AGM accompanying this Annual Report. The Notice of AGM sets out the
business of the meeting and includes an explanation of all resolutions to be proposed. Separate resolutions will be proposed in respect of
each substantive issue. The AGM is also used by the Board to take account of views expressed by shareholders and proxy bodies at and
following AGMs, updating future proposals as and when appropriate.
By order of the Board.
Tony Hunter
Company Secretary
23 April 2023
72 Gulf Marine Services PLC
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors are required to
prepare the Group financial statements in accordance with International Accounting Standards in conformity with the requirements of the
Companies Act 2006 and International Financial Reporting Standards (IFRS Standards) adopted pursuant to Regulation (EC) No 1606/2002
as it applies in the European Union. The Directors have also chosen to prepare the parent company financial statements in accordance with
Financial Reporting Standard 102 “The Financial Reporting Standard Applicable in the UK and Republic of Ireland”.
The separate financial statements of the Company are presented as required by the Companies Act 2006. They have been prepared under
the historical cost convention, modified to include certain items at fair value, and in accordance with Financial Reporting Standard 102 (FRS
102) issued by the Financial Reporting Council. Under Company law the Directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the company for that period.
In preparing the parent company financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• state whether Financial Reporting 102 “The Financial Reporting Standard Applicable in the UK and Republic of Ireland” has been followed,
subject to any material departures disclosed and explained in the financial statements; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue
in business.
In preparing the Group financial statements, International Accounting Standard 1 requires that Directors:
• properly select and apply accounting policies;
• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and
understandable information;
• provide additional disclosures when compliance with the specific requirements in IFRS Standards are insufficient to enable users
to understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial
performance; and
• make an assessment of the Company’s ability to continue as a going concern.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions
and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial
statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for
taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s
website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation
in other jurisdictions.
Directors’ Responsibility Statement
We confirm that to the best of our knowledge:
• the financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole;
• the strategic report includes a fair review of the development and performance of the business and the position of the Company and the
undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they
face; and
• the annual report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information
necessary for shareholders to assess the Company’s position and performance, business model and strategy.
This responsibility statement was approved by the Board of Directors on 23 April 2023 and is signed on its behalf by:
Mansour Al Alami Rashed Al Jarwan
Executive Chairman Senior Independent Director
23 April 2023 23 April 2023
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
73Annual Report 2022
Financial Statements
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF GULF MARINE SERVICES PLC
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
Opinion
We have audited the financial statements of Gulf Marine Services Plc (‘the Company’) and its consolidated undertakings (‘the Group’) for
the year ended 31 December 2022 set out on pages 80 to 138, which comprise the consolidated statement of profit or loss and other
comprehensive income, the consolidated and Company statements of financial position, the consolidated and Company statements of
changes in equity, the consolidated statement of cash flows and related notes, including the summary of significant accounting policies
set out in note 3. The financial reporting framework that has been applied in their preparation is UK Law, UK adopted international
accounting standards and, as regards the Company financial statements, Financial Reporting Standard 102 “The Financial Reporting
Standard applicable in the UK and Republic of Ireland”, as applied in accordance with the provisions of the Companies Act 2006.
In our opinion:
• the financial statements give a true and fair view of the state of the Group’s and of the Company’s affairs as at 31 December 2022 and of
the Group’s profit for the year then ended;
• the Group financial statements have been properly prepared in accordance with UK adopted international accounting standards;
• the Company financial statements have been properly prepared in accordance with Financial Reporting Standard 102 “The Financial
Reporting Standard applicable in the UK and Republic of Ireland”, as applied in accordance with the provisions of the Companies Act
2006; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities
under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report.
We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion. Our audit opinion is consistent
with our report to the Audit and Risk Committee.
We were appointed as auditor by the directors on 15 August 2022. The period of total uninterrupted engagement is for the one financial
year ended 31 December 2022. We have fulfilled our ethical responsibilities under, and we remain independent of the Group in accordance
with UK ethical requirements, including the Financial Reporting Council (FRC)’s Ethical Standard as applied to listed public interest entities.
No non-audit services prohibited by that standard were provided.
Conclusions Relating to Going Concern
The directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Group or the Company
or to cease their operations, and as they have concluded that the Group and the Company’s financial position means that this is realistic.
They have also concluded that there are no material uncertainties that could have cast significant doubt over their ability to continue as a
going concern for at least one year from the date of approval of the financial statements (“the going concern period”).
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation
of the financial statements is appropriate. Our evaluation of the directors’ assessment of the entity’s ability to continue to adopt the going
concern basis of accounting included:
• Obtaining and evaluating management’s cash flow projections and challenging each key assumption applied through:
– comparing forecast day rates to signed contracts for contracted periods, and challenging the basis adopted for day rates elsewhere
in the calculations;
– performing retrospective analysis of management’s historic budgeting accuracy and comparing historical forecast revenues and costs
to actuals;
– assessing whether other assumptions used in management’s forecasts including operating expenditure, capital expenditure and
working capital assumptions are reasonable;
– making enquiries of management as to its knowledge of events or conditions and related business risks beyond the period of
assessment used by management (12 months from the date of signing of the financial statements) that may cast significant doubt
on the Group’s and Company’s ability to continue as a going concern;
– assessing whether management has appropriately reflected impacts arising from climate change, energy transition and the Russia-
Ukraine war in the going concern period;
– challenging the appropriateness of downside and stress test scenarios in order to assess the reasonableness of the assumptions
included; and
– challenging management regarding the status of the contract pipeline and the likelihood and timing of awards;
• Recalculating the covenant ratios in accordance with the term loan facility to determine whether any breaches of those covenants exist
in the forecast cash flows;
• Testing the mathematical accuracy of the cash flow model used by management to prepare the forecasts and resulting
covenant calculations;
• Determining whether the cash flow projections are consistent with those used in the Group’s assessment of the recoverability of the
carrying value of its marine vessels and substantiating any differences; and
• Assessing the related disclosures in the Annual Report.
74 Gulf Marine Services PLC
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF GULF MARINE SERVICES PLC continued
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the Group or the Company’s ability to continue as a going concern for a period of at least twelve
months from the date when the financial statements are authorised for issue.
In relation to the Group and the Company’s reporting on how they have applied the UK Corporate Governance Code, we have nothing
material to add or draw attention to in relation to the directors’ statement in the financial statements about whether the directors considered it
appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with
judgements that were reasonable at the time they were made, the absence of reference to a material uncertainty in this auditor’s report is not
a guarantee that the Group or the Company will continue in operation.
Detecting Irregularities Including Fraud
We identified the areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements and
risks of material misstatement due to fraud, using our understanding of the entity’s industry, regulatory environment and other external factors
and inquiry with the directors. In addition, our risk assessment procedures included:
• Inquiring with the directors and other management as to the Group’s policies and procedures regarding compliance with laws and
regulations, identifying, evaluating and accounting for litigation and claims, as well as whether they have knowledge of non-compliance or
instances of litigation or claims;
• Inquiring of directors, the Audit and Risk Committee, and inspection of policy documentation as to the Group’s high-level policies and
procedures to prevent and detect fraud, including the internal audit function, and the Group’s channel for “whistleblowing”, as well as
whether they have knowledge of any actual, suspected or alleged fraud;
• Inquiring of directors, the audit committee, regarding their assessment of the risk that the financial statements may be materially misstated
due to irregularities, including fraud;
• Inspecting the Group’s regulatory and legal correspondence;
• Reading Board/ Audit and Risk Committee meeting minutes;
• Performing planning analytical procedures to identify any usual or unexpected relationships.
We discussed identified laws and regulations, fraud risk factors and the need to remain alert among the audit team.
Firstly, the Group is subject to laws and regulations that directly affect the financial statements including companies and financial reporting
legislation. We assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial
statement items, including assessing the financial statement disclosures and agreeing them to supporting documentation when necessary.
Secondly, the Group is subject to many other laws and regulations where the consequences of non-compliance could have a material effect
on amounts or disclosures in the financial statements, for instance through the imposition of fines or litigation or the loss of the Group’s
licence to operate. We identified the following areas as those most likely to have such an effect: UK Companies Act, Listing Rules and tax
legislation recognising the nature of the Group’s activities.
Auditing standards limit the required audit procedures to identify non-compliance with these non-direct laws and regulations to inquiry of
the directors and other management and inspection of regulatory and legal correspondence, if any. Through these procedures, we identified
actual or suspected non-compliance and considered the effect as part of our procedures on the related financial statement items.
We assessed events or conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud.
As required by auditing standards, we performed procedures to address the risk of management override of controls and the risk of
fraudulent revenue recognition. We identified fraud risks in relation to the Group charter hire revenue and assessment of the recoverability
of the carrying value of the Group’s marine vessels.
Further detail in respect of Charter hire revenue and Impairment of vessels is set out in the key audit matter disclosures in this report.
In response to the fraud risks, we also performed procedures including:
• Identifying journal entries to test based on risk criteria and comparing the identified entries to supporting documentation;
• Evaluating the business purpose of significant unusual transactions;
• Assessing significant accounting estimates for bias; and
• Assessing the disclosures in the financial statements.
As the Company is regulated, our assessment of risks involved obtaining an understanding of the legal and regulatory framework that the Company
operates and gaining an understanding of the control environment including the entity’s procedures for complying with regulatory requirements.
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the
financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example,
the further removed non-compliance with laws and regulations (irregularities) is from the events and transactions reflected in the financial
statements, the less likely the inherently limited procedures required by auditing standards would identify it.
75Annual Report 2022
Financial Statements
In addition, as with any audit, there remains a higher risk of non-detection of irregularities, as these may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal controls. We are not responsible for preventing non-compliance and cannot be
expected to detect non-compliance with all laws and regulations.
Key Audit Matters: Our Assessment of Risks of Material Misstatement
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial statements and
include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had
the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and
we do not provide a separate opinion on these matters.
In arriving at our audit opinion above, the key audit matters, in decreasing order of audit significance, were as follows:
Impairment and Impairment Reversals of the Group’s Vessels (net Reversal: US$ 7.8 Million) and Company’s
Investment in Subsidiary (reversal US$ 18.8 Million)
Refer to page 93 (Group accounting policy), pages 100 to 104 (Group financial disclosures), page 132 (Parent Company accounting policy)
and pages 132 to 134 (Parent Company financial disclosures)
The key audit matter How the matter was addressed in our audit
The Group’s vessels are the largest balance in the Group financial
statements, with a carrying amount of US$ 549.7 million at
31 December 2022 (2021: US$ 560.9 million).
As described in Note 5 certain factors, such as the improvement
in day rates, utilisation and the market outlook underpinned by an
increased oil price and production environment were indications
that the value of the marine vessels may have increased as of
31 December 2022 compared to 31 December 2021, whilst an
increased interest rate environment during this period might result in
the reduction of those values. As a result of these triggering events,
the Group undertook an assessment of the recoverability of the
carrying value of its marine vessels as of 31 December 2022. This
assessment involved comparing the carrying value of each vessel,
which is deemed by the Group to be an individual cash generating
unit (‘CGU’), with its respective recoverable amount, being the higher
of value in use (‘VIU’) and fair value less cost to sell. Following this
assessment the Group recognised a net impairment reversal of
US$ 7.8 million in the year ended 31 December 2022 for its vessels.
As with the prior year, a fair valuation was conducted in compliance
with Group’s bank lending arrangements of the Group’s marine
vessels as at 31 December 2022. As described in Note 4,
management concluded that recoverable amount of each vessel
should be based on VIU. The calculation of VIU is underpinned by
assumptions, notably day and utilisation rates and the nominal
pre-tax discount rate. As disclosed in Note 4, these assumptions,
particularly the respective vessel’ day and utilisation rates beyond
their contracted term, are identified as key sources of estimation
uncertainty and judgment.
Due to the sensitivity of the recoverable amounts to these key
assumptions and the subjectivity and judgement involved impacting
the net impairment reversal in the current year, we identified a key
audit matter relating to these assumptions with regard to the Group’s
vessels. Furthermore, we also identified a potential for management
bias through possible manipulation of these assumptions and the
resulting recoverable amount.
The carrying amount of Company’s investment in its subsidiaries
represents 78% (2021: 84%) of the Company’s total assets. The
recoverability of investments is primarily impacted by the VIU of the
marine vessels owned by the Company’s subsidiary undertakings.
Our key audit procedures are described below.
• We obtained an understanding of the relevant control surrounding
management’s preparation of the discounted cash flow model
(VIU), including the assumed day and utilisation rates and the rate
applied to discount the cash flows;
• We tested by inspection and enquiry the reasonableness of the
valuation methodology and key assumptions underpinning the fair
value less cost to sell of the Group’s vessels as of 31 December
2022 reported by the external valuer appointed by the Group’s
lending banks. We also assessed for reasonableness the
competence, capabilities and objectivity of that expert;
With respect to the VIU model, we:
• tested its mathematical accuracy
• challenged the reasonableness of the assumed day and utilisation
rates by reading contracts for secured backlog, assessing
likelihood of current pipeline opportunities by inspecting underlying
evidence such as tender documents and corroborating these
key assumptions through enquires of the Group’s commercial
management team, and considering the historical rates
achieved for individual vessels to assess whether forward
looking assumptions are within a reasonable range;
• inspected the report on forecast day and utilisation rates
indicated by an external assessor for the Group’s marine vessels,
particularly with respect to those rates beyond the respective
vessels’ contracted terms and also discussed these key
assumptions with that external assessor as part of our
procedures to assess these assumptions for reasonableness.
We also undertook procedures to assess the external assessor’s
independence, competence and capabilities for the purpose of
providing its report;
• involved our specialist to assess the reasonableness of the rate
applied to discount the forecast cash flows to their present value;
• agreed the operating and capital expenses assumed in the model
to the Group’s approved budget and assessed the reasonableness
of these assumptions by performing a retrospective budget
versus actual analysis to gauge management’s historical
forecasting accuracy and analytically reviewing forecast costs
against historical levels;
• Assessed whether there was any evidence of management bias
with respect to its VIU calculations; and
• Performed an overall stand back assessment to determine
whether management’s VIU estimate was reasonable;
76 Gulf Marine Services PLC
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF GULF MARINE SERVICES PLC continued
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
Impairment and Impairment Reversals of the Group’s Vessels (net Reversal: US$ 7.8 Million) and Company’s
Investment in Subsidiary (reversal US$ 18.8 Million) continued
The key audit matter How the matter was addressed in our audit
• We assessed the impact of the Group’s stated commitments
around climate change and energy transition on its assumed
cash flow projections. We also considered the existence
of any contradictory evidence that was identified through the
performance of each of these procedures and weighed such
evidence in our overall conclusions. Such evidence included the
relevant long-term outlook from external industry and market
observers; and
• We assessed the adequacy and reasonableness of the related
disclosures in the financial statements, including the Group
vessels’ sensitivities to future impairment/impairment reversals
and the Parent Company’s sensitivity to future impairment/
impairment reversals.
Based on the above audit procedures we found that the Group’s
recognition of a net impairment reversal of $7.8 million as of
31 December 2022, and the calculations underpinning it and the
related disclosures in note 5 was reasonable. We noted that the
Group’s carrying value of its marine vessels continues to be sensitive
to further impairment or impairment reversal subject to changes in
assumed day and utilisation rates and the rate applied to arrive at
each vessels’ VIU, as described in note 5, and that this assessment
is subject to significant estimation and judgment, as described in
note 4. We found that the parent Company’s investment in
subsidiaries and the related impairment reversal to be acceptable.
We identified that management’s controls throughout the process
of preparing and reviewing the value in use calculations, were
not sufficiently robust to identify errors in the overall assessment.
We consider our audit procedures appropriately responded to the
control deficiencies identified.
Recognition of Charter Hire and Lease Revenue of Group (US$ 115 Million)
Refer to page 91 (accounting policy) and page 123 (financial disclosures).
77Annual Report 2022
Financial Statements
The key audit matter How the matter was addressed in our audit
Each of the Group’s vessels earns revenues on the basis of a specific
contract with the relevant counterparty. Each contract will typically
specify a day rate, which can vary significantly by vessel and by
counterparty, as well as a standby rate for when the vessel is
available for use but not operational. Certain contracts also include
amounts payable to the Group in respect of mobilising the vessel at
the inception of the contract and/or demobilising the vessel at the
end of the contract term.
As disclosed in the accounting policies in Note 3, revenue is
recognised over the term of the contract for certain performance
obligations. Accordingly, in order for revenue to be recorded
appropriately, management must:
• accurately record the number of days both on hire and on
standby (to ensure both completeness and accuracy);
• apply the correct contractual rates, net of any agreed discounts,
to the number of days in each of these categories (to ensure
accuracy); and
• ensure there is an appropriate process for reviewing all contracts
in place to ensure contractual terms are accounted for in line with
both the lessor accounting requirements of IFRS 16 (given the
required allocation under IFRS 16 to leasing revenue for hired
equipment on board) and the revenue recognition principles of
IFRS 15.
Due to the significant variability in contract terms by vessel and by
counterparty, and the potential for management bias to record higher
revenues given it is a key performance indicator for the Group, we
have identified the accurate recording of charter hire revenue (and by
extension, the lease revenue) as a key audit matter.
Our key audit procedures are described below.
We evaluated and tested the design and operating effectiveness of
the relevant control in the revenue business process;
We performed a recalculation of charter hire revenue on the number
of days on hire/standby based on customer/third party signed logs
and obtained supporting explanations for any gaps and reconciled
this to our knowledge of each vessel’s operational performance
during the period;
We agreed the respective marine vessel day rates and terms of hire
to the underlying contracts;
For mobilisation and demobilisation revenue, we assessed whether
revenue has been recorded in accordance with the terms of the
contract and IFRS 15. Further, we also calculated the expected
deferred revenue given mobilisation contractual arrangements
and compared this with the Group’s balances for reasonableness;
We tested journals to assess for any evidence of fraudulent revenue
recognition; and
We performed a reconciliation of total billings and total cash receipts
during the year, along with year on year movements in revenue
related balance to obtain additional high level audit evidence around
the completeness, existence and accuracy of revenue recognition.
Based on the above audit procedures we found an immaterial
uncorrected error in the Group’s calculation of charter hire revenue,
which we have noted as an audit difference in our report to the Audit
and Risk Committee.
Our Application of Materiality and an Overview of the Scope of Our Audit
Materiality for the Group financial statements as a whole was set at US$ 1 million, determined with reference to a benchmark of total Group
revenues of US$ 133 million, of which it represents 0.75% .
We consider total revenue to be the most appropriate benchmark for the Group financial statements as it provides a more stable measure
year on year than group profit before tax.
Materiality for the Parent company financial statements as a whole was set at US$ 1 million, determined with reference to a benchmark
of Parent Company’s total assets, of which it represents 0.32%.
We consider total assets to be the most appropriate benchmark for the Parent Company’s financial statements as the primary nature of the
Parent Company is to hold investments in subsidiaries.
We applied Group and Parent Company materiality to assist us determine the overall audit strategy.
In line with our audit methodology, our procedures on individual account balances and disclosures were performed to a lower threshold,
performance materiality, so as to reduce to an acceptable level the risk that individually immaterial misstatements in individual account
balances add up to a material amount across the financial statements as a whole.
Performance materiality was set at 65% of materiality for the financial statements as a whole, which equates to US$ 0.65 million for the Group
and the Parent company. We applied this percentage in our determination of performance materiality based on the level of identified
misstatements/control deficiencies/changes in the control environment during the prior period.
As this was the first year as auditor for the Group, our ability to assess the factors which impact on our determination of performance
materiality was reduced. In response to this uncertainty in the aggregation risk, we considered it appropriate to set performance materiality
at 65% of Group materiality for both Group and Parent Company.
We applied Group and Parent company’s performance materiality to assist us determine what risks were significant risks for the Group and
Parent company respectively.
Our audit was conducted to the materiality levels specified above and was performed by the engagement team in Dublin with the assistance
of the Abu Dhabi office.
78 Gulf Marine Services PLC
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF GULF MARINE SERVICES PLC continued
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
We reported to the Audit and Risk Committee any corrected or uncorrected identified misstatements exceeding US$ 50,000, in addition
to other identified misstatements that warranted reporting on qualitative grounds.
We have nothing to report on the other information in the annual report.
The directors are responsible for the other information presented in the Annual Report together with the financial statements. The other
information comprises the information included in the strategic report, the governance section of the annual report, the glossary, the other
definitions and the corporate information. The financial statements and our auditor’s report thereon do not comprise part of the other
information. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit
opinion or, except as explicitly stated below, any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work, the
information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that work
we have not identified material misstatements in the other information.
Opinions on Other Matters Prescribed by the Companies Act 2006
Strategic report and directors’ report
Based solely on our work on the other information undertaken during the course of the audit:
• we have not identified material misstatements in the directors’ report or the strategic report;
• in our opinion, the information given in the strategic report and the directors’ report is consistent with the financial statements;
• in our opinion, the strategic report and the directors’ report have been prepared in accordance with the Companies Act 2006.
Directors’ remuneration report
In our opinion the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies
Act 2006.
Corporate Governance Statement
We have reviewed the directors’ statement in relation to going concern, longer-term viability and that part of the Corporate Governance
Statement relating to the Company’s compliance with the provisions of the UK Corporate Governance Code specified for our review by the
Listing Rules.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance
Statement is materially consistent with the financial statements and our knowledge obtained during the audit:
• Directors’ statement with regards the appropriateness of adopting the going concern basis of accounting and any material uncertainties
identified set out on page 70 to 71;
• Directors’ explanation as to their assessment of the Group’s prospects, the period this assessment covers and why the period is
appropriate set out on page 70 to 71;
• Director’s statement on whether it has a reasonable expectation that the Group will be able to continue in operation and meets its liabilities
set out on page 70 to 71
• Directors’ statement on fair, balanced and understandable and the information necessary for shareholders to assess the Group’s position
and performance, business model and strategy set out on page 72;
• Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks and the disclosures in the annual
report that describe the principal risks and the procedures in place to identify emerging risks and explain how they are being managed or
mitigated set out on page 24 to 30;
• Section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on page
48; and;
• Section describing the work of the Audit and Risk Committee set out on page 47 to 49.
Based solely on our work on the other information described above:
• with respect to the Corporate Governance Statement disclosures about internal control and risk management systems in relation to
financial reporting processes and about share capital structures:
– we have not identified material misstatements therein;
– the information therein is consistent with the financial statements and has been prepared in accordance with the applicable legal
requirements; and
• in our opinion, the Corporate Governance Statement has been prepared in accordance with relevant rules of the Disclosure Guidance
and Transparency Rules of the Financial Conduct Authority.
We are also required to report to you if a corporate governance statement has not been prepared by the Company.
We have nothing to report in these respects.
79Annual Report 2022
Financial Statements
We have nothing to report on the other matters on which we are required to report by exception.
Under the Companies Act 2006, we are required to report to you if, in our opinion:
• adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received from
branches not visited by us; or
• the Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the
accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
We have nothing to report in these respects.
Respective Responsibilities and Restrictions on Use
Responsibilities of directors for the financial statements
As explained more fully in the directors’ responsibilities statement set out on page 72, the directors are responsible for: the preparation of the
financial statements including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable
the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Group and
Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern
basis of accounting unless they either intend to liquidate the Group and Company or to cease operations, or have no realistic alternative but
to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud, other irregularities or error, and to issue an opinion in an auditor’s report. Reasonable assurance is a high level of
assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when
it exists. Misstatements can arise from fraud, other irregularities or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities.
The purpose of our audit work and to whom we owe our responsibilities
Our report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them
in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone
other than the Company and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed.
Terence Coveney, (Senior Statutory Auditor)
for and on behalf of KPMG Statutory Auditor
KPMG Statutory Auditor
1 Harbourmaster Place
IFSC, Dublin 1
Ireland
23 April 2023
80 Gulf Marine Services PLC
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2022
Notes
2022
US$’000
2021
US$’000
Revenue 30, 33 13 3 ,157 11 5 ,1 2 7
Cost of sales (78,587 ) (69,398 )
Impairment loss (1 3 ,1 9 2 ) –
Reversal of impairment 5, 30 20, 980 14 , 9 5 9
Expected credit losses 9 (1, 8 2 4 ) (62 )
Gross profit 60, 53 4 6 0,62 6
General and administrative expenses (13 , 2 12 ) (1 2 ,27 2 )
Operating profit 47, 3 2 2 48,354
Finance income 34 11 9
Finance expense 35 (2 0 ,1 3 7 ) (14 , 4 6 3 )
Foreign exchange loss, net 36 (13 8 ) (1,0 0 2 )
Other income 36 68 28
Profit for the year before taxation 2 7,12 6 32, 9 26
Taxation charge for the year 8 (1,7 2 4 ) (1, 7 0 7 )
Net profit for the year 25,40 2 31, 2 19
Other comprehensive income/(expense) – items that may be reclassified
to profit or loss:
Net hedging gain reclassified to the profit or loss 35 279 278
Net exchange loss on translation of foreign operations (79 9 ) (9 1 )
Total comprehensive gain for the year 24,8 82 3 1, 4 0 6
Profit attributable to:
Owners of the Company 25,326 3 1, 0 0 1
Non-controlling interests 19 76 2 18
Total comprehensive profit attributable to:
Owners of the Company 24,80 6
Non-controlling interests 19 76 2 18
Earnings per share:
Basic (cents per share) 32 2 .49 4.48
Diluted (cents per share) 32 2 . 47 4.4 6
All results are derived from continuing operations in each year. There are no discontinued operations in either year.
The attached notes 1 to 38 form an integral part of these consolidated financial statements.
81Annual Report 2022
Financial Statements
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2022
Notes
2022
US$’000
2021
US$’000
ASSETS
Non-current assets
Property and equipment 5 5 92,95 5 6 0 5,526
Dry docking expenditure 6 8,93 1 8 ,7 9 9
Right-of-use assets 7 3, 371 2, 8 8 4
Total non-current assets 6 05 , 257 6 1 7, 2 0 9
Current assets
Derivative financial instruments 11 386 –
Trade receivables 9 3 3 ,1 7 9 4 1 ,948
Prepayments, advances and other receivables 10 7, 7 2 2 6,9 6 9
Cash and cash equivalents 12 12 , 2 7 5 8 , 2 71
Total current assets 53,562
Total assets 6 5 8 , 819 674,397
EQUITY AND LIABILITIES
Capital and reserves
Share capital – Ordinary 13 3 0 ,11 7 3 0 ,117
Share capital – Deferred 13 – 4 6,4 4 5
Capital redemption reserve 13 46,4 45 –
Share premium account 13 9 9 ,1 0 5 99 , 1 05
Restricted reserve 14 272 272
Group restructuring reserve 15 (4 9,7 10 ) (4 9 ,710 )
Share based payment reserve 16 3,6 32 3,64 8
Capital contribution 17 9 ,1 7 7 9 ,1 7 7
Cash flow hedge reserve 11 (279 ) (558 )
Translation reserve (2 ,8 85 ) (2,0 8 6 )
Retained earnings 14 9 ,7 12 12 4 , 3 8 6
Attributable to the owners of the Company 285,586 2 6 0 ,7 9 6
Non-controlling interests 19 1, 9 8 8 1, 9 12
Total equity 2 8 7, 5 7 4 2 6 2 ,70 8
Current liabilities
Trade and other payables 21 2 7, 9 7 9 19 , 4 5 5
Current tax liability 6, 321 5,6 69
Bank borrowings – scheduled repayments within one year 22 30,00 0 26, 0 97
Lease liabilities 23 1, 8 4 5 1, 817
Derivative financial instruments 11 3 ,19 8 –
Total current liabilities 69, 343 5 3,0 38
Non-current liabilities
Provision for employees’ end of service benefits 20 2 ,14 0 2,3 22
Bank borrowings – scheduled repayments more than one year 22 298, 085 353, 429
Lease liabilities 23 1 ,677 1 ,1 0 7
Derivative financial instruments 11 3 ,19 8 1,7 9 3
Total non-current liabilities 3 0 1, 9 0 2 3 5 8 , 6 51
Total liabilities 37 1, 2 4 5 411, 6 8 9
Total equity and liabilities 6 5 8 , 819 674,397
The financial statements were approved by the Board of Directors and authorised for issue on 23 April 2023. Registered Company 08860816.
They were signed on its behalf by:
Rashed Al Jarwan Mansour Al Alami
Senior Independent Director Executive Chairman
The attached notes 1 to 38 form an integral part of these consolidated financial statements.
82 Gulf Marine Services PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
Share
capital–
Ordinary
US$’000
Share
capital–
Deferred
US$’000
Capital
redemption
reserve
US$’000
Share
premium
account
US$’000
Restricted
reserve
US$’000
Group
restructuring
reserve
US$’000
Share
based
payment
reserve
US$’000
Capital
contribution
US$’000
Cash
flow
hedge
reserve
US$’000
Translation
reserve
US$’000
Retained
earnings
US$’000
Attributable
to the
Owners of
the
Company
US$’000
Non-
controlling
interests
US$’000
Total equity
US$’000
At 1 January 2021 58,0 57 − − 93, 080 272 (4 9 ,710 ) 3 ,74 0 9 ,1 7 7 (836 ) (1, 9 9 5 ) 93,385 2 0 5 ,1 7 0 1, 6 9 4 206,8 64
Profit for the year − − − − − − − − − − 3 1, 0 0 1 31, 0 0 1 218 31, 2 19
Other comprehensive
income for the year
Net hedging gain
on interest hedges
reclassified to the
profit or loss − − − − − − − − 278 − − 278 − 278
Exchange differences
on foreign operations − − − − − − − − − (9 1 ) − (91 ) − (9 1 )
Total comprehensive
income for the year − − − − − − − − 278 (9 1 ) 3 1, 0 0 1
Transactions with
owners of the
Company
Share based payment
charge (Note 16,28) − − − − − − (18 ) − − − − (18 ) − (18 )
Capital reorganisation
(Note 12) (46 ,4 4 5 ) − − − − − − − − − − (4 6, 4 4 5 ) − (4 6, 4 4 5 )
Issue of share capital
(Note 12) 18 , 5 0 5 4 6,44 5 − 9,2 53 − − − − − − − 74 , 2 0 3 − 74, 2 0 3
Share issue costs
(Note 12) − − − (3 ,228 ) − − − − − − − (3, 228 ) − (3,228 )
Cash settlement of
share-based payments
(Note 27) − − − − − − (74 ) − − − − ( 74 ) − (74 )
Total transactions
with owners of
the Company ( 2 7, 9 4 0 ) 46,4 45 – 6 ,025 – – (9 2 ) – – – – 24, 4 3 8 – 24, 4 3 8
At 31 December 2021 3 0 ,117 46 ,44 5 − 9 9 ,10 5 272 (4 9 ,710 ) 3,64 8 9 ,17 7 (558 ) (2,0 8 6 ) 124 , 3 8 6 26 0 ,79 6 1, 9 12 2 6 2,70 8
Profit for the year − − − − − − − − − − 25,32 6 25,32 6 76 25,4 02
Other comprehensive
income
Net hedging gain
on interest hedges
reclassified to the profit
or loss − − − − − − − − 279 − − 279 − 279
Exchange differences
on foreign operations − − − − − − − − − (79 9 ) − (79 9 ) − (79 9 )
Total comprehensive
income for the year − − − − − − − − 279 (79 9 ) 25,3 26 24 , 8 0 6 76 24 , 8 8 2
Transactions with
owners of the
Company
Capital reorganisation
(Note 13) − (4 6,4 4 5 ) 46,4 4 5 − − − − − − − − – − –
Share based payment
charge (Note 16,28) − − − − − − 45 − − − − 45 − 45
Cash settlement of
share-based payments
(Note 27) − − − − − − (6 1 ) − − − − (6 1 ) − (6 1 )
Total transactions
with owners of
the Company – (4 6, 4 45 ) 46 ,44 5 – – – (16 ) – – – – (16 ) – (16 )
At 31 December 2022 3 0 ,11 7 – 46,4 45 9 9 ,1 0 5 272 (4 9 ,710 ) 3,6 32 9 ,17 7 (279 ) (2, 88 5 ) 14 9 ,7 12 285,586 1, 9 8 8
Refer to Notes 13 to 19 for description of each reserve.
The attached notes 1 to 38 form an integral part of these consolidated financial statements.
83Annual Report 2022
Financial Statements
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2022
Notes
2022
US$’000
2021
US$’000
Net cash generated from operating activities 37 82 ,565 4 0 , 5 11
Investing activities
Payments for additions of property and equipment (3,345 ) (7,898 )
Dry docking spend excluding drydock accruals (2 ,970 ) (3, 609 )
Interest received 11 9
Net cash used in investing activities (6,3 0 4 )
(11,498 )
Financing activities
Repayment of bank borrowings (51, 4 4 5 ) (30, 983 )
Interest paid on bank borrowings (1 7, 5 2 5 ) (12 , 9 5 0 )
Principal elements of lease payments (2 ,524 ) (2, 3 42 )
Settlement of derivatives (38 4 ) (1,0 3 3 )
Payment of issue costs on bank borrowings (14 8 ) (3 , 6 15 )
Interest paid on leases (17 0 ) (14 7 )
Share issue costs paid – (3 ,2 28 )
Cash settled share–based payments (6 1 ) –
Proceeds from issue of shares – 2 7, 7 5 8
Bank borrowings received – 2, 000
Net cash used in financing activities (7 2,257 ) (24 , 5 4 0 )
Net increase in cash and cash equivalents 4,0 04 4, 473
Cash and cash equivalents at the beginning of the year 8, 2 71 3,7 9 8
Cash and cash equivalents at the end of the year 12 12 , 2 75 8, 2 71
Non-cash transactions
(Cancellation)/recognition of deferred shares (4 6, 4 4 5 ) 4 6,4 4 5
Recognition of right-of-use asset 3 ,12 2 1, 9 5 5
(Reversal)/addition to capital accruals (9 ) 408
Increase in drydock accruals 2 ,7 75 302
The attached notes 1 to 38 form an integral part of these consolidated financial statements.
84 Gulf Marine Services PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
85Annual Report 2022
Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 31 DECEMBER 2022
86 Gulf Marine Services PLC
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88 Gulf Marine Services PLC
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COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2022
Notes
2022
US$’000
2021
US$’000
Non-current assets
Investments in subsidiaries 5 248,580 229,806
Other receivables 7 67,663 43,591
Total non-current assets 316,243 273,397
Current assets
Other receivables 7 159 216
Cash and cash equivalents 6 2 −
Total current assets 161 216
Creditors: Amounts falling due within one year
Other payables 9 61,631 36,172
Derivatives 10 3,198 –
Net current liabilities 64,829 36,172
Total assets less current liabilities 251,575 2 37,4 41
Creditors: Amounts falling due after more than one year
Derivatives 10 – 717
Net assets 251,575 236,724
Equity
Share capital – Ordinary 11 30,117 3 0,117
Share capital – Deferred 11 – 46,445
Capital redemption reserve 11 46,445 –
Share premium account 11 99,105 99,105
Share based payment reserve 11 3,631 3,647
Retained earnings 72,277 57,410
Total equity 251,575 236,724
The Company reported a profit for the financial year ended 31 December 2022 of US$ 14.9 million (2021: loss US$ 18.3 million).
The financial statements of Gulf Marine Services PLC (registered number 08860816) were approved by the Board of Directors and authorised
for issue on 23 April 2023. Signed on behalf of the Board of Directors.
Rashed Al Jarwan Mansour Al Alami
Senior Independent Director Executive Chairman
The attached Notes 1 to 14 form an integral part of these financial statements.
128 Gulf Marine Services PLC
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
Share capital
– Ordinary
US$’000
Share capital
– Deferred
US$’000
Capital
redemption
reserve
US$’000
Share
premium
account
US$’000
Share based
payment
reserve
US$’000
Retained
earnings
US$’000
Total equity
US$’000
At 1 January 2021 58,057 − − 93,080 3,739 75,737 230,613
Loss for the year/Total comprehensive
expense − − − − − (18,327) (18,327)
Share based payment credit (N o te 11) − − − − (18) − (18)
Capital reorganisation (No te 11) (46,445) − − − − − (46,445)
Issue of share capital (Note 11) 18,505 46,445 − 9,253 − − 74,20 3
Share issue costs − − − (3,228) − − (3,228)
Cash settlement of share based
payments (Note 13) − − − − ( 74) − (74)
At 31 December 2021 30,117 46,445 − 99,105 3,647 57,410 236,724
Profit for the year/Total comprehensive
income − − − − − 14,867 14,867
Share based payment charge (N o te 11) − − − − 45 − 45
Capital reorganisation (No te 11) − (46,445) 46,445 − − − –
Cash settlement of share based
payments (Note 13) − − − − (61) − (61)
At 31 December 2022 30,117 – 46,445 99,105 3,631 72,277 251,575
The attached Notes 1 to 14 form an integral part of these financial statements.
129Annual Report 2022
Financial Statements
NOTES TO COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
1 Corporate Information
Gulf Marine Services PLC (“the Company”) is a public company limited by shares in the United Kingdom under the Companies Act 2006
and is registered in England and Wales. The address of the registered office of the Company is 107 Hammersmith Road, London, United
Kingdom, W14 0QH. The registered number of the Company is 08860816. The Company is the parent company of the Gulf Marine Services
PLC Group comprising of Gulf Marine Services PLC and its underlying subsidiaries (“the Group”). The consolidated Group accounts are
publicly available.
2 Accounting Policies
Currency
The functional and presentational currency of the Company is US Dollars (“US$”).
Going Concern
The Company’s ability to continue as a going concern is premised on the same assessment as the Group.
The Group’s Directors have assessed the Group’s financial position for a period through to June 2024 and have a reasonable expectation
that the Group will be able to continue in operational existence for the foreseeable future.
The Group has reported a profit for the second consecutive year and is expected to continue to generate positive operating cash flows for the
foreseeable future especially considering a better market outlook.
The Group was in a net current liability position as at 31 December 2022 amounting to US$ 15.8 million (31 December 2021: net current
assets of US$ 4.2 million). Despite the reduction in the current asset ratio from 31 December 2021 to 31 December 2022, the Group closely
monitors its liquidity and is confident to meet its short term liabilities obligations. The Group made a loan prepayment of US$3.8m in Q4 2022
which reduced the current assets (Cash) and the non-current liabilities (Bank loan) at the year end, leading to a reduction in the current ratio.
The loan prepayment was made after taking into account the forecast cash inflows in Q1 2023, being sufficient to meet Group’s short-
term obligations.
The Group has also fully repaid its Working Capital Facility (Non-Current Liability) during the year, with payments of US$21.5m. The Working
Capital Facility expires alongside the main debt facility in June 2025 and was accordingly classified as non-current liability in prior period.
The forecast used for Going Concern reflects management’s key assumptions including those around utilisation and vessel day rates on
a vessel-by-vessel basis. Specifically, these assumptions are:
• average day rates across the fleet are assumed to be US$ 30.7k for the 18-month period to 30 June 2024;
• 92% forecast utilisation for the 18-month period to 30 June 2024;
• strong pipeline of tenders and opportunities for new contracts that would commence during the forecast period.
A downside case was prepared using the following assumptions:
• no work-to-win in 2023;
• an 11 percent reduction in work to win utilisation in H1 2024;
• a reduction in day-rates for a K-Class vessel assumed to have the largest day rate, by 10 percent commencing from May 2023; and
• increase in forecast interest rate by 10 percent in H1 2024.
Based on the above scenario, the Group would not be in breach of its term loan facility. The downside case is considered to be severe but
plausible and would still leave the Group with US$ 15.5 million of liquidity and in compliance with the covenants under the Group’s banking
facilities throughout the assessment period.
In addition to the above reasonably plausible downside sensitivity, the Directors have also considered a reverse stress test, where profit has
been sufficiently reduced to breach the net leverage ratio as a result of a combination of reduced utilisation and day rates, as noted below:
• no work-to-win in 2023;
• a 16% reduction in work to win utilisation in H1 2024;
• a reduction in day-rate for a K-Class vessel assumed to have the largest day rate after expiry of the current secured period; and
• increase in forecast interest rate by 10 percent in H1 2024.
Based on the above scenario there will be covenant breaches as Finance Service Cover and Interest Cover ratios would exceed the permitted
levels at 30 June 2024. Should circumstances arise that differ from the Group’s projections, the Directors believe that a number of mitigating
actions can be executed successfully in the necessary timeframe to meet debt repayment obligations as they become due (refer to Note 21
for maturity profiles) and in order to maintain liquidity. Potential mitigating actions include the following:
• vessels off hire for prolonged periods could be cold stacked to minimise operating costs on these vessels at the rate of US$ 35,000/month
for K-Class and US$ 50,000/month for S-Class/E-Class;
• reduction in overhead costs, particularly, bonus payments estimated at US$ 125k per month.
130 Gulf Marine Services PLC
2 Accounting Policies continued
Going Concern continued
GMS continues to remain cognisant of the wider context in which it operates and the impact that climate change could have on the financial
statements of the Group. The impact of climate change is expected to be insignificant in the going concern assessment period.
During January 2023, a customer of the Group entered administration. Management has ascertained that the impact of their administration
is not going to affect the ability of the Group to operate as a Going Concern. As at the reporting date, the Group has provided for 50% of the
receivable balance amounting to US $1.92 million. See Note 14.
The Group’s forecasts, having taken into consideration reasonable risks and downsides, indicate that its current bank facilities along with
higher utilisation secured at increased day rates and a strong pipeline of near-term opportunities for additional work will provide sufficient
liquidity for its requirements for the foreseeable future and accordingly the consolidated financial statements for the Group for the current
period have been prepared on a going concern basis.
Basis of Accounting
The separate financial statements of the Company are presented as required by the Companies Act 2006. These have been prepared
under the historical cost convention, modified to include certain items at fair value, and in accordance with Financial Reporting Standard 102
(FRS 102) issued by the Financial Reporting Council.
The Company has elected to take the exemption under Section 408 of the Companies Act 2006 (the ‘Act’) to not present the Company
Income Statement nor the Company Statement of Comprehensive Income. The result for the Company for the year was a profit of US$ 13.7
million (2021: loss of US$ 18.3 million). The principal accounting policies are summarised below. They have all been applied consistently
throughout both years.
The Company meets the definition of a qualifying entity under FRS 102 and has therefore taken advantage of the disclosure exemptions
available to it. Exemptions have been taken in relation to the presentation of a statement of profit or loss and other comprehensive income,
cash flow statement, remuneration of key management personnel, and financial instrument disclosures.
Investments
Investments in subsidiaries are recognised at cost less impairment.
Financial Instruments
Financial assets and financial liabilities are recognised in the Company’s statement of financial position, when the Company becomes a party
to the contractual provisions of the instrument.
Financial liabilities
Financial liabilities are classified as either financial liabilities at Fair Value Through Profit or Loss (‘‘FVTPL’’) or ‘‘other financial liabilities’’.
Other payables are classified as ‘‘other financial liabilities’’. Other financial liabilities are initially measured at the transaction price, net of
transaction costs. Other financial liabilities are subsequently measured at amortised cost using the effective interest rate (“EIR”) method,
with interest expense recognised on an effective interest rate, except for short-term payables or when the recognition of interest would
be immaterial.
The EIR method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period.
The EIR is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate,
a shorter period.
Derecognition of financial liabilities
The Company derecognises financial liabilities when, and only when, the Company’s obligations are discharged, cancelled or they expire.
Derivative liability
The Company considers whether a contract contains a derivative liability when it becomes a party to the contract. Derivatives are initially
recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting
date. The resulting gain or loss is recognised in profit or loss immediately.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Equity
instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
Financial assets
Basic financial assets including other receivables and cash and bank balances are initially measured at transaction price, plus transaction
costs. Such assets are subsequently carried at amortised cost using the effective interest method.
Interest income is recognised by applying the effective interest rate method, except for short-term receivables when the recognition of interest
would be immaterial.
Other financial assets are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair
value and the changes in fair value are recognised in profit or loss.
NOTES TO COMPANY FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 31 DECEMBER 2022
131Annual Report 2022
Financial Statements
Impairment of financial assets
Financial assets are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective
evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows
of the investment have been affected.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits.
Taxation
Current tax, including UK Corporation tax, is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have
been enacted or substantively enacted by the balance sheet date.
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the reporting date where transactions
or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the reporting date.
Deferred tax is measured on a non-discounted basis. Timing differences are differences between the Company’s taxable profits and its
results as stated in the financial statements that arise from the inclusion of gains and losses in tax assessment periods different from those
in which they are recognised in the financial statements.
Unrelieved tax losses and other deferred tax assets are recognised only to the extent that, on the basis of all available evidence, it can be
regarded as more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences
can be deducted.
Deferred tax is measured using the tax rates and laws that have been enacted or substantively enacted by the reporting date that are
expected to apply to the reversal of the timing difference.
Foreign Currencies
Transactions in foreign currencies are recorded using the rate of exchange ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are translated using the contracted rate or the rate of exchange ruling at the balance sheet date and the
gains or losses on translation are included in the profit or loss account.
Share-Based Payments
The fair value of an equity instrument is determined at the grant date based on market prices if available, taking into account the terms and
conditions upon which those equity instruments were granted. If market prices are not available for share awards, the fair value of the equity
instruments is estimated using a valuation technique to derive an estimate of what the price of those equity instruments would have been at
the relevant measurement date in an arm’s length transaction between knowledgeable, willing parties. Equity-settled share-based payments
to employees are measured at the fair value of the instruments, using a binomial model together with Monte Carlo simulations as at the grant
date, and is expensed over the vesting period. The value of the expense is dependent upon certain key assumptions including the expected
future volatility of the Company’s share price at the date of grant.
The fair value measurement reflects all market based vesting conditions. Service and non-market performance conditions are taken into
account in determining the number of rights that are expected to vest. The impact of the revision of the original estimates, if any, is recognised
in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to equity reserves.
3 Critical Accounting Judgements and Key Sources of Estimation Uncertainty
In the application of the Company’s accounting policies, which are described in Note 2, the Directors are required to make judgements,
estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates
and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ
from these estimates.
Critical Judgements in Applying the Company’s Accounting Policies
Critical accounting judgements are those which management make in the process of applying the Company’s accounting policies and that
have the most significant effect on the amounts recognised in the financial statements.
Management has not made any critical judgements in applying the Company’s accounting policies for the year ended 31 December 2022.
Key Source of Estimation Uncertainty
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period
in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects
both current and future periods.
The key assumptions concerning the future, and other key sources of estimation uncertainty that may have a significant risk of causing a
material adjustment to the carrying value of assets and liabilities within the next financial year, are outlined below.
132 Gulf Marine Services PLC
3 Critical Accounting Judgements and Key Sources of Estimation Uncertainty continued
Recoverability of investments
As noted above, the Company performs impairment reviews in respect of investments whenever events or changes in circumstance indicate
that the carrying amount may not be recoverable. An impairment loss is recognised when the recoverable amount of an asset, which is the
higher of the asset’s net realisable value and its value in use, is less than its carrying amount. The recoverability of investments is primarily
impacted by the cash flows of the vessels owned by the Group’s subsidiary undertakings and cashflows related to the Group’s debt facility.
The projection of cash flows related to vessels and debt facility requires the use of various estimates including future day rates, vessel utilisation
levels, and discount rates, in which the estimate is most sensitive. For further details on analysis of the sensitivities of these estimates, refer to
Note 5. The Company undertook a full impairment review of its investments during the year. The review led to the recognition of an aggregate
impairment reversal of US$ 18.8 million (2021: impairment charge US$ 17.0 million) on the investment in subsidiaries (see Note 5). As at
31 December 2022, the Company had investments of US$ 248.6 million (2021: US$ 229.8 million).
4 Dividends
There was no interim dividend declared or paid in 2022 (2021: Nil).
No final dividend in respect of the year ended 31 December 2022 (2021: Nil at the 2022 AGM) is to be proposed at the 2022 AGM.
5 Investment in Subsidiaries
2022
US$’000
2021
US$’000
Gross investments in subsidiaries as at 01 January 574,472 574,995
Capital (reduction)/contribution in subsidiary in relation to derivative liability (Note 9) – (523)
Gross investments in subsidiaries as at 31 December 574,472 574,472
Impairments as at 1 January (344,666) (327,670)
Impairment reversal/(charge) of investments in year 18,774 (16,996)
Impairments as at 31 December (325,892) (344,666)
Carrying amount as at 31 December 248,580 229,806
Based on the impairment reviews performed in previous years, management recognised impairment losses of US$ 327.67m and US$ 17.0m
for the year ended 31 December 2020 (“FY20”) and for the year ended 31 December 2021 (“FY21”) respectively.
As at 31 December 2022, and in line with the requirements, management concluded that a formal impairment assessment was required.
Factors considered by management included favourable indicators, including an improvement in utilization rates, daily chartered rates and an
increase in market values of vessels, and unfavourable indicators including a rise in interest rates as well as the market capitalization of the
group remaining below the book value of the groups equity.
As at 31 December 2022, the market capitalisation of the GMS Group continued to be lower than the carrying value of investments in the
Company’s investments in its subsidiary undertakings. As such management decided to perform a formal impairment assessment to determine
the recoverable amount of its investments in subsidiaries at the reporting date.
The review was done by identifying the value in use of each vessel in the fleet as the underlying cash generating units of the investments in
subsidiaries. The net bank debt of the GMS Group was then deducted from the value in use of the investments, which was based on the
combined value in use of vessels within the Group.
This assessment is based on management’s projections of utilisation and day rates and associated cash flows and adjusted to include full
overheads and future tax charges. The risk adjusted cash flows were discounted using the post-tax discount rate of 12.1% (2021: 12.1%),
which is based on the Group’s weighted average cost of capital. The cost of equity incorporated in the computation of the discount rate is
based on the industry sector average betas, risk-free rate of return as well as Group specific risk premium reflecting any additional risk factors
relevant to the Group. A post tax discount rate was used as the cashflows to derive the value in use of investments in subsidiaries includes
the impacts of tax as described above.
The review led to the recognition of an aggregate impairment reversal of US$ 18.77 million (2021: Impairment charge of US$ 17.0 million) on
the investment in subsidiaries. The assessment described above takes into account complete profitability of underlying investments which
also included implications of tax and debt.
The Company has conducted an analysis of the sensitivity of the impairment test to reasonably possible changes in the key assumptions
(day rates, utilisation and nominal post-tax discount rates) used to determine the recoverable amount of investments.
The first sensitivity modelled a 10% increase/reduction to day rates over the remaining useful economic life of vessels included in investments.
A second sensitivity modelled a 10% increase/reduction to utilisation rates. Management would not expect an assumption change of more
than 10% across all vessels within the next financial year, and accordingly believes that a 10% sensitivity to day rates and utilisation
is appropriate.
NOTES TO COMPANY FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 31 DECEMBER 2022
133Annual Report 2022
Financial Statements
A third sensitivity was modelled where a 1% increase/decrease was applied to the post-tax discount rate mentioned above. Following
consultations with external advisors in 2021, management reviewed and narrowed down the peer companies used to compute the discount
rate and measured the overall impact of existing and additional risks related to the Group. The same companies are used in 2022 as these
are deemed to be more specific to GMS’s capital structure and management still consider a 1% sensitivity on discount rate to be appropriate.
The results of the first sensitivity indicated that a 10% decrease to day rates would lead to decrease the impairment reversal by US$ 18.77 million
to US$ nil and an additional impairment charge of US$ 108.79 million. In comparison, a 10% increase to day rates would increase the impairment
reversal by US$ 93.41 million. The total carrying amount of investments would be US$ 138.01 million and US$ 358.98 million, respectively.
The results of the second sensitivity indicated that a 10% decrease to utilisation would lead to decrease the impairment reversal by US$ 18.77 million
to US$ nil and an additional impairment charge of US$ 108.79 million. In comparison, a 10% increase to utilisation would increase the impairment
reversal booked by US$ 42.11 million. The total carrying amount of investments would be US$ 138.01 million and US$ 307.68 million, respectively.
The results of the third sensitivity indicated that a 1% decrease to the post-tax discount rate would lead to an increase in impairment reversal
booked by US$ 23.45 million whereas a 1% increase to the post-tax discount rate would lead to an decrease to the impairment reversal
charge booked during the period of US$ 18.77 million to zero and an additional impairment of US$ 34.02 million. The total carrying amount
of investments would be US$ 289.03 million and US$ 212.79 million, respectively.
134 Gulf Marine Services PLC
5 Investment in Subsidiaries continued
The Company has investments in the following subsidiaries:
Name Place of Registration Registered Address
Proportion of
Ownership Interest
Type of Activity2022 2021
Gulf Marine Services W.L.L. United Arab
Emirates
Office 403, International Tower, 24th Karama
Street, P.O. Box 46046, Abu Dhabi, United
Arab Emirates
100% 100% Marine contractors
Offshore Holding Invt SA Panama Bloc Office Hub, Fifth Floor, Santa Maria
Business District, Panama, Republic of Panama
100% 100% Holding Company
Offshore Logistics Invt SA Panama Bloc Office Hub, Fifth Floor, Santa Maria
Business District, Panama, Republic of Panama
100% 100% Dormant
Offshore Accommodation
Invt SA
Panama Bloc Office Hub, Fifth Floor, Santa Maria
Business District, Panama, Republic of Panama
100% 100% Dormant
Offshore Jack-up Invt SA Panama Bloc Office Hub, Fifth Floor, Santa Maria
Business District, Panama, Republic of Panama
100% 100% Owner of barge “Kamikaze”
Offshore Craft Invt SA Panama Bloc Office Hub, Fifth Floor, Santa Maria
Business District, Panama, Republic of Panama
100% 100% Owner of barge “GMS
Endeavour”
Offshore Structure Invt SA Panama Bloc Office Hub, Fifth Floor, Santa Maria
Business District, Panama, Republic of Panama
100% 100% Owner of barge “Kikuyu”
Offshore Maritime Invt SA Panama Bloc Office Hub, Fifth Floor, Santa Maria
Business District, Panama, Republic of Panama
100% 100% Owner of “Helios” – Dormant
Offshore Tugboat Invt SA Panama Bloc Office Hub, Fifth Floor, Santa Maria
Business District, Panama, Republic of Panama
100% 100% Owner of “Atlas” – Dormant
Offshore Boat Invt SA Panama Bloc Office Hub, Fifth Floor, Santa Maria
Business District, Panama, Republic of Panama
100% 100% Owner of barge “Kawawa”
Offshore Kudeta Invt SA Panama Bloc Office Hub, Fifth Floor, Santa Maria
Business District, Panama, Republic of Panama
100% 100% Owner of barge “Kudeta”
GMS Endurance Invt SA Panama Bloc Office Hub, Fifth Floor, Santa Maria
Business District, Panama, Republic of Panama
100% 100% Owner of barge “Endurance”
Gulf Marine Services (UK)
Limited
United Kingdom 14 Carden Place, Aberdeen, AB10 1UR 100% 100% Operator of offshore barges
Gulf Marine Saudi Arabia Co.
Limited
Saudi Arabia King Fahad Road, Al Khobar, Eastern Province,
P.O. Box 31411 Kingdom Saudi Arabia
75% 75% Operator of offshore barges
Gulf Marine Services (Asia)
Pte. Ltd.
Singapore 1 Scotts Road, #21-07, Shaw Centre,
Singapore, 228208
100% 100% Operator of offshore barges
GMS Enterprise Investment
SA
Panama Bloc Office Hub, Fifth Floor, Santa Maria
Business District, Panama, Republic of Panama
100% 100% Owner of barge “Enterprise”
GMS Sharqi Investment SA Panama Bloc Office Hub, Fifth Floor, Santa Maria
Business District, Panama, Republic of Panama
100% 100% Owner of barge “Sharqi”
GMS Scirocco Investment
SA
Panama Bloc Office Hub, Fifth Floor, Santa Maria
Business District, Panama, Republic of Panama
100% 100% Owner of barge “Scirocco”
GMS Shamal Investment SA Panama Bloc Office Hub, Fifth Floor, Santa Maria
Business District, Panama, Republic of Panama
100% 100% Owner of barge “Shamal”
GMS Jersey Holdco. 1
Limited*
Jersey 12 Castle Street, St. Helier, Jersey, JE2 3RT 100% 100% General investment
GMS Jersey Holdco. 2
Limited
Jersey 12 Castle Street, St. Helier, Jersey, JE2 3RT 100% 100% General investment
GMS Marine Middle East
FZE
United Arab
Emirates
ELOB, Office No. E-16F-04, P.O. Box 53944,
Hamriyah Free Zone, Sharjah
100% 100% Operator of offshore barges
GMS Global Commercial Invt
LLC
United Arab
Emirates
Office 403, International Tower, 24th Karama
Street, P.O. Box 46046, Abu Dhabi, United
Arab Emirates
100% 100% General investment
GMS Keloa Invt SA Panama Bloc Office Hub, Fifth Floor, Santa Maria
Business District, Panama, Republic of Panama
100% 100% Owner of barge “Keloa”
GMS Pepper Invt SA Panama Bloc Office Hub, Fifth Floor, Santa Maria
Business District, Panama, Republic of Panama
100% 100% Owner of barge “Pepper”
GMS Evolution Invt SA Panama Bloc Office Hub, Fifth Floor, Santa Maria
Business District, Panama, Republic of Panama
100% 100% Owner of barge “Evolution”
Gulf Marine Services LLC Qatar Qatar Financial Centre, Doha 100% 100% Marine contractor
Mena Marine Limited Singapore Ugland House, Grand Cayman, KY1-1104,
Cayman Islands, P.O. Box 309
100% 100% General investment
GMS Phoenix Investment SA
Bloc Office Hub, Fifth Floor, Santa Maria
Business District, Panama, Republic of Panama 100% 100% Dormant
* Held directly by Gulf Marine Services PLC.
NOTES TO COMPANY FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 31 DECEMBER 2022
135Annual Report 2022
Financial Statements
6 Cash and Cash Equivalents
2022
US$’000
2021
US$’000
Interest bearing
Cash at bank 2 –
Total cash at bank and in hand 2 –
7 Other Receivables
2022
US$’000
2021
US$’000
Non-current assets
Amounts receivable from Group undertakings 67,663 43,591
67,663 43,591
Current assets
Prepayments 159 216
159 216
67,822 43,807
Amounts receivable from Group undertakings are interest-free, unsecured and have no fixed repayment terms.
8 Deferred Tax Asset
At the reporting date, the Company has unused tax losses of US$ 18.4 million available for offset against future profits (2021: US$ 12.8 million).
These UK tax losses may be carried forward indefinitely. The company is not expected to have any future taxable profits to be able to utilise the
deferred tax assets and therefore no deferred tax asset has been recognised in the current year (2021: US$ Nil).
9 Other Payables
2022
US$’000
2021
US$’000
Amounts falling due within one year
Amounts owed to Group undertakings 60,801 35,606
Accruals 830 566
61,631 36,172
Amounts owed to Group undertakings are current, interest-free, unsecured and have no fixed repayment terms. Balances with related parties
are repayable on demand. The present value of the liability is deemed to equal the undiscounted cash amount payable. No interest charge is
therefore imputed on these amounts.
10 Derivative Financial Instruments
Derivative Liability – Contract to Issue Warrants
Under the terms of the Group’s loan facility, the Group is required to issue warrants to its lenders if GMS had not raised US$ 50.0 million of
equity by 31 December 2022.
On 2 January 2023, as the US$ 50.0 million equity raise did not take place, therefore 87,621,947 warrants were issued to the lenders. Based
on the final report prepared by a Calculation Agent, the warrants give right to their holders to acquire 137,075,773 shares at an exercise price
of 5.75 pence per share for a total consideration of GBP £7.9 million. Warrant holders will have the right to exercise their warrants up to the
end of the term of the loan facility being 30 June 2025 (or earlier if a refinance takes place).
As the terms of the loan facility contained separate distinguishable terms with a contingent requirement to issue warrants to banks, management
determined the debt facility to contain an embedded derivative. The Group was required to recognise the embedded derivative at fair value.
Management commissioned an independent valuation expert to measure the fair value of the warrants, which was determined using Monte
Carlo simulations. The simulation considers sensitivity by building models of possible results by substituting a range of values. This represents
a Level 3 fair value measurement under the IFRS 13 hierarchy.
The fair value of the derivative as at 31 December 2022 was US$ 3.2 million (31 December 2021: US$ 0.7 million). As the derivative was
settled in January 2023, the balance is recognised as a current liability as at 31 December 2022.
136 Gulf Marine Services PLC
10 Derivative Financial Instruments continued
Derivative Liability – Contract to Issue Warrants continued
The movement in the derivative financial statements is as follows:
2022
US$’000
2021
US$’000
As at 1 January (717) (1,449)
Net loss on changes in fair value of derivative liabilities (2,481) (232)
Derecognition of derivative liability warrants – 1,890
Initial recognition of derivative liability – (926)
As at 31 December (3,198) (717)
11 S hare Capital and Reserves
The share capital of Gulf Marine Services PLC was as follows:
Ordinary shares at £0.02 per share
Number of
ordinary shares
(Thousands)
Ordinary
shares
US$’000
At 1 January 2021 350,488 58,057
Placing of new shares 665,927 18,505
Capital reorganisation – (46,445)
As at 31 December 2021 and 31 December 2022 1,016,415 30,117
Deferred shares at £0.08 per share
Number of
ordinary shares
(Thousands) US$’000
At 1 January 2022 350,488 46,445
Buyback and cancellation of deferred shares (350,488) (46,445)
As at 31 December 2022 – –
Deferred shares at £0.08 per share
Number of
ordinary shares
(Thousands)
Ordinary
shares
US$’000
At 1 January 2021 – –
Capital reorganisation 350,488 46,445
As at 31 December 2021 350,488 46,445
Capital redemption reserve
Number of
ordinary shares
(Thousands)
Capital
redemption
reserve
US$’000
At 1 January 2022 – –
Placing of new shares 350,488 46,445
As at 31 December 2022 350,488 46,445
Share premium
Number of
ordinary shares
(Thousands)
Share premium
account
US$’000
At 1 January 2021 350,488 93,080
Placing of new shares* 665,927 6,025
As at 31 December 2021 and 2022 1,016,415 99,105
* net of issue costs of US$ 3,228,000.
NOTES TO COMPANY FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 31 DECEMBER 2022
137Annual Report 2022
Financial Statements
Prior to an equity raise on 28 June 2021 the Group underwent a capital reorganisation where all existing ordinary shares with a nominal value
of 10 pence per share were subdivided and re-designated into 1 ordinary share with a nominal value of 2 pence and 1 deferred share with
a nominal value of 8 pence each. The previously recognised share capital balance relating to the old 10p ordinary shares was allocated pro
rata to the new subdivided 2p ordinary shares and 8p deferred shares. The deferred shares had no voting rights and no right to the profits
generated by the Group. On winding-up or other return of capital, the holders of deferred shares had extremely limited rights if any. The
Group had the right but not the obligation to buyback all of the Deferred Shares for an amount not exceeding £1.00 in aggregate, which
with the shareholders approval, was completed on June 30, 2022. Accordingly, 350,487,787 deferred shares were cancelled. Following
the cancellation of the Deferred shares on 30 June 2022, a transfer of $46.4 million was made from Share capital – Deferred to a Capital
redemption reserve. There was no dilution to the shares ownership as a result of the share reorganisation.
Under the Companies Act a share buy-back by a public company (such as the Company) can only be financed through distributable reserves
or the proceeds of a fresh issue of shares made for the purpose of financing a share buyback. The Company had sufficient reserves to
purchase the Deferred shares for £1.00.
The Company has one class of ordinary shares, which carry no right to fixed income.
The share premium account contains the premium arising on issue of equity shares, net of related costs.
The Company’s share-based payment reserve of US$ 3.6 million (2021: US$ 3.6 million) relates to the cumulative charge for awards granted
to employees of a subsidiary undertaking under a long-term incentive plan, details of which are provided in Note 13. The share-based
payment charge during the year was US$ 0.05 million (2021: share-based payment credit of US$ 0.02 million).
The retained earnings represent cumulative profits or losses net of dividends paid and other adjustments.
12 Staff Numbers and Costs
The average monthly number of employees (including executive directors) was:
2022
Number
2021
Number
Administration 3 4
3 4
Their aggregate remuneration comprised:
2022
US$’000
2021
US$’000
Wages and salaries 256 241
256 241
13 Long Term Incentive Plans
The Company has Long Term Incentive Plans (“LTIPs”) which were granted to senior management, managers and senior offshore officers.
The employment condition attached to the Company LTIP’s is that each eligible employee of the Company must remain in employment during
the three-year vesting period. LTIP awards granted in 2019 and 2020 were aligned to Company’s share performance. The release of these
shares was conditional upon continued employment and market vesting conditions. There were no LTIP awards granted during 2021.
During the year ended 31 December 2022, additional LTIPs awards were granted to the Chairman and Senior Management. The awards
would vest over three years subject to the same employment conditions described above and performance conditions being met in 2024
based on defined ranges. There was an underpin condition such that no awards would vest if the debt leverage in the Group exceeded 4.0
times EBITDA at 31 December 2022. As this criteria had not been met all LTIP awards issued in 2022 were forfeited.
Equity-settled share-based payments were measured at fair value at the date of grant. The fair value determined, using the Binomial
Probability Model together with Monte Carlo simulations, at the grant date of equity-settled share-based payments, is expensed on a
straight-line basis over the vesting period, based on an estimate of the number of shares that will ultimately vest. The fair value of each award
was determined by taking into account the performance conditions, the term of the award, the share price at grant date, the expected price
volatility of the underlying share and the risk-free interest rate for the term of the award.
Non-market vesting conditions were taken into account by adjusting the number of equity instruments expected to vest at each balance
sheet date so that, ultimately, the cumulative amount recognised over the vesting period was based on the number of awards that eventually
vest. Any market vesting conditions were factored into the fair value of the share-based payment granted.
To the extent that share-based payments are granted to employees of the Company’s subsidiaries without charge, the share-based payment
is capitalised as part of the cost of investment in subsidiaries.
138 Gulf Marine Services PLC
13 Long Term Incentive Plans continued
During the year cash settlements amounting to US$ 0.06 million (2021: US$ 0.07 million) were made to employees in respect of share options.
The number of share awards granted by the Company during the year is given in the table below:
2022
000’s
2021
000’s
At the beginning of the year 2,499,714 6,573,229
Granted in the year 9,460,000 –
Cash settled in the year (921,311) (1,854,298)
Forfeited in the year (9,862,390) (2,219,217)
Lapsed –
At the end of the year 1,176,014 2,499,714
The weighted average remaining contractual life for the vesting period outstanding as at 31 December 2022 was 0.1 years (31 December
2021: 0.5 years). The weighted average fair value of shares granted during the period to 31 December 2022 was US$ 0.057 million
(31 December 2021: US$ nil).
LTIP LTIP LTIP
Grant date 14 Jun 2022 29 May 2020 15 Nov 2019
Share price £0.06 £0.09 £0.08
Expected volatility 102% 120% 103%
Risk-free rate 2.17% 0.01% 0.48%
Expected dividend yield 0.00% 0.00% 0.00%
Vesting period 3 years 3 years 3 years
Award life 3 years 3 years 3 years
The expected share price volatility of Gulf Marine Services PLC shares was determined taking into account the historical share price
movements for a three-year period up to the grant date (and of each of the companies in the comparator group). The risk-free return was
determined from similarly dated zero coupon UK government bonds at the time the share awards were granted, using historical information
taken from the Bank of England’s records.
On 15 March 2021, the Remuneration Committee determined that awards granted on 28 March 2018 which were due to vest on 28 March 2021
would be settled in cash, not by the issue of shares as was contractually stipulated, subject to the achievement of the original performance
conditions. For the purposes of IFRS 2, this represented a reclassification of these awards from equity-settled to cash-settled. In accordance
with IFRS 2, at the date of reclassification a balance of US$ 0.1 million equal to the fair value of the awards at the modification date was
deducted from equity. As the fair value at the modification date was lower than the cumulative equity-settled share-based payment charge
at that date, no adjustment was made to profit or loss as a result of the modifications.
On 9 June 2021, the Company’s Ordinary Shares of 10p each were split into Ordinary Shares of 2p each and deferred shares of 8p each.
A consequence of this change will be that the share options issued in prior years will be modified to such that the recipients are granted
Ordinary Shares of 2p each, not Ordinary Shares of 10p each. All of the deferred shares will be subject to a right of repurchase by the
Company for an aggregate sum of £1 following admission. These shares were cancelled when repurchased.
14 Events After the Reporting Period
Administration of a Customer
During January 2023, a customer of Gulf Marine Service (UK) Limited entered administration. The Company has traded with this customer during
the year and management has ascertained that the impact of their administration is not going to affect the ability of the Group to operate as a
Going Concern. The Company has provided for a provision for bad and doubtful debts of US $1.92 million. Further details are disclosed in Note
9 of the consolidated financial statements.
Issue of Warrants
Under the terms of the Group’s loan facility, the Group is required to issue warrants to its lenders if GMS had not raised US$ 50.0 million of
equity by 31 December 2022.
On 2 January 2023, as the US$ 50.0 million equity raise did not take place, therefore 87,621,947 warrants were issued to the lenders. Based
on the final report prepared by a Calculation Agent, the warrants give right to their holders to acquire 137,075,773 shares at an exercise price
of 5.75 pence per share for a total consideration of GBP £7.9 million. Warrant holders will have the right to exercise their warrants up to the
end of the term of the loan facility, being 30 June 2025 (or earlier if a refinance takes place).
NOTES TO COMPANY FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 31 DECEMBER 2022
139Annual Report 2022
Financial Statements
GLOSSARY
Alternative Performance Measure (APMs) – An APM is a financial measure of historical or future financial performance, financial position,
or cash flows, other than a financial measure defined or specified in the applicable financial reporting framework.
APMs are non-GAAP measures that are presented to provide readers with additional financial information that is regularly reviewed by
management and the Directors consider that they provide a useful indicator of underlying performance. Adjusted results are also an important
measure providing useful information as they form the basis of calculations required for the Group’s covenants. However, this additional
information presented is not uniformly defined by all companies including those in the Group’s industry. Accordingly, it may not be
comparable with similarly titled measures and disclosures by other companies. Additionally, certain information presented is derived from
amounts calculated in accordance with IFRS but is not itself an expressly permitted GAAP measure. Such measures should not be viewed
in isolation or as an alternative to the equivalent GAAP measure. In response to the Guidelines on APMs issued by the European Securities
and Markets Authority (ESMA), we have provided additional information on the APMs used by the Group.
Adjusted diluted earnings/loss per share – represents the adjusted earnings/loss attributable to equity holders of the Company for the
period divided by the weighted average number of ordinary shares in issue during the period, adjusted for the weighted average effect of
share options outstanding during the period. The adjusted earnings/loss attributable to equity shareholders of the Company is used for the
purpose of basic gain/loss per share adjusted by adding back impairment charges (deduction of reversal of impairment during the year 2022),
and any exceptional costs. This measure provides additional information regarding earnings per share attributable to the underlying activities
of the business. A reconciliation of this measure is provided in Note 32.
Adjusted EBITDA – represents operating profit after adding back depreciation (deduction for reversal of impairment during 2022),
amortisation, non-operational items and impairment charges. This measure provides additional information in assessing the Group’s
underlying performance that management is more directly able to influence in the short term and on a basis comparable from year to year.
A reconciliation of this measure is provided in Note 31.
Adjusted EBITDA margin – represents adjusted EBITDA divided by revenue. This measure provides additional information on underlying
performance as a percentage of total revenue derived from the Group.
Adjusted gross profit/(loss) – represents gross profit/loss after deducting reversal of impairment/adding back impairment charges.
This measure provides additional information on the core profitability of the Group. A reconciliation of this measure is provided in Note 31.
Adjusted net profit/(loss) – represents net profit/(loss) after adding back net impairment reversals. This measure provides additional
information in assessing the Group’s total performance that management is more directly able to influence and, on a basis, comparable from
year to year. A reconciliation of this measure is provided in Note 31 of these results.
Average fleet utilisation – represents the percentage of available days in a relevant period during which the fleet of SESVs is under contract
and in respect of which a customer is paying a day rate for the charter of the SESVs.
Average fleet utilisation is calculated by adding the total contracted days in the period of each SESV, divided by the total number of days
in the period multiplied by the number of SESVs in the fleet.
Cost of sales excluding depreciation and amortisation – represents cost of sales excluding depreciation and amortisation.
This measure provides additional information of the Group’s cost for operating the vessels. A reconciliation is shown below:
2022
US$’000
2021
US$’000
Statutory cost of sales 80,411 69,460
Less: depreciation and amortisation (29,181) (28,241)
51,230 41,219
EBITDA – represents earnings before interest, tax, depreciation and amortisation, which represents operating profit after adding back
depreciation and amortisation. This measure provides additional information of the underlying operating performance of the Group.
A reconciliation of this measure is provided in Note 31.
Margin – revenue less cost of sales before depreciation, amortization and impairment as identified in Note 31 of the consolidated
financial statements.
140 Gulf Marine Services PLC
Net bank debt – represents the total bank borrowings less cash and cash equivalents. This measure provides additional information of the
Group’s financial position. A reconciliation is shown below:
2022
US$’000
2021
US$’000
Statutory bank borrowings 328,085 379,526
Less: cash and cash equivalents (12,275) (8,271)
315,810 371,255
Finance leases are excluded from net bank debt to ensure consistency with definition of the Group’s banking covenants.
Net cash flow before debt service – the sum of cash generated from operations and investing activities.
Net leverage ratio – the ratio of net bank debt at year end to adjusted EBITDA which is further adjusted for items including but are not
limited to reversal of impairment credits/(impairment charges), restructuring costs, exceptional legal costs and non-operational finance related
costs in alignment with the terms of our bank facility agreement. This has no impact for the current or prior periods. The reconciliation is
shown below:
2022
US$’000
2021
US$’000
A: Net bank debt, as identified above 315,810 371,255
B: Adjusted EBITDA, as disclosed in Note 31 71,478 6 4,124
Net leverage ratio (A/B): 4.42 5.78
Non-operational finance expenses – this pertains to the following items below as disclosed in Note 35, Finance expense.
2022
US$’000
2021
US$’000
Cost to acquire new bank facility – (3,165)
Fair value adjustment on recognition of new debt facility – 1,439
– (1,726)
Operational downtime – downtime due to technical failure.
Segment adjusted gross profit/loss – represents gross profit/loss after adding back depreciation, amortisation and impairment charges.
This measure provides additional information on the core profitability of the Group attributable to each reporting segment.
A reconciliation of this measure is provided in Note 30.
Underlying performance – day to day trading performance that management are directly able to influence in the short term
GLOSSARY continued
141Annual Report 2022
Financial Statements
OTHER DEFINITIONS
Average day rates We calculate the average day rates by dividing total charter hire revenue per month by total hire days per month
throughout the year and then calculating a monthly average.
Backlog Represents firm contracts and extension options held by clients. Backlog equals (charter day rate x remaining days
contracted) + ((estimated average Persons On Board x daily messing rate) x remaining days contracted) +contracted
remaining unbilled mobilisation and demobilisation fees. Includes extension options.
Borrowing rate LIBOR plus margin.
Calendar days Takes base days at 365 and only excludes periods of time for construction and delivery time for newly constructed
vessels.
Costs capitalised Represent qualifying costs that are capitalised as part of a cost of the vessel rather than being expensed as they meet
the recognition criteria of IAS 16 Property, Plant and Equipment.
Day rates Rate per day charge to customers per hire of vessel as agreed in the contract.
Demobilisation Fee paid for the vessel re-delivery at the end of a contract, in which client is allowed to offload equipment and
personnel.
DEPS/DLPS Diluted earnings/losses per share.
Employee retention Percentage of staff who continued to be employed during the year (excluding retirements and redundancies) taken as
number of resignations during the year divided by the total number of employees as at 31 December.
EPC Engineering, procurement and construction.
ESG Environmental, social and governance.
Finance service The aggregate of
a) Net finance charges for that period; and
b) All scheduled payments of principal and any other schedule payments in the nature of principal payable by the
Group in that period in respect of financing:
i) Excluding any amounts falling due in that period under any overdraft, working capital or revolving facility
which were available for simultaneous redrawing under the terms of that facility;
ii) Excluding any amount of PIK that accretes in that period;
iii) Including the amount of the capital element of any amounts payable under any Finance Lease in respect of
that period; and
iv) Adjusted as a result of any voluntary or mandatory prepayment
Debt Service Cover Represents the ratio of Adjusted EBITDA to debt service.
GCC Gulf Cooperation Council.
GMS core fleet Consists of 13 SESVs, with an average age of twelve years.
Interest Cover Represents the ratio of Adjusted EBITDA to Net finance charges.
IOC Independent Oil Company.
KPIs Key performance indicators.
Lost Time Injuries Any workplace injuries sustained by an employee while on the job that prevents them from being able to perform their
job for a period of one or more days.
Lost Time Injury Rate
(LTIR)
The lost time injury rate per 200,000 man hours which is a measure of the frequency of injuries requiring employee
absence from work for a period of one or more days.
LIBOR London Interbank Offered Rate.
Mobilisation Fee paid for the vessel readiness at the start of a contract, in which client is allowed to load equipment and personnel.
Net finance charges Represents finance charges as defined by the terms of the Group’s banking facility for that period less interest income
for that period.
Net leverage ratio Represents the ratio of net bank debt to Adjusted EBITDA.
NOC National Oil Company.
142 Gulf Marine Services PLC
OTHER DEFINITIONS continued
OSW Offshore Wind.
PIK Payment In Kind. Under the banking documents dated 17 June 2020 and 31 March 2021, PIK is calculated at 5.0%
per annum on the total term facilities outstanding amount and reduces to:
a) 2.5% per annum when Net Leverage reduces below 5.0x
b) Nil when Net Leverage reduces below 4.0x
Under the documents dated 31 March 2021, PIK accrues on either 1 July 2021 if the US$ 25 million equity is not
raised by 30 June 2021, or from 1 January 2023 if the US$ 50 million is not raised by 31 December 2022.
PIK stops accruing at the date on which all loans are paid or discharged in full.
Restricted work day
case (RWDC)
Any work-related injury other than a fatality or lost work day case which results in a person being unfit for full
performance of the regular job on any day after the occupational injury.
Secured backlog Represents firm contracts and extension options held by clients. Backlog equals (charter day rate x remaining days
contracted) + ((estimated average Persons On Board x daily messing rate)) x remaining days contracted) + contracted
remaining unbilled mobilisation and demobilisation fees. Includes extension options.
Secured day rates Day rates from signed contracts firm plus options held by clients.
Secured utilisation Contracted days of firm plus option periods of charter hire from existing signed contracts.
Security Cover
(loan to value)
The ratio (expressed as a percentage) of Total Net Bank Debt at that time to the Market Value of the Secured Vessels.
SESV Self-Elevating Support Vessels.
SG&A spend Means that the selling, general and administrative expenses calculated on an accruals basis should be no more than
the SG&A maximum spend for any relevant period.
Total Recordable Injury
Rate (TRIR)
Calculated on the injury rate per 200,000 man hours and includes all our onshore and offshore personnel and
subcontracted personnel. Offshore personnel are monitored over a 24-hour period.
Underlying G&A Underlying general and administrative (G&A) expenses excluding depreciation and amortisation, and exceptional
related costs.
Utilisation The percentage of calendar days in a relevant period during which an SESV is under contract and in respect of which
a customer is paying a day rate for the charter of the SESV.
Vessel operating
expense
Cost of sales before depreciation, amortisation and impairment, refer to Note 31.
Warrants Under the banking documents date 31 March 2021, if Warrants are issued on 1 July 2021 because of the failure to
raise US$ 25 million by 30 June 2021, half of the issued warrants vest on that date. The other half will only vest on
2 January 2023 if there is a failure to raise US$ 50 million. If warrants are issued on 2 January 2023 because of the
failure to raise US$ 50 million all of the issued warrants vest on the same date. All warrants to expire on 30 June 2025
(maturity date of the facilities).
143Annual Report 2022
Financial Statements
CORPORATE INFORMATION
Registered Office
Gulf Marine Services PLC
Masters House
107 Hammersmith Road
London W14 0QH
Head Office
Gulf Marine Services
P.O. Box 46046
Abu Dhabi, UAE
T: +971 (2) 5028888
F: +971 (2) 5553421
E: IR@gmsplc.com
Company Secretary
Tony Hunter
Corporate Brokers
Panmure Gordon
One New Change,
London EC4M 9AF
Arden Partners plc
125 Old Broad Street
London
EC2N 1AR
Legal Advisers
Shearman and Sterling LLP
9 Appold Street
London EC2A 2AP
Auditors
KPMG
1 Stokes Place
St Stephen’s Green
Dublin 2
D02 DE03
Public Relations Advisers
Celicourt Communications Limited
Orion House
5 Upper St Martin’s Lane
London WC2H 9EA
Registrar
Equiniti
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
Board of Directors
Mansour Al Alami
Executive Chairman
Hassan Heikal
Deputy Chairman, Non-Executive Director
Rashed Saif Al Jarwan
Senior Independent Non-Executive Director
Lord Anthony St John of Bletso
Independent Non-Executive Director
Charbel El Khoury
Non-Executive Director
Jyrki Koskelo
Independent Non-Executive Director
Gulf Marine Services
P.O. Box 46046
Abu Dhabi, UAE
T: +971 (2) 5028888
F: +971 (2) 5553421
E: IR@gmsplc.com
www.gmsplc.com
144 Gulf Marine Services PLC
OUR CLIENTS
This publication was printed with vegetable oil-based inks by
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The outer cover of this report has been laminated with a biodegradable film.
Around 20 months after composting, an additive within the film will initiate
the process of oxidation.
GULF MARINE SERVICES PLC Annual Report 2022
Gulf Marine Services
P.O. Box 46046
Abu Dhabi, UAE
T: +971 (2) 5028888
F: +971 (2) 5553421
E: IR@gmsplc.com
www.gmsplc.com