Gulf Marine Services PLC

Annual Report 2023

GULF MARINE SERVICES PLC Annual Report 2023

HIGHLIGHTS

Our Vision

To be the best SESV

operator in the world

2023 Overview

Revenue

US$ 151.6m

(2022: US$ 133.2m)

Adjusted EBITDA

US$ 87.5m

(2022: US$ 71.5m)

Net profit for the year

US$ 42.1m

(2022: US$ 25.4m)

2023 Financial Highlights

— Group net profits of US$ 42.1 million (2022: US$ 25.4 million), reflecting

the strength of the Group’s recovery.

— Adjusted EBITDA

increased to US$ 87.5 million (2022: US$ 71.5 million)

driven by an increase in revenue. Adjusted EBITDA margin

also

increased to 58% (2022: 54%).

— Net bank debt

reduced to US$ 267.3 million (2022: US$ 315.8 million).

Net leverage ratio

reduced to 3.05 times (2022: 4.4 times).

— Revenue increased by 14% to US$ 151.6 million (2022: US$ 133.2 million)

driven by increased utilisation on E-Class and K-Class vessels and higher

average day rates across all vessel classes, particularly E-Class.

— Cost of sales as a percentage of revenue

reduced by five percentage

points to 54% (2022: 59%).

— Underlying general and administrative expenses

as a percentage of

revenue reduced to 7% (2022: 8%).

— Net reversal of impairment of US$ 33.4 million (2022: US$ 7.8 million)

reflecting continued improved market conditions.

— Finance expenses have increased to US$ 31.4 million (2022: US$ 17.7

million) driven by an increase in LIBOR/SOFR rates, the temporary

introduction of both a 250 bps PIK in Q1 as well as the increase on the

margin rate of the loan from 3.1 to 4.0%, both triggered by the net

leverage ratio exceeding 4:1 times as at 31 December 2022. On achieving

net leverage ratio below 4:1 times, PIK ceased to accrue in the second

quarter of the year, and the margin was thereafter reduced by 90 basis

points to 3.1%. This resulted in a reduction in the cost of financing of

340 basis points.

— Impact of changes in the fair value of the derivative increased to US$ 11.1

million (2022: US$ 2.5 million), primarily due to the increase in the

Group’s share price.

Average fleet utilisation

94%

(2022: 88%)

Underlying G&A

expenses as

percentage of revenue

(2022: 8%)

In this report

Strategic Report

Highlights IFC

2023 Financial Highlights IFC

2023 Operational Highlights 1

2024 Highlights and Outlook 1

Non-Financial and Sustainability

Information Statement 1

Chairman’s Review 2

Business Model and Strategic Objectives 4

Section 172 Statement 8

Market Analysis 10

Risk Management 12

Key Performance Indicators 20

Financial Review 22

Long-term Viability Statement 24

People and Values 26

Governance

Chairman’s Introduction 42

Board of Directors 44

Report of the Board 46

Audit and Risk Committee Report 51

Nomination Committee Report 54

Remuneration Committee Report 57

Directors’ Remuneration Policy Report 59

Annual Report on Remuneration 67

Directors’ Report 72

Statement of Directors’ Responsibilities 76

Financial Statements

Independent Auditor’s Report 77

Group Consolidated

Financial Statements 84

Company Financial Statements 127

Glossary 138

Other Definitions 140

Corporate Information 142

Also online at

https://www.gmsplc.com/Results-and-

Presentations.aspx

HIGHLIGHTS

1Annual Report 2023

Strategic Report

2024 Highlights and Outlook

— Adjusted EBITDA guidance is set at US$ 92 million

to US$ 100 million for 2024.

— Target utilisation for 2024 is 95% of which 83%

is already secured.

— Anticipate continued improvement on day rates

as our vessel demand outstrips supply on the

back of a pipeline of opportunities.

— Average secured day rates of over 10% higher

than 2023 actual levels.

— Reversal of impairment recognised with a value

of US$ 33.4 million indicative of continued

improvement of long-term market conditions.

— Group anticipates net leverage ratio to be

below 2.5 times before the end of 2024.

See Glossary.

1 Represents operating profit after adding back depreciation, amortisation,

non-operational items and impairment charges or deducting reversal of

impairment. 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 to the consolidated financial statements.

2 Represents total bank borrowings less cash.

3 Represents the ratio of net bank debt to adjusted EBITDA.

4 Represents general and administrative costs excluding depreciation,

amortisation and other exceptional costs. A reconciliation of this measure is

provided in Note 31 to the consolidated financial statements

5 Represents adjusted EBITDA divided by revenue.

6 Represents reported cost of sales divided by revenue.

7 Represents the percentage of available days in a relevant period during which

the fleet of Self Elevating Support Vessels (SESVs) is under contract and in

respect of which a customer is paying a day rate for the charter of the SESVs.

2023 Operational Highlights

— Average fleet utilisation

increased by six percentage points to 94% (2022: 88%) with an improvement

in E-Class and K-Class vessels at 92% (2022: 82%) and 95% (2022: 87%) respectively.

— Average day rates increased to US$ 30.3k (2022: US$ 27.5k) with improvements across all vessel classes,

particularly for E-Class.

— New charters and extensions secured in the year totalled 8.4 years (2022: 19.4 years).

— Operational downtime decreased to 0.8% (2022: 2.2%).

NON-FINANCIAL AND SUSTAINABILITY INFORMATION STATEMENT

The Group has complied with the requirements of section 414C7B of the Companies Act 2006 by including certain non-financial

and sustainability information within the strategic report. We welcome the introduction of LR 9.8.6(8)R, which requires premium listed

companies like GMS, to include TCFD statements in their annual reports. 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

• Task Force on Climate-related Financial Disclosures (TCFD)

• Carbon emission reporting, page 35

• People and values section, page 26

• Carbon emission reporting, page 35

• TCFD, page 26

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 38

• Ethical practises, page 38, and Audit and

Risk Committee report, page 53

• Health and safety, page 39

• Diversity, page 37, and Directors’ Report, page 72

• Employee engagement and welfare, page 37

• People as at 31 December 2023, Page 38

Human rights

• Disability Policy

• Anti-Slavery Policy

• Code of Conduct Policy

• Employees and policies, Directors’ Report, page 74

• Ethical practises, page 38

• Ethical practises, page 38, Risk management page 17

Principal risks and impact on business activity • Risk management, pages 12

Remuneration Policy • Remuneration Policy, page 59

Description of the business model • Our business model, page 6

Key Performance Indicators (KPIs) • KPIs, page 20

* 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

In 2023, the Group demonstrated

improvement in its financial performance,

attributed to an increase in both utilisation

and average day rates across the fleet.

Average utilisation was up six percentage

points to 94% and the average day rates

across the fleet increased to US$ 30.3k

compared to the previous year's US$ 27.5k.

It is important to highlight that these figures

represent averages for the entire fleet, and

considering some contracts carried over

from previous years at lower rates, the actual

increase for new contracts surpassed the

reported average. This signals a positive

trend in securing new contracts at rates

higher than the fleet's overall average,

contributing to the overall revenue growth.

The improvement in revenue translated into

an improved adjusted EBITDA of US$ 87.5

million (2022: US$ 71.5 million). This

exceeded both our initial guidance range of

US$ 75 million to US$ 83 million, as well as

surpassing the revised guidance of US$ 86

million. This accomplishment highlights the

success of our operational performance in

maximising financial results.

Capital Structure and Liquidity

As a result of our commitment to

deleveraging, the net leverage ratio on

31 December 2023 was reduced to 3.05

times (31 December 2022: 4.4 times), driven

by a reduction in the net bank debt to

US$ 267.3 million (31 December 2022:

US$ 315.8 million) and with improved

EBITDA for the year. Attaining a net leverage

ratio below 4:1 was crucial, allowing us to

limit the number of quarters we were

charged PIK interest to one quarter.

In 2023, our business thrived amid industry tailwinds, showcasing year-over-year growth in

revenues, utilisation, and day rates. We successfully reduced our net leverage ratio to 3.05 times

from 4.4 times as of 31 December 2022. Looking forward, we will continue our deleveraging

journey as we spare no efforts to continue to increase shareholders value.

During the year, we lowered the cost of

financing by 340 basis points. Key benefits of

being below 4:1 times includes GMS meeting

its covenants, being able to pay dividends

and cutting some debt monitoring fees. This

achievement not only highlights our financial

resilience but also positions us to effectively

address other challenges, as highlighted

in the risk management section, while

advancing on our deleveraging journey.

Concurrent with our deleveraging efforts

aimed at shifting value from lenders to

shareholders, we are initiating plans to

reward our shareholders. Recently approved

by the Board, our residual dividend policy

seeks to strike a balance between investing

in the business and providing returns to

shareholders. Management is currently

evaluating the timing for its implementation,

a consideration that has only recently come

to the forefront.

The Group is in the process of refinancing its

term facility in advance of the bullet payment

becoming due in June 2025. Management’s

ongoing discussions with various lending

entities are aimed at securing terms that

align with our long-term strategic objectives,

ensuring continued financial stability. We are

optimistic about the outcome of these

negotiations and will keep shareholders

updated as we navigate this pivotal phase in

our financial planning. The Board expresses

confidence in our ability to secure favourable

terms that will contribute to the sustained

success and growth.

Governance

In August 2023, we announced the

departure of Rashed Al Jarwan, a non‐

executive Director of the Group, who retired

from the Board. I extend my sincere gratitude

to Rashed for his contributions during the

pivotal period since joining the Board in

2020. Following Rashed’s retirement, we

were pleased to welcome Haifa Al Mubarak

who joined the Board as an independent

non‐executive Director in October 2023.

Haifa brings over 40 years of oil and gas

experience to the business and also reflects

our efforts to create a more representative

Board, demonstrating our commitment to

promoting diversity in all aspects of our

organisation. I look forward to continuing to

benefit from Haifa's insights and expertise.

As a Board, we have continued to emphasise

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 have

open lines of communication on relevant

information. 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. This is an example of our

continuous commitment towards

environmental, social, and governance

(ESG) initiatives, including sustainability

practices and community engagement.

Committed

to Maximising

Shareholder Value

3Annual Report 2023

Strategic Report

change is now integrated into our enterprise

risk assessment process. Risk management

workshops are held at least annually and

attended by the Executive Chairman and

other Directors. Full details are provided in

our TCFD report on page 26.

Outlook

The offshore industry is dynamic, and today

we are more agile to adapt and ensure

sustained relevance in the future. I take pride

in our successful deleveraging efforts, which

along with our much improved operational

and financial performance, underscores our

commitment to enhancing shareholder value.

Concurrently, we are actively exploring

avenues for future growth, aligning ourselves

with emerging trends and positioning for

sustained success.

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 for 2024

between US$ 92 million to US$ 100 million.

This reflects our confidence in sustaining

positive momentum.

Finally, I would like to thank our employees,

shareholders and other stakeholders for their

continued support in achieving the Group’s

ongoing success.

Mansour Al Alami

Executive Chairman

03 April 2024

Commercial and Operations

The Group successfully secured four

new contracts and extended four existing

ones, totalling 8.4 years in aggregate (2022:

19.4 years in aggregate). Our operational

performance also demonstrated continued

improvement, as evidenced by a reduction in

operational downtime to 0.8%, compared to

2.2% in 2022.

Safety

The Group improved its Lost Time Injury Rate

(LTIR) going from 0.1 in 2022 to zero in 2023.

However, two medical treatment cases were

recorded taking the Total Recordable Injury

Rate (TRIR) from 0.1 in 2022 to 0.18 in 2023.

These levels continue to be below industry

average. 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.

Task Force on Climate-Related

Financial Disclosures

We continue to comply 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. The TCFD

recommendations focus on how companies

respond to the risks and opportunities

associated with climate change. Consistent

with the recommendations, a 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

4 Gulf Marine Services PLC

BUSINESS MODEL AND STRATEGIC OBJECTIVES

Our business model revolves around providing a practical and cost-effective

solution to customers in the offshore oil, gas, and renewable energy sectors.

We achieve this through a fleet of self-propelled Self-Elevating Support Vessels

(SESVs), designed to meet the specific needs of our clients in challenging

marine conditions.

Prioritising Health,

Environment and Quality

Safety remains our foremost priority,

supported by a resilient Health, Safety,

Environment and Quality (HSEQ)

management framework and a

pervasive safety-centric culture.

Meeting Client Demands

for Efficiency and

Cost Reduction

As clients increasingly prioritise vessels

that reduce costs and improve operational

efficiencies for their projects. Our fleet of 13

SESVs, with an average age of 13 years, is

designed to meet the operating standards

our clients require.

Empowering a Diverse

Workforce for Success

Our workforce, rich in diversity and global

experience, personifies excellence in the

SESV sector. GMS cultivates talent to

unmatched standards by empowering

individuals to grow, develop and realise

their utmost potential, thereby driving

success for our organisation.

Leveraging Flexibility

for Market Resilience

GMS operates across various industries and

geographical regions, leveraging the

adaptability of its fleet to deliver highest

quality services to a diverse clientele. This

strategic flexibility enables us to maintain a

market presence across different business

sectors and geographies, positioning us as a

resilient entity in times of fluctuating demand.

Operates a Fleet of

Self-propelled SESVs

GMS owns and operates a fleet of SESVs,

which are chartered to our clients, providing

cost-effective and safe offshore support

solutions. With an average age of 13 years,

the fleet is well positioned within the market.

GMS currently supports oil, gas and

renewable energy clients in the Arabian

Peninsula region and North-West Europe.

Delivering

Operational Excellence

GMS is dedicated to achieving excellence

across all operational activities, providing

clients with a comprehensive suite of services

aimed at enhancing operational efficiency

while delivering time and cost benefits. Our

commitment to maintaining excellent safety

standards not only safeguards the well-being

of clients, employees and contractors but also

minimises our environmental footprint.

To align with the in-country value

requirements mandated by several of our

Arabian Peninsula-based clients, GMS

collaborates closely with local suppliers.

This strategic partnership maximises

in-country expenditures, thereby fostering

economic growth within the region.

Additionally, we encourage our partners to

similarly prioritise in-country spending within

their own supply chains whenever feasible.

Our Resources Our Operations

Drives Performance

Through Reportable Metrics

GMS assesses productivity across the Group

by ensuring reportable 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.

5Annual Report 2023

Strategic Report

Shareholders

Generating higher and sustainable profits

through improving utilisation and charter day

rates, reduction in operational cost base.

Transfer of value to shareholders via improved

capital structure through continued

deleveraging of the Group’s balance sheet.

Customers

GMS delivers services that prioritise safety,

reliability and cost-effectiveness, empowering

clients to optimise their operations. Our

commitment to safety highlights our

exceptional track record in consistently

providing clients with market leading services.

People

A dedicated workforce committed to

performance and well-being flourishes within

an environment characterised by positivity

and openness. This engaged workforce

remains a cornerstone of our operations,

fostering a culture of excellence and

continuous improvement.

Suppliers

Long-term partnerships focusing

on local content.

What We Deliver

6 Gulf Marine Services PLC

Strategic Priority What it Means 2023 Progress Future Priorities

Revenue

Maximisation

Increase charter day rates driven by the improving

supply/demand dynamics in our core markets.

Maximise utilisation through best-in-class operations.

Continually enhance operating capability while offering

new and improved offshore support solutions, to

anticipate client needs.

Utilisation increased by six percentage points to 94% from the

2022 figure of 88%. This continues to be the highest level of

utilisation achieved since 2014.

Average day rates across the fleet increased by 10%

compared to the previous year’s increase of 7%.

New contracts and extensions secured in the year totalled

8.4 years (2022: 19.4 years).

Focus on local content requirements demanded by our clients across

the Arabian Peninsula region to ensure we are well placed to secure

new contracts.

Maintaining strong relationships with our core customers to win

and secure contracts that add to our backlog.

Renegotiate contractual terms when existing contracts come to an end with

the precursor to day rate improvement and longer-term contracts.

Continue to explore new opportunities in other markets.

Cost management

Deliver safe and cost-effective operations.

Optimise capital expenditure.

Focused efficiencies in operational costs.

Total Recordable Injury Rate (TRIR) slightly increased from

0.1 in 2022 to 0.18 in 2023 which continues to remain below

industry average.

Limiting capital expenditure to maintaining the fleet to a level

that ensures safe operations and meets client requirements.

The adjusted EBITDA has improved to US$ 87.5 million

(2022: US$ 71.5 million), through cost control measures.

Ensure key safety Key Performance Indicators (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.

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 4.4 times at the end of 2022

to 3.05 times at the end of 2023, through effective working

capital management as highlighted by a reduction in the

trade debtors to US$ 30.6 million (2022: US$ 33.2 million).

Group has continued to deleverage by making repayments

of US$ 56.2 million (2022: US$ 51.4 million) towards its

borrowings, of which, US$ 26.2 million (2022: US$ 3.8

million) were over and above its contractual obligations.

A total of US$ 33.7 million (2022: US$ 3.8 million) was

prepaid during 2023.

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

continue to deleverage, thus reducing the finance cost.

Refinancing its term facility in advance of the bullet

payment becoming due in June 2025.

Controls

Maintain an efficient and effective control environment.

Develop and maintain a robust internal controls manual.

Equip our staff with greater skills to deliver

quality performance.

Monitoring the implementation of controls with close

exception reporting.

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.

Internal auditors conducted audits of the HR and IT

functions during the year. The IT audit is at its final stages

with observations being discussed with the IT team, while

the HR audit report has been completed. The report

identified control weaknesses, which were assessed as not

representing significant risks.

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.

Monitoring progress of the internal audit and implementing

required controls to ensure a robust controls environment.

BUSINESS MODEL AND STRATEGIC OBJECTIVES

continued

Securing Sustainable Value

Creation for Shareholders

Management's primary aim is to deliver resilient shareholder value by swiftly and efficiently

deleveraging the Group. The following strategic priorities are entirely geared towards

accomplishing this key objective.

7Annual Report 2023

Strategic Report

Strategic Priority What it Means 2023 Progress Future Priorities

Revenue

Maximisation

Increase charter day rates driven by the improving

supply/demand dynamics in our core markets.

Maximise utilisation through best-in-class operations.

Continually enhance operating capability while offering

new and improved offshore support solutions, to

anticipate client needs.

Utilisation increased by six percentage points to 94% from the

2022 figure of 88%. This continues to be the highest level of

utilisation achieved since 2014.

Average day rates across the fleet increased by 10%

compared to the previous year’s increase of 7%.

New contracts and extensions secured in the year totalled

8.4 years (2022: 19.4 years).

Focus on local content requirements demanded by our clients across

the Arabian Peninsula region to ensure we are well placed to secure

new contracts.

Maintaining strong relationships with our core customers to win

and secure contracts that add to our backlog.

Renegotiate contractual terms when existing contracts come to an end with

the precursor to day rate improvement and longer-term contracts.

Continue to explore new opportunities in other markets.

Cost management

Deliver safe and cost-effective operations.

Optimise capital expenditure.

Focused efficiencies in operational costs.

Total Recordable Injury Rate (TRIR) slightly increased from

0.1 in 2022 to 0.18 in 2023 which continues to remain below

industry average.

Limiting capital expenditure to maintaining the fleet to a level

that ensures safe operations and meets client requirements.

The adjusted EBITDA has improved to US$ 87.5 million

(2022: US$ 71.5 million), through cost control measures.

Ensure key safety Key Performance Indicators (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.

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 4.4 times at the end of 2022

to 3.05 times at the end of 2023, through effective working

capital management as highlighted by a reduction in the

trade debtors to US$ 30.6 million (2022: US$ 33.2 million).

Group has continued to deleverage by making repayments

of US$ 56.2 million (2022: US$ 51.4 million) towards its

borrowings, of which, US$ 26.2 million (2022: US$ 3.8

million) were over and above its contractual obligations.

A total of US$ 33.7 million (2022: US$ 3.8 million) was

prepaid during 2023.

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

continue to deleverage, thus reducing the finance cost.

Refinancing its term facility in advance of the bullet

payment becoming due in June 2025.

Controls

Maintain an efficient and effective control environment.

Develop and maintain a robust internal controls manual.

Equip our staff with greater skills to deliver

quality performance.

Monitoring the implementation of controls with close

exception reporting.

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.

Internal auditors conducted audits of the HR and IT

functions during the year. The IT audit is at its final stages

with observations being discussed with the IT team, while

the HR audit report has been completed. The report

identified control weaknesses, which were assessed as not

representing significant risks.

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.

Monitoring progress of the internal audit and implementing

required controls to ensure a robust controls environment.

Securing Sustainable Value

Creation for Shareholders

8 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. We recognise

the importance of the activities and outcomes of

stewardship and regularly engage with investors on

our financial performance, strategy and business

model and our Environmental, Social and Governance

(ESG) performance.

The Executive Chairman holds regular meetings with

the representatives of major shareholders and an update

on these meetings is provided at each of the main

Board meetings.

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 General Meeting (AGM) provides

another forum for our shareholder base to engage.

GMS also has an active social media presence on

LinkedIn and posts updates on major developments

in the Group.

Two of our non-executive Directors are nominated by

our two largest shareholders.

Refer to the Board Report on page 46 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)

and ESG performance

of the Group.

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 40

occasions during 2023.

The Board continued to have input to the Group’s

communication with its shareholders. There continued

to be a regular flow of trading updates including all

major contract wins and information posted on the

Group’s website and social media to provide

transparency to all current shareholders in the business

and any potential investors.

The Board continued to engage with the major

shareholders as a special resolution was not

passed at the AGM in 2023. The Board hopes

that the shareholders would support all the resolutions

recommended and proposed at the AGM in 2024.

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 Arabian Peninsula 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 deleveraging the

balance sheet. Once this is sufficiently progressed,

capital allocation and resources will be reviewed

assuming resources are available. Refer to the

Financial Review for more details.

The Directors of Gulf Marine Services Plc, as individuals and together, consider that they have acted in a way that would most likely promote

the success of the Group and 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 and safety 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.

The Board has always taken into account its obligations under Section 172(1) of the Companies Act 2006 (Section 172), including during the

year, in line with current reporting requirements. Key decisions have been specifically confirmed at each Board meeting to take into account

these matters. This has been supplemented by the roles of the individual Directors giving due regard and consideration for each element of

the Section 172 requirements. The Board has always 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.

9Annual Report 2023

Strategic Report

How GMS Engages

with Stakeholders

Stakeholder

Objectives

How did Engagement Support

Board Decision Making?

Lenders

GMS continued to have extensive interaction with its

lenders and respective teams. Capital structure is

always kept under consideration in any decision making

to ensure that the Group stays within its covenants.

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 increase in adjusted EBITDA meant that the Group

continues to successfully repay significant amounts of

principal and this resulted in a reduction in leverage to

3.05 times (2022: 4.4 times). This was one of the main

priorities for the Board, which Management

successfully delivered.

Refer to the Financial Review on pages 22 to 24 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 National Oil

Company (NOC) clients.

The Board was given regular presentations and

updates on the Group’s procurement activities

including development of key focus areas for

procurement in future. The Group continues to look

into cost savings initiatives and maximising in-country

value and renegotiate the terms of major supply

contracts to improve efficiency.

People

Our employees are our most important asset.

They want to work in an environment where they are

safe and respected, and have the opportunity to learn,

reach their potential and develop successful careers in

a Company they can be proud of. The quality of the

workforce is crucial to the success of GMS. We regularly

communicate with both on and offshore staff via weekly

email updates, meetings 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.

Lord Anthony St John of Bletso is our dedicated

workforce engagement non-executive Director. An end

of year celebration event was held at the Abu Dhabi HQ

office to celebrate the collective wins as a team in 2023.

During this event, long service employees were also

recognised with awards for 10, 15, 20 and 25 years

of service.

Employees are

concerned with job

security, opportunities

for training, a culture of

fairness, inclusion and

communication,

compensation

and benefits.

Regular updates on Health and Safety and

HR activities and its future plans are provided

at main Board meetings.

Refer to page 37 for more details on

engagement with our people.

10 Gulf Marine Services PLC

MARKET ANALYSIS

Markets

Arabian Peninsula Region

In the Arabian Peninsula region, Offshore Oil

and Gas (O&G) production is expected to

increase over the next decade, driven by a

planned 29% increase in production capacity.

Self-Elevating Support Vessels (SESV’s)

demand across the Arabian Peninsula region

was at c.21,300 vessel days in 2023, an

increase by 22% year-on-year, with an

implied utilisation of 82%. Over the next five

years, demand across the Arabian Peninsula

markets is expected to grow rapidly and

reach a height of 37,930 vessel days by 2027.

This growth would effectively exceed

available supply, leading to exploration and

production contractors across the region to

attempt to lock in capacity early to secure

SESVs to support committed field

development work. The high utilisation rates

spurred several new build orders in 2022,

which were fulfilled in 2023, consequently

increasing the overall number of SESVs in

the region. Additional orders for SESVs were

placed in 2023, with anticipated delivery

dates in 2024, however a portion of these

new builds are earmarked for contracts

already awarded. Increasing supply tightness

as well as the importance of SESVs to

support major offshore field developments

has seen a uptick in day rates over the past

few years. While day rates averaged US$ 30k

over the 2017-2021 period, new tenders in

2023 drove the average rates to just over

US$ 44k.

In 2023, the Arabian Peninsula region

revenue contributed 91% (2022: 89%) of the

total Group revenue. During the year, the

Group secured eight new contracts and

extensions to current contracts with a total

duration of 8.4 years. The Arabian Peninsula

region saw an increase in fleet average

utilisation from 88% to 95%, driven by the rise

in demand for E-Class and K-Class vessels.

As of 31 December 2023, GMS operates

three vessels in Qatar, three vessels in KSA

and six vessels in the UAE.

North-West Europe

Offshore wind farms in Europe remains

a pivotal market for GMS across both

operation and maintenance sectors, as

well as in supporting the construction

and commissioning of new wind farms.

Anticipated overall activity is projected to

average 9,150 vessel days annually from

2024 to 2027, with c.40% yoy surge

expected in 2027-2028.

In 2023, the North-West Europe region

revenue contributed 9% (2022: 11%) of the

total Group revenue. GMS currently has one

of its large class vessels working in Europe

engaged in the ongoing maintenance and

operation of existing windfarms. The vessel

is engaged on a long-term contract with

options extending up to 2029.

Market Outlook

Global energy demand is the principal

indicator of all O&G related investments,

driving support for hydrocarbon exploration,

and production and consequently demand

for supply chain services such as SESVs.

The BP Energy Outlook 2023 forecasts

primary energy demand to increase by c.13%

between 2020-2040. The Arabian Peninsula

region is expected to provide the largest

incremental demand of 4.8 mmboe in

offshore O&G production – growing 29%

from 16.6 mmboe to 21.4 mmboe over the

next decade. In addition, it is likely that the

offshore wind industry investment will

generally exceed that of O&G for the

foreseeable future accounting for c.45% of

total offshore energy spending expected

over the 2024-2027 period.

11Annual Report 2023

Strategic Report

E-Class

S-Class K-Class

Map legend

KSA

Enterprise

Kudeta

Sharqi

Qatar

Endurance

Evolution

Kikuyu

Europe

Endeavour

UAE

Kawawa

Kamikaze

Keloa

Pepper

Scirocco

Shamal

12 Gulf Marine Services PLC

Senior Management

The Executive team implements the risk management process from risk identification

to management and mitigation.

RISK MANAGEMENT

Ensuring the effective identification, management and mitigation of business risks, as well as

the pursuit of opportunities, are pivotal for achieving the Group’s strategic goals. A robust risk

management system is established to facilitate the identification, analysis, evaluation, mitigation

and continuous monitoring of risks, as outlined 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 an integral part of their regular risk

assessment procedures, the Board evaluates

the relevance of Environmental, Social and

Governance (ESG) issues to GMS'

operations. The Audit and Risk Committee

oversees the evaluation of the Group's

internal control system and procedures.

Following its assessment, the Audit and Risk

Committee has determined that GMS'

operational internal control system, including

risk management practices, remains

effective for day-to-day operations.

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 52 for details of the Board’s

actions as part of their review).

13Annual Report 2023

Strategic Report

IMPACT

LIKELIHOOD

K11

K10

K1 Utilisation

K2 Inability to secure appropriate

capital structure

K3 Arabian Peninsula region local

content requirements

K4 Inability to deliver safe and

reliable operations

K5 Liquidity and covenant compliance

K6 People

K7 Legal, economic and political conditions

K8 Compliance and regulation

K9 COVID-19 pandemic (Removed in 2023)

K10 Cyber-crime – security and integrity

K11 Climate change

Residual Risk Heat Map

14 Gulf Marine Services PLC

Principal Risks and Uncertainties

Future results are uncertain due to factors beyond our control. Operating vessels

offshore involves varying levels of uncertainty influenced by weather conditions, sea state and

navigational hazards. Despite advanced technology and experienced crews, there’s always

some uncertainty. Our operations follow strict safety regulations to minimise risks.

It's important to plan and remain adaptable as circumstances change, impacting our

results and investment value. The principal risks facing the Group in the next five years,

along with mitigation measures, are outlined below, though not exhaustive.

Risk Mitigating Factors and Actions

1 Utilisation

Utilisation levels may be reduced by the

following underlying causes:

• Customer concentration leading to

potential changes in our contract profile

and pipeline. Risks of potential loss of

some clients to competitors.

• ADNOC continues to expand its fleet

thus controlling the UAE market.

• Fleet capabilities may no longer match

with changing client requirements.

Clients may increase the standard

specification required for a Self-Elevating

Support Vessel (SESV), which might require

the Group to upgrade some of its fleet to

be compliant.

Strengthening Client Engagement and Foster Loyalty

The Group maintains strong client relationships through consistent communication and

a demonstrated history of delivering secure and reliable services. GMS has formulated

strategies for fleet upgrades aligned with anticipated client needs in the future. These

initiatives aim to craft commercial proposals that foster loyalty, encouraging customers

to commit to longer-term contracts involving a greater utilisation of vessels

through incentivisation.

Diversification Strategies Across Business Segments and Geographies

The Group actively seeks opportunities to optimise vessel utilisation and consistently

evaluates avenues for diversifying its market presence by expanding its client portfolio.

Customisation Capabilities for Client Needs

The Group is capable of modifying assets in order to satisfy client requirements.

Further, GMS’ vessels are adaptable to compete for a wider market share, enabling

the Group to maximise the utilisation level and charter day rates.

To comply with LIMS (Lifting Integrity Management System) the Group has involved

engineering companies to perform technical studies on existing equipment to extend

the life of equipment (time limited).

RISK MANAGEMENT

continued

Key

Revenue Maximisation

Cost Management

Working Capital Management

Controls

15Annual Report 2023

Strategic Report

Risk Mitigating Factors and Actions

2 Inability to Secure an Appropriate Capital Structure

Poor financial performance, such as declining

revenues or profitability, can make it more

difficult for the Group to attract financing or

negotiate favourable terms.

A low share price may prevent GMS from

raising sufficient levels of equity to recapitalise

the business.

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 Deleveraging

Conscious focus on deleveraging has resulted in reduction in leverage levels to 3.05 times

compared to 4.4 times in 2022. Group anticipates net leverage ratio to be below 2.5 times

before the end of 2024.

Investors Relationship Management

Maintain strong investor relations and ensure timely dissemination of Regulatory News

Service (RNS) updates.

Increased share price

The share price has increased from 4.65 pence as of 31 December 2022 to 14.5 pence as of

31 December 2023, reflecting investors’ confidence in the Group’s business strategy.

3 Arabian Peninsula Local Content Requirements

Arabian Peninsula region National Oil

Companies (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 fully embraces local content regulations, reflecting its extensive experience

in serving NOCs in the Arabian Peninsula region. The Group maintains offices in Arabian

Peninsula region countries where it operates, actively overseeing its supply chain to prioritise

the enhancement of local content. When required, GMS collaborates with local partners in

targeted markets to strategically position itself for project acquisition. Notably, during the

tendering phase, companies with superior audited local content scores are typically offered

first refusal to match any lower bids.

Market Knowledge and Operational Expertise

The Group has well-established long-term relationships in the Arabian Peninsula 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 it operates. We are tracking the scores in two jurisdictions.

4 Inability to Deliver Safe and Reliable Operations

Geo-political events or pandemic may impact

ability to safely operate assets due to

restricted crew travel in certain countries.

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 Commitment and Operational Reliability

Our highest priority is providing safe and reliable operations. This is achieved through a

resilient Health, Safety, Environment and Quality (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 standards.

Business Continuity Plan

The Group has implemented a business continuity management plan, which it regularly

updates to ensure the reliability of its operations, including the capability to transfer crew

and source spares from different regions to maintain safe operations.

Management continues to review and improve the current management systems

and monitors the performance of HSEQ.

16 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 high interest rates

and inflation, which could impact the debt

service obligations and the Group’s bank

facilities covenants.

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 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.

Optimising Capital Expenditure

The Group continues to restrict capital expenditure to essential spending as well as specific

client requirements, but without jeopardising 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.

Focus on Deleveraging

Management continues to focus 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.

Effective Communication, Training and Engagement Initiatives

Communication has remained a key practice of management. GMS held a full two-day

strategy meeting at the Group’s headquarters in Abu Dhabi. This brought together the

Board and Senior Management in a productive forum discussing longer-term plans for the

business. It included presentations and discussion on each key aspect of the Group’s

operations, recent and future industry developments and ongoing and future strategic plans.

Further, events like our recent Abu Dhabi headquarters celebration, recognising employee

milestones from 10–25 years of tenure, reinforce our united culture. As the Group matures

and longtime experts pass their torches, we are committed to developing the next generation

of leaders equipped to guide our mission.

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 adds value through development programs, promotion from within the

organisation 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 head-hunters to fulfil key positions as

the need had arisen.

RISK MANAGEMENT

continued

17Annual Report 2023

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 and

Southeast Asia, political instability may

hamper the recruitment, retention and

deployment of personnel.

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. Multiple new recruitment agencies registered to source and diversify

crew composition across different geographies.

Monitoring Inflation and Interest Rates

Management is continually monitoring the liquidity position from changes in inflation and a

focus on cost reduction. During the year, GMS has recruited a Cost Controller to monitor

and manage financial expenditures to ensure adherence to budgetary constraints and

optimise cost efficiency. 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.

Compliance with recently introduced UAE

Corporate Tax Regulations, including

adherence to transfer pricing requirements,

poses potential administrative and financial

obligations for the Group.

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 operates.

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.

Engagement of Tax Consultant

A reputed tax consultant has been engaged to assist with a Group tax health check, a

review of Group's transfer pricing policy and implementation of corporate tax in the UAE.

9 COVID-19 Pandemic – Removed During 2023

18 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 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 Section 172 statement), industry-

specific journals, and reviews of reporting

published by peer companies.

Examples of emerging risks include

unexpected changes in the demand for oil,

technological advancements, 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 inability to deliver safe and

reliable operations.

Legal and Policy Monitoring

The Group carefully monitors legislative developments to ensure compliance with all

relevant laws both in the UK and the Arabian Peninsula region. 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 Arabian Peninsula 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.

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

19Annual Report 2023

Strategic Report

20 Gulf Marine Services PLC

KEY PERFORMANCE INDICATORS

Key Performance Indicators (KPIs) serve as vital metrics for

evaluating performance of the Group in relation to our strategic

objectives. These KPIs comprise of financial and operational

measures and each links to the four pillars of our strategic

framework. Refer to the Glossary for the definition of each

Alternative Performance Measure (APM).

KPI Description 2023 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 our fleet

of Self-Elevating Support Vessels (SESVs) are

chartered on a day rate out of total calendar days.

The Group demonstrated an improved financial

performance leading to an increase in revenue

by 14% which is attributed to increase in

both utilisation and average day rates

across the fleet.

Average utilisation was up six percentage

points to reach 94% and the average day rates

across the fleet increased to US$ 30.3k

compared to the previous year’s US$ 27.5k.

US$ 109m

US$ 102m

US$ 115m

US$ 133m

US$ 152m

2023

2022

2021

81%

69%

84%

94%

88%

2020

2019

% – SESV utilisation Bars – Revenue

Adjusted EBITDA

and

adjusted EBITDA Margin

Adjusted EBITDA (Earnings before Interest,

Tax, Depreciation and Amortisation), excluding

exceptional items and non-cash transactions

such as impairments or reversal of

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 profit.

The improvement in revenue translated into an

improved adjusted EBITDA of US$ 87.5 million.

This exceeded both our initial guidance range of

US$ 75 million to US$ 83 million, as well as

surpassing the revised guidance of US$ 86

million. The adjusted EBITDA margin has

also increased to 58% (2022: 54%).

US$ 51m

US$ 50m

US$ 64m

US$ 72m

US$ 88m

2023

2022

2021

49%

47%

56%

54%

58%

2020

2019

% – 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

exceptional items 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.

Adjusted profit was US$ 9.8 million

(2022: US$ 17.6 million). The decrease reflects

higher finance expenses by US$ 13.8 million

due to increase in interest rates and higher

impact of changes in fair value of derivative

by US$ 8.6 million.

US$ 18m

US$ 10m

ADEPS US$ 0.02

ADEPS US$ 0.01

ADLPS US$ (0.04)

ADEPS US$ (0.03)

ADLPS US$ (0.06)

US$ -20m

US$ (20)m

US$ (15)m

2023

2022

2021

2020

2019

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 Group’s bank facilities is necessary to avoid

an event of default.

As a result of our commitment to deleveraging,

the net leverage ratio on 31 December 2023

was reduced to 3.05 times (31 December 2022:

4.4 times), driven by a reduction in the net debt

to US$ 267.3 million (31 December 2022:

US$ 315.8 million) combined with improved

EBITDA for the year.

7.6

8.0

5.8

4.4

3.1

2023

2022

2021

2020

2019

Key

Revenue Maximisation

Cost Management

Working Capital Management

Control

See Glossary.

1 Represents operating profit after adding back depreciation, amortisation, non-operational items and impairment charges or deducting reversal of impairment. 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 to the consolidated financial statements.

2 Represents adjusted EBITDA divided by revenue. This measure provides additional information on underlying performance as a percentage of total revenue derived from the Group.

21Annual Report 2023

Strategic Report

KPI Description 2023 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$ 240

US$ 199

US$ 179

US$ 342

US$ 459

2023

2022

2021

2020

2019

The backlog figures shown above are as at 1 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 provides an indication of the

Group’s service capacity, scale of operations,

and manpower cost base.

Group staff retention increased to 88% from

84% reported in 2022.

Average onshore FTEs over the year have

increased to 59 from 55 reported in 2022.

While for offshore FTEs, the average number

throughout the year increased from 511 in 2022

to 569. The total Group headcount increased

from 594 at 31 December 2022 to 660 at

31 December 2023, which was driven by

increased utilisation of our vessels, which required

an increase in recruitment of offshore FTEs.

482

496

534

567

628

2023

2022

2021

84%

83%

86%

88%

92%

2020

2019

% – 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.

The Group improved its LTIR going from 0.1

in 2022 to zero in 2023 as there was no Lost

Time Injury incident.

However, two medical treatment cases were

recorded taking the TRIR from 0.10 in 2022 to

0.18 in 2023.

0.10

0.20

0.30

0.29

0.19

0.20

0.10

0.18

0.00

20232022202120202019

= TRIR = LTIR

Underlying G&A

as percentage of revenue

The underlying G&A to revenue expense ratio

compares revenue to the amount of expenses

incurred in onshore support operations.

The underlying G&A has slightly increased from

US$ 10.4 million in 2022 to US$ 10.7 million in

2023. However, underlying G&A as percentage

of revenue has decreased from 8% in 2022 to

7% in 2023.

US$ 14m

US$ 10m

US$ 11m

10%

13%

2023

2022

2021

2020

2019

Underlying General and Administrative (G&A) expenses

excluding depreciation and amortisation, and

exceptional 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 10

percentage points compared to the prior year.

The decrease is due to three K-Class vessel

and one E-Class contracts coming to an end in

2024. These contracts are in the process of

being renewed.

67%

73%

77%

84%

74 %

2023

2022

2021

2020

2019

3 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 warrants and LTIP’s 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 any exceptional costs, impairment charges or deducting

reversal of impairment. 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 to the consolidated financial statements.

4 Represents total bank borrowings less cash.

5 Represents general and administrative expenses excluding depreciation and amortisation, and other exceptional costs. A reconciliation of this measure is provided in

Note 31 to the financial statements.

22 Gulf Marine Services PLC

Cost of Sales, Reversal

of Impairment and

Administrative Expenses

Cost of sales as a percentage of revenue

decreased by five percentage points to 54%

compared to 59% reported in 2022.

As a result of continued improved market

conditions, an impairment assessment of the

Group’s fleet was conducted which resulted

in a net impairment reversal of US$ 33.4

million (2022: net impairment reversal of

US$ 7.8 million). Refer to Note 5 to the

consolidated financial statements for

further details.

Underlying general and administrative

expenses

(which excludes depreciation,

amortisation and other exceptional costs)

reduced as a percentage of revenue to 7%

in 2023 from 8% in 2022. Reported general

and administrative expenses amounted to

US$14.6 million, up from US$13.2 million in

2022, driven by increased staff costs and

professional fees.

Adjusted EBITDA

The adjusted EBITDA increased to US$

87.5 million (2022: US$ 71.5 million) which

exceeded both our initial guidance range

of US$ 75 million to US$ 83 million as well

as surpassed the revised guidance of

US$ 86 million. The increase reflects

improvement in market conditions leading

to higher utilisation and day rates.

The adjusted EBITDA margin has also

increased to 58% (2022: 54%). Adjusted

EBITDA is considered an appropriate and

comparable measure showing underlying

performance, that management are able to

influence. Please refer to Note 31 to the

consolidated financial statements and

Glossary for further details.

Revenue

US$’000

Gross Profit

US$'000

Adjusted gross profit

US$’000

Vessel Class 2023 2022 2023 2022 2023 2022

E-Class vessels 60,955 51,135 43,070 18,525 26,730 15,205

S-Class vessels 35,018 33,986 21,327 12,600 16,865 17, 2 31

K-Class vessels 55,630 48,036 38,440 29,409 25,814 20,310

Total 151,603 133,157 102,837 60,534 69,409 52,74 6

FINANCIAL REVIEW

Revenue and Segmental

Profit/Loss

The Group posted 14% increase in revenue,

reaching US$ 151.6 million compared to the

previous year’s US$ 133.2 million. This

growth was a result of combination of an

increase in both utilisation and average

day rates.

Utilisation increased by six percentage points

to 94% from the 2022 figure of 88%.

This continues to be the highest level of

utilisation achieved since 2014. Notable

improvements in the utilisation rates were

observed in the E-Class and K-Class vessels,

reaching 92% (2022: 82%) and 95% (2022:

87%) respectively. S-Class vessels utilisation

was slightly lower at 94% (2022: 97%).

Average day rates across the fleet increased

by 10% to US$ 30.3k compared to the

previous year's US$ 27.5k with improvements

across all vessel classes, particularly for

E-Class whereby, the day rates improved

by 17% to US$ 41.4k (2022: US$ 35.4k).

K-Class and S-Class rates increased by

7% and 5%, respectively.

The United Arab Emirates (UAE), Qatar and

Saudi Arabia combined region continue to be

the largest geographical market representing

91% (2022: 89%) of total revenue. The

remaining 9% (2022: 11%) of revenue was

earned from the renewables market

in Europe.

The table below shows the contribution to

revenue, gross profit and adjusted gross

profit

made by each vessel class during

the year.

2023

US$m

2022

US$m

2021

US$m

Revenue 151.6 133.2 115.1

Gross profit 102.8 60.5 60.6

Adjusted EBITDA

87.5 71.5 64.1

Net impairment reversal 33.4 7. 8 15.0

Net profit for the year 42.1 25.4 31.2

1 Represents operating profit after adding back depreciation, amortisation, non-operational items and impairment charges or deducting reversal of impairment. 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 to the financial statements.

2 Represents gross profit 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.

3 Represents general and administrative expenses excluding depreciation and amortisation, and other exceptional costs. A reconciliation of this measure is provided in

Note 31 to the financial statements.

23Annual Report 2023

Strategic Report

Finance Expense

Finance expenses increased to US$ 31.4

million (2022: US$ 17.7 million) which is

mainly driven by an increase in LIBOR/SOFR

rates. Further, 250 basis points of PIK

interest costs were also applied and the

margin rate on the loan increased from 3%

to 4% for first quarter of the year which were

triggered by the net leverage ratio exceeding

4.0 times as at 31 December 2022. On

achieving a net leverage ratio below 4:1

times, PIK interest ceased to accrue in the

second quarter of the year, and the margin

was thereafter reduced by 90 basis points to

3.1%. This has resulted in reduction in cost of

financing by 340 basis points. Attaining a net

leverage ratio below 4:1 times was crucial,

allowing us to limit the number of quarters

we were charged a PIK interest to one

quarter only. Key benefits of being below 4:1

times is it allows GMS to meet its covenants,

to pay dividends and to cut some debt

monitoring fees.

The accounting driven impact of changes

in fair value of the derivative (the warrants

issued to the lenders) increased to US$

11.1 million (2022: US$ 2.5 million) in 2023,

due to the increase in the share price of the

Company. Company expects valuation

charges over par value to get reversed when

the warrants are either exercised or when

they will expire, on 30 June 2025.

Earnings

Net profit for the year increased to US$ 42.1

million compared to US$ 25.4 million

reported in 2022. The 65.7% increase in net

profit was mainly driven by higher revenue

and the reversal of impairments charged in

the previous years. The increase was partially

offset by an increase in finance expenses

and the accounting impact of changes in the

fair value of derivative (the warrants issued to

the lenders) as explained above.

Capital Expenditure

The Group’s capital expenditure relating

to drydocking and improvements of the

vessels increased to US$ 11.3 million

(2022: US$ 9.1 million).

Cash Flow and Liquidity

During the year, the Group delivered higher

operating cash flows of US$ 94.4 million

(2022: US$ 82.6 million). This increase is

primarily from higher revenues generated

during the year. The net cash outflow

from investing activities increased to

US$12.8million (2022: US$ 6.3 million).

The Group’s net cash outflow from financing

activities was US$ 85.2 million (2022: US$

72.3 million) mainly comprising of

repayments to the banks of US$ 56.2 million

(2022: US$ 51.4 million) and interest paid of

US$ 27.4 million (2022: US$ 17.5 million). The

repayments towards the bank loan of US$

56.2 million were almost double the Group's

obligation to its lenders for 2023.

The Group has US$ 8.7 million of available

resources comprising cash and cash

equivalents at the reporting date. Further, it

has an available working capital facility of

US$ 15.0 million (2022: US$ 20.0 million)

which can be utilised to draw down cash, of

which US$ 2.0 million (2022: Nil) was utilised,

leaving US$ 13.0 million (2022: US$ 20.0

million) available for drawdown. During the

period, the working capital facility was

reduced by US$ 5.0 million. The facility

expires alongside the main debt facility

in June 2025.

Balance Sheet

Total non-current assets at 31 December 2023

were US$ 621.0 million (2022: US$ 605.3

million), following a net impairment reversal

of US$ 33.4 million (2022: US$ 7.8 million)

on some of the Group’s vessels.

The total current liabilities increased to

US$ 99.5 million from US$ 69.3 million in

2022, primarily due to higher scheduled

repayments under the loan agreement for

2024. Additionally, trade payables and accrued

expenses increased to US$ 13.2 million

(2022: US$ 12.6 million) and US$ 16.1 million

(2022: US$ 11.2 million), respectively.

The Group was in a net current liability position

as of 31 December 2023, amounting to US$

52.1 million (2022: US$ 15.8 million). Total

current assets have decreased as receivables

are converted into cash that was used to

repay the debt. Management closely monitors

the Group's liquidity position including focus

on the forecasted short-term cash flows which

would be sufficient to meet the Group’s

current liabilities, including the current portion

of the bank borrowings which represents the

principal repayments due over the next 12

months. The loan prepayments were also

made after ensuring that forecasted cash

inflows are sufficient to meet the Group's

short-term obligations.

Total non-current liabilities decreased as a

result of reduction in bank borrowings. The

increase in equity reflects the net profit

achieved during the period.

24 Gulf Marine Services PLC

FINANCIAL REVIEW

continued

How We Assess Our Prospects

In assessing the Group’s long-term

prospects, the Directors regularly evaluate

the key risks of the Group including the

factors likely to affect the Group’s future

performance, financial position, cash flows,

liquidity position and debt facilities. These

assessments rely on established risk

management procedures and involve

analysing the Group's exposure to

significant 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 monitor

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 comprehensive review of

the Group’s prospects and its ability to fulfil

its obligations over a three-year period,

similar to the timeframe assessed in the

2022 long-term viability evaluation.

This period was selected with reference

to the current backlog and business

development pipeline, both of which

offer limited visibility beyond this

point, particularly in light of current

macroeconomic volatility. 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. This

assessment is based on management’s

reasonable expectations of the position and

performance of the Group over this period,

forecasts, and its planning timeframes.

The Group is in the process of refinancing

its term facility in advance as the bullet

payment becoming due in June 2025, i.e.

within the long-term viability assessment

period. Management’s ongoing discussions

with various lending entities are aimed at

securing terms that align with our long-term

strategic objectives, ensuring continued

financial stability. Given the improved

financial performance reported during 2023

and the current high levels of utilisation

secured, combined with higher day rates,

the Group expects the financial

performance to continue to improve during

the assessment period. As a result,

management is optimistic about the

outcome of these negotiations and expect

to complete the process on improved

terms in later half of 2024.

LONG-TERM

VIABILITY STATEMENT

Net Bank Debt and Borrowings

Net bank debt reduced to US$ 267.3 million

(2022: US$ 315.8 million). This was a result of

management’s commitment to accelerate

deleveraging. The Group repaid US$ 56.2

million (2022: US$ 51.4 million) towards its

term loan, of which, US$ 26.2 million (2022:

US$ 3.8 million) were over and above its

contractual obligation for 2023. A total of

US$ 33.7 million (2022: US$ 3.8 million)

was prepaid during 2023.

Going Concern

The Group is in the process of refinancing its

term facility in advance as the bullet payment

becoming due in June 2025. Management’s

ongoing discussions with various lending

entities are aimed at securing terms that align

with our long-term strategic objectives,

ensuring continued financial stability. Given

the improved financial performance reported

during 2023 and the current high levels of

utilisation secured, combined with higher

day rates, the Group expects the financial

performance to continue to improve during the

assessment period. As such, we are optimistic

about the outcome of these negotiations.

The Group’s forecasts indicate that its

anticipated refinanced 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 to

the consolidated financial statements.

Related Party Transactions

During the year, there were related party

transactions for catering services of

US$ 0.6 million (2022: US$ 1.2 million),

overhauling services of US$ 2.4 million

(2022: US$ 1.9 million) and laboratory

services of US$ 18k (2022: US$ 7k) with

affiliates of Mazrui International LLC, the

Group’s second largest shareholder (25.6%).

All related party transactions disclosed

herein have been conducted at arm’s length

and entered into after a competitive bidding

process. This process ensures that the terms

and conditions of such transactions are fair,

reasonable, and comparable to those that

would be available in similar transactions

with unrelated third parties.

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 73 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 to

the consolidated financial statements with

further information provided in the Glossary.

Alex Aclimandos

Chief Financial Officer

03 April 2024

25Annual Report 2023

Strategic Report

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 assess 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. The risk assessment process,

principal risks, and the actions being taken

to manage or mitigate them, are explained

in detail on pages 12 to 18 of this

Annual Report.

Sensitivity Analysis

To assess the Group’s viability, the Directors

have performed analysis considering the

following scenario:

• no work-to-win in 2024 and 2025;

• a 12%, 26% and 17% reduction

in utilisation in 2024, 2025 and

2026 respectively;

• a reduction in day-rates of an E-Class

and two S-Class vessels by 20% and

25% respectively after expiry of their

currently secured contracts; and

• interest rate to remain at current levels

instead of a forecasted decline of 25

basis points commencing second

quarter of 2024.

Based on the above scenario, the Group

would not be in breach of its current term

loan facility. The downside case is

considered to be severe but would still leave

the Group in compliance with the covenants

under the Group’s banking facility until

its maturity.

Reverse Stress Testing

In addition to the above downside sensitivity,

the Directors have also conducted a reverse

stress test, wherein EBITDA has been

reduced to the extent of breaching the debt

covenant. This scenario assumes a notable

increase in operational downtime to 7%,

which is in addition to the sensitivities

applied in the downside case above. The

4.5% increase in operational downtime for

FY24 would lead to a breach of the Finance

Service Cover ratio as of 31 December 2024.

Given the recent performance of the Group,

improved market conditions and

strengthening of the demand for GMS

vessels, 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 vessels off hire for

prolonged periods could be cold stacked to

minimise operating costs on these vessels

which has been factored into the downside

case. Additional mitigations could be

considered including but not limited to

reduction in overhead costs, relaxation/

waiver from covenant compliance and

rescheduling of repayments with lenders.

Management is aware of the broader

operating context and acknowledges the

potential impact of climate change on the

Group’s financial statements. However, it is

anticipated that the effect of climate change

will be negligible during the going concern

assessment period.

Conclusion

Considering the Group’s current position

and its principal risks, the Directors have

reasonable expectation for the Group to

sustain operations and fulfil its obligations

as they arise throughout the assessment

period. The principal basis for this

conclusion revolves around management’s

strategic focus on deleveraging existing

bank obligations and securing refinancing

for the balloon payment due in June 2025,

which continues to remain a key priority.

Mansour Al Alami

Executive Chairman

03 April 2024

26 Gulf Marine Services PLC

PEOPLE AND VALUES

2023 TCFD & CFD

Annual Report for

Gulf Marine Services PLC

TCFD Overview

Executive Statement

“At GMS, we have acknowledged climate

change as an emerging risk since 2019

and a principal risk since 2021. This is in

recognition of the challenges it will pose to

our business and the need for us to respond

to this in our operations. In 2022, we set our

targets for net-zero and developed our

strategy for reaching them. Throughout

2023, we continued our work towards our

commitments to reducing our environmental

impact and limiting our contribution to

climate change. COP28 this year was

hosted close to home, and we were excited

to follow and analyse the outcomes and

future opportunities it brings to our business.

We look forward to reporting back in 2024

on our further developments.”

Mansour Al Alami

Executive Chairman

TCFD Compliance Statement

GMS has complied with the requirements

of LR 9.8.6(8)R by including climate-related

financial disclosures consistent with the

Task Force 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 11 of the recommendations.

The Companies (Strategic Report) (Climate-

related Financial Disclosure) Regulations

2022 require publicly quoted and large

private companies to integrate climate

disclosures into their annual reports. We

have complied with the eight reporting

disclosure requirements of Climate-related

Financial Disclosure (CFD), details of which

can be found below.

Table 1: GMS Compliance Statement

TCFD Recommendation Climate-related Financial Disclosure Compliance

Governance

a) Describe the Board’s oversight of climate-

related risks and opportunities.

company in relation to assessing and managing climate-related

risks and opportunities.

Compliant

b) Describe management’s role in assessing

and managing climate-related risks and

opportunities.

Compliant

Strategy

a) Describe the climate-related risks and

opportunities the organisation has identified

over the short, medium and long term.

(d) a description of:

(i) the principal climate-related risks and opportunities arising

in connection with the operations of the company and,

(ii) the time periods by reference to which those risks

and opportunities are assessed.

Compliant

b) Describe the impact of climate-related risks

and opportunities on the organisation’s

businesses, strategy and financial planning.

(e) a description of the actual and potential impacts of the principal

climate-related risks and opportunities on the business model

and strategy of the company.

Compliant

c) Describe the resilience of the organisation’s

strategy, taking into consideration different

climate-related scenarios, including a 2°C

or lower scenario.

(f) an analysis of the resilience of the business model and

strategy of the company, taking into consideration of

different climate-related scenarios.

Compliant

27Annual Report 2023

Strategic Report

TCFD Recommendation Climate-related Financial Disclosure Compliance

Risk Management

a) Describe the organisation’s processes for

identifying and assessing climate-related risks.

(d) a description of how the company identifies, assesses,

and manages climate-related risks and opportunities.

Compliant

b) Describe the organisation’s processes for

managing climate-related risks.

Compliant

c) Describe how processes for identifying,

assessing, and managing climate-related

risks are integrated into the organisation’s

overall risk management.

(e) a description of how processes for identifying, assessing,

and managing climate-related risks are integrated into the

overall risk management process in the company.

Compliant

Metrics and Targets

a) Disclose the metrics used by the

organisation to assess climate-related risks

and opportunities in line with the strategy

and risk management process.

(d) the key performance indicators used to assess progress

against targets used to manage climate-related risks and realise

climate-related opportunities and a description of the calculations

on which those key performance indicators are based.

Compliant

b) Disclose Scope 1, Scope 2, and, if

appropriate, Scope 3 greenhouse gas

(GHG) emissions, and related risks.

Compliant

c) Describe the targets used to manage

climate-related risks and opportunities

and performance against targets.

(e) a description of the targets used by the company to manage climate-

related risks and to realise climate-related opportunities and performance

against those targets.

Compliant

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.

As a business focused on supporting various

offshore operations, 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. We are constantly

researching opportunities to reduce our

impact on the environment. In 2022, we

calculated our Scope 3 emissions for the first

time, which are those associated with our

value chain. Based on those findings, in

2022, we set a net-zero

target of 2050 and

interim targets to guide our progress. In

2023, we are proud to be making progress

against these targets, which are outlined in

the Metrics and Targets section of the report.

Governance

Overview

The effective identification, management and

mitigation of business risks and opportunities

are essential to successfully delivering the

Group’s strategic objectives. A risk

management system is in place to support

the identification, analysis, evaluation,

mitigation and ongoing monitoring of risks,

as shown in the framework below. The

Group recognises that as part of our

long-term business strategy, we need to

operate responsibly. Therefore, climate

change is an area of interest for the Board,

Senior Management and GMS stakeholders.

It was recognised as an emerging risk in

2019 and classified as a principal risk in

2021. The Board has seven principal

meetings per year, and risk management and

the key risks facing the Group are discussed

at each of these meetings. Environmental,

social and governance (ESG), including

climate change, is a specific agenda item

for the December Board meeting each year.

Following through on the potential risks that

climate change can pose to our business,

we review and evaluate the levels of potential

impacts on an annual basis. Our overall

climate-related risks are assessed as low

likelihood and low impact. We do not believe

climate change will 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

Arabian Peninsula region is forecasted to

continue. However, should demand change,

we can mobilise more of the fleet to offshore

renewables without significant additional

capital expenditure. We aim to ensure that

we are aware of future developments in the

potential risks and opportunities posed by

climate change. Hence, we have designated

it a principal risk. We have used the TCFD

recommendations to improve our

assessment of climate-related risks and

guide our reporting on the findings. This

financial year, we have conducted our third

climate-scenario analysis, to review any

recent changes in the risk levels and expand

our understanding of our supply chain risks.

Overall responsibility for risk management

lies with the Board, supported by the

Audit and Risk Committee. Our Senior

Management team assists in implementing

the risk management process, including risk

identification, management and mitigation.

This is all overseen by the internal audit

function. Climate change, as a principal risk,

is integrated into each stage of this process.

28 Gulf Marine Services PLC

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: Risk Management Structure Within GMS

PEOPLE AND VALUES

continued

The standard defines net-zero targets as emission reductions of at least 90% across all scopes before 2050 and only a very small number of residual emissions

(up to 10%) can be neutralised with carbon removals.

The Board’s Oversight

The Board has overall responsibility for

ensuring that risks are effectively managed.

ESG topics, including climate change, are

included in the regular risk assessment

procedure. The Board reviews the risk profile

formally on an annual basis and monitors

and oversees progress against goals and

targets for addressing climate-related issues.

Each year, the latest updates to the climate

scenario analysis and climate-related risk

assessment are presented to the Board in

a workshop session. The session also aims

to continue to build the Board’s climate-

related competence.

Board Committees

Risk and Audit Committee

The Audit and Risk Committee consists of

at least two independent non-executive

Directors, of which one is appointed as

Chair. It meets at least twice a year, at

appropriate times in the Company’s financial

reporting and audit cycle. Also, it

communicates (as needed) throughout the

year with key individuals involved in the

Company’s governance, including the

Executive Chairman, the Chief Financial

Officer, the external audit lead partner and

the Head of Internal Audit.

The Board is assisted in its responsibility for

reviewing the effectiveness of the Group’s

system of internal control and procedures

by the Audit and Risk Committee.

The Audit and Risk Committee receives

reports from external advisors (as required)

to ensure sufficient insight into the relevant

issues to enable it to discharge its duties.

An external consultant has been engaged

to provide guidance on climate-related risks

and conduct climate-scenario analysis.

This information is considered when

developing the Company’s strategy and risk

management policies and while setting

budgets. The Financial Controller reviews

the risk register and feeds it back to the

Audit and Risk Committee.

Remuneration Committee

The Remuneration Committee consists

of at least two independent non-executive

Directors, of which one is appointed as Chair.

The Committee meets at least twice a year

and at other times, as required. It is

responsible for designing remuneration

policies and practices for the Company’s

Chair, executive Directors, Company Secretary

and senior executives. The remuneration plan

must support the Company’s long-term

strategy, purpose, and values.

The Committee considers corporate

performance on ESG issues when setting the

executive Directors’ remuneration. The

Committee ensures that the incentive structure

for Senior Management does not raise ESG

risks by inadvertently motivating irresponsible

behaviour. Whilst there are currently no direct

links between Board remuneration and

meeting our climate strategy or targets, we will

revisit the possibility of adding climate strategy

and targets as part of the remuneration

process in the next two reporting years.

Senior Management’s Role

The Senior Management team comprises the

Executive Chairman, Chief Financial Officer,

Business Development & Commercial

Director, Head of HSE & Quality, Director

Operations 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 Senior Management team

discusses climate-related issues a minimum

of twice a year where climate change is an

agenda item and routinely throughout the

year as needed. The Senior Management

team reports to the Board and the Risk and

Audit Committee twice a year, with the main

update prior to the Board’s annual update

meeting. The update consists of information

about climate-related strategy updates,

progress against set targets, an overview

of the workshop agenda and plans for the

upcoming financial year. It meets with the

Executive Chairman at least twice a year to

conduct risk management workshops.

Senior leadership is actively engaged with

an external consultancy, to help guide

climate-related agenda for GMS. They have

participated in December’s climate-risk

workshop along with the Board of Directors.

This financial year, GMS full Scope 3

emissions have been calculated for the third

time, allowing comparisons and measured

progress tracking. Our Senior Management

team will use this information to improve its

understanding of GMS’ GHG emissions,

guided by the Head of HSE & Quality, who

manages Health, Safety and the Environment

(HSE). This will help monitor progress against

our reduction targets and net-zero strategy

and appropriately assess the Group’s

operational risk from climate change in line

with climate-related scenarios.

29Annual Report 2023

Strategic Report

Strategy

GMS wants to ensure the long-term

sustainable success of the Company,

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. Climate change is

considered as our principal risk and we have

a separate climate risk register, which

provides details on the 18 associated risks,

guided by the TCFD recommendations.

Climate Scenario Analysis

To understand the 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.

Transition 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

representative futures, 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 continue to

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.

The climate scenarios used in the risk

assessment process make projections on

hypothetical futures and as such come with

a degree of uncertainty. While most of the

information is obtained from existing climate

models which have a high degree of

accuracy, there is still a level of uncertainty.

As such, the results of the analysis should

only be used as a guide for the climate-

related risks and opportunities facing Gulf

Marine Services. 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.

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 horizons of business

planning. The UK and UAE have set a

net-zero date of 2050, and climate modelling

is often based on temperature changes by

2100. As a result, and to align with our

net-zero strategy, we have decided to use

the following time horizons to assess our

climate-related risks and opportunities.

Table 2: Time Horizons Used for

Climate Scenario Analysis

Short-term: Medium-term: Long-term:

2023–2027 2028–2037 2038–2052

The Results

Overall, the physical risk level is considered

low for GMS’ operations and buildings.

As most of the Group’s operations are

already in extreme climate conditions, the

infrastructure we own and use has been built

accordingly. Our office buildings in the

Arabian Peninsula region are already

exposed to temperatures above 40°C for

consecutive days. Therefore, the region’s

infrastructure design and our working

schedules consider these extreme

weather conditions.

Our risk management process classifies

risks with an overall rating of red, amber or

green based on a combination of the

inherent risk and the control rating. Across all

timelines and scenarios, no red ratings were

assigned to climate-related transition risks.

Most transition risks were determined to

have a green rating. The number of risks

rated significant increases over time, with

tables 4 to 7 below presenting the scenario

and timeline in which a significant rating is

assigned. All physical risks were assigned

a green risk rating.

Table 3: Risk Rating Criteria

Likelihood Factor Rating Impact Factor Rating Control Effectiveness Rating

Almost Certain 5 Major 5 Very Good 5

Likely 4 Significant 4 Good 4

Possible 3 Moderate 3 Satisfactory 3

Unlikely 2 Minor 2 Weak 2

Rare 1 Insignificant 1 Unsatisfactory 1

Inherent risks

Green – Inherent risk is equal to or lower than 9, regardless of the control rating.

Amber – Inherent risk is greater than 9 but Controls are either 4 or above, qualifies as material.

Red – Inherent risk is greater than 9 and Controls are 3 or below, qualifies as material.

The steps we have taken to identify and

manage each climate-related issue have

been based on our existing risk management

framework to ensure a consistent and

efficient assessment and categorisation.

Each climate-related issue is classified using

our rating system. Our process ranks risks

initially by their likelihood, then, each issue is

ranked according to its impacts on GMS to

determine an inherent risk score. We then

rank each issue against our control

effectiveness to determine the overall risk

value. Risks scored with an overall score of

greater than 9 are deemed as material.

The findings of the updated climate scenario

analysis were presented to key GMS staff

and the Board in December 2023. As this

was the third year of running this workshop,

it included a discussion of how the risks were

impacted by changes at GMS, within the

broader macroeconomic landscape and by

updates to the underlying data sets. Each

risk was discussed to determine whether the

impact and likelihood ratings needed

amending. It was decided that no updates

were needed from the 2022 ratings, as there

had been no material changes in the past

financial year.

30 Gulf Marine Services PLC

PEOPLE AND VALUES

continued

Transition Risks – Policy & Legal

Table 4. Policy & Legal risks with a description, the Timeline and Scenario of Highest Impact and

Our Response

Risk Description Scenario Our Response

Enhanced

emissions

reporting

obligations

As a premium listed company on the London

Stock Exchange, with operations primarily in

the Arabian Peninsula region, GMS is subject to

UK and UAE climate change and environmental

reporting regulations. Changes to policy and

reporting requirements are almost certain to

occur in the short term with the UK committing

to net-zero by 2050. However, only one of the

Group’s vessels is currently located in Europe,

which means that the potential operational/

financial impact of such changes would be

limited to Moderate. In the short term, fewer

climate-related policy obligations are

anticipated for operations in the Arabian

Peninsula region sites (as compared to the UK

reporting regulations noted above); however,

the UAE has its own 2050 net-zero target.

Therefore, the potential likelihood of this risk is

deemed to be lower (possible as compared to

almost certain). However, if such policies and

increased regulations were to be introduced

over a longer period, the concentration of GMS’

fleet in the Arabian Peninsula region would

result in a higher (Significant) potential impact.

<2ºC, 2–3°C

Short, Medium

2023 Risk

rating – amber

The Group aims to mitigate this risk by carefully

monitoring legislative developments to minimise

non-compliance with all relevant laws in the UK

and the Arabian Peninsula region. Our Annual

Report includes all the legally required information.

We provide additional updates on our website

as appropriate.

There is potential for increased mandates and

regulation of our existing products and services. In

the long term, this is expected to be associated with

the carbon emissions of our vessels. More detail on

this is provided in Table 7 below.

Financial impact: Increased opex.

There are costs associated with this compliance,

including engaging external specialists internal

resources, and potential penalties if regulations are

not followed. Non-compliance could result in fines of

a minimum of £2,500 and a maximum of £50,000.

These costs have been assessed and factored into

the budget, which is currently considered negligible.

A central database is maintained to document

our legally required and regulated policies and

procedures. We are ISO 14001 certified, which

provides a framework for managing the

environmental legislation that applies to

our operations.

Exposure to

carbon pricing

In the short term, this risk is unlikely and would

have a minor impact. In the longer term, the

impact would be minor in the 2–3°C scenario.

However, this risk could be more likely and have

a greater impact in the medium term. It is likely

that in a <2°C scenario, carbon pricing and

taxes could be introduced in the short term,

and the potential cost impacts could be

moderate to significant.

2–3ºC

Medium

2023 Risk

rating – amber

There is no indication that carbon pricing will be

introduced, which would affect GMS’ operations in

the short term. In the interim, we have developed

our net-zero strategy, which will reduce our carbon

emissions and minimise the impact should a carbon

tax be introduced. Changes in tax legislation will be

closely monitored, and internal models can be used

to factor this into the business strategy.

Financial impact: increased capex and opex.

Based on our 2023 Scope 1 emissions, our

net-zero target and current projections for global

carbon prices per tCO

e, a carbon tax could have

various financial impact ranges; please see the table

below. This is based on data from The World Bank,

NGFS, IPCC, OECD and Reuters.

Scenario

2027 (£) 2037 (£) 2052 (£)

Proactive 1,875,301 1,531,786 –

Reactive 605,172 3,784,860 –

Inactive 692,417 981,942 1,252,694

31Annual Report 2023

Strategic Report

Transition Risks – Reputation

Table 5. Reputation Risks with a Description, the Timeline and Scenario of Highest Impact and

Our Response

Risk Description Scenario Our Response

Increased

stakeholder

concern

In the short term, increased stakeholder

concern may be seen, including from

employees who may start to take company

environmental action and preparedness into

account. This could impact the Group’s revenue

and employee retention. This concern would be

greater in a <2°C scenario, where there is

greater awareness and more action required.

It would be lower in a 2–3°C scenario, where

action is being taken sporadically.

<2ºC, 2–3ºC

Short, Medium

Risk rating – amber

The Group’s workforce requirement is concentrated

in its core market of the Arabian Peninsula region,

which is currently reliant on and supported by the oil

and gas industry. It is expected to remain so in the

near future. GMS does not anticipate struggling to

retain suitably experienced and qualified staff.

We are committed to acting responsibly towards

the environment, as demonstrated by our net-zero

targets and strategy. This will help mitigate this risk

by showing that we are a proactive company in

regard to climate change and environmental

responsibility.

Financial impact: reduced revenue, cost to recruit

new employees if there is increased turnover.

Shifts in

consumer

preferences

As climate change becomes increasingly

important and urgent, it will impact investment

decisions. This is especially important following

the outcomes of COP28, as we expect the

general sentiment towards environmental and

climate change matters to become more

prominent. This could impact future access

to capital for businesses that do not

respond appropriately.

<2ºC, 2–3ºC

Short, Medium

Risk rating – amber

There is increasing concern over fossil fuel use in

the UK/EU, although 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 Company’s

existing strategy and business model. Therefore,

the likelihood of a significant impact is only

considered possible in the short term under the

most optimistic scenario (<2ºC), which is not

currently in line with the UAE’s approach.

Financial impact: reduced ability to raise capital.

Stigmatisation

of sector

Increased climate concerns can lead to the

stigmatisation of certain sectors and industries.

<2ºC, 2–3ºC

Short, Medium

Risk rating – amber

This risk would significantly impact the business if

realised, but we do not expect to experience an

impact on demand for or production of oil and gas

in the Arabian Peninsula region within the short to

medium term. The amber rating is first given in the

medium term for the <2ºC scenario, which is not the

current trajectory for the Arabian Peninsula region.

Financial impact: reduced revenue from

decreased demand for services.

Climate opportunities, for example, using our

vessels for the maintenance of offshore renewable

projects, offer versatility and resilience to our

business model.

As part of our vision of being the best self-elevating support vessel (SESV) operator in the world, it is important that GMS is seen to be acting

responsibly and contributing to a sustainable future. We are aware that a suitable response to the challenges of climate change is increasingly

important to our investors and shareholders. We believe that through our TCFD reporting and net-zero strategy, we are responding to this

area of risk by proving our commitment to responding appropriately to climate change.

32 Gulf Marine Services PLC

PEOPLE AND VALUES

continued

Transition Risks – Market

Table 6. Market Risks with a Description, the Timeline and Scenario of Highest Impact and Our Response

Risk Description Scenario Our Response

Changing

customer

behaviour

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.

<2–3ºC

Medium

Risk rating – amber

The Group will continue to monitor any shift in consumer demand

across the regions in which it operates. However, oil and gas have

always been the mainstay of our business. It is only considered

possible for a significant impact to be felt in a <2ºC scenario, which

is not currently considered in the UAE. Globally, the Westwood

Global Energy Group report predicts an increase in demand for

oil and gas over the next 40 years, including in the Group’s core

markets. However, the Group is aware that the UAE, along with

many other governments, has set a net-zero target and, in the long

term, will need to make changes to meet these targets.

GMS has a proven track record in the renewables sector and an

ongoing presence in Europe for offshore wind projects. This

provides versatility in our business model, and vessels are suitable

for use in this sector without major additional capital expenditure.

We are on a six-year contract for one of our vessels on a renewables

project in Europe.

We are researching a business management system that can

support us in identifying potential areas for financial loss and help

us adapt if our strategy needs to change.

Financial impact: reduced revenue.

Given the concentration of revenue in National Oil Companies

in the Arabian Peninsula region, the impact could be significant

if materialised.

Increased cost

of raw

materials

Climate policies could

lead to additional abrupt

and unexpected shifts in

energy costs.

<2–3ºC

Medium

Risk rating – amber

This is considered a low risk, with only minor financial impact for

the Group, as our clients pay for the 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 they receive.

Financial impact: increased operating costs for clients.

Transitioning to a net-zero economy will require changes to the products and services sold globally. This poses risks and opportunities for

businesses. The main risk is the potential impact on the supply and demand for our services and changes

in our supply chain.

33Annual Report 2023

Strategic Report

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 Arabian

Peninsula region, which adapted to an

extreme climate with high temperatures,

low precipitation, and high water stress.

Infrastructure and workers’ rights regulations

have been designed to manage these risks.

The climate scenario analysis suggests that

more frequent sandstorms will occur due to

increased temperatures and decreased

precipitation. Our vessels are prepared for

sandstorms 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. We are

trialling machinery which can extract water

from the air.

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

more 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.

Currently, the GMS financial value associated

with climate-related opportunities is 9.5% of

our 2023 revenue (10.8% of 2022 revenue)

as services provided to the renewable

energy sector.

Engaging with Our Clients

and Supply Chain

To manage our climate-related risks and

reduce our carbon emissions, we need to

engage with our clients and supply chain.

We will be introducing additional social and

environmental screening criteria for our

suppliers, which will be the responsibility of

our Procurement Manager. In 2023, we

started, and in 2024, we plan to continue

engaging with our suppliers on their carbon

footprint, asking whether they already collect

data on their Scope 1, 2 and 3 emissions,

which feed into our Scope 3 emissions, and

then starting to work with them to reduce

those emissions. Currently, ten of our top 30

suppliers have already published their

emissions on their websites or using the

annual CDP disclosure questionnaire.

This financial year, we have continued

considering the risks associated with our

suppliers directly and supply chain-

associated risks in general. These 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 Arabian

Peninsula 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.

Transition Risks – Technology

Table 7. Technology Risks with a Description, the Timeline and Scenario of Highest Impact and

Our Response

Risk Description Scenario Our Response

Costs to

transition

to lower

emissions

technology

A requirement to transition to

lower emissions technology is

possible in the medium term,

under a <2°C scenario, which

could be associated with

additional costs for GMS. The

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.

<2ºC, 2–3ºC

Short, Medium

Risk rating – amber

Existing vessels will likely need to be retired or will have fully

depreciated across their remaining useful life before we are

required to replace them with greener options. These routine

replacements are factored into our budget and strategy. Therefore,

we do not consider that vessel replacement costs will significantly

impact our business at this point. This risk is higher in Europe, where

we currently have one vessel and is considered lower in the Group’s

core market of the Arabian Peninsula region. However, in the 2024

financial period, we will research the options for replacement vessels

using lower-carbon fuels. If a feasible option is identified, we will

replace our oldest vessel with a low-carbon alternative in 2030.

Planning for net-zero, will help to minimise these risks, as these

costs can be factored into our long-term business plan.

Financial impact: increased capex.

34 Gulf Marine Services PLC

PEOPLE AND VALUES

continued

Risk Management

Our Risk Management Approach

GMS has an established enterprise risk

assessment process into which climate-

related risk management has been integrated

(see Risk Management section on page 12).

Material risks identified in our climate risk

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

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.

Senior Management 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 annually.

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 in November 2023, for the third year

in a row, to assess 14 potential transitional

and four physical risks to the business over

three climate warming pathways and three

timelines. These were presented to Senior

Management and the Board at the climate-

risk workshop in December 2023 for their

input on the potential size/scale of the risk/

opportunity, which could impact the

business operations and strategy.

Step 2 – Assessing the Risks:

These provisional risks were presented to

relevant internal stakeholders, including the

Chief Financial Officer. The provisional risks

were presented at Group and site levels.

Following our existing enterprise risk

assessment process and drawing on the

relevant expertise of Senior Management,

each provisional climate-related risk and

opportunity was allocated 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. This was

combined with the inherent risk rating to

provide a provisional overall risk rating of

Red, Amber or Green for each scenario and

timeline. There were no changes to this

assessment from last financial year’s ratings.

Therefore, there are still eight risks assigned

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 Senior

Management team, where principal risks,

including climate change, are assessed for

impact and likelihood.

In 2022, we developed our net-zero targets

and strategy, which will mitigate some of the

policy, legal, reputation and technology risks

identified. Our net-zero targets and progress

against those targets also demonstrate to

interested stakeholders that we are taking

climate change seriously. The resulting

strategy will allow us to plan for the transition

to a low-carbon economy, especially around

our business travel, vessels and fuel use.

Table 8: 2023 Progress Against Targets

Target 2021 Baseline Value 2023 Value % Change Comments

2025: engage with the top ten suppliers by

spend on their carbon emissions and

reporting.

Zero suppliers

engaged.

One supplier engaged.

Additionally, ten of our top 30

suppliers have emissions data

published, either on their own

websites, reporting or through

C D P.

100% Achieved

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)

No feasibility

assessment

under-taken.

Work has begun to assess the

feasibility of novel energy system

jack-up barges.

14% In progress

2035: net-zero in absolute Scope 3

emissions from 1: Purchased goods and

services, 4: Upstream transport and

distribution, 5: Waste generated in

operations, 6: Business travel, 7: Employee

commuting and 8: Upstream leased assets.

22,959 tCO

e 9,015 tCO

e -60.7%

Driven by a large

decrease in our

purchased

goods and

services and

business travel

emissions.

On Track

A 2.4% annual reduction

is needed going

forward.

2050: net-zero emissions in absolute Scope

1 and Scope 3 (2: capital goods and 3:

fuel-related emissions)

58,114 tCO

e 68,378 tCO

e +17.6%

Due to a 15.5%

increase in fuel

consumed by

our vessels.

Off Track

We will continue to focus

on our 2030 target of

low-emission vessels to

tackle these emissions.

A 4.0% annual reduction

is needed.

35Annual Report 2023

Strategic Report

Metrics and Targets

We acknowledge that we have a

responsibility to reduce our environmental

impact as far as possible, while delivering

sustainable business growth. We have been

measuring our Scope 1 and 2 emissions

since 2014 and our Scope 3 emissions since

2021. Therefore, we selected financial year

2021 as our base year for our emission

reduction targets, as this was the first year of

our full emissions footprint. Our near-term

and net-zero targets were approved by our

Board in December 2022, and the progress

against each of them is outlined in Table 8.

Our ultimate net-zero deadline of 2050 is in

line with the national targets of the UK, UAE

and Qatar. Achieving net-zero requires us to

reduce our CO

e emissions by 90% or more

from our baseline year of 2021, offsetting the

remaining 10% in our net-zero year.

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.

Each year, we aim to improve the quality of

our data collection to ensure our reporting is

increasingly accurate. We acknowledge that

sometimes this will increase the figures in

some categories, and we will explain these in

our reporting, as required. We believe this

transparency is an important part of being a

responsible business.

Carbon Emissions

In compliance with the UK Government’s

Streamlined Energy and Carbon Reporting,

we have included our emission figures,

energy usage and intensity metrics for this

reporting year. GMS provided relevant data

to a third party which used this data to

calculate our Scope 1, 2 and 3 emissions.

No formal assurance was provided.

Scope 1 emissions result from the direct

combustion of gaseous and transportation

fuels 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 operating our business.

Although we do not have direct control over

these emissions, we are taking steps to work

with our supply chain and employees to

develop an emission reduction strategy.

Table 9: 2021, 2022 and 2023 Full Carbon Footprint (tCO

e) and Progress since Our 2021 Baseline

Target 2023 2022 2021 Progress from 2021 Baseline

Scope 1 54,396 51,860 47,247 >15.1%

Scope 2 (location-based) 26 28 31 <16.1%

Total Scope 3 22,996 26,205 33,827 <32.0%

1. Purchased goods and services 4,811 6,088 11,970 <59.8%

2. Capital goods 2,264 1,141 687 >229.5%

3. Fuel-related Emissions 11,717 10,270 10,180 >15.1%

4. Upstream transportation and distribution 304 5,641 251 >21.1%

5. Waste generated in operations 1,271 667 654 >94.3%

6. Business travel 2,481 2,275 10,027 <75.3%

7. Employee commuting 136 124 57 >138.6%

8. Upstream leased assets 11 – – >10 0.0%

Total All Scopes 77,418 78,093 81,105 <4.5%

Scope 1 and 2 CO

e emissions data has been calculated using the GHG Protocol – A Corporate Accounting and Reporting Standard (World

Business Council for Sustainable Development and World Resources Institute, 2004); Greenhouse Gas Protocol – Scope 2 Guidance (World

Resources Institute, 2015); ISO 14064-1 and ISO 14064-2 (ISO, 2018; ISO, 2019a); Environmental Reporting Guidelines: Including Streamlined

Energy and Carbon Reporting Guidance (HM Government, 2019). Scope 3carbon emissions have been calculated in line with the GHG

Protocol Corporate Value Chain (Scope 3) Reporting Standard. There is no data for categories 9-15, as these are not applicable to GMS.

Category 8, upstream leased assets, became applicable in 2023, as we leased a small amount of shared office space in Qatar and Saudi

Arabia. The large reduction in business travel emissions since the baseline is due to the removal of quarantine requirements for offshore staff

due to COVID-19, which decreased the number of hotel nights. The large increase in capital goods in 2023, was due to an increase in

capital expenditure.

36 Gulf Marine Services PLC

PEOPLE AND VALUES

continued

Water

Water is the most important resource on the planet. We know that our workers must always have access to adequate, safe drinking water.

The water on our vessels is either sourced from desalination or single-use plastic bottles. Most water used on board is for drinking or

sanitation services. As our crew are working under extreme temperatures, we do not feel it is safe to set water reduction targets,

since a plentiful supply of water and electrolytes are always needed to reduce the risk of heat stroke or illness.

Energy Usage and Carbon Intensity

We use average carbon intensity data (tCO

e/$m revenue) to assess our performance against the Paris Agreement target. Our metrics use

location-based Scope 2 emissions. UK energy use and emissions in 2022 and 2023 were zero.

Table 10: Our 2021–2023 Energy Usage and Carbon Intensity Metrics

Year 2023 2022 2021

Progress from

2021 Baseline

Scope 1 Energy Usage MWh 198,063 190,060 171,165 >15.7%

Scope 2 Energy Usage MWh 63 67 72 <12.0%

Scope 1 and 2 tCO

e/$m revenue 360.41 389.47 398.78 <9.6%

Scope 1, 2 and 3 tCO

e/$m revenue 512.70 586.48 700.84 <26.8%

Efficiency Actions

We continually assess how to reduce energy use and the associated carbon emissions. This financial year, we have booked flights based on

carbon emissions, choosing lower-carbon flights when prices are similar.

Waste

Waste management is important in minimising our environmental footprint and will contribute to our net-zero journey. Our waste strategy is

centred around four principles: Reduction, Reuse & Recycle, Treatment and Disposal. Our vessels are fitted with separate waste bins for each

type of recyclable material or disposal method, which ensures that we have detailed data on waste materials. Waste is then emptied and

brought to shore, where it can be appropriately managed. It is securely stored before the treatment process, to ensure our waste does not

degrade, spill or get stolen. Due to the nature of our operations, we produce oil waste. Our oil waste is not contaminated or mixed, to ensure

it can be correctly treated and recycled. We send regular reports to the local governing bodies concerning the quality and quantity of oil

waste and its treatment methods. Table 11 summarises our waste produced and the percentage sent for recycling. Although we prioritise

reducing the volumes of waste produced on board our vessels, our customer's crew make up around 75% of the people on board, with our

crew making up the remainder. Therefore, we are unable to set formal waste reduction targets as our influence on this is limited.

Table 11: A Breakdown of the Waste Types from Our Vessels and Offices during the Financial Year 2023

Metric 2023 2022 2021

Total waste produced (tonnes) 6,676 4,572 7,5 6 6

% of waste recycled 58.5% 1.0% 0.0%

37Annual Report 2023

Strategic Report

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 maintains a firm commitment to

the health, safety, and environmental

stewardship of all individuals and

communities connected to our operations.

We embed safety into everything we

operate and maintain.

Our sense of duty extends across all

business relationships – with employees,

subcontractors, clients, partners,

shareholders and beyond. We believe that

diligently managing risks and caring for

people are fundamental to creating

sustainable, long-term value.

As we explore opportunities for growth, we

remain guided by our foundational priorities

of safety and collective welfare. We strive to

deliver excellence while maintaining our

responsibilities to the people we serve, the

environments we protect, and the societies

that grant us license to operate. Our

commitments are ongoing and endured.

Excellence

At GMS, we pursue continuous improvement

and innovation to better serve client needs.

We build on past learnings and explore

new ideas that can enhance delivery for

our partners.

We hold ourselves to high performance

standards that exceed expectations. We set

ambitious targets around superior quality,

value, and outcomes to challenge our

organisation across all levels to deliver

positive impacts for clients and stakeholders.

Our reputation for integrity and transparency

underscores our business and guides

our conduct. We operate rigorously and

ethically to remain the preferred contractor

for clients who value our commitments to

sustainable quality.

As we explore avenues for future growth, we

stay rooted to our core priorities of service

excellence, stakeholder welfare, and a

continued commitment to delivering value

to our clients. These priorities have been

instrumental in establishing GMS as a

respected player in our sector. We work

diligently to uphold and strengthen that

foundation of trust.

Relationships

At GMS, our people drive our success.

We aim to attract and retain top talent and

empower employees to perform their duties

safely and impactfully.

We champion diversity and provide

environments where our team can thrive

and realise their full potential. We reward

excellence and integrity across all levels of

our organisation.

Core values of Responsibility, Excellence

and Collaborative Relationships anchor our

culture and decision-making. We maintain an

unwavering commitment to the health,

safety, and ethical treatment of employees,

subcontractors clients and partners.

Our people exemplify the spirit of world-class

service, expertise and leadership that makes

GMS a preferred partner. As we plan for the

future, we will continue investing in our

team’s growth across technical skills,

well-being and professional development.

Our vision depends on unleashing their

potential for long-term innovation.

GMS Organisation Structure

GMS maintains a robust yet agile

organisational structure that positions us

for sustained excellence. We have built a

foundation of Core functions in Operations,

Marine and Engineering, Maintenance and

project delivery that directly steer our

technical capabilities and performance.

Enabling support functions underpin and

amplify these strengths by driving strategy,

business development, procurement, finance

and other essential expert services.

This structure strikes an optimal balance –

sharpening our client delivery focus through

Core forces, while enabling teams streamline

the wider business. With seasoned

leadership guiding strategy, our model

fosters seamless collaboration to mobilise

the right talent for new opportunities.

As markets evolve, GMS remains equipped

for sustainable excellence. Our organisational

foundations will drive growth through

client-centric agility, operational discipline,

unified vision, and governance rigor.

Our structure serves as a robust platform

ready for sustainable growth trajectories in

the years ahead.

Turnover

Employee turnover decreased to 12% in

2023 from 16% in 2022. This decrease in the

turnover trend underscores the success of

various measures taken to retain talent such

as competitive day rates for senior officers

based on market benchmarking and

opportunity for growth for high-

performing employees.

Diversity

GMS boasts a global team of 660 personnel

representing 34 countries (2022: 594

personnel representing 36 countries) – with

diversity that fuels our innovation and

connects us closer to the markets we serve.

We leverage experience and specialised

skills to responsibly expand our

operational footprint.

The information on page 38 provides details

of the gender diversity and country of origin

of our personnel as of 31 December 2023.

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 reflects 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 Arabian Peninsula region, 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

Our 2023 engagement survey garnered an

exceptional 91% participation rate. Results

indicated strong workplace solidarity, with

99% agreeing they can stop unsafe work and

95% feeling empowered and valued in their

roles. Another standout data point showed

99% confidence in our organisation's

commitment to safety-first operations

ensuring all personnel return home safe.

Key insights gained will inform our retention

and professional growth programs.

While 34% of respondents indicated they

may explore external opportunities, we aim

to expand internal mobility, upskilling and

career development initiatives.

While participation levels signal strong

workplace solidarity, closing experience

gaps remains a priority. We strive to foster an

environment where all team members feel

invested in long-term personal success,

enabling collective growth.

38 Gulf Marine Services PLC

Nationalities

(2022: 36)

Total Number of Directors

(2022: 6)

Total number of Direct Reports

to Executive Team

(2022: 21)

Total number

of Executive Team

(2022: 4)

Offshore

599

(2022: 539)

Total number of employees

660

(2022: 594)

People as at 31 December 2023

Voluntary turnover

12%

(2022: 16%)

Onshore

(2022: 55)

PEOPLE AND VALUES

continued

Male Female

Events like our recent Abu Dhabi headquarters

celebration, recognising employee milestones

from 10-25 years of tenure, reinforce our

united culture. They also highlight

accomplished role models to inspire emerging

talent. As our Company matures and longtime

experts pass their torches, we are committed

to developing the next generation of leaders

equipped to guide our mission.

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 2023 STIP

measures for employees are set out on

page 68.

This aligns with shareholder interests and

encourages a performance-based culture

to achieve Group objectives.

Succession Planning

GMS strives to provide growth opportunities

by promoting from within whenever possible.

We have structured succession planning

processes based on experience and

capabilities to fill key roles with internal

candidates first.

However, external recruitment is also utilised

for highly specialised or volume hiring needs

unsuitable for backfilling. All recruitment

follows fair and ethical practices aligned

with our values.

In 2023, 34 employees were promoted

across levels, a slight decrease from 37

in prior year. This stabilisation comes after

major pandemic-recovery scale-ups and

indicates prudent pace.

Positively, 20% of onshore promotions

granted last year advanced talented female

staff into expanded responsibilities, signify

efforts to uplift diversity are taking hold.

While external hiring fills key gaps,

our priority is nurturing talent internally.

We believe purposeful development not

only rewards employee investments – it

transforms individual growth into

collective gains.

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. All onshore employees and offshore

key personnel must complete annual

trainings focused on ethical business

practices mandatory for upholding our

standards globally.

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.

635 25

39Annual Report 2023

Strategic Report

475

GMS Employees – By Region Review – 2023

Offshore Onshore

MENA Asia Europe Africa Others (Canada, Venezuela, New Zealand)

Health and Safety

The Group adheres to the highest

international standards of health and safety

in operating its vessels. Our Management

Systems, which oversee all activities and

operations of the Group, are voluntarily

accredited to ISO 9001, ISO 14001, and ISO

45001. Additionally, 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.

Regular assessments of risks stemming from

operations and activities are conducted to

ensure the implementation of mitigation

procedures, which are then communicated

to all employees. Comprehensive training

and employee engagement initiatives ensure

that all employees are well-informed about

operational risks. Annual training programs

are developed and periodically reviewed to

maintain efficacy.

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

Group-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.

In 2023, the Group implemented an online

platform that delivered comprehensive safety

awareness trainings directly to individuals on

board the vessels, ensuring quick

comprehension and immediate application.

With this system, crew that is off rotation

do not miss important and relevant safety

updates that pertains to the Group when

they are back to the vessel. This is achieved

because the system acts as a repository

of safety information, guaranteeing access

to the latest safety information anytime

and anywhere.

There were two medical treatment cases but

no Lost Time Injuries. As a result, the Lost

Time Injury rate improved from 0.1 in 2022 to

zero in 2023. However, because of the other

recordable injuries, our Total Recordable

Injury Rate (TRIR) increased slightly from

0.1 in 2022 to 0.18 in 2023. These levels

continue to be below industry average and in

both cases, they maintained a downward

trajectory when measured over the last five

years. 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.

Number of

work-related fatalities

(2022: 0)

Number of

recordable work-related injuries

(2022: 1)

Number of

high-consequence work-related injuries

(2022: 0)

Number of hours worked

2,378,216

(2022: 1,934,340)

The information below is intended to provide an overview of the Health and Safety performance over the reporting period.

40 Gulf Marine Services PLC

PEOPLE AND VALUES

continued

Measure Weighting Performance Range (from zero to full pay-out)

EBITDA 30% Less than US$ 75m – Greater than US$ 88.0m

EBITDA margin 15% Less than 53% – Greater than 60%

Securing contract % of 2024 budget revenue 15% Less than 60% – Greater than 85%

Securing contract % of 2025 budget revenue 15% Less than 35% – Greater than 55%

Achieving Leverage <4.0 (25%) 25% After 31 December 2023 – On or before 30 June 2023

Total 100%

The following results highlight key performance measures and their respective outcomes.

EBITDA* <US$ 75m US$ 75m–US$ 85m US$ 85.1m–US$ 88.0m

Score 0% 0.1– 24%* 24.1– 30%*

EBITDA Margin* <53% 53–57% 57.1– 6 0.0%

Score 0% 4.1- 12%* 12.1–15%*

Securing contracts % of 2024

budget revenue* <60% 60–80% 80.1– 85%

Score 0% 0.1–12%* 12.1–15%*

Securing contracts % of 2025

budget revenue* <35% 35–50% 50.1– 55%

Score 0% 0.1–12%* 12.1–15%*

Achieving Leverage < 4.0

After

31 December 2023

Between

1 July – 31 December 2023

On or Before

30 June 2023

Score 0% 15 –5%* 25%*

* 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.

Performance Evaluation Framework for 2023

As approved by the Remuneration Committee, the following table outlines the key performance measures and their respective weightings in

determining the overall performance of the Group for 2023.

41Annual Report 2023

Strategic Report

42 Gulf Marine Services PLC

The governance review in the pages that follow, including the reports

of the Board and its Audit and Risk, Nomination and Remuneration

Committees, summarise our work in these areas. Particular aspects

in relation to the past year are set out below:

1. We appointed Haifa Al Mubarak to the Board as an additional

independent non-executive Director. Haifa is based in the UAE and

has extensive business experience in the Arabian Peninsula region.

She was appointed following the retirement of Rashed Al Jarwan

from the Board. Her appointment, which was on merit, comes as a

first step towards building a gender diversified Board of Directors.

2. The diversity of the members of our Board, in terms of

background skill sets, experience and geographic location

ensures the right level of debate, challenge and encouragement

for management in relation to Group’s strategy after taking

account of the important factors in this. It also allows the

monitoring of that implementation in a way that enables

adjustments to be made as and when appropriate.

3. We held a full two-day strategy meeting at the Group’s headquarters

in Abu Dhabi. This brought together the Board and Senior

Management in a productive forum discussing longer-term plans

for the business. It included presentations and discussion on each

key aspect of the Group’s operations, recent and future industry

developments and ongoing and future strategic plans. The

conclusions reached are helping inform our continual planning for the

business with a focus on shareholder value and stakeholder interests.

4. We continued our engagement with stakeholders including

employees, lenders and shareholders to understand their views and

take these into account in the decisions we make. This sometimes

requires us to balance the interests of different stakeholder groups to

reach the most appropriate overall judgements. These judgements

are reached only after taking account of all relevant factors with the

aim of promoting success of the Group in the way that enhances

stakeholder interests on an ongoing basis.

5. The Audit and Risk Committee oversaw the Group’s 2022 annual

accounts and audit of these, the first following appointment of

KPMG as the Group’s new auditors following an audit tender. This

achieved both an improved process and earlier reporting of the

Group’s annual results and annual report. Learnings from this

process have been incorporated in the work on the 2023 annual

accounts and audit such that the Group has been able to finalise

and publish its annual results earlier again and enable plans to be

made to move to quarterly reporting in the second half of 2024.

I would like to thank Jyrki Koskelo as Chair of the Committee,

along with Alex Aclimandos as our Chief Financial Officer and

KPMG as our external auditors together with their teams. A

summary of this Committee’s work commences on page 51.

6. Our Remuneration Committee oversaw a transition in

remuneration in the Group from payment of no bonuses in

respect of 2022 (due to the imperative of achieving our leverage

target) and the lapse of the 2022 Long Term Incentive Plan (LTIP)

awards due to the leverage underpin not having been achieved to

a position where bonus payments have been awarded for the

2023 financial year. The Committee decided to defer further

awards of LTIPs until these could again be seen as valuable

incentives by participants in general and intends to consider

such awards again later this year. A summary of the Committee’s

work commences on page 57.

7. The Nomination Committee led the recruitment of an additional

independent non-executive Director which resulted in the

appointment of Haifa Al Mubarak to the Board. This followed a

process of consideration of a number of candidates based on

agreed search criteria. It also included interviews with all

members of the Nomination Committee including a face-to-face

meeting in London with the Senior Independent non-executive

Director and Company Secretary. The Committee also reviewed

the Senior Management team and developments within this.

8. The Board concluded that I should remain in the role of Executive

Chairman for the time being. This reflects the success of the

business, the ongoing development of the management team and

the challenges in attracting an external candidate of the appropriate

calibre to take over an executive role in the UAE of a London listed

UK PLC. Nonetheless, the Board intends to keep this under review

as the year progresses and intends that the Chairman and Chief

Executive role be split at the time appropriate for the Group.

9. The Board has continued to consider avenues for ongoing

enhancement to shareholder value. This includes plans to initiate

the payment of dividends at the appropriate time. Recently

approved by the Board, our residual dividend policy seeks to

strike a balance between funding growth initiatives and providing

returns to shareholders. Management is currently evaluating the

timing for its implementation, a consideration that has recently

In my commentary featured in the Chairman's Review on page 2, I highlighted the success our

business achieved in the past year. We witnessed year-over-year growth in revenues, utilisation, and

day rates, reflecting the resilience and strength of our operations. Notably, we executed successful

strategies to reduce our leverage ratio, reaffirming our unwavering commitment to deleverage and

prioritise value for shareholders above all else. As a company, we have evolved into a more agile

and adaptive entity, ensuring our continued relevance in the ever-changing landscape. This

transformation positions us well for the future, where we remain dedicated to navigating

challenges with versatility and delivering sustained value to our stakeholders.

The governance backdrop to this has been our ongoing focus on strategy, risk management

and internal control. This process reflects the Board’s continuing belief that sustained business

success is achieved by good governance; that shareholder value benefits from internal and

external transparency; and that the interests of all stakeholders are best served by ethical business

practices. Whilst this has always been the approach taken by this Board, it is gratifying to see this

now reflected in continuing improvement in financial performance.

CHAIRMAN’S INTRODUCTION

43Annual Report 2023

Governance

Governance Calendar for 2023

The overall calendar of meetings of the Board and its Committees for 2023 is shown below.

Governance Calendar for 2023

Further

information Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Board Page 44

Audit and Risk Committee Page 51

Nomination Committee Page 54

Remuneration Committee Page 57

Annual General Meeting Page 50

Directors also meet informally between main Board and Committee meetings to discuss performance and latest developments as these

arise, with additional formal meetings being arranged as and when appropriate.

Meeting Attendance by Directors in 2023

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

Haifa Al Mubarak

Attended Attended all or part of meeting as an invitee Apologies* Not on Board/Committee

* Where apologies were sent by a Director, this was due to unavoidable circumstances preventing them from attending. Their views of the subjects to be discussed were

obtained in advance and they received a debrief on the outcome of the meeting.

1 Appointed to the Board on 11 October 2023.

come to the forefront. We will always pursue opportunities to

increase shareholder value where these are available and are in

the interests of shareholders in the long term.

10. An evaluation of the Board was completed following on from that

in the prior year. This confirmed areas in which planned

improvements had been made and identified those for ongoing

enhancement. The evaluation is commented on further in the

report of the Nomination Committee on page 54.

The Board and its Committees continue to work diligently on behalf

of all shareholders and other stakeholders in the Group. 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 Group, the generation of shareholder value and the governance

of the Group in line with its duties 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 2018 UK Corporate Governance Code

(the Code). The Board considers that the Group complied with the

relevant Code provisions that applied during the year, except the

provision with regard to the combined role of Chairman and Chief

Executive due to the relatively small scale of the business and the

challenges in recruiting a CEO of appropriate calibre commented

on above. Whilst the Board believes this combined role remains

appropriate at this time, active succession planning is underway

to enable the roles to be split in the future.

We look forward to reporting on progress next year.

Mansour Al Alami

Executive Chairman

03 April 2024

44 Gulf Marine Services PLC

Mansour Al Alami

Executive Chairman

Hassan Heikal

Deputy Chairman,

non-executive Director

Lord Anthony

St John of Bletso

Senior Independent

non-executive Director

Charbel El Khoury

Non-executive Director

Jyrki Koskelo

Independent

non-executive Director

Haifa Al Mubarak

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

26 May 2021

Appointed Senior Independent

non-executive Director on 4 August

2023 (previously served on the Board

as independent non-executive Director

from 26 May 2021)

23 August 2021 5 February 2021 11 October 2023

Relevant Skills and Experience

Mansour Al Alami’s career spans over

40 years in the MENA region and

includes experience in the oil, gas

and 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 repositioning 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 leading

discount retailer in Egypt, Morocco and

KSA. 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 and 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.

Anthony is a crossbench 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 Fibank (Bulgaria) and

as a member of the Supervisory Board

of Serengeti Energy (Sub-Saharan

Africa). Jyrki also holds currently

several senior advisory positions for

regional multilateral development

banks. 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, the African Development

Corporation and Africa Agriculture and

Trade Investment Fund (Luxembourg).

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.

Haifa Al Mubarak is the CEO and

Founder of Know How for Management

Consulting, an organisation that

specialises in delivering key learning

initiatives for blue-chip clients across

the region, helping them create a

platform for developing the managers

and leaders of tomorrow, through

data-driven strategies having assessed

over 7,000 UAE nationals.

She brings over 40 years’ experience in

the oil & gas sector and other related

industries, having started her career

at Abu Dhabi Company for Offshore

Oil Operations in 1980 before

subsequently joining Abu Dhabi Marine

Operating Company.

Ms Al Mubarak holds a BA in

Psychology from the University of

Denver, USA, and is a certified

practitioner for NLP, Myers-Briggs EQ-I

2.0 and EQ 360, as well as being a

Psychometric Assessor.

Significant External Appointments

None Hassan is the Chairman of Seafox and of

Kazyon, a supermarket chain in Egypt.

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 Non Executive

Director of First Investment Bank.

CEO and Founder of Know How

for Management, Consulting &

Training LLC.

RA N N RA N RA N

BOARD OF DIRECTORS

Indicates Committee Chair

Member of the Audit and Risk Committee

Member of the Nomination Committee

Member of the Remuneration Committee

45Annual Report 2023

Governance

Mansour Al Alami

Executive Chairman

Hassan Heikal

Deputy Chairman,

non-executive Director

Lord Anthony

St John of Bletso

Senior Independent

non-executive Director

Charbel El Khoury

Non-executive Director

Jyrki Koskelo

Independent

non-executive Director

Haifa Al Mubarak

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

26 May 2021

Appointed Senior Independent

non-executive Director on 4 August

2023 (previously served on the Board

as independent non-executive Director

from 26 May 2021)

23 August 2021 5 February 2021 11 October 2023

Relevant Skills and Experience

Mansour Al Alami’s career spans over

40 years in the MENA region and

includes experience in the oil, gas

and 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 repositioning 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 leading

discount retailer in Egypt, Morocco and

KSA. 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 and 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.

Anthony is a crossbench 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 Fibank (Bulgaria) and

as a member of the Supervisory Board

of Serengeti Energy (Sub-Saharan

Africa). Jyrki also holds currently

several senior advisory positions for

regional multilateral development

banks. 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, the African Development

Corporation and Africa Agriculture and

Trade Investment Fund (Luxembourg).

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.

Haifa Al Mubarak is the CEO and

Founder of Know How for Management

Consulting, an organisation that

specialises in delivering key learning

initiatives for blue-chip clients across

the region, helping them create a

platform for developing the managers

and leaders of tomorrow, through

data-driven strategies having assessed

over 7,000 UAE nationals.

She brings over 40 years’ experience in

the oil & gas sector and other related

industries, having started her career

at Abu Dhabi Company for Offshore

Oil Operations in 1980 before

subsequently joining Abu Dhabi Marine

Operating Company.

Ms Al Mubarak holds a BA in

Psychology from the University of

Denver, USA, and is a certified

practitioner for NLP, Myers-Briggs EQ-I

2.0 and EQ 360, as well as being a

Psychometric Assessor.

Significant External Appointments

None Hassan is the Chairman of Seafox and of

Kazyon, a supermarket chain in Egypt.

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 Non Executive

Director of First Investment Bank.

CEO and Founder of Know How

for Management, Consulting &

Training LLC.

RA N

N RA N RA N

46 Gulf Marine Services PLC

REPORT OF THE BOARD

Dear Shareholders,

Our Board is the core decision-making forum for the Group, managing its business and corporate affairs at the highest level. Our Board’s

primary focus 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. It oversees the allocation of human, financial and other resources to achieve the

Company’s overall aims. We view the Board’s role as critical to ensuring the sustainable growth the Group has achieved in the past few

years continues into the future. 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 2023

Main agenda items reviewed and discussed

at each principal meeting:

Review of reports from Board Committees

as relevant

• ESG matters, including health, safety and the environment

and climate change considerations

• Fleet performance and operational matters

• Discussions regarding Company’s capital structure and

lending banks

• Competitive landscape, market and future business

development opportunities

• Consideration of provisions of Section 172 of the Companies Act

2006 for the Directors of the Company

• 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

Specific items reviewed and discussed at individual meetings:

March

• Review and discussion of the 2023–2025 business plan

• Review and discussion of the Board evaluation

• Status and plans for approval of annual results

• Review and discussion on 2023 forecast including planned

debt repayment and expected cash flows.

• Report of the Audit and Risk; Remuneration; and Nomination

Committee meetings

• Plans for the Annual General Meeting (AGM)

July

• Update on discussions with the lender banks and other

capital considerations

• Consideration of related party transactions

• Update on Task Force on Climate-related Financial Disclosures

(TCFD) compliance

• Strategic discussions

• Half-year results update

• Update on full year 2023 forecast

• Plans for the strategy meeting in September in Abu Dhabi

• Report of the Audit and Risk and Remuneration

Committee meetings

August

• Report of the Audit and Risk Committee

• Review and approval of half-year results

• Review and discussion on borrowing arrangements

and leverage

September (2 day meeting in Group Abu Dhabi offices)

• Strategy discussions

• Review and discussion on borrowing arrangements

• Operational review of the Group

• Review and discussion of regional markets and

business development

• Review ESG including climate related matters

• Report of the Audit and Risk; Remuneration; and Nomination

Committee meetings

• Update on recruitment of additional non-executive Director

October

• Welcoming Haifa Al Mubarak as non-executive Director

• Discussion of future financing

• Ongoing strategic planning

• Review of the forecasts for 2023

December

• Update from advisors

• Review of financing arrangements

• Report of the Audit and Risk Committee meeting

• Discussion and approval of the budget for 2024

• Remuneration matters for non-executive Directors

47Annual Report 2023

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 51 to 53 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 57 to 58 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 54 to 56 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 44 to 45. The Board recognises the importance of diversity in the boardroom and throughout the business.

It recognises this in its aim to recruit the best people who can add the most value to the Board. As part of the ongoing process of refreshing

the Board, the appointment of at least one additional non-executive Director to the Board was a priority for the past year. I am delighted to

report that Haifa Al Mubarak has joined the Board in October 2023. This is reported upon further in the report of the Nomination Committee on

pages 54 to 56.

Non-executive Directors and Independence

The non-executive Directors are a key source of expertise and contribute to the effectiveness of the Board. The non-executive Directors provide

balanced judgement and constructive challenge as well as a broad range of skills and experience to the Board as a whole. The Board considers

and reviews the independence of each non-executive Director identified as independent 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 reappointment at the Company’s upcoming AGM.

Haifa Al Mubarak, Jyrki Koskelo and Anthony St John are considered by the Board to be fully independent. Rashed Al Jarwan was also

considered to be fully independent until the date of his retirement from the Board. 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 non-executive Directors. 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 48, and both these Directors provide significant value to the Board.

Jyrki Koskelo, Anthony St John and Haifa Al Mubarak as our 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 Group 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 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.

48 Gulf Marine Services PLC

REPORT OF THE BOARD

continued

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.

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 specific 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 47 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 the overall calendar for Board discussions 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 the 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, where appropriate.

Re-appointment 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-appointment at the Company’s 2024 AGM as set out in the Notice of AGM

to shareholders. As Haifa Al Mubarak was appointed to the Board since the last AGM in 2023, she will accordingly also retire and seek

re-appointment by shareholders for the first time, in accordance with the Company’s Articles of Association.

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 where they arise, and a

procedure including 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.

49Annual Report 2023

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 55. 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 Committee's 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 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 and strong independent representation on the Board.

• 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 Key Performance Indicators 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.

50 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.

Annual General Meeting (‘AGM’)

Notice of the 2024 AGM will be issued to shareholders and available on the Company’s website.

At the Company’s AGM in 2023, three resolutions (resolution 3, to re-appoint Mansour Al Alami as a Director; resolution 11, to authorise the

Directors to allot shares (s551 of the Companies Act 2006) in connection with a Rights issue; and resolution 12, to disapply pre-emption rights

(s.570 and s.573 of the Companies Act 2006) in connection with a Rights issue), received more than 20% of the votes cast against the

recommendation of the Board. The Executive Chairman and Independent Non-Executive Directors have had extensive discussions with the

major shareholders to understand their concerns, and to explain the reasoning why the Board believes such resolutions to have been

appropriate, The Board aims for broad support from shareholders in the resolutions to be proposed at the forthcoming AGM.

Mansour Al Alami

Executive Chairman

03 April 2024

REPORT OF THE BOARD

continued

51Annual Report 2023

Governance

AUDIT AND RISK COMMITTEE REPORT

Dear Shareholders,

I am pleased to present the report of the Audit and Risk Committee (the Committee) for 2023 which provides insights into our work

during the year. The Committee’s activities continue to focus on the effectiveness of the internal and external audit processes, the

integrity of the Group’s financial reporting, the effectiveness of the Group’s risk management process and other governance-related

matters. These areas are important to the way the Group’s business is operated and are vital in enabling the Group to achieve its

strategy, as described on page 4, in a controlled and sustainable manner.

Membership

The Committee’s membership consists of three independent non-executive Directors. This marks the third year of membership for Lord

Anthony St John of Bletso and myself since our appointment to the Committee in 2021. I am pleased to welcome Haifa Al Mubarak to the

Committee effective October 2023, following the retirement of Rashed Al Jarwan. Haifa’s appointment reflects our efforts to create a more

representative Committee, demonstrating our commitment to promoting diversity in all aspects of our organisation. I look forward to

benefiting from Haifa’s insights and expertise.

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 UK Corporate Governance Code (the 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 44 to 45.

As Chair of the Committee and a member of the Board with recent and relevant experience, I collaborated with management to review

significant areas of judgement and internally reported information. Additionally, I engaged in conversations with the external auditors.

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 seven times during 2023 with an agenda linked to events in the Group’s

financial calendar and other important matters 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

43 for details of meeting attendance by Committee members during the year.

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 Executive

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

During 2023, 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 2023 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 2023 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 Financial Conduct Authority’s Listing Rules.

Throughout 2023, 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.

52 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 impairment of US$ 37.0 million. Additionally, an impairment charge of

US$ 3.6 million was recognised on one vessel.

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 judgements.

The Committee scrutinised and questioned the impairment calculations formulated by

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 key judgements and calculations linked with accounting estimates

established by 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 risk related to

COVID-19 has been excluded from the principal risks with the lifting of lockdown, travel and other restrictions in the jurisdictions where our Group

operates. Further, recent developments around the geo-political landscape have been reflected in the risk heatmap presented on page 13. 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 utilised the expertise of various

specialists where appropriate.

The Committee also reviewed control observations identified during the 2023 year end external audit and the areas of improvement needed

to enhance controls in the following areas: impairment review, classification of accruals and financial reporting process. They concluded that

in 2023, after implementing enhanced controls, there remained areas in which further improvements could be made. As such, the Audit and

Risk Committee plans to conduct an enhanced review of internal controls to identify areas of further enhancement in 2024.

The 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.

The internal auditors were engaged in performing audits of HR and IT functions during the year. The IT audit is at its final stages with

observations being discussed with the IT team, while the HR audit report has been completed. The report identified control weaknesses,

which were assessed as not representing significant risks. Any gaps between the current state and industry best practices are reported to

the Committee.

Overall, GMS has taken proactive steps to ensure the effectiveness of its internal controls system, and the Audit and Risk Committee has

played a important role in overseeing the Group's risk management practices.

AUDIT AND RISK COMMITTEE REPORT

continued

53Annual Report 2023

Governance

D) External Audit

Appointment and independence

The Committee considers formally the reappointment 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. This appointment followed the most recent tender of the Group audit which concluded in

2022 with KPMG accordingly now having two years tenure.

In accordance with UK regulations and to help ensure independence, our external auditor adheres to a rotation policy based on the Financial

Reporting Council's (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 2023 audit fees were US$ 800,000 (2022: US$ 620,000). The total non-audit services provided by the Group’s external auditors for the year

ended 31 December 2023 were US$ 150,000 (2022: US$ 167,000) which comprised 16% (2022: 21%) of total audit and non-audit fees. The

non-audit fee was incurred in relation to the interim review. Additionally, the Group disbursed US$ 177,000 in audit overruns and out of pocket

expenses in 2023, specifically attributed to activities related to the 2022 financial year. 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 to the

consolidated 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 49.

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

03 April 2024

54 Gulf Marine Services PLC

Dear Shareholders,

I am pleased to present the report of the Nomination Committee (the “Committee”), which summarises our activities during the past year.

The Committee met three times during the year which we considered necessary to discharge our duties efficiently as a Committee.

The Committee is responsible for evaluating the balance of skills, knowledge and experience of the Directors. It also reviews the

composition and structure of the Board, makes recommendations to the Board on retirements and appointments of additional and

replacement Directors, and has a continuous and proactive approach to succession planning for the Board and Senior Management.

Our role is also 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, Haifa Al Mubarak, 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 business. The Board believes this achieves the appropriate balance in its

membership with half of the Board being considered fully independent.

One of the pivotal considerations on any appointment to the Board relates to diversity. The Nomination Committee takes an active role in

setting and meeting diversity objectives and strategies for the Company as a whole. The Board’s policy is to continue to seek and encourage

diversity within long and short lists, including with regard to gender, as part of the overall selection process for non-executive Director roles.

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’ backgrounds are

included in their biographies on pages 44 to 45.

Workforce Engagement

Rashed Al Jarwan was the nominated non-executive Director to oversee the workforce engagement process, until he retired from the Board.

He was replaced by Lord Anthony St John of Bletso. Lord Anthony brings a wealth of experience and expertise in this area. As part of his

initiatives in workforce engagement Director role, Lord Anthony held an interactive session with management to better understand progress

and any issues directly from the employee perspective. An employee engagement survey was also completed 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 end of year celebration event was held at the

Abu Dhabi HQ office to celebrate the collective wins as a team in 2023. During this event, long service employees were recognised with

awards for 10, 15, 20 and 25 years of service.

NOMINATION COMMITTEE REPORT

55Annual Report 2023

Governance

Board and Committee Evaluation

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 effectiveness and operation;

• Executive Chairman’s effectiveness;

• Effectiveness of the Board and each of its Committees;

• Director effectiveness and independence; and

• Other general observations.

Results

The results of the 2022 Board evaluation questionnaire were collectively reviewed by the Board and conclusions drawn from this. The

progress since the 2022 evaluation in key areas identified was welcomed As a result of the findings from the 2023 evaluation, the Board

has concluded that the performance of each of the Directors standing for re-appointment continues to be effective and demonstrates a

commitment to their roles. The Board has also concluded that it should maintain its increased focus on longer term strategy, including at

its face to face meetings, as well as continuing to progress the Group’s business with the support of its standing Committees in their areas

of responsibility.

Chairman Review

The performance of the Executive Chairman was evaluated by the non-executive Directors. The evaluation was led by the Senior

Independent Director and was concluded to be satisfactory. The Senior Independent provides relevant feedback to the Chairman.

Appointment of Independent Non-Executive Director

The appointment of Haifa Al Mubarak as an independent non-executive Director followed a rigorous and transparent recruitment process and

discussions at the meetings of both Nomination Committee and the Board. The process followed is summarised in the table on page 42.

Selection Process for Key Board Appointments

Candidate Specification

A specification for candidate was 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 were identified from a diverse range of backgrounds.

Interviews and Selection

Each of the independent non-executive Directors met the selected candidate and gave their feedback to the Chairman

of the Nomination Committee.

Recommendations and Confirmation of Appointment

The Nomination Committee considered and discussed the feedback and recommended the candidate to the Board.

The Board approved the appointment as recommended by the Committee.

Re-appointment of Directors

All the Directors being proposed for reappointment attended all meetings they were scheduled to attend unless unavoidably prevented from

doing so. They all devote sufficient time to their duties. The evaluation also confirmed that the roles of the Directors in other companies in no

way impede their roles within the Company. Indeed, each demonstrates great enthusiasm as well as commitment to their roles.

The biographical details of Directors can be found on pages 44 to 45. All of the Company’s Directors will stand for re-appointment at the 2024

AGM. 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 AGM during that meeting.

56 Gulf Marine Services PLC

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 on the Board.

This approach to diversity at a Board level is part of the Group’s policy on diversity and inclusion which is a key objective in the Company

strategy as an international maritime business. This policy is consistently implemented in recruitments to the business resulting in a wide

range of nationalities, backgrounds, and other aspects of diversity in the workforce. Our most recent appointment to the Board, Haifa Al

Mubarak aligns with our longstanding goal of achieving gender diversity. As a continuation of our merit-based approach, the Board intends to

work towards further gender diversity in future Board appointments. In the meantime, less than 40% of the individuals on the Board are

women and none of the senior positions are currently held by women. Whilst this has not been possible to date due to the membership of the

Board, the Board aims to meet these targets in the future. For the purposes of this disclosure, 31st December 2023 has been used as the

reference date.

Individuals on the Board and in its executive management are situated overseas where Data Protection laws restrict the collection and

publication of certain data. In addition, the Group embraces ethnic diversity within the Board and the business as part of its normal operation

and believes that drawing distinctions between individuals based on ethnicity would work against the ethos it actively pursues and delivers

on. The Company accordingly does not disclose the ethnicity of such individuals. It can though confirm that at least one of the Directors is

from what the Financial Conduct Authority’s Listing Rules describe as a ‘minority ethic background’, though as an international company with

Board members each from different countries in several regions, that is not a term which we would otherwise use.

The Board also continues to be diverse in terms of 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 26 to 40 provides further information on the Group’s workforce.

Succession Planning

The Committee noted the importance of ensuring 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 Group. 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.

We will report to you again next year on the results of our ongoing succession planning and other activities we intend to carry out

during 2024.

Mansour Al Alami

Nomination Committee Chairman

03 April 2024

NOMINATION COMMITTEE REPORT

continued

57Annual Report 2023

Governance

REMUNERATION COMMITTEE REPORT

Dear Shareholders,

The structure and levels of remuneration of the Group’s Senior Management team are critically important to the Group successfully achieving

and sustaining its strategic aims. The Remuneration Committee sets the strategy, structure and levels of remuneration of our Executive

Chairman and reviews the remuneration of the other members of the Senior Management team. It also reviews remuneration in the Group

more generally providing guidance to management and taking this into account when setting executive remuneration. We do this in the

context of the Group’s strategy and goals to drive their achievement using internal measures taking account of comparatives within the

Group and in comparable companies.

I am pleased to present our Directors’ Remuneration Report for the year ended 31 December 2023. On the Committee with me are Jyrki

Koskelo and Haifa Al Mubarak, both our other independent non-executive Directors. Mansour Al Alami and Charbel El Khoury also attend

Remuneration Committee meetings on invitation although, of course, Mansour Al Alami does not participate in any decisions in relation

to his own remuneration. The Committee meets during the year when appropriate to consider either executive or wider Group

remuneration.

This report covers the work of the Committee during the year. In addition, the Company is required to put the Directors’ Remuneration

Policy to a vote at the 2024 Annual General Meeting (AGM). No material changes are proposed to the Directors’ Remuneration Policy

approved at the 2021 AGM. We seek approval of shareholders of this report and the Directors’ Remuneration Policy (the “Policy”) to ensure

an appropriate remuneration structure is in place for the Group on an ongoing basis.

The Committee has continued to progress matters in respect of remuneration in line with the Policy previously approved by shareholders,

with a focus on creating appropriate performance parameters as well as structures.

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.

Executive Chairman

(a) Salary

The Executive Chairman’s salary, having not been reviewed or increased since his appointment in 2020, the Committee determined that

Mansour Al Alami’s remuneration should be reviewed for 2024. Accordingly, his annual salary has been increased from AED 1,536,000 to

AED1,646,100. This first uplift since Mr Al Alami’s appointment in 2020 represents an increase of 7% on a salary which is relatively low in

relation to market comparatives in similar companies for the roles he fulfils and experience he brings. The Committee would like to thank

Mr Al Alami for his continued approach to prioritising the interests of the Company. Group salaries overall, which unlike that of the Executive

Chairman, are set at market rates show an average annual increase for 2024 of 6%.

(b) Annual Bonus

Annual Bonus targets are set are set based on metrics aligned with the implementation of the Group’s strategy. No annual bonuses were paid

in the Group in relation to 2022 as the Group did not meet its target debt leverage of below 4.0 times adjusted EBITDA at 31 December 2022.

This target was achieved by 31 March 2023 and the leverage has been reduced further to 3.05 times adjusted EBITDA by 31 December 2023.

The annual bonus potential for Mansour Al Alami in 2023 continued at 100% of salary for maximum performance. The maximum potential for

2024 is to be 120% of salary in line with the current and proposed remuneration policy (and not to utilise the full capacity of up to 150% of

salary available for exceptional circumstances). This has allowed inclusion of key strategic targets and important personal objectives in

addition to financial targets, as well as reflecting the improved performance of the Group.

For 2023, the annual bonus was payable based on the following measures:

• 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;

subject to an over-riding discretion to vary outcomes if a payment is not justified by overall performance and developments in the Group.

The outcome of these measures, detailed on page 68 result in a payment of a bonus of 95.1% of the maximum, reflecting the excellent

performance of the business during the year.

For 2024, the annual bonus of the bonus of the Executive Chairman is intended to be payable for the following measures (expressed as a

percentage of salary):-

Financial targets

• 25% weighting on EBITDA;

• 10% weighting on EBITDA margin;

• 20% weighting on securing contracts for 2024 Revenues;

• 10% weighting on securing contracts for 2025 Revenues;

• 20% weighting on achieving target leverage;

58 Gulf Marine Services PLC

REMUNERATION COMMITTEE REPORT

Strategic targets

• 15% weighting on financing target;

• 5% on strategic partnership target;

Personal objectives

• 10% on capital market development objectives;

• 10% on management talent development and succession planning objectives;

subject to an over-riding discretion to vary outcomes if a payment is not justified by overall performance and developments in the Group.

There was an underpin condition in the 2022 LTIP awards such that none of the shares could vest unless the debt leverage in the Group fell

below 4.0 times EBITDA at 31 December 2022. This condition was not met and accordingly the 2022 LTIP awards lapsed. The Committee

has decided to defer consideration of further LTIP awards until such time as it considers these can be an effective incentive for participants

generally. It plans to consider this matter further later in the year.

(d) Non-Executive Director Fees

The fees of non-executive Directors, having not been increased since 2014, have been reviewed for 2024. Following this review, and taking

account of both market comparables, and the commitments required from non-executive Directors in the Company, the Board has increased

the base fee of independent non-executive Directors from £45,000 per annum to £55,000 per annum. Similarly, the fees of the Chairmen of

the Audit and Risk Committee and Remuneration Committee, have been increased from £5,000 per annum to £10,000 and £15,000 per

annum respectively, the latter reflecting the increasing role of that Committee in light of the forthcoming changes to the UK Corporate

Governance Code (with seven meetings held in 2023). Similarly members of those Committees other than the Chair will each receive fees of

£5,000 per annum. The fees of the Senior Non-executive Director which role includes workforce engagement have been increased from

£5,000 to £10,000. The Board (excluding the independent non-executive Directors) believes these fees to be commensurate with the

commitment and work involved on the Board and its Committees recognising the time devoted to travel to face to face meetings over

multiple days in the UAE where the Group’s operations are based.

Conclusion

The other members of the Committee and I consider that the extensive work undertaken over the past years, including the valuable

contributions by shareholders, continues to stand us in good stead for the future years as well. 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 proposed for approval by shareholders at the upcoming AGM. Our aim is to

maintain the consensus we have previously 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 to the ongoing

support of shareholders.

Lord Anthony St John of Bletso

Remuneration Committee Chairman

03 April 2024

59Annual Report 2023

Governance

DIRECTORS’ REMUNERATION POLICY REPORT

(UNAUDITED)

This part of the report, which is not subject to audit, sets out the remuneration policy for the Company and has been prepared in accordance

with the provisions of the Companies Act 2006, the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008.

The policy has been developed taking into account the principles of the UK Corporate Governance Code (the Code), the guidelines published by

institutional advisory bodies and the views of our major shareholders. The Company is required to prepare and seek shareholder approval for an

updated Directors’ Remuneration Policy at least once every three years. The Directors’ Remuneration Policy will be put to a shareholder vote at the

Company’s Annual General Meeting in 2024 and is detailed below.

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 Code summarised below:

• Clarity

The Policy seeks to be transparent and promote effective engagement with shareholders and the workforce with appropriate alignment

and open disclosure.

• 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 and none implemented in the past year.

• Risk

The Policy seeks to balance opportunity with risk in relation to the specific circumstances of the Group by structuring targets to align with

sustained success.

• Predictability

The Policy seeks to quantify potential outcomes from achievement of both shorter and longer-term objectives as well as quantifying fixed

remuneration and has determined bonuses to be paid consistently across the Group.

• 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, with target achievement in the

past year having fairly reflected overall performance.

• 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 by ensuring remuneration of different groups of employees takes account of the

overall approach followed.

The Committee was able to consider corporate performance on Environmental, Social and Governance (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.

In the past year, the policy operated as intended in terms of driving company performance and resulting in the appropriate quantum of

remuneration, other than the operation of the long term incentive plan as a valued incentive across the management team, which is intended

to be reviewed during the current year. No discretion has needed to be, not has been, exercised in the implementation of the remuneration

policy for the past year.

60 Gulf Marine Services PLC

The following table sets out the Directors’ Remuneration Policy.

REMUNERATION POLICY TABLE FOR EXECUTIVE DIRECTORS

Element of Pay

Purpose and Link

to Strategy Operation

Maximum

Opportunity Performance Criteria

No changes are proposed to the current approved policy other than confirmation under allowances in relation to untaken holiday

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

service

• 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 Arabian

Peninsula region

– 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

61Annual Report 2023

Governance

Element of Pay

Purpose and Link

to Strategy Operation

Maximum

Opportunity Performance Criteria

No changes are proposed to the current approved policy other than confirmation under allowances in relation to untaken holiday

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

62 Gulf Marine Services PLC

Element of Pay

Purpose and Link

to Strategy Operation

Maximum

Opportunity Performance Criteria

No changes are proposed to the current approved policy other than confirmation under allowances in relation to untaken holiday

Allowances • Allowances are

set to cover living

and travel costs

where the Director

serves outside

their home

country and is in

line with local

market practice

and to cover

payments in lieu of

untaken holiday

where such

payments are in

line with the

Group’s policies in

relation to the

wider workforce.

• 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 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 out-performance of challenging strategic

plans approved at the time of grants.

REMUNERATION COMMITTEE REPORT

continued

63Annual Report 2023

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 Financial Conduct Authority’s 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 2024 at different levels of

performance. The chart highlights that the performance-related elements of the package comprise a 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 throughout 2024.

$461

$461 $461

$431

$539

$636

$539

$636

$419

$954

$2,000

$1,500

$1,000

$500

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 3.665. 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.

For further details see page 57 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 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 Group performance and is mostly in the form of salary and benefits.

Whilst the Committee did not formally consult with employees in respect of the design of the Director’s Remuneration Policy, it nonetheless

takes into account wider remuneration in the Group and the views of employees in determining the Policy and implementation of Executive

remuneration. For example, no bonuses having been paid in relation to 2022 to assist the Group in achieving its leverage targets, the

Committee took account of feedback subsequently received and has approved the payment of bonuses in full in relation to the performance

achieved in 2023. Similarly, following feedback on the long-term incentive awards granted in 2022, lapsing in 2023 due to non-achievement of

the leverage underpin, the Committee is giving further consideration as to how best to utilise such awards in future. Following the retirement

of Rashed Al Jarwan from the Board, the role of senior non-executive Director overseeing workforce engagement was assumed by Lord

Anthony St John on 4 August 2023 and further details regarding workforce engagement can be found on page 54.

64 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. This past engagement has shaped the Remuneration Policy followed by the

Company and the outcomes from implementation of this, both in terms of structure, and quantum.

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, 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 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 Financial Conduct Authority’s 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

65Annual Report 2023

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

six 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 six 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.

66 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-appointment),

which are terminable by three months’ notice by the Director or the Company. In relation to a Chairman (where a non-executive appointment),

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:

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 05 February 2021

Lord Anthony St John of Bletso Independent non-executive Director 26 May 2021

Haifa Al Mubarak Independent non-executive Director 10 October 2023

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 Policy in force at that time.

Lord Anthony St John of Bletso

Remuneration Committee Chairman

03 April 2024

REMUNERATION COMMITTEE REPORT

continued

67Annual Report 2023

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 2024 AGM. Sections of this report that are subject to audit have been indicated.

Shareholder Voting At AGM

The 2023 Annual Report on Remuneration will be subject to an advisory shareholder vote at the 2024 AGM. Votes cast by proxy and at the

2023 AGM in respect of the Directors’ Remuneration Report and 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 2022 700,501,822 99.48% 3,632,496 0.52% 500 704,134,318

Directors’ Remuneration Policy

approved at 2021 AGM

394,480,051 90.97% 39,151, 228 9.03% 14,539 433,631,279

1 The Directors 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 2023, 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 2023 (Audited)

The table below summarises executive Directors’ remuneration in respect of 2023.

Fixed Element of Pay Pay For Performance

Base Salary

US$’000

Allowances

and

Benefits

US$’000

End of

Service

Gratuity

US$’000 Subtotal

Annual

Bonus

US$’000

Long-Term

Incentives

US$’000

Other

US$’000 Subtotal

Total

Remuneration

US$’000

Executive Chairman

Mansour Al Alami

2023 419 12 24 455 377 – – – 832

2022 419 12 24 455 – – – – 455

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 68 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 The remuneration was paid in UAE Dirhams and reported in US$ using an exchange rate of US$ 1/AED 3.665.

68 Gulf Marine Services PLC

Performance Against Annual Bonus Targets for 2023 (Audited)

For 2023 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

30%

Less than US$ 75m –

Greater than US$ 88.0m US$ 87.5m 29.0%

EBITDA margin

15%

Less than 53% –

Greater than 60% 57.7 % 12.7%

Securing contract % of 2024 budget

revenue 15%

Less than 60% –

Greater than 85% 82.4% 13.4%

Securing contract % of 2025 budget

revenue 15%

Less than 35% –

Greater than 55% 57.1% 15.0%

Achieving leverage <4.0 (25%)

25%

After 31 December 2023 –

On or before 30 June 2023

Achieved before

30 June 2023 25%

Total 100% 95.1%

EBITDA* <US$ 75m US$ 75m–US$ 85m US$ 85.1m–US$ 88.0m

Score 0% 0.1– 24%* 24.1– 3 0%*

EBITDA Margin*

<53% 53–57% 57.1– 60 .0%

Score 0% 4.1–12%* 12.1–15%*

Securing contracts % of 2023 budget revenue*

<60% 60–80% 80.1– 85%

Score 0% 0.1–12%* 12.1–15%*

Securing contracts % of 2024 budget revenue*

<35% 35–50% 50.1– 55%

Score 0% 0.1–12%* 12.1–15%*

Achieving leverage < 4.0 After 31 December 2023

Between 1 July –

31 December 2023 On or before 30 June 2023

Score 0% 15 –5%* 25%*

* Zero to full pay-out is not linear as bands operate within the performance ranges shown.

LTIP Awards Vesting for 2023 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 2023

Base Salary in 2023

Base Salary from

1 January 2024

US$’000

Base Salary from

1 January 2023

US$’000 % Change

Mansour Al Alami 449 419 7%

REMUNERATION COMMITTEE REPORT

continued

69Annual Report 2023

Governance

Allowances and Benefits for 2023

The cash allowances for 2023 comprise payments to cover costs of transport will be as follows:

Base Salary from

1 January 2024

US$’000

Base Salary from

1 January 2023

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 2024

For 2024 the maximum bonus opportunity will be 120% of base salary. Any proportion above 100% of salary or otherwise determined by the

Remuneration Committee will be deferred into shares under the Deferred Bonus Plan. The annual bonus for the executive Director will be

based on Group financial performance, strategic targets and personal objectives weighted as follows (expressed as a percentage of salary):

Measure Weighting

EBITDA 25%

EBITDA Margin 5%

2024 Secured revenue 20%

2025 Secured revenue 10%

Achieving target leverage 20%

Financing target 15%

Strategic partnership target 5%

Capital market development objectives 10%

Management talent development and succession planning objectives 10%

Total 120%

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

2023

US$’000

Fees

2022

US$’000

Total

Remuneration

2023

US$’000

Total

Remuneration

2022

US$’000

Chairman

Mansour Al Alami – – – –

Chairman total – – – –

Non-executive Directors

Rashed Al Jarwan

36 62 36 62

Hassan Heikal

– – – –

Jyrki Koskelo 62 62 62 62

Lord Anthony St John of Bletso 64 62 64 62

Charbel El Khoury

– – – –

Haifa Al Mubarak

12 – 12 –

Non-executive Directors total 174 186 174 186

1 The non-executive Directors’ remuneration is paid in Pound Sterling and reported in US$ using an exchange rate of US$ 1.24/£1 for 2023.

2 Rashed Al Jarwan retired from the Board effective 04 August 2023.

3 Haifa Al Mubarak was appointed to the Board effective 11 October 2023.

4 Hassan Heikal and Charbel El Khoury waived their entitlements to receive a fee for their roles.

70 Gulf Marine Services PLC

Directors’ Interests in Ordinary Shares (Audited)

Through participation in performance-linked share-based plans, there is strong encouragement for 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.

The beneficial interests of the Directors and connected persons in the share capital of the Company at 31 December 2023 were as follows:

At 31 December

2023

At 31 December

2022

Shareholding

Ownership

Requirement

Met?

Outstanding

LTIP Awards

Mansour Al Alami 2,571,000 2,571,000 N/A –

Hassan Heikal – – N/A –

Jyrki Koskelo – – N/A –

Lord Anthony St John of Bletso – – N/A –

Haifa Al Mubarak – – 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.

Fees for the 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 decisions 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 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 service contracts with the Company and their services are

provided under letters of appointment detailed in the policy report and are terminable on 1 months notice.

Annual Fee

2023

£’000

Annual Fee

2022

£’000

Independent non-executive Director base fee 45 45

Additional fees:

Senior Independent Director 5 5

Audit and Risk Committee Chair 5 5

Nomination Committee Chair

– –

Remuneration Committee Chair 5 5

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 2023 financial year,

compared to that for employees of the Group as a whole:

Measure % Change

Executive Chairman

Base salary 0%

Allowances and benefits 0%

Bonus 100%

All employees

Base salary 3%

Allowances and benefits 22%

Bonus 100%

REMUNERATION COMMITTEE REPORT

continued

71Annual Report 2023

Governance

Annual Percentage Change in Director and Employee Remuneration

The table below shows the annual percentage change in fixed remuneration of base salary, allowances and benefits of Directors and

employees in 2023 compared to 2022 and 2022 compared to 2021:

2023 Compared to 2022 2022 Compared to 2021

Base Salary Benefits Annual Bonus Base Salary Benefits Annual Bonus

Mansour Al Alami 0% 0% 100% 0% -60% -100%

Rashed Al Jarwan

-42% N/A N/A -16% N/A N/A

Jyrki Koskelo 0% N/A N/A 0% N/A N/A

Lord Anthony St John of Bletso

0% N/A N/A 61% 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

Haifa Al Mubarak

100% N/A N/A N/A N/A N/A

Chief Financial Officer

10% 15% 100% N/A N/A N/A

FTEs 3% 22% 100% 4% 12% -10 0%

1 Rashed Al Jarwan retired from the Board effective 4 August 2023.

2 Lord Anthony St John of Bletso was appointed to the Board effective 26 May 2021.

3 Charbel El Khoury and Hassan Haikal waived their entitlement to receive a fee for this role.

4 Haifa Al Mubarak was appointed to the Board effective 11 October 2023.

5 Chief Financial Officer joined the Company on 03 February 2022.

Relative Importance of the Spend on Pay

The table below shows overall expenditure on pay in the whole Group in 2023 and 2022 financial years, compared to returns to shareholders

through dividends:

2023

US$’000

2022

US$’000 % Change

Overall expenditure on pay 30,477 26,845 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 2023 is in compliance with the Code which provides that all members of the Committee

should be independent non-executive Directors.

Jyrki Koskelo and I served on the Committee throughout the year, both as independent non-executive Directors. Rashed Al Jarwan served

as a member of the Committee until his resignation in August 2023 and he was replaced by Haifa Al Mubarak in December 2023, both being

independent non-executive directors.

The Executive Chairman, Charbel El Khoury and the 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 was debating matters concerning

themselves. The Company Secretary acts as Secretary to the Committee. The Committee met on two occasions during 2023. Members’

attendance at those meetings is shown on page 43. 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 55.

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 26 March 2024 for presentation to shareholders at the AGM.

Lord Anthony St John of Bletso

Remuneration Committee Chairman

03 April 2024

72 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 40 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 2023.

The Corporate Governance Report on pages 42 to 76 include summaries of the operations of the Board and its Committees, and information

regarding the Group’s compliance with the Code during 2023.

The Strategic Report and the Corporate Governance Report 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 68

Waiver of emoluments by a Director Pages 69

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 (stepped down from the Board on 4 August 2023)

Lord Anthony St John of Bletso

Haifa Al Mubarak (appointed to the Board on 11 October 2023)

Charbel El Khoury

Jyrki Koskelo

Biographical details of the current Directors are set out on pages 44 to 45. The beneficial interests of the Directors and connected persons in

the share capital of the Company are set out on page 70 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-appointment annually in accordance with provision 18 of the Code. All Directors are being

proposed by the Board for reappointment at the forthcoming Annual General Meeting (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 37. Please also refer to pages

8 to 9 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 37 and forms part of this report by reference.

73Annual Report 2023

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 2023, 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 page 58 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 2023 can be found in Note 13 to the consolidated financial statements,

on page 109. The Company’s share capital comprises ordinary shares with a nominal value of 2 pence 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 date of the notice of 2023 AGM the Directors were granted authority to allot up to a maximum aggregate nominal amount of

£13,552,194, which was equal to approximately two-thirds of the issued share capital of the Company at that date, in connection with

a rights issue. This is a routine authority common amongst listed companies and follows. The Investment Association’s share capital

management guidelines.

In accordance with the Group’s debt agreement, 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.

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 2023

Number of Shares

As at 31 December 2023

% of Share Capital

As at 03 April 2024

Number of Shares

As at 03 April 2024

% 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 31,033,091 3.04% 31,033,091 3.04%

74 Gulf Marine Services PLC

DIRECTORS’ REPORT

continued

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 12 to 18 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 114 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 40

and forms part of this report by reference.

Research and Development

The Group did not undertake any research and development activities during the year (2022: none).

Political Donations

The Group made no political donations and incurred no political expenditure during the year (2022: 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 40 and pages 42 to 76 respectively.

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 35 to 36 and forms

part of this report by reference.

Dividends

During 2023, the Board of Directors have approved dividend policy to take effect in future. No dividend is to be paid or proposed for 2023

(2022: nil).

Going Concern

The Directors have assessed the Group's financial position through to June 2025 and hold a reasonable expectation of its ability to continue

as going concern for the foreseeable future. With three consecutive years of reported profit and a forecast of continued positive operating

cash flows, particularly in light of market outlook, the Group remains well-positioned for sustained success.

During the year, the Group made a repayment of US$ 56.2 million (2022: US$ 51.4 million) towards its borrowings, of which, US$ 26.2 million

(2022: US$ 3.8 million) were over and above its contractual obligations, resulting in a reduction in the current ratio. A total of US$ 33.7 million

(2022: US$ 3.8 million) was prepaid during 2023. Hence, the Group was in a net current liability position as of 31 December 2023, amounting

to US $37.8 million (2022: US$12.6 million). Management closely monitors the Group's liquidity position including focus on the forecasted

short-term cash flows which would be sufficient to meet the Group’s current liabilities, in particular, the current portion of the bank borrowings

which represents the principal repayments due over the next 12 months. The loan prepayments were also made after ensuring that

forecasted cash inflows are sufficient to meet the Group’s short-term obligations.

The Group is in the process of refinancing its term facility in advance of the bullet payment becoming due in June 2025. Management's

ongoing discussions with various lending entities are aimed at securing terms that align with our long-term strategic objectives, ensuring

continued financial stability. Given the improved financial performance reported during 2023 and the current high levels of utilisation secured,

combined with higher day rates, the Group expects the financial performance to continue to improve. As such, we are optimistic about the

outcome of these negotiations.

The forecast used for assessing going concern reflects management's key assumptions including those around utilisation, and day rates on a

vessel-by-vessel basis and refinancing of its term facility during latter half of the coming year. Specifically, these assumptions are:

• average day rates across the fleet to be US$ 34.0k for the 18-months period to 30 June 2025;

• 94% forecast utilisation for the 18-month period to 30 June 2025; and

• pipeline of tenders and opportunities for new contracts that would commence during the forecast period.

75Annual Report 2023

Governance

A downside case was prepared using the following assumptions:

• no work-to-win during the 18-month period to 30 June 2025;

• 17 percentage points reduction in utilisation for the 18-month period to 30 June 2025; and

• interest rate to remain at current levels instead of a forecasted decline of 25 basis points commencing second quarter of 2024.

Based on the above scenario, the Group would not be in breach of its current term loan facility. The downside case is considered to be

severe, but it would still leave the Group with US$ 7.9 million of liquidity and in compliance with the covenants under the Group’s banking

facilities throughout the assessment period.

In addition to the above downside sensitivity, the Directors have also considered a reverse stress test, where EBITDA has been sufficiently

reduced to breach the debt covenant. This scenario assumes an increase in operational downtime to 7%, compared to the base case

cashflows with a 2.5% operational downtime. The 4.5% increase in operational downtime to the base case for 2024 would result in breach of

the Finance Service Cover ratio as at 31 December 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 and in order to maintain liquidity. Potential

mitigating actions include the vessels off hire for prolonged periods could be cold stacked to minimise operating costs on these vessels

which has been factored into the downside case. Additional mitigations could be considered including but not limited to reduction in

overhead costs, relaxation/waiver from covenant compliance and rescheduling of repayments with lenders.

Management is aware of the broader operating context and acknowledges the potential impact of climate change on the Group’s financial

statements. However, it is anticipated that the effect of climate change will be negligible during the going concern assessment period.

After considering reasonable risks and potential downsides, the Group's forecasts suggest that its bank facilities, combined with increased

utilisation at higher day rates and a pipeline of near-term opportunities for additional work, will provide sufficient liquidity to meet its needs in

the foreseeable future. Accordingly, the consolidated financial statements for the Group for the year ended 31 December 2023 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.

Re-appointment of External Auditor

KPMG, the Group’s external auditor, have indicated their willingness to continue in office and in accordance with Section 489 of the Act,

a resolution to re-appoint them will be put to the 2024 AGM.

Annual General Meeting

Details of the Company’s 2024 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

03 April 2024

76 Gulf Marine Services PLC

Statement of Directors’ Responsibilities in Respect of the Annual Report and the Financial Statements

The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.

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 Group and Company and of the Group's profit or loss for that year.

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 Group and Company and of the Group's profit or loss for that year.

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 its financial

statements comply with the Companies Act 2006. They are responsible for such internal controls as they determine is necessary to enable

the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility

for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and

other irregularities.

Under applicable law and regulations, the directors are also responsible for preparing a strategic report, directors’ report, Directors’

Remuneration Report and Corporate Governance Statement that complies with that law and those regulations.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website.

Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Responsibility Statement of the Directors in Respect of the Annual Financial Report

We confirm that to the best of our knowledge:

• the financial statements, prepared in accordance with the applicable set of accounting standards, 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; and

• the strategic report includes a fair review of the development and performance of the business and the position of the issuer and the

undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they

face. We consider the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information

necessary for shareholders to assess the group’s position and performance, business model and strategy.

On behalf of the board

Mansour Al Alami

Executive Chairman

03 April 2024

Jyrki Koskelo

Independent non-executive Director

03 April 2024

STATEMENT OF DIRECTORS’ RESPONSIBILITIES

77Annual Report 2023

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 2023 set out on pages 84 to 137, 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 material accounting policies set out in note 3.

The financial reporting framework that has been applied in the preparation of the Group financial statements is UK Law, UK adopted

international accounting standards and, as regards the Company financial statements, UK Law and UK accounting standards, including FRS

102 The Financial Reporting Standard applicable in the UK and Republic of Ireland.

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 December 31, 2023 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 FRS 102 The Financial Reporting Standard applicable

in the UK and Republic of Ireland; 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 committee.

We were appointed as auditor by the directors on 15 August 2022. The period of total uninterrupted engagement is for the 2 financial years

ended December 31, 2023. 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 a 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 approval 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, the Russia-

Ukraine war and the conflict in Gaza in the going concern period;

– challenging the appropriateness of downside and stress test scenarios in order to assess the reasonableness of the assumptions

included;

– challenging management regarding the status of the contract pipeline and the likelihood and timing of contract 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;

• Assessing the status of refinancing by reviewing the correspondance with the lenders and related documents; and

• Assessing the related disclosures in the Annual Report.

78 Gulf Marine Services PLC

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 and Risk 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 out 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.

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF GULF MARINE SERVICES PLC continued

REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS

79Annual Report 2023

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 judgement, 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 (unchanged from

(2022)):

Key audit matters

Impairment and Impairment Reversals of the Group’s Vessels (net Reversal: US$ 33.4 million) (2022: US$ 7.8 million) and Company’s

Investment in Subsidiary (reversal US$ 120 million (2022: US$ 18.8 million)).

Refer to page 94 (Group accounting policy) and pages 100 to 104 (Group financial disclosures), page 130 (Parent Company accounting

policy) and pages 132 to 133 (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$ 562.2 million at

31 December 2023 (2022: US$ 549.7 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 2023 compared to 31 December 2022, 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 2023. 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$

33.4 million in the year ended 31 December 2023 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 2023. 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 judgement.

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 80% (2022: 78%) 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.

For the reasons outlined above the engagement team determine this

matter to be a key audit matter.

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 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 2023

reported by the external valuer appointed by the Group’s lending

banks. We also assessed for reasonableness of 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;

• Considering the procedures above, we performed an overall

stand back assessment to determine whether management’s VIU

estimate was reasonable and assessed whether there was any

evidence of management bias with respect to its VIU calculations;

80 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

Key audit matters 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 in accordance with

relevant accounting standards, including the Group vessels’

sensitivities to future impairment/impairment reversals and the

Parent Company’s sensitivity to future impairment/

impairment reversals.

Based on evidence obtained, we found that the Group’s recognition

of a net impairment reversal of $33.4 million as of 31 December

2023, 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 judgement, 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$ 133 Million (2022: US$ 115 million)

Refer to page 92 (accounting policy) and page 123 (financial disclosures)

81Annual Report 2023

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.

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, the

engagement team determine the accurate recording of charter hire

revenue (and by extension, lease revenue) to be 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;

We inspected a selection of 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 did not find any material

uncorrected error in the Group’s calculation of charter

hire revenue.

Our application of materiality and an overview of the scope of our audit

Materiality for the Group and Company financial statements was set at US$ 1.2 million (2022: US$ 1 million) and US$ 1.2 million (2022:US$

1 million) respectively, determined with reference to a benchmark of total Group revenues and Company total assets (of which it represents

0.8% (2022: 0.75%) and 0.26% (2022: 0.32%) respectively.

Performance materiality for the Group financial statements and Company financial statements as a whole was set at 65% of materiality

(2022: 65%) US$ 0.78 million (2022: US$ 0.65 million) and US$ 0.78 million (2022: US$ 0.65 million) respectively. 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.

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.

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 reported to the Audit and Risk Committee any corrected or uncorrected identified misstatements exceeding US$ 60,000 (2022:

US$ 50,000), in addition to other identified misstatements that warranted reporting on qualitative grounds.

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.

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.

82 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

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 pages 74 to 75;

• 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 pages 74 to 75;

• 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 pages 74 to 75;

• 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 76;

• 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 pages 12 to 18;

• Section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on

page 52; and

• Section describing the work of the Audit and Risk committee set out on pages 51 to 53.

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; and

– 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.

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.

83Annual Report 2023

Financial Statements

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 76, 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 or the 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

1 Harbourmaster Place

IFSC,

Dublin 1

D01 F6F5

03 April 2024

84 Gulf Marine Services PLC

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2023

		2023	2022
	Notes	US$’000	US$’000
Revenue	30,33	15 1,6 0 3	13 3 ,15 7
Cost of sales		(81 ,987)	(78,5 87)
Impairment loss of property and equipment	5,30	(3,5 65)	(13 ,19 2)
Reversal of impairment of property and equipment	5,30	36,993	20,9 8 0
Expected credit losses	9	(207)	(1, 8 2 4)
Gross profit		10 2 , 8 3 7	60, 53 4
General and administrative expenses		(14 , 6 4 5)	(13 , 2 12)
Operating profit		8 8 ,19 2	47, 3 2 2
Finance income	34	2 21	11
Impact of change in fair value of warrants	11	(1 1 ,077)	(2 , 4 8 1)
Finance expense	35	(31,4 31)	(17, 6 5 6)
Foreign exchange loss, net	36	(987)	(13 8)
Other income		12	68
Profit for the year before taxation		44,93 0	2 7,1 2 6
Taxation charge for the year	8	(2 , 86 2)	(1,7 24)
Net profit for the year		42 ,06 8	25,4 02
Other comprehensive income/(expense) – items that may be reclassified
to profit or loss:
Net hedging gain reclassified to the profit or loss	35	279	279
Net exchange gain/(loss) on translation of foreign operations		343	(79 9)
Total comprehensive income for the year		42 ,69 0	24, 8 8 2
Profit attributable to:
Owners of the Company		41, 3 4 2	25,3 26
Non-controlling interests	19	72 6	76
		42 ,06 8	25,4 02
Total comprehensive income attributable to:
Owners of the Company		41, 9 6 4	24 , 8 0 6
Non-controlling interests	19	72 6	76
		42 ,69 0	24, 8 8 2
Earnings per share:
Basic (cents per share)	32	4.07	2.4 9
Diluted (cents per share)	32	3.92	2 .47

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

The attached notes 1 to 39 form an integral part of these consolidated financial statements.

85Annual Report 2023

Financial Statements

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2023

		2023	2022
	Notes	US$’000	US$’000
ASSETS
Non-current assets
Property and equipment	5	6 0 6 , 412	59 2,9 5 5
Dry docking expenditure	6	11, 2 0 4	8 ,9 31
Right-of-use assets	7	3 , 3 47	3 , 3 71
Total non-current assets		620,963	6 0 5 ,257
Current assets
Trade receivables	9	30,64 6	3 3 ,17 9
Prepayments, advances and other receivables	10	8 ,0 57	7,722
Derivative financial instruments	11	–	386
Cash and cash equivalents	12	8,666	12, 2 7 5
Total current assets		47,369	53,562
Total assets		668,332	6 5 8 , 8 19
EQUITY AND LIABILITIES
Capital and reserves
Share capital – Ordinary	13	30,117	30,117
Capital redemption reserve	13	4 6,44 5	4 6,4 4 5
Share premium account	13	9 9 ,10 5	99, 1 05
Restricted reserve	14	272	272
Group restructuring reserve	15	(4 9 ,710)	(4 9 ,710)
Share based payment reserve	16	–	3,6 32
Capital contribution	17	9 ,1 7 7	9 ,1 7 7
Cash flow hedge reserve	11	–	(27 9)
Translation reserve		(2 ,5 42)	(2,885)
Retained earnings		19 4 ,7 0 3	14 9 ,7 12
Attributable to the owners of the Company		3 2 7, 5 6 7	285, 58 6
Non-controlling interest	19	2 , 7 14	1, 9 8 8
Total equity		330,281	287,574
Current liabilities
Trade and other payables	21	3 5,05 4	2 7, 9 7 9
Current tax liability		7, 0 3 2	6 , 321
Bank borrowings – scheduled repayments within one year	22	41, 50 0	3 0,0 0 0
Lease liabilities	23	1, 6 2 3	1, 8 4 5
Derivative financial instruments	11	14 , 2 75	3 ,19 8
Total current liabilities		99, 484	69,343
Non-current liabilities
Provision for employees’ end of service benefits	20	2,395	2,140
Bank borrowings – scheduled repayments more than one year	22	234, 439	298,085
Lease liabilities	23	1,7 3 3	1, 6 7 7
Total non-current liabilities		238,567	3 01,9 0 2
Total liabilities		3 3 8 , 0 51	3 71, 2 4 5
Total equity and liabilities		668,332	6 5 8 , 8 19

The consolidated financial statements were approved by the Board of Directors and authorised for issue on 03 April 2024. Registered

Company 08860816. They were signed on its behalf by:

Jyrki Koskelo Mansour Al Alami

Independent non-executive Director Executive Chairman

The attached notes 1 to 39 form an integral part of these consolidated financial statements.

86 Gulf Marine Services PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2023

Attributable

Cash

to the

Capital

Group

based

flow

owners of

Non-

capital–

redemption

premium

Restricted

restructuring

payment

Capital

hedge

Translation

Retained

the

controlling

Ordinary

Deferred

reserve

account

reserve

contribution

reserve

Reserve

earnings

Company

interest

Total equity

US$’000

At 1 January 2022

3 0 ,117

46,4 45

–

99,105

2 72

(4 9 ,710)

3,64 8

9 ,17 7

(558)

(2,0 8 6)

124 , 3 8 6

26 0 ,79 6

1,9 1 2

2 6 2,7 0 8

Profit for the year

–

25,326

25, 326

25 ,40 2

Other comprehensive

income for the year

Net hedging gain on

interest hedges

reclassified to the profit

or loss

–

279

–

279

–

279

Exchange differences on

foreign operations

–

(799)

–

(79 9)

–

(79 9)

Total comprehensive

income for the year

–

279

(79 9)

25,3 26

24 , 8 0 6

24, 8 8 2

Transactions with

owners of the

Company

Capital reorganisation

(Note 13)

–

(4 6, 4 45)

4 6,44 5

–

Share based payment

charge

–

Cash settlement of

share-based payments

–

(6 1)

–

(6 1)

–

(6 1)

Total transactions

with owners of

the Company

–

(4 6, 4 45)

4 6,44 5

–

(16)

–

(16)

–

(16)

At 31 December 2022

3 0 ,117

–

4 6,44 5

9 9 ,10 5

272

(4 9 ,710)

3,63 2

9 ,17 7

(279)

(2,885)

14 9 ,7 12

28 5,5 86

1, 9 8 8

2 8 7, 5 7 4

Profit for the year

–

41 , 3 4 2

41, 3 4 2

72 6

4 2,0 6 8

Other comprehensive

income for the year

Net hedging gain on

interest hedges

reclassified to the profit

or loss

–

279

–

279

–

279

Exchange differences on

foreign operations

–

343

–

343

–

343

Total comprehensive

income for the year

–

279

343

41, 3 4 2

41, 9 6 4

72 6

4 2,6 9 0

Transactions with

owners of the

Company

Share based payment

charge

–

Transfer of share option

reserve

–

(3,6 49)

–

3,6 4 9

–

Total transactions

with owners of

the Company

–

(3,6 32)

–

3 ,64 9

–

At 31 December 2023

3 0 ,11 7

–

46,4 45

9 9 ,1 0 5

272

(4 9,710)

–

9 ,17 7

–

(2, 542)

194 ,7 03

3 2 7, 5 6 7

2 , 714

33 0 , 2 81

Refer to Notes 13 to 19 for description of each reserve.

The attached Notes 1 to 39 form an integral part of these consolidated financial statements.

87Annual Report 2023

Financial Statements

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2023

		2023	2022
	Notes	US$’000	US$’000
Operating activities
Profit for the year		42 ,06 8	25,4 02
Adjustments for:
Depreciation of property and equipment	5	24, 2 97	23,6 9 5
Finance expenses	35	31,4 31	17, 6 5 6
Impact of change in fair value of warrants	11	1 1 ,077	2, 4 81
Amortisation of dry-docking expenditure	6	4,6 87	5 , 613
Depreciation of right-of-use assets	7	3 ,1 8 8	2,6 3 5
Income tax expense	8	2,862	1,7 2 4
Net charge of expected credit losses	9	2 07	1, 8 2 5
End of service benefits charge	20	723	2 70
Impairment loss	5	3,565	13 ,19 2
Reversal of impairment	5	(3 6,993)	(20,9 80)
End of service benefits paid	20	(46 8)	(4 52)
Share-based payment charge	16	–	45
Interest income	34	(2 2 1)	(11)
Other income		(12)	(6 8)
Cash flows from operating activities before movement in working capital		8 6 , 411	73 ,0 27
Changes in:
– trade and other receivables		2 ,00 3	5 , 6 10
– trade and other payables		8 ,14 0	5,0 0 5
Cash generated from operations		96,55 4	8 3,6 42
Taxation paid		(2 ,1 5 1)	(1, 0 7 7)
Net cash generated from operating activities		94,403	8 2,5 6 5
Investing activities
Payments for additions of property and equipment		(3,45 9)	(3,345)
Dry docking spend excluding drydock accruals		(9, 55 0)	(2,9 70)
Interest received		221	11
Net cash used in investing activities		(12 ,7 8 8)	(6,304)
Financing activities
Repayment of bank borrowings	37	(5 6 ,174)	(51, 4 4 5)
Interest paid on bank borrowings		(2 7, 4 2 8)	(17, 5 2 5)
Principal elements of lease payments	37	(3,330)	(2, 5 24)
Settlement of derivatives	37	327	(3 8 4)
Payment of issue costs on bank borrowings		(3 74)	(14 8)
Interest paid on leases	37	(245)	(17 0)
Cash settled share-based payments		–	(6 1)
Bank borrowings received	37	2,000	–
Net cash used in financing activities		(85,2 24)	(7 2,2 57)
Net (decrease)/increase in cash and cash equivalents		(3,609)	4,0 0 4
Cash and cash equivalents at the beginning of the year		12 , 2 75	8 , 2 71
Cash and cash equivalents at the end of the year	12	8,666	12, 2 7 5
Non-cash transactions
Cancellation of deferred shares		–	(4 6,4 4 5)
Recognition of right-of-use assets		3 , 2 31	3 ,12 2
Addition/(reversal) to capital accruals		867	(9)
Increase in drydock accruals		2,590	2,7 75

The attached Notes 1 to 39 form an integral part of these consolidated financial statements.

88 Gulf Marine Services PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

1 General Information

Gulf Marine Services PLC (“GMS” or “the Company”) is a company which is limited by shares and is registered and incorporated in England

and Wales on 24 January 2014. The Company is a public limited company with operations mainly in the Arabian Peninsula region and Europe.

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 shareholder pattern of the Group is disclosed on the page 73.

The principal activities of GMS and its subsidiaries (together referred to as “the Group”) are chartering and operating a fleet of specially

designed and built vessels. All information in the notes relate to the Group, not the Company unless otherwise stated.

The Company and its subsidiaries are engaged in providing self-propelled, self-elevating support vessels, which provide a stable platform for

delivery of a wide range of services throughout the total lifecycle of offshore oil, gas and renewable energy activities and which are capable of

operations in the Arabian Peninsula, Europe and other regions.

2 Adoption of new and revised International Financial Reporting Standards (IFRS)

The accounting policies and methods of computation adopted in the preparation of these consolidated financial statements are consistent

with those followed in the preparation of the Group’s consolidated annual financial statements for the year ended 31 December 2022, except

for the adoption of new standards and interpretations effective as at 1 January 2023.

New and revised IFRSs

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

IFRSs has not had any material impact on the amounts reported for the current and prior years but may affect the accounting for future

transactions or arrangements.

	Effective for
	annual periods
	beginning on or after
IFRS 17 Insurance Contracts	1 January 2023
Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality Judgements
– Disclosure of Accounting Policies	1 January 2023
Amendments to IAS 8 Accounting Policies Changes in Accounting Estimates and Errors – Definition of Accounting Estimates	1 January 2023
Amendments to IAS 12 Income Ta xes – Deferred Tax related to Assets and Liabilities arising from a Single Transaction	1 January 2023
Amendments to IAS 12 International tax reform – Pillar two model rules	23 May 2023

New and revised IFRSs in issue but not yet effective

At the date of authorisation of these consolidated financial statements, the following new and revised IFRSs were in issue but not yet effective:

	Effective for
	annual periods
	beginning on or after
Amendments to IAS 1 Classification of Liabilities as Current or Non-Current and Non-Current Liabilities with Covenants	1 January 2024
Amendments to IAS 7 and IFRS 7 Supplier Finance Arrangements	1 January 2024
Amendments to IFRS 16 Lease Liability in a Sale and Leaseback	1 January 2024
Amendments to IAS 21 Lack of Exchangeability	1 January 2025
Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture	Optional

Management anticipates that these new standards, interpretations and amendments will be adopted in the Group’s consolidated financial

statements as and when they are applicable and the impact of adoption of these new standards, interpretations and amendments is currently

being assessed on the consolidated financial statements of the Group before the period of initial application.

3 Material Accounting Policies

The Group’s material accounting policies adopted in the preparation of these consolidated financial statements are set out below. Except as

noted in Note 2, these policies have been consistently applied to each of the years presented. During the year we amended the presentation

of the change in fair value of the warrants in the consolidated statement of profit or loss and other comprehensive income to provide better

information to the users of the consolidated financial statements. Please see note 39 for further information.

Statement of compliance

The consolidated financial statements have been prepared in accordance with UK-adopted international accounting standards in conformity

with the requirements of the Companies Act 2006.

Basis of preparation

The consolidated financial statements have been prepared on the historical cost basis, except for derivative financial instruments that are

measured at fair values at the end of each reporting period. Historical cost is generally based on the fair value of the consideration given in

exchange for assets.

89Annual Report 2023

Financial Statements

For financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair

value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the

measurement date;

• Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or

indirectly; and

• Level 3 inputs are unobservable inputs for the asset or liability.

The principal accounting policies adopted are set out below.

Going concern

The Directors have assessed the Group’s financial position through to June 2025 and hold a reasonable expectation of its ability to continue

as going concern for the foreseeable future. With three consecutive years of reported profit and a forecast of continued positive operating

cash flows, particularly in light of the market outlook, the Group remains well-positioned for sustained success.

During the year, the Group made a repayment of US$ 56.2 million (2022: US$ 51.4 million) towards its borrowings, of which, US$ 26.2 million

(2022: US$ 3.8 million) were over and above its contractual obligations, resulting in a reduction in the current ratio. A total of US$ 33.7 million

(2022: US$ 3.8 million) was prepaid during 2023. Hence, the Group was in a net current liability position as of 31 December 2023, amounting

to US $52.1 million (2022: US$15.8 million). Management closely monitors the Group's liquidity position including focus on the forecasted

short-term cash flows which would be sufficient to meet the Group’s current liabilities, including the current portion of the bank borrowings

which represents the principal repayments due over the next 12 months. The loan prepayments were also made after ensuring that

forecasted cash inflows are sufficient to meet the Group's short-term obligations.

The Group also has a revolving working capital facility which amounts to US$ 40.0 million (31 December 2022: US$ 45.0 million).

US$ 25.0 million (31 December 2022: US$ 25.0 million) of the working capital facility is allocated to performance bonds and guarantees and

US$ 15.0 million (31 December 2022: US$ 20 million) is allocated to funded portion, of which US$ 2.0 million was utilised as of 31 December

2023, leaving US$ 13.0 million available for drawdown (31 December 2022: US$ 20.0 million). The working capital facility expires alongside

the main debt facility in June 2025.

The Group is in the process of refinancing its term facility in advance as the bullet payment becomes due in June 2025. Management's

ongoing discussions with various lending entities are aimed at securing terms that align with our long-term strategic objectives, ensuring

continued financial stability. Given the improved financial performance reported during 2023 and the current high levels of utilisation secured,

combined with higher day rates, the Group expects the financial performance to continue to improve. As such, we are optimistic about the

outcome of these negotiations.

The forecast used for Going Concern reflects management's key assumptions including those around utilisation, vessel day rates on a vessel-

by-vessel basis and refinancing of its term facility during latter half of the coming year. Specifically, these assumptions are:

• average day rates across the fleet are assumed to be US$ 34.0k for the 18-month period to 30 June 2025;

• 94% forecast utilisation for the 18-month period to 30 June 2025;

• 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 during the 18-months period to 30 June 2025;

• 17 percentage points reduction in utilisation for the 18-months period to 30 June 2025;

• interest rate to remain at current levels instead of a forecasted decline of 25 basis points commencing second quarter of 2024.

Based on the above scenario, the Group would not be in breach of its current term loan facility. The downside case is considered to be

severe, but it would still leave the Group with US$ 7.9 million of liquidity and in compliance with the covenants under the Group’s banking

facilities throughout the assessment period.

In addition to the above downside sensitivity, the Directors have also considered a reverse stress test, where EBITDA has been sufficiently

reduced to breach debt covenant. This scenario assumes a substantial increase in operational downtime to 7%, compared to the base case

cashflows with a 2.5% operational downtime. The significant increase in operational downtime for 2024 would result in breach of the Finance

Service Cover ratio as at 31 December 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 and in order to maintain liquidity. Potential

mitigating actions include the vessels off hire for prolonged periods could be cold stacked to minimise operating costs on these vessels

which has been factored into the downside case. Additional mitigations could be considered including but not limited to reduction in

overhead costs, relaxation/waiver from covenant compliance and rescheduling of repayments with lenders.

Management is aware of the broader operating context and acknowledges the potential impact of climate change on the Group's

consolidated financial statements. However, it is anticipated that the effect of climate change will be negligible during the going concern

assessment period.

After considering reasonable risks and potential downsides, the Group's forecasts suggest that its bank facilities, combined with increased

utilization at higher day rates and a pipeline of near-term opportunities for additional work, will provide sufficient liquidity to meet its needs in

the foreseeable future. Accordingly, the consolidated financial statements for the Group for the year ended 31 December 2023 have been

prepared on a going concern basis.

90 Gulf Marine Services PLC

3 Material Accounting Policies continued

Basis of consolidation

These consolidated financial statements incorporate the financial statements of GMS and subsidiaries controlled by GMS. The Group has

assessed the control which GMS has over its subsidiaries in accordance with IFRS 10 Consolidated Financial Statements, which provides

that an investor controls an investee when the investor is exposed, or has rights, to variable returns from its involvement with the investee and

has the ability to affect those returns through its power over the investee.

Details of GMS’s subsidiaries at 31 December 2023 and 2022 are as follows:

					Proportion of Ownership
					Interest
Name	Place of Registration	Registered Address		2023	2022	Type of Activity
Gulf Marine Services	United Arab Emirates	Office 403, International Tower, 24th		100%	100%	Marine Contractor
W.L.L.		Karama Street, P.O. Box 46046,
		Abu Dhabi, United Arab Emirates
Gulf Marine Services	United Arab Emirates	Office 403, International Tower, 24th		100%	100%	Marine Contractor
W.L.L. – Qatar Branch		Karama Street, P.O. Box 46046,
		Abu Dhabi, United Arab Emirates
GMS Global Commercial	United Arab Emirates	Office 403, International Tower, 24th		100%	100%	General Investment
Invt LLC		Karama Street, P.O. Box 46046,
		Abu Dhabi, United Arab Emirates
Gulf Marine Middle East	United Arab Emirates	ELOB, Office No. E-16F-04, P.O. Box		100%	100%	Operator of offshore barges
FZE		53944	, Hamriyah Free Zone, Sharjah
Gulf Marine Saudi Arabia	Saudi Arabia	King Fahad Road, Al Khobar,		75%	75%	Operator of offshore barges
Co. Limited		Eastern Province, P.O. Box 31411
		Kingdom Saudi Arabia
Gulf Marine Services LLC	Qatar	41 Floor, Tornado Tower, West Bay,		100%	100%	Marine Contractor
		Doha, Qatar, POB 6689
Gulf Marine Services (UK)	United Kingdom	c/o MacKinnon’s, 14 Carden Place,		100%	100%	Operator of offshore barges
Limited		Aberdeen, AB10 1UR
GMS Jersey Holdco. 1*	Jersey	12 Castle Street, St. Helier,		100%	100%	General Investment
Limited		Jersey, JE2 3RT
GMS Jersey Holdco. 2	Jersey	12 Castle Street, St. Helier,		100%	100%	General Investment
Limited		Jersey, JE2 3RT
Offshore Holding Invt SA	Panama	Bloc Office Hub, Fifth Floor, Santa		100%	100%	Holding Company
		Maria Business District, Panama,
		Republic of Panama
Offshore Accommodation	Panama	Bloc Office Hub, Fifth Floor, Santa		100%	100%	Dormant
Invt SA		Maria Business District, Panama,
		Republic of Panama
Offshore Jack-up Invt SA	Panama	Bloc Office Hub, Fifth Floor, Santa		100%	100%	Owner of Barge “Kamikaze”
		Maria Business District, Panama,
		Republic of Panama
Offshore Structure Invt SA	Panama	Bloc Office Hub, Fifth Floor, Santa		100%	100%	Owner of Barge “Kikuyu”
		Maria Business District, Panama,
		Republic of Panama
Offshore Craft Invt SA	Panama	Bloc Office Hub, Fifth Floor, Santa		100%	100%	Owner of Barge “GMS
		Maria Business District, Panama,				Endeavour”
		Republic of Panama

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

FOR THE YEAR ENDED 31 DECEMBER 2023

91Annual Report 2023

Financial Statements

					Proportion of Ownership
					Interest
Name	Place of Registration	Registered Address		2023	2022	Type of Activity
Offshore Maritime Invt SA	Panama	Bloc Office Hub, Fifth Floor, Santa		100%	100%	Dormant
		Maria Business District, Panama,
		Republic of Panama
Offshore Tugboat Invt SA	Panama	Bloc Office Hub, Fifth Floor, Santa		100%	100%	Dormant
		Maria Business District, Panama,
		Republic of Panama
Offshore Boat Invt SA	Panama	Bloc Office Hub, Fifth Floor, Santa		100%	100%	Owner of Barge “Kawawa”
		Maria Business District, Panama,
		Republic of Panama
Offshore Kudeta	Panama	Bloc Office Hub, Fifth Floor, Santa		100%	100%	Owner of Barge “Kudeta”
Invt SA		Maria Business District, Panama,
		Republic of Panama
GMS Endurance	Panama	Bloc Office Hub, Fifth Floor, Santa		100%	100%	Owner of Barge “Endurance”
Invt SA		Maria Business District, Panama,
		Republic of Panama
GMS Enterprise	Panama	Bloc Office Hub, Fifth Floor, Santa		100%	100%	Owner of Barge “Enterprise”
Investment SA		Maria Business District, Panama,
		Republic of Panama
GMS Sharqi	Panama	Bloc Office Hub, Fifth Floor, Santa		100%	100%	Owner of Barge “Sharqi”
Investment SA		Maria Business District, Panama,
		Republic of Panama
GMS Scirocco	Panama	Bloc Office Hub, Fifth Floor, Santa		100%	100%	Owner of Barge “Scirocco”
Investment SA		Maria Business District, Panama,
		Republic of Panama
GMS Shamal	Panama	Bloc Office Hub, Fifth Floor, Santa		100%	100%	Owner of Barge “Shamal”
Investment SA		Maria Business District, Panama,
		Republic of Panama
GMS Keloa Invt SA	Panama	Bloc Office Hub, Fifth Floor, Santa		100%	100%	Owner of Barge “Keloa”
		Maria Business District, Panama,
		Republic of Panama
GMS Pepper Invt SA	Panama	Bloc Office Hub, Fifth Floor, Santa		100%	100%	Owner of Barge “Pepper”
		Maria Business District, Panama,
		Republic of Panama
GMS Evolution Invt SA	Panama	Bloc Office Hub, Fifth Floor, Santa		100%	100%	Owner of Barge “Evolution”
		Maria Business District, Panama,
		Republic of Panama
GMS Phoenix	Panama	Bloc Office Hub, Fifth Floor, Santa		100%	100%	Dormant
Investment SA		Maria Business District, Panama,
		Republic of Panama
Mena Marine Limited**	Cayman Islands	Ugland House, Grand Cayman,		0%	100%	General investment and
		KY1-1104, Cayman Islands,				trading
		P.O. Box 309
Gulf Marine Services	Singapore	1 Scotts Road, #21-07, Shaw Centre,		100%	100%	Operator of offshore barges
(Asia) Pte. Limited		Singapore, 228208
Gulf Marine Services	Qatar	22 Floor, Office 22, Tornado Tower,		100%	100%	Operator of offshore barges
(Asia) Pte. Limited –		Majilis Al Tawoon Street, P.O. Box
Qatar branch		2777	4, Doha, Qatar

* Held directly by Gulf Marine Services PLC.

** The subsidiary wound up on 29 December 2023.

92 Gulf Marine Services PLC

3 Material Accounting Policies continued

Basis of consolidation continued

The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of profit or loss and other

comprehensive income from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the results of subsidiaries to bring their accounting policies in line with those used by other

members of the Group. All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.

Non-controlling interests in subsidiaries are identified separately from the Group’s equity therein. The interests of non-controlling shareholders

are initially measured either at fair value or at the non-controlling interests’ proportionate share of the fair value of the acquiree’s identifiable

net assets. The choice of measurement basis is made on an acquisition-by-acquisition basis. Subsequent to acquisition, the carrying amount

of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests’ share of subsequent

changes in equity. Total comprehensive income is attributed to non-controlling interests even if this results in the non-controlling interests

having a deficit balance.

Changes in the Group’s interests in subsidiaries that do not result in a loss of control are accounted for as equity transactions. The carrying

amounts of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the

subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration

paid or received is recognised directly in equity and attributed to owners of the Group. Acquisitions of subsidiaries and businesses are

accounted for using the acquisition method. The consideration for each acquisition is measured at the aggregate of the fair values (at the

date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the

acquiree. Acquisition-related costs are recognised in profit or loss as incurred. Fair value is determined as the amount for which an asset

could be exchanged, or a liability transferred, between knowledgeable, willing parties in an arm’s length transaction.

The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 (2008) are

recognised at their fair value at the acquisition date.

When the Group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the aggregate of the fair

value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including

goodwill), and liabilities of the subsidiary and any non-controlling interests. Amounts previously recognised in other comprehensive income in

relation to the subsidiary are accounted for (i.e. reclassified to profit or loss or transferred directly to retained earnings) in the same manner as

would be required if the relevant assets or liabilities were disposed of. The fair value of any investment retained in the former subsidiary at the

date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under IFRS 9 Financial Instruments:

Recognition and Measurement or, when applicable, the cost on initial recognition of an investment in an associate or jointly controlled entity.

Revenue recognition

The Group recognises revenue from contracts with customers as follows:

• Charter revenue;

• Lease income;

• Revenue from messing and accommodation services;

• Manpower income;

• Maintenance income;

• Contract mobilisation revenue;

• Contract demobilisation revenue; and

• Sundry income.

Revenue is measured as the fair value of the consideration received or receivable for the provision of services in the ordinary course of

business, net of trade discounts, volume rebates, and sales taxes excluding amounts collected on behalf of third parties. Revenue is

recognised when control of the services is transferred to the customer.

Consequently, revenue for the provision of services is recognised either:

• Over time during the period that control incrementally transfers to the customer and the customer simultaneously receives and consumes

the benefits. The Group has applied the practical expedient and recognises revenue over time in accordance with IFRS 15 i.e. the amount

at which the Group has the right to invoice clients.

• Wholly at a single point in time when GMS has completed its performance obligation.

Revenue recognised over time

The Group’s activities that require revenue recognition over time includes the following performance obligation:

Performance obligation 1 – Charter revenue, contract mobilisation revenue, revenue from messing and accommodation

services, and manpower income

Chartering of vessels, mobilisations, messing and accommodation services and manpower income are considered to be a combined

performance obligation as they are not separately identifiable and the Group’s clients cannot benefit from these services on their own or

together with other readily available resources. This performance obligation, being the service element of client contracts, is separate from

the underlying lease component contained within client contracts which is recognised separately.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

FOR THE YEAR ENDED 31 DECEMBER 2023

93Annual Report 2023

Financial Statements

Revenue is recognised for certain mobilisation related reimbursable costs. Each reimbursable item and amount is stipulated in the Group’s

contract with the customer. Reimbursable costs are included in the performance obligation and are recognised as part of the transaction

price, because the Group is the primary obligor in the arrangement, has discretion in supplier selection and is involved in determining product

or service specifications.

Performance obligation 2 – Sundry income

Sundry income that relates only specifically to additional billable requirements of charter hire contracts are recognised over the duration of the

contract. For the component of sundry income that is not recognized over time, the performance obligation is explained below.

Revenue recognised at a point in time

The Group’s activities that require revenue recognition at a point in time include the following performance obligations.

Performance obligation 1 – Contract demobilisation revenue

Lump-sum fees received for equipment moves (and related costs) as part of demobilisations are recognised when the demobilisation has

occurred at a point in time.

Performance obligation 2 – Sundry income

Includes in Sundry income are handling charges, which are applied to costs paid by the Group and then recharged to the customer. The

revenue is recognised when the costs are recharged to customers as this is when the performance obligation is fulfilled and control has

passed to the customer.

Deferred and Accrued Revenue

Clients are typically billed on the last day of specific periods that are contractually agreed upon. Where there is delay in billing, accrued

revenue is recognised in trade and other receivables for any services rendered where clients have not yet been billed (see Note 9).

As noted above, lump sum payments are sometimes received at the outset of a contract for equipment moves or modifications. These lump

sum payments give rise to deferred revenue in trade and other payables (see Note 21).

Leases

The Group as lessee

The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a right-of-use asset and a

corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for certain short-term leases (defined as

leases with a lease term of 12 months or less) and leases of low value assets.

Low value assets have a low value purchase price when new, typically $5,000 or less, and include items such as tablets and personal

computers, small items of office furniture and telephones. For these leases, the Group recognises the lease payments as an operating

expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which

economic benefits from the leased assets are consumed. Leases of operating equipment linked to commercial contracts are recognised to

match the length of the contract even where the contract term is less than 12 months.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by

using the Group’s incremental borrowing rate. This is the rate that would be available on a loan with similar conditions to obtain an asset of a

similar value.

Lease payments included in the measurement of the lease liability comprise:

• Fixed lease payments (including in-substance fixed payments), less any lease incentives receivable;

• Variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date;

• The amount expected to be payable by the lessee under residual value guarantees;

• The exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and

• Payments of penalties for terminating the lease if the lease term reflects the exercise of an option to terminate the lease.

The lease liability is presented as a separate line in the consolidated statement of financial position.

The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective

interest method) and by reducing the carrying amount to reflect the lease payments made.

The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:

• The lease term has changed or there is a significant event or change in circumstances resulting in a change in the assessment of exercise

of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using a revised

discount rate.

• The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in

which cases the lease liability is remeasured by discounting the revised lease payments using an unchanged discount rate (unless the

lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is used).

• A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is

remeasured based on the lease term of the modified lease by discounting the revised lease payments using a revised discount rate at the

effective date of the modification.

94 Gulf Marine Services PLC

3 Material Accounting Policies continued

Leases continued

There were no such remeasurements made during the year (2022: nil).

The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the

commencement day, less any lease incentives received and any initial direct costs. They are subsequently measured at cost less

accumulated depreciation and impairment losses.

Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which it is located or restore

the underlying asset to the condition required by the terms and conditions of the lease, a provision is recognised and measured under IAS 37.

To the extent that the costs relate to a right-of-use asset, the costs are included in the related right-of-use asset, unless those costs are

incurred to produce inventories.

Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If a lease transfers ownership

of the underlying asset or the cost of the right-of-use asset reflects that the Group expects to exercise a purchase option, the related

right-of-use asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement date of the lease.

The right-of-use assets are presented as a separate line in the consolidated statement of financial position. The Group applies IAS 36 to

determine whether a right-of-use asset is impaired and accounts for any identified impairment loss as described in the ‘Property and

Equipment’ policy.

As a practical expedient, IFRS 16 permits a lessee not to separate non-lease components, and instead account for any lease and associated

non-lease components as a single arrangement. The Group has not used this practical expedient. For a contract that contains a lease

component and one or more additional lease or non-lease components, the Group allocates the consideration in the contract to each lease

component on the basis of the relative stand-alone price of the lease component and the aggregate stand-alone price of the non-

lease components.

The Group as a lessor

At inception or on modification of a contract that contains a lease component, the Group allocates the consideration in the contract to each

lease component on the basis of their relative stand- alone prices.

When the Group acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operating lease.

To classify each lease, the Group makes an overall assessment of whether the lease transfers substantially all of the risks and rewards

incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease. As part

of this assessment, the Group considers certain indicators such as whether the lease is for the major part of the economic life of the asset.

When the Group is an intermediate lessor, it accounts for its interests in the head lease and the sub-lease separately. It assesses the lease

classification of a sub-lease with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset. If a

head lease is a short-term lease to which the Group applies the exemption described above, then it classifies the sub-lease as an

operating lease.

The Group’s contracts with clients contain an underlying lease component separate to the service element. These leases are classified as

operating leases and the income is recognised on a straight line basis over the term of the lease.

The Group applies IFRS 15 to allocate consideration under each component based on its standalone selling price. The standalone selling

price of the lease component is estimated using a market assessment approach by taking the market rate, being the contract day rate and

deducting all other identifiable components, creating a residual amount deemed to be the lease element.

Property and equipment

Property and equipment is stated at cost which includes capitalised borrowing costs less accumulated depreciation and accumulated

impairment losses (if any). The cost of property and equipment is their purchase cost together with any incidental expenses of acquisition.

Subsequent expenditure incurred on vessels is capitalised where the expenditure gives rise to future economic benefits in excess of the

originally assessed standard of performance of the existing assets.

The costs of contractual equipment modifications or upgrades to vessels that are permanent in nature are capitalised and depreciated in

accordance with the Group’s fixed asset capitalisation policy. The costs of moving equipment while not under contract are expensed

as incurred.

Depreciation is recognised so as to write-off the cost of property and equipment less their estimated residual values over their useful lives,

using the straight-line method. The estimated residual values of vessels and related equipment are determined taking into consideration the

expected scrap value of the vessel, which is calculated based on the weight and the market rate of steel at the time of asset purchase.

If the price per unit of steel at the balance sheet date varies significantly from that on date of purchase, the residual value is reassessed to

reflect changes in market value.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

FOR THE YEAR ENDED 31 DECEMBER 2023

95Annual Report 2023

Financial Statements

The estimated useful lives used for this purpose are:

Vessels*	35 years
Vessel spares, fittings and other equipment*	3 – 20 years
Others**	3 – 5 years

* Depreciation of these assets is charged to cost of sales.

** Depreciation of these assets is charged to general and administrative expenses.

Taking into consideration independent professional advice, management considers the principal estimated useful lives of vessels for the

purpose of calculating depreciation to be 35 years from the date of construction of the vessel.

The estimated useful life depends on the type and nature of the vessel. The estimated useful lives, residual values and depreciation method

are reviewed at each year end, with the effect of any changes in estimate accounted for on a prospective basis.

The gain or loss arising on the disposal or retirement of an item of property and equipment is determined as the difference between the sale

proceeds and the carrying amount of the asset and is recognised within administrative expenses in the profit or loss. The depreciation charge

for the year is allocated between cost of sales and administrative expenses, depending on the usage of the respective assets.

Dry docking

Dry docking costs are costs of repairs and maintenance incurred on a vessel to ensure compliance with applicable regulations and to

maintain certification for vessels. The cost incurred for periodical dry docking or major overhauls of the vessels are identified as a separate

inherent component of the vessels. These costs depreciate on a straight-line basis over the period to the next anticipated dry docking being

approximately 30 months. Costs incurred outside of the dry docking period which relate to major works, overhaul/services, that would

normally be carried out during the dry docking, as well as surveys, inspections and third party maintenance of the vessels are initially treated

as capital work-in-progress (“CWIP”) of the specific vessel. Following the transfer of these balances to property and equipment, depreciation

commences at the date of completion of the survey. Costs associated with equipment failure are recognised in the profit and loss as incurred.

Capital work-in-progress

Properties and vessels under the course of construction, are carried at cost, less any recognised impairment loss. Cost includes professional

fees and, for qualifying assets, borrowing costs capitalised in accordance with the Group’s accounting policy. Depreciation of these assets,

on the same basis as other property assets, commences when the assets are ready for their intended use.

Impairment of tangible assets

At the end of each reporting period, the Group reviews the carrying amounts of its tangible assets to determine whether there is any

indication that those assets have suffered an impairment loss or impairment reversal.

If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).

When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the

cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets

are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which

a reasonable and consistent allocation basis can be identified. The Group also has separately identifiable equipment which are typically

interchangeable across vessels and where costs can be measured reliably. These assets are not included as part of the cash generating unit.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows

are discounted to their present value using a pre-tax discount rate. The discount rate reflects risk free rates of returns as well as specific

adjustments for country risk in the countries the Group operates in, adjusted for a Company specific risk premium, to determine an

appropriate discount rate.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the

asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.

When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised

estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been

determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is

recognised immediately in profit or loss.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take

a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are

substantially ready for their intended use or sale.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

96 Gulf Marine Services PLC

3 Material Accounting Policies continued

Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the

Group will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the

reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash

flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value

of money is material).

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is

recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

Employees’ end of service benefits

In accordance with Labour Laws of some of the countries in which we operate, the Group is required to provide for End of Service Benefits

for certain employees.

The only obligation of the Group with respect to end of service benefits is to make the specified lump-sum payments to employees, which

become payable when they leave the Group for reasons other than gross misconduct but may be paid earlier at the discretion of the Group.

The amount payable is calculated as a multiple of a pre-defined fraction of basic salary based on the number of full years of service.

To meet the requirement of the laws of the countries in which we operate, a provision is made for the full amount of end of service benefits

payable to qualifying employees up to the end of the reporting period. The provision relating to end of service benefits is disclosed as a

non-current liability. The provision has not been subject to a full actuarial valuation or discounted as the impact would not be material.

The actual payment is typically made in the year of cessation of employment of a qualifying employee but may be pre-paid. If the payment is

made in the year of cessation of employment, the payment for end of service benefit will be made as a lump-sum along with the full and final

settlement of the employee.

The total expense recognised in profit or loss of US$ 0.7 million (2022: US$ 0.3 million) (Note 20) represents the end of service benefit

provision made for employees in accordance with the labour laws of companies where we operate.

Foreign currencies

The Group’s consolidated financial statements are presented in US Dollars (US$), which is also the functional currency of the Company. All

amounts have been rounded to the nearest thousand, unless otherwise stated. For each entity, the Group determines the functional currency

and items included in the financial statements of each entity are measured using that functional currency.

In preparing the financial statements of the individual companies, transactions in currencies other than the entity’s functional currency (foreign

currencies) are recorded at the rates of exchange prevailing at the dates of the transactions.

At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date.

Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when

the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences are recognised in profit or loss in the period in which they arise, except for exchange differences on monetary items

receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur, which form part of the net

investment in a foreign operation, and which are recognised in the foreign currency translation reserve and recognised in profit or loss on

disposal of the net investment.

For the purpose of presenting consolidated financial information, the assets and liabilities of the Group’s subsidiaries are expressed in US$

using exchange rates prevailing at the end of the reporting period. Income and expense items are translated at the average exchange rates

for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the

transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity

(attributed to non-controlling interests as appropriate).

On the disposal of a foreign operation (i.e. a disposal of the Group’s entire interest in a foreign operation, or a disposal involving loss of control

over a subsidiary that includes a foreign operation, loss of joint control over a jointly controlled entity that includes a foreign operation, or loss

of significant influence over an associate that includes a foreign operation), all of the accumulated exchange differences in respect of that

operation attributable to the Group are reclassified to profit or loss. Any exchange differences that have previously been attributed to

non-controlling interests are derecognised, but they are not reclassified to profit or loss.

Adjusting items

Adjusting items are significant items of income or expense in cost of sales, general and administrative expenses, and net finance costs, which

individually or, if of a similar type, in aggregate, are relevant to an understanding of the Group’s underlying financial performance because of

their size, nature or incidence. Adjusting items together with an explanation as to why management consider them appropriate to adjust are

disclosed separately in Note 31. The Group believes that these items are useful to users of the Group’s consolidated financial statements in

helping them to understand the underlying business performance through alternate performance measures that are used to derive the

Group’s principal non-GAAP measures of adjusted Earnings Before Interest, Taxes, Depreciation, and Amortisation (“EBITDA”), adjusted

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

FOR THE YEAR ENDED 31 DECEMBER 2023

97Annual Report 2023

Financial Statements

EBITDA margin, adjusted gross profit/(loss), adjusted operating profit/(loss), adjusted net profit/(loss) and adjusted diluted earnings/(loss) per

share, all of which are before the impact of adjusting items and which are reconciled from operating profit/(loss), profit/(loss) before taxation

and diluted earnings/(loss) per share. Adjusting items include but are not limited to reversal of impairment credits/(impairment charges),

restructuring costs, exceptional legal & tax costs, and non-operational finance related costs.

Taxation

Income tax expense represents the sum of the tax currently payable.

Current tax

The tax currently payable is based on taxable profit for each subsidiary based on the jurisdiction in which it operates. Current tax comprises

the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in

respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or

received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the

reporting date.

Deferred tax

Deferred tax is recognised on temporary differences between the carrying amounts of the assets and liabilities in the consolidated financial

statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all

taxable temporary differences.

Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will

be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised

if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and

liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in

joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary

difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable

that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised based on

tax laws and rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax is charged or credited in the profit

or loss, except when it relates to items charged or credited in other comprehensive income, in which case the deferred tax is also dealt with

in other comprehensive income.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set-off current tax assets against current tax liabilities

and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities

on a net basis.

Share based payments

Long term incentive plans

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 Group’s share price at the date of grant. The fair value measurement reflects all

market based vesting conditions. 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.

Financial assets

Financial assets including derivatives are classified, at initial recognition, and subsequently measured at amortised cost, fair value through

other comprehensive income, or fair value through profit or loss.

The Group has the following financial assets: cash and cash equivalents and trade and other receivables (excluding prepayments and

advances to suppliers). These financial assets are classified at amortised cost.

The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the

Group’s business model for managing them. With the exception of trade receivables that do not contain a significant financing component or

for which the Group has applied the practical expedient, the Group initially measures a financial asset at its fair value plus, in the case of a

financial asset not at fair value through profit or loss, transaction costs.

Trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient are

measured at the transaction price determined under IFRS 15.

98 Gulf Marine Services PLC

3 Material Accounting Policies continued

Financial assets continued

In order for a financial asset to be classified and measured at amortised cost or fair value through other comprehensive income (“OCI”),

it needs to give rise to cash flows that are solely payments of principal and interest (“SPPI”) on the principal amount outstanding. This

assessment is referred to as the SPPI test and is performed at an instrument level.

The Group’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows.

The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both.

Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market

place (regular way trades) are recognised on the trade date, i.e. the date that the Group commits to purchase or sell the asset.

The Group measures financial assets at amortised cost if both of the following conditions are met:

• the financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows; and

• the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on

the principal amount outstanding.

As the business model of the Group is to hold financial assets to collect contractual cashflows, they are held at amortised cost.

Financial assets at amortised cost are subsequently measured using the effective interest rate (“EIR”) method and are subject to impairment.

Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired.

Cash and cash equivalents

Cash and cash equivalents include balances held with banks with original maturities of three months or less and cash on hand.

Trade receivables

Trade receivables represent the Group’s right to an amount of consideration that is unconditional (i.e. only the passage of time is required

before the payment of the consideration is due).

Impairment of financial assets

The Group recognises an allowance for expected credit losses (“ECLs”) for all financial assets that are measured at amortised cost or debt

instruments measured at fair value through other comprehensive income. ECLs are based on the difference between the contractual cash

flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at the EIR.

For trade and other receivables and contract assets, the Group applies a simplified approach.

For trade receivables and contract assets, the Group recognises loss allowances based on lifetime ECLs at each reporting date.

The Group has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors

specific to the debtors and the economic environment.

The provision rates are grouped together based on days due for various customer segments that have similar loss patterns (geography,

customer type and rating and coverage by letters of credit and other forms of credit insurance).

The Group had an expected credit loss provision of US$ 2.2 million as at 31 December 2023 (31 December 2022: US$ 2.0 million), refer to

Note 9 for further details.

The Group considers a financial asset to move into stage 3 and be in default when 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.

Objective evidence of impairment could include:

• significant financial difficulty of the issuer or counterparty; or

• default or delinquency in interest or principal payments; or

• it becoming probable that the borrower will enter bankruptcy or financial reorganisation.

A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows.

Derecognition of financial assets

The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the

financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains

substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest

in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership

of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the

proceeds received.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

FOR THE YEAR ENDED 31 DECEMBER 2023

99Annual Report 2023

Financial Statements

Financial Liabilities and Equity Instruments

Classification as debt or equity

Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual

arrangements and the definitions of a financial liability and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity

instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.

Financial liabilities

The Group’s financial liabilities include trade and other payables, derivatives, lease liabilities and bank borrowings. All financial liabilities are

classified at amortised cost unless they can be designated as at Fair Value Through Profit or Loss (“FVTPL”).

Derivatives that are not designated and effective as hedging instruments are classified as financial liabilities and are held at FVTPL.

Derivatives held at FVTPL are initially recognised at fair value at the date a derivative contract is entered into and are subsequently

remeasured to their fair value at the end of each reporting period with the resulting gain or loss recognised in profit or loss immediately.

Trade and other payables, bank borrowings, lease liabilities, amounts due to related parties and contract liabilities are classified at amortised

cost and are initially measured at fair value, net of transaction costs. They are subsequently measured at amortised cost using the EIR

method, with interest expense recognised based on its 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.

The Group’s loan facility is a floating rate financial liability as interest rates are based on variable SOFR rates. The Group’s accounting policy is

to treat the loan as a floating rate financial liability and the Group performs periodic estimations to reflect movements in market interest rates

and alters the effective interest rate accordingly.

Derecognition of financial liabilities

The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or they expire. The

difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in the

consolidated statement of profit or loss.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing

liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition

of a new liability. The difference between the carrying amount of the financial liability derecognised and the consideration paid is recognised

in the consolidated statement of profit or loss and other comprehensive income.

When an existing financial liability is replaced by another on terms which are not substantially modified, the exchange is deemed to be a

continuation of the existing liability and the financial liability is not derecognised.

Derivative financial instruments

The Group uses derivative financial instruments, such as interest rate swaps, to hedge its interest rate risks. Such derivative financial

instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at

fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.

For the purpose of hedge accounting, hedges are classified as cash flow hedges when hedging the exposure to variability in cash flows that

is either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction or the foreign

currency risk in an unrecognised firm commitment.

At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which it wishes to apply

hedge accounting and the risk management objective and strategy for undertaking the hedge.

The documentation includes identification of the hedging instrument, the hedged item, the nature of the risk being hedged and how the

Group will assess whether the hedging relationship meets the hedge effectiveness requirements (including the analysis of sources of hedge

ineffectiveness and how the hedge ratio is determined).

A hedging relationship qualifies for hedge accounting if it meets all of the following effectiveness requirements:

• there is ‘an economic relationship’ between the hedged item and the hedging instrument;

• the effect of credit risk does not ‘dominate the value changes’ that result from that economic relationship;

• the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the Group actually

hedges and the quantity of the hedging instrument that the Group actually uses to hedge that quantity of hedged item .

100 Gulf Marine Services PLC

3 Material Accounting Policies continued

Financial liabilities and equity instruments continued

Derivative financial instruments continued

Hedges that meet all the qualifying criteria for hedge accounting are accounted for as described below:

Cash flow hedges

The effective portion of the gain or loss on the hedging instrument is recognised in other comprehensive income (“OCI”) and accumulated in

the cash flow hedge reserve, while any ineffective portion is recognised immediately in the consolidated statement of profit or loss and other

comprehensive income. The cash flow hedge reserve is adjusted to the lower of the cumulative gain or loss on the hedging instrument and

the cumulative change in fair value of the hedged item.

The ineffective portion relating for cash flow hedges are recognised in finance expenses in the profit or loss.

The Group designates interest rate swaps (“IRS”) as hedging instruments. The Group designates the change in fair value of the entire

derivative contracts in its cash flow hedge relationships.

For cash flow hedges, the amount accumulated in OCI is reclassified to profit or loss as a reclassification adjustment in the same period or

periods during which the hedged cash flows affect profit or loss. The amount remaining in the cashflow hedge reserve is reclassified to profit

or loss as reclassification adjustments in the same period or periods during which the hedged expected future cashflows affected profit or

loss. The Group reclassify amounts remaining in the cashflow hedge reserve on a time apportionments basis.

If cash flow hedge accounting is discontinued, the amount that has been accumulated in OCI must remain in accumulated OCI if the hedged

future cash flows are still expected to occur. Otherwise, the amount will be immediately reclassified to profit or loss as a reclassification

adjustment. After discontinuation, once the hedged cash flow occurs, any amount remaining in accumulated OCI must be accounted for

depending on the nature of the underlying transaction as described above.

Warrants

The Group measures the warrants issued at fair value with changes in fair value recognised in the profit or loss.

4 Key sources of Estimation Uncertainty and Critical Accounting Judgements

In the application of the Group’s accounting policies, which are described in Note 3, 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.

In applying the Group’s accounting policies during the year, there was one critical accounting judgement relating to a subsidiary of the Group

that received a tax assessment from the Saudi tax authorities (ZATCA) for an amount related to the transfer pricing of our inter-group

bareboat agreement. While the Directors, guided by the Group’s tax advisors, believe that the Group has complied with the relevant tax

legislation and a zero balance is due, a provision of US$ 0.5 million is recognised for potential outcome in an attempt to reach an amicable

solution. Further details of the tax assessment are disclosed in Note 8.

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:

Impairment and reversal of previous impairment of property and equipment

The Group obtained an independent valuation of its vessels as at 31 December 2023 for the purpose of its banking covenant compliance

requirements. However, consistent with prior years, management does not consider these valuations to represent a reliable estimate of the

fair value for the purpose of assessing the recoverable value of the Group’s vessels, noting that there have been limited, if any, “willing buyer

and willing seller” transactions of similar vessels in the current offshore vessel market on which such values could reliably be based. Due to

these inherent limitations, management concluded that recoverable amount should be based on value in use.

Management carried out an impairment assessment of property and equipment for year ended 31 December 2023. Following this

assessment management determined that the recoverable amounts of the cash generating units to which items of property and equipment

were allocated, being vessels and related assets, were most sensitive to future day rates, vessel utilisation and discount rate. It is reasonably

possible that changes to these assumptions within the next financial year could require a material adjustment of the carrying amount of the

Group’s vessels.

Management would not expect an assumption change of more than 10% in aggregate for the entire fleet within the next financial year, and

accordingly, believes that a 10% sensitivity to day rates and utilisation is appropriate. Further, for discount rate, management would not

expect an assumption change of more than 1% and accordingly, believes that a 1% sensitivity to discount rate is appropriate.

As at 31 December 2023, the total carrying amount of the property and equipment, drydocking expenditure, and right of use assets subject

to estimation uncertainty was US$ 621.0 million (2022: US$ 605.3 million). Refer to Note 5 for further details including sensitivity analysis.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

FOR THE YEAR ENDED 31 DECEMBER 2023

101Annual Report 2023

Financial Statements

Impairment of financial assets

The Group recognises an allowance for expected credit losses (“ECLs”) for all financial assets that are measured at amortised cost or debt

instruments measured at fair value through other comprehensive income. ECLs are based on the difference between the contractual cash

flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at the EIR.

Management carried out an impairment assessment of trade receivables and contract assets for the year ended 31 December 2023.

Following this assessment management considered the following criteria for impairment:

Objective evidence of impairment could include:

• significant financial difficulty of the issuer or counterparty; or

• default or delinquency in interest or principal payments; or

• it becoming probable that the borrower will enter bankruptcy or financial reorganisation.

A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows.

Management concluded that the Group had an expected credit loss provision expense of US$ 0.2 million as at 31 December 2023

(31 December 2022: US$ 2.0 million), refer to Notes 9 for further details.

Fair valuation of Warrants

Management commissioned an independent valuation expert to measure the fair value of the warrants, which was determined using Monte

Carlo option-pricing model. The simulation considers sensitivity by building models of possible results by substituting a range of values. The

increase in fair value of the warrants is primarily due to increase in share price and its volatility. A 10% change in share price will increase or

decrease the valuation by US$ 0.2 million.

5 Property and equipment

		Capital	Vessel spares,
		work-in-	fitting and other
	Vessels	progress	equipment	Others	Total
	US$’000	US$’000	US$’000	US$’000	US$’000
Cost
At 1 January 2022	896,871	5,042	60,234	1,967	964,114
Additions	–	3,336	–	–	3,336
Transfers	1,329	(1,612)	–	283	–
At 31 December 2022	898,200	6,766	60,234	2,250	9 6 7, 4 50
Additions	–	4,326	–	–	4,326
Transfers	–	(523)	523	–	–
At 31 December 2023	898,200	10,569	60,757	2,250	971,776

		Capital	Vessel spares,
		work-in-	fitting and other
	Vessels	progress	equipment	Others	Total
	US$’000	US$’000	US$’000	US$’000	US$’000
Accumulated depreciation and impairment
At 1 January 2022	335,938	2,845	18,018	1,787	358,588
Depreciation expense (Note 36)	20,365	–	3,201	129	23,695
Impairment charge	13,192	–	–	–	13,192
Reversal of impairment	(20,980)	–	–	–	(20,980)
At 31 December 2022	348,515	2,845	21,219	1,916	374,495
Depreciation expense (Note 36)	20,900	–	3,252	145	24,297
Impairment charge	3,565	–	–	–	3,565
Reversal of impairment	(36,993)	–	–	–	(36,993)
At 31 December 2023	335,987	2,845	24,471	2,061	365,364
Carrying amount
At 31 December 2023	562,213	7,724	36,286	189	606,412
At 31 December 2022	549,685	3,921	39,015	334	592,955

102 Gulf Marine Services PLC

5 Property and equipment continued

Depreciation amounting to US$ 24.3 million (2022: US$ 23.7 million) has been charged to the profit and loss, of which US$ 24.2 million

(2022: US$ 23.6 million) was allocated to cost of sales (Note 31). The remaining balance of the depreciation charge is included in general and

administrative expenses (Note 31).

Vessels with a total net book value of US$ 562.2 million (2022: US$ 549.7 million), have been mortgaged as security for the loans extended by

the Group’s banking syndicate (Note 22).

Impairment

In accordance with the requirements of IAS 36 – Impairment of Assets, the Group assesses at each reporting period if there is any indication

an additional impairment would need to be recognised for its vessels and related assets, or if the impairment loss recognised in prior periods

no longer exists or had decreased in quantum. Such indicators can be from either internal or external sources. In circumstances in which any

indicators of impairment or impairment reversal are identified, the Group performs a formal impairment assessment to evaluate the carrying

amounts of the Group’s vessels and their related assets, by comparing against the recoverable amount to identify any impairments or

reversals. The recoverable amount is the higher of the vessels and related assets’ fair value less costs to sell and value in use.

Based on the impairment assessment reviews conducted in previous years, the Group recognised impairment losses of US$ 59.1 million and

US$ 87.2 million in fiscal years 2019 and 2020 respectively. As conditions improved, including day rates, utilization, and market outlook, the

historical impairment losses of US$ 14.9 million and US$ 21.0 million on various vessels were subsequently reversed in fiscal years 2021 and

2022, respectively. During 2022, an additional impairment loss of US$ 13.2 million was also recognised on certain vessels, primarily due to

higher discount rate resulting in a net impairment reversal of US$ 7.8 million.

As at 31 December 2023, and in line with IAS 36 requirements, management concluded that a formal impairment assessment was required.

Factors considered by management included favourable indicators, including an improvement in utilization, day rates, an increase in market

values of vessels and decrease in interest rate, and unfavourable indicators including the market capitalization of the Group remaining below

the book value of the Group’s equity.

The Group has again obtained an independent valuation of its vessels as at 31 December 2023 for the purpose of its banking covenant

compliance requirements. However, consistent with prior years, management does not consider these valuations to represent a reliable

estimate of the fair value for the purpose of assessing the recoverable value of the Group’s vessels, noting that there have been limited, if any,

“willing buyer and willing seller” transactions of similar vessels in the current offshore vessel market on which such values could reliably be

based. Due to these inherent limitations, management has again concluded that recoverable amount should be based on value in use.

The impairment review was performed for each cash-generating unit, by identifying the value in use of each vessel and of spares fittings,

capitalised dry-docking expenditure and right-of-use assets relating to operating equipment used on the fleet, based on management’s

projections of future utilisation, day rates and associated cash flows.

The projection of cash flows related to vessels and their related assets is complex and requires the use of a number of estimates, the primary

ones being future day rates, vessel utilisation and discount rate.

In estimating the value in use, management estimated the future cash inflows and outflows to be derived from continuing use of each vessel

and its related assets for the next four years based on its latest forecasts. The terminal value cash flows (i.e., those beyond the 4-year period)

were estimated based on terminal value mid-cycle day rates and utilisation levels calculated by looking back as far as 2014, when the market

was at the top of the cycle through to 2022 levels as the industry starts to emerge out of the bottom of the cycle, adjusted for anomalies. The

terminal value cash flow assumptions are applied till the end of estimated useful economic life of each vessel, which is consistent with prior

year. Such long-term forecasts also took account of the outlook for each vessel having regard to their specifications relative to expected

customer requirements and about broader long-term trends including climate change.

The near-term assumptions used to derive future cash flows reflect contracted rates, where applicable, and thereafter the market recovery

from increased activity in Self Elevated Support Vessels (SESV) market. Though the Group continues to operate in the North Sea, its core

market in the long term is expected to remain in the Arabian Peninsula region which, in turn, is expected to continue to benefit from the low

production costs for oil and gas in the region, the current appetite of National Oil Companies (“NOCs”) to increase production and the reliance

the local governments have on revenues derived from oil and gas.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate. The discount

rate of 12.93% (2022: 13.58%) is computed on the basis of 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. The cost of debt is based on the Group’s actual cost of debt and the

effective cost of debt reported by the peer group as at 31 December 2023. The weighted average is computed based on the industry

capital structure.

The impairment review led to the recognition of a net impairment reversal of US$ 33.43 million. The key reason for the reversal is further

improvement in general market conditions compared to prior year and a decrease in discount rate from 13.58% to 12.93% predominantly due

to reduction in the cost of equity of the Group.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

FOR THE YEAR ENDED 31 DECEMBER 2023

103Annual Report 2023

Financial Statements

In accordance with the Companies Act 2006, section 841(4), the following has been considered:

a) the Directors have considered the value of some/all of the fixed assets of the Group without revaluing them; and

b) the Directors are satisfied that the aggregate value of those assets are not less than the aggregate amount at which they were stated in

the Group’s accounts.

Details of the impairment reversal by cash-generating unit, along with the associated recoverable amount reflecting its value in use, are

provided below:

	Impairment		Impairment
	reversal/	Recoverable	reversal/	Recoverable
	(Impairment)	amount	(Impairment)	amount
	2023	2023	2022	2022
Cash Generating Unit (CGUs)	US$’000	US$’000	US$’000	US$’000
E-Class – 1	12,414	94,441	1,820	66,933
E-Class – 2	(3,565)	62,481	(2,691)	66,823
E-Class – 3	907	79,985	(941)	73,269
E-Class – 4	6,584	88,582	5,131	85,592
E-class	16,340	325,489	3,319	292,617
S-Class – 1	4,462	61,092	(4,631)	53,923
S-Class – 2	–	67,067	–	56,398
S-Class – 3	–	68,787	–	58,865
S-class	4,462	196,946	(4,631)	169,186
K-Class – 1	1,773	16,264	(1,984)	15,475
K-Class – 2	1,102	17,0 33	3,333	16,874
K-Class – 3	2,025	18,353	2,880	16,059
K-Class – 4	4,464	16,268	(19)	12,678
K-Class – 5	1,321	22,047	7, 816	21,519
K-Class – 6	1,941	51,075	(2,926)	51,139
K-class	12,626	141,040	9,100	133,744
Total	33,428	663,475	7,788	595,547

The below table compares the long-term (Terminal value) day rate and utilisation assumptions used to forecast future cash flows from 2028

for the remainder of each vessel’s useful economic life against those secured for 2024:

	Day rate change %	Utilisation change %
Vessels class	on 2024 levels	on 2024 levels
E-Class CGUs	30%	(13%)
S-Class CGUs	(4%)	3%
K-Class CGUs	(9%)	(16%)

The below table compares the long-term day rate and utilisation assumptions used to forecast future cash flows during the year ended

31 December 2023 against the Group’s long-term assumptions in the impairment assessment performed as at 31 December 2022:

	Day rate change %	Utilisation change %
Vessels class	on 2023 levels	on 2023 levels
E-Class CGUs	–	–
S-Class CGUs	–	–
K-Class CGUs	–	–

The impairment reversal recognised on the Group’s K-Class vessels primarily reflects an increase in short-term forecast day rates and

utilisation, as the Group experiences increased demand in a recovering market. When reviewing the longer-term assumptions, the Group has

assumed a lower day rate and utilisation for terminal values to reflect higher competition in the market for smaller vessels.

The net impairment reversal recognised on E-Class vessels reflect further increases in short-term assumptions on day rates and utilisation

relative to the Group’s previous forecasts. The forecast of 30% increase in day rates relative to 2024 reflects improving market conditions

coupled with a limited supply of vessels with the capabilities of the E-Class such as their large crane capacities and superior leg length. As

these vessels are the most capable of all the vessels in the fleet it is anticipated they will be able to demand higher day rates and utilization

going forward.

The net impairment reversal recognised on the Group’s S-Class vessel primarily reflects an increase in short-term forecast day rates and

utilisation, as the Group experiences increased demand in a recovering market.

104 Gulf Marine Services PLC

5 Property and equipment continued

Impairment continued

Key assumption sensitivities

The Group has conducted an analysis of the sensitivity of the impairment test to reasonable possible changes in the key assumptions

(long-term day rates, utilisation and pre-tax discount rates) used to determine the recoverable amount for each vessel as follows:

Day rates

	Day rates higher by 10%		Day rates lower by 10%
	Impact	Number of	Impact	Number of
	(in US$ million)	vessels impacted	(in US$ million)	vessels impacted
	(Impairment)/		(Impairment)/
	impairment		impairment
Vessels class	reversal of*		reversal of*
E-Class CGUs	38.0	6	(15.0)	3
S-Class CGUs	4.5	–	(2.6)	1
K-Class CGUs	28.1	2	(17.1)	6
Total fleet	70.6	8	(34.7)	10

* This reversal of impairment/(impairment charge) is calculated on carrying values before the adjustment for impairment reversals in 2023.

The total recoverable amounts of the Group’s vessels as at 31 December 2023 would have been US$ 766.8 million under the increased day

rates sensitivity and US$ 552.3 million for the reduced day rate sensitivity.

Utilisation

	Utilisation higher by 10%		Utilisation lower by 10%
	Impact	Number of	Impact	Number of
	(in US$ million)	vessels impacted	(in US$ million)	vessels impacted
	(Impairment)/		(Impairment)/
	impairment		impairment
Vessels class	reversal of*		reversal of*
E-Class CGUs	31.1	2	(15.0)	3
S-Class CGUs	4.5	–	(2.6)	1
K-Class CGUs	22.2	6	(17.1)	6
Total fleet	57.8	8	(34.7)	10

* This reversal of impairment/(impairment charge) is calculated on carrying values before the adjustment for impairment reversals in 2023.

The total recoverable amounts of the Group’s vessels as at 31 December 2023 would have been US$ 726.9 million under the increased

utilisation sensitivity and US$ 552.3 million for the reduced utilisation sensitivity.

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.

Discount rate

An additional sensitivity analysis was conducted by adjusting the pre-tax discount rate upwards and downwards by 100 basis points (1%).

Given that the change in the discount rate from the previous year is less than 100 basis points, such sensitivity was deemed appropriate for

this analysis.

		Discount rate higher by 1%		Discount rate lower by 1%
	Impact	Number of	Impact	Number of
	(in US$ million)	vessels impacted	(in US$ million)	vessels impacted
	(Impairment)/		(Impairment)/
	impairment		impairment
Vessels class	reversal of*		reversal of*
E-Class CGUs	6.3	2	27.7	2
S-Class CGUs	3.7	1	4.5	–
K-Class CGUs	6.0	6	16.7	6
Total fleet	16.0	9	48.9	8

* This (impairment charge)/impairment reversal is calculated on carrying values before the adjustment for impairment reversals in 2023.

The total recoverable amounts of the vessels as at 31 December 2023 would have been US$ 707.3 million under the reduced discount rate

sensitivity and US$ 624.4 million for the increased discount rate sensitivity.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

FOR THE YEAR ENDED 31 DECEMBER 2023

105Annual Report 2023

Financial Statements

6 Dry docking expenditure

The movement in dry docking expenditure is summarised as follows:

	2023	2022
	US$’000	US$’000
At 1 January	8,931	8,799
Expenditure incurred during the year	6,960	5,745
Amortised during the year (Note 36)	(4,687)	(5,613)
At 31 December	11,204	8,931

7 Right-of-use assets

		Communications		Operating
	Buildings	equipment		equipment		Total
	US$’000	US$’000		US$’000		US$’000
Cost
At 1 January 2022	2,262	251	7,56	0		10,073
Additions	186	–	2,936			3,122
At 31 December 2022	2,448	251	10,496			13,195
Additions	519	894	1,818			3,231
Derecognised	–	–	(567)			(567)
At 31 December 2023	2,967	1,145	11,747			15,859
Accumulated depreciation
At 1 January 2022	1,448	173	5,568		7,18	9
Depreciation for the year	419	78	2,138		2,635
At 31 December 2022	1,867	251	0 6	7,7	9,824
Depreciation for the year	574	106	2,508		3,18	8
Derecognised	–	–	(500)			(500)
At 31 December 2023	2,441	357	9,714			12,512
Carrying amount
At 31 December 2023	526	788	2,033			3,347
At 31 December 2022	581	–	2,790			3,371

The consolidated statement of profit or loss and other comprehensive income includes the following amounts relating to leases.

	2023	2022
	US$’000	US$’000
Depreciation of right of use assets (Note 36)	3,188	2,635
Expense relating to short term leases or leases of low value assets (Note 36)	228	965
Lease charges included in operating activities	3,416	3,600
Interest on lease liabilities (Note 35)	245	170
Lease charges included in profit before tax	3,661	3,770

The total cash outflow for leases amounted to US$ 3.8 million for the year ended 31 December 2023 (2022: US$ 3.7 million).

106 Gulf Marine Services PLC

8 Taxation charge for the year

Tax is calculated at the rates prevailing in the respective jurisdictions in which the Group operates. The overall effective rate is the aggregate

of taxes paid in jurisdictions where income is subject to tax (being principally Qatar, the United Kingdom, and Saudi Arabia), divided by the

Group’s profit/(loss).

	2023	2022
	US$’000	US$’000
Profit from operations before tax	44,930	27,126
Tax at the UK corporation tax rate of 23.5% (2022: 19%)	10,568	5,154
Effect of different tax rates in overseas jurisdictions	(13,461)	(6,10	6)
Expense not deductible for tax purposes	2,413		20
Overseas taxes not based on profit	1,714		861
Increase in unrecognised deferred tax	1,113		1,242
Prior year tax adjustments	630		584
Income not taxable for tax purposes	(115)		(31)
Total tax charge	2,862		1,724

During the year, the tax rates on profits were 10% in Qatar (2022: 10%), 23.52% in the United Kingdom (2022: 19%) and 20% in Saudi Arabia

(2022: 20%) applicable to the portion of profits generated from respective jurisdictions. The Group also incurred 2.5% Zakat tax (an obligatory

tax to donate 2.5% of retained earnings each year) on the portion of profits generated in Saudi Arabia (2022: 2.5%).

The Group incurs 5% withholding tax on remittances from Saudi Arabia (2022: 5%). The withholding tax included in the current tax charge

amounted to US$ 1.6 million (2022: US$ 0.9 million).

The Group expects the overall effective tax rate in the future to vary according to local tax law changes in jurisdictions which incur taxes,

applicability of corporate tax in the UAE, as well as any changes to the share of Group’s profits or losses which arise in tax paying jurisdictions.

At the consolidated statement of financial position date, the Group has unused tax losses of US$ 30.2 million (2022: US$ 26.4 million), arising

from UK operations, available for offset against future profits with an indefinite expiry period. In line with the prior year, the current year

assessment relates to the E-Class vessel which is the only vessel expected to operate in the UK for the foreseeable future. Based on the

projections of this remaining vessel’s activity, there are insufficient future taxable profits to justify the recognition of a deferred tax asset.

On this basis no deferred tax asset has been recognised in the current or prior year, the unrecognised deferred tax asset calculated at the

substantively enacted rate in the UK of 25% amounts to US$ 7.6 million as at 31 December 2023 (2022: US$ 6.6 million).

The Group accrues for estimated penalties, if any, with respect to any open tax related matters. Any changes to such estimates relating to

prior periods are presented in the “prior year tax adjustments” above.

Factors affecting current and future tax charges

United Kingdom (UK)

In the Spring Budget 2021, the UK Government announced that from 01 April 2023 the corporation tax rate would increase to 25%. Deferred

taxes at the balance sheet date have been measured using these enacted tax rates as disclosed in these consolidated financial statements.

The future effective tax rate of the Group could be impacted by changes in tax law, primarily increasing corporation tax rates and increasing

withholding taxes applicable to the Group.

United Arab Emirates (UAE)

On 9 December 2022, the UAE Ministry of Finance released Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and

Businesses (Corporate Tax Law or the Law) to enact a Federal Corporate Tax regime in the UAE. This Law has become effective for

accounting periods beginning on or after 1 June 2023.

The Group’s UAE operations will be subject to a 9% corporation tax rate with effect from 01 January 2024. A rate of 0% will apply to taxable

income not exceeding a particular threshold to be prescribed by way of a Cabinet Decision (expected to be AED 375,000 based on

information released by the UAE Ministry of Finance).

GMS has considered deferred tax implications in the preparation of these consolidated financial statements in respect of property and

equipment and potential timing differences that could give rise to a deferred tax liability. There are currently no UAE tax laws that would

impact treatment of depreciation and amortisation of property, plant and equipment, that would result in such a timing difference. Hence,

management has concluded that no adjustments to these consolidated financial statements are necessary.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

FOR THE YEAR ENDED 31 DECEMBER 2023

107Annual Report 2023

Financial Statements

Kingdom of Saudi Arabia

A subsidiary of the Group received a tax assessment from the Saudi tax authorities (ZATCA) for an amount of US$ 7.3 million related to the

transfer pricing of inter-group bareboat agreement, for the period from 2017 to 2019. The Group has currently filed an appeal with the Tax

Violations and Disputes Appellate Committee (TVDAC) against the assessment raised by ZATCA. The Directors have considered the claim,

including consideration of third-party tax advice received. Noticing the claim retrospectively applied from 2010 in respect of a law which was

issued in 2019, which applied a “tested party” assessment different to that supported by the Group tax advisors and using an approach

which the Directors (supported by their tax advisors) consider to be inconsistent with the principles set out in the KSA transfer price

guidelines, the Directors believe that the Group has complied with the relevant tax legislation. Nevertheless, to reach an amicable solution,

the Group has also filed a settlement application with the Alternate Dispute Resolution Committee (ADRC), which subsequently requested a

settlement offer. The Directors have responded by proposing a settlement of US$ 0.5 million and are currently awaiting a response from the

ADRC. On that basis, a provision of US$ 0.5 million has also been recognised in these consolidated financial statements.

9 Trade receivables

	2023	2022
	US$’000	US$’000
Trade receivables (gross of allowances)	32,872	35,198
Less: Allowance for expected credit losses	(2,226)	(2,019)
Trade receivables	30,646	33,179

Gross trade receivables, amounting to US$ 32.9 million (2022: US$ 35.2 million), have been assigned as security against the loans extended

by the Group’s banking syndicate (Note 22).

Trade receivables disclosed above are measured at amortised cost. Credit periods are granted on a client by client basis. The Group does

not hold any collateral or other credit enhancements over any of its trade receivables nor does it have a legal right of offset against any

amounts owed by the Group to the counterparty. For details of the calculation of expected credit losses, refer to Note 3.

Impairment has been considered for accrued revenue but is not considered material.

The movement in the allowance for ECL and bad and doubtful receivables during the year was as follows:

	2023	2022
	US$’000	US$’000
At 1 January	2,019	195
Net charge of expected credit losses (Note 36)	207	1,824
At 31 December	2,226	2,019

Trade receivables are considered past due once they have passed their contracted due date. The net charge of expected credit loss provision

during the year was US$ 0.2 million (2022: US$ 1.8 million).

Management carried out an impairment assessment of trade receivables for the year ended 31 December 2023 and concluded that the

Group had an expected credit loss provision of US$ 2.2 million as at 31 December 2023 (31 December 2022: US$ 2.0 million).

During January 2023, a customer entered administration. The Group had traded with this customer in the past and accordingly, had recorded

an allowance for impairment amounting to US$ 1.9 million in the previous year.

Included in the Group’s trade receivables balance are receivables with a gross amount of US$ 4.1 million (2022: US$ 0.8 million) which are

past due for 30 days or more at the reporting date. At 31 December, the analysis of Trade receivables is as follows:

				Number of days past due
	Current		< 30 days	31-60 days	61-90 days	91-120 days	> 120 days	Total
	US$’000		US’000	US’000	US’000	US’000	US’000	US’000
Trade receivables	28,714		26	–	–	–	4,132	32,872
Less: Allowance for expected
credit losses	(110)		–	–	–	–	(2,116)	(2,226)
Net trade receivables 2023	28,604		26	–	–	–	2,016	30,646
Trade receivables	30,16		6	4,216	–	–	30	786	35,198
Less: Allowance for expected
credit losses	(2,003)		(10)	–	–	–	(6)	(2,019)
Net trade receivables 2022	28	,16 3	4,206	–	–	30	780	3 3,179

Seven customers (2022: nine) account for 99% (2022: 99%) of the total trade receivables balance (see revenue by segment information in

Note 30). When assessing credit risk, ongoing assessments of customer credit and liquidity positions are performed.

108 Gulf Marine Services PLC

10 Prepayments, advances and other receivables

	2023	2022
	US$’000	US$’000
Accrued revenue	2,656	1,303
Prepayments	3,557	3,137
Deposits*	86	85
Advances to suppliers	1,758	3,197
At 31 December	8,057	7,7	2 2

* Deposits include bank guarantee deposits of US$ 39K (2022: US$ 39K). Guarantee deposits are paid by the Group for employee work visas under UAE labour laws.

11 Derivative financial instruments

Warrants

Under the terms of the Group’s loan facility, the Group was required to issue warrants to its lenders as 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.

Management commissioned an independent valuation expert to measure the fair value of the warrants, which was determined using Monte

Carlo option-pricing model, which takes into consideration the market values of comparable public companies, considering among other

factors, the use of multiples of earnings, and adjusted to reflect the restrictions on the ability of our shares to trade in an active market. The

simulation considers sensitivity by building models of possible results by substituting a range of values. Warrants valuation represents a Level

3 fair value measurement under IFRS 13 hierarchy. The fair value of the warrants as at 31 December 2023 was US$ 14.3 million (31 December

2022: US$ 3.2 million). The increase in fair value of the warrants is primarily due to increase in share price and its volatility. The share price

increased from 4.65 pence as at 31 December 2022 to 14.5 pence as at 31 December 2023. A 10% change in share price will increase or

decrease the valuation by US$ 0.2 million.

Interest Rate Swap

The Group had an Interest Rate Swap (IRS) arrangement, originally in place, with a notional amount of US$ 50.0 million. The remaining

notional amount hedged under the IRS as at 31 December 2023 was US$ nil (31 December 2022: US$ 23.1 million). The IRS hedged the risk

of variability in interest payments by converting a floating rate liability to a fixed rate liability. The IRS arrangement matured during the year,

therefore, the fair value of the IRS as at 31 December 2023 was US$ nil (31 December 2022: asset value US$ 0.4m). In 2020 cash flows of the

hedging relationship for the IRS were not highly probable and, therefore, hedge accounting was discontinued from that point.

Historically, the fair value measurement of the interest rate swap was determined by independent valuers with reference to quoted market

prices, discounted cash flow models and recognised pricing models as appropriate. They represent Level 2 fair value measurements under

the IFRS 13 hierarchy.

IFRS 13 fair value hierarchy

Apart from warrants, the Group has no other financial instruments that are classified as Level 3 in the fair value hierarchy in the current year

that are determined by reference to significant unobservable inputs. There have been no transfers of assets or liabilities between levels of the

fair value hierarchy. There are no non-recurring fair value measurements.

Derivative financial instruments are made up as follows:

	Interest
	rate swap	Warrants	Total
	US$’000	US$’000	US$’000
At 1 January 2023	386	(3,198)	(2,812)
Net loss on changes in fair value of interest rate swap	(59)	–	(59)
Final settlement of derivatives	(327)	–	(327)
Impact of change in fair value of warrants	–	(11,077)	(11,077)
As at 31 December 2023	–	(14,275)	(14,275)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

FOR THE YEAR ENDED 31 DECEMBER 2023

109Annual Report 2023

Financial Statements

	Interest
	rate swap	Warrants		Total
	US$’000	US$’000		US$’000
At 1 January 2022	(1,076)	(717)		(1,793)
Settlement of derivatives	384	–		384
Net gain on changes in fair value of interest rate swap	1,078	–		1,078
Impact of change in fair value of warrants	–	(2,481)		(2,481)
As at 31 December 2022	386	(3	,19 8)	(2,812)

These consolidated financial statements include the cost of hedging reserve and cash flow hedge reserve which are detailed further in the

consolidated statement of changes in equity. These reserves are non-distributable.

The balance in the cashflow hedging reserve as at 31 December 2023 was nil (2022: US $ 0.28 million).

12 Cash and cash equivalents

	2023	2022
	US$’000	US$’000
Interest bearing
Held in UAE banks	1,422	1,209
Non-interest bearing
Held in UAE banks	964	2,824
Held in banks outside UAE	6,280	8,242
Total cash and cash equivalents	8,666	12,275

13 Share capital and other reserves

Ordinary shares at £0.02 per share

	Number of	Ordinary
	ordinary shares	shares
	(Thousands)	US$’000
At 1 January 2023	1,016,415	3 0,117
As at 31 December 2023	1,016,415	30,117

	Number of	Ordinary
	ordinary shares	shares
	(Thousands)	US$’000
At 1 January 2022	1,016,415	3 0,117
As at 31 December 2022	1,016,415	30,117

Capital redemption reserve

		Capital
	Number of	redemption
	ordinary shares	reserve
	(Thousands)	US$’000
At 1 January 2023	350,488	46,445
As at 31 December 2023	350,488	46,445

110 Gulf Marine Services PLC

13 Share capital and other reserves continued

Share premium

	Number of	Share premium
	ordinary shares	account
	(Thousands)	US$’000
At 1 January 2023	1,016,415	99,105
As at 31 December 2023	1,016,415	99,105

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 30 June 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 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 Group has issued warrants to its lenders which may result in increase in issued share capital in future (refer Note 11).

14 Restricted reserve

The restricted reserve of US$ 0.3 million (2022: US$ 0.3 million) represents the statutory reserves of certain subsidiaries. As required by the

Commercial Companies Law in the countries where those entities are established, 10% of profit for the year is transferred to the statutory

reserve until the reserve equals 50% of the share capital. Following a recent change to the Regulations of Companies in Kingdom of Saudi

Arabia, apportions can cease when the reserve equals 30% instead of 50% of the share capital, although the subsidiary continues to

maintain this at 50%. This reserve is not available for distribution. No amounts were transferred to this reserve during the year ended

31 December 2023 (2022: US$ nil).

15 Group restructuring reserve

The Group restructuring reserve arose on consolidation under the pooling of interests (merger accounting) method used for the Group

restructuring. Under this method, the Group was treated as a continuation of GMS Global Commercial Investments LLC (the predecessor

parent Company) and its subsidiaries. At the date the Company became the new parent company of the Group via a share-for-share

exchange, the difference between the share capital of GMS Global Commercial Investments LLC and the Company, amounting to

US$ 49.7 million (2022: US $49.7 million), was recorded in the books of Gulf Marine Services PLC as a Group restructuring reserve.

This reserve is non-distributable.

16 Share based payment reserve

Share based payment reserve of US$ nil (2022: US$ 3.6 million) relates to awards granted to employees under the long-term incentive plans.

Refer to Note 28 for further details.

17 Capital contribution

The capital contribution reserve is as follows:

	2023	2022
	US$’000	US$’000
At 31 December	9,177	9,177

During 2013, US$ 7.8 million was transferred from share appreciation rights payable to capital contribution as, effective 1 January 2013, the

shareholders have assumed the obligation to settle the share appreciation rights. An additional charge in respect of this scheme of

US$ 1.4 million was made in 2014. The total balance of US$ 9.2 million is not available for distribution.

18 Translation reserve and Retained earnings

Foreign currency translation reserve represents differences on foreign currency net investments arising from the re-translation of the net

investments in overseas subsidiaries.

Retained earnings include the accumulated realised and certain unrealised gains and losses made by the Group.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

FOR THE YEAR ENDED 31 DECEMBER 2023

111Annual Report 2023

Financial Statements

19 Non-controlling interests

The movement in non-controlling interests is summarised as follows:

	2023	2022
	US$’000	US$’000
At 1 January	1,988	1,912
Share of profit for the year	726	76
At 31 December	2,714	1,988

The following table summarises the information relating to the subsidiary that has material non-controlling interest, before any

intra-group eliminations.

	2023	2022
	US$’000	US$’000
Statement of financial position information:
Non-current assets	129	76
Current assets	16,408	17,8 3 0
Non-current liabilities	(18)	(38)
Current liabilities	(6,952)	(9,607)
Net assets	9,567	8,261
Net assets attributable to non-controlling interests	2,714	1,988
Statement of profit or loss and other comprehensive income information:
Revenue	38,088	22,569
Profit after tax and zakat	1,306	876
Total comprehensive income	1,306	876
Profit allocated to non-controlling interests	726	76
Statement of cashflow information:
Cash flows from operating activities	(1,162)	1,933
Cash flows from financing activities (dividends: nil)	(795)	(525)
Net (decrease) / increase in cash and cash equivalents	(1,957)	1,408

20 Provision for employees’ end of service benefits

In accordance with Labour Laws of some of the countries where the Group operates, it is required to provide for end of service benefits for

certain employees. The movement in the provision for employees’ end of service benefits during the year was as follows:

	2023	2022
	US$’000	US$’000
At 1 January	2,140	2,322
Provided during the year	723	270
Paid during the year	(468)	(452)
At 31 December	2,395	2,140

21 Trade and other payables

	2023	2022
	US$’000	US$’000
Trade payables	13,213	12,618
Due to related parties (Note 24)	962	2,841
Accrued expenses	16,090	11,16	9
Deferred revenue	3,546		628
VAT payable	392		365
Other payables	851		358
	35,054		27,979

No interest is payable on the outstanding balances. Trade and other payables are all current liabilities.

112 Gulf Marine Services PLC

22 Bank borrowings

Secured borrowings at amortised cost are as follows:

	2023	2022
	US$’000	US$’000
Term loans	273,939	328,085
Working capital facility (utilised)*	2,000	–
	275,939	328,085

* The revolving working capital facility amounts to US$ 40.0 million (31 December 2022: US$ 45.0 million). US$ 25.0 million (31 December 2022: US$ 25.0 million) of the

working capital facility is allocated to performance bonds and guarantees and US$ 15.0 million (31 December 2022: US$ 20 million) is allocated to funded portion, of

which US$ 2.0 million was utilised as of 31 December 2023, leaving US$ 13.0 million available for drawdown (31 December 2022: US$ 20.0 million). The working capital

facility expires alongside the main debt facility in June 2025.

Bank borrowings are split between hedged and unhedged amounts as follows:

	2023	2022
	US$’000	US$’000
Unhedged bank borrowings	275,939	305,008
Hedged bank borrowing via Interest Rate Swap*	–	23,077
	275,939	328,085

* This is an economic hedge and not accounted for in accordance with IFRS 9, Financial Instruments. The Group used an IRS to hedge a portion of the Group’s floating

rate liability by converting SOFR to a fixed rate. The IRS matured during the year, Refer to Note 27 for further details.

Bank borrowings are presented in the consolidated statement of financial position as follows:

	2023	2022
	US$’000	US$’000
Non-current portion
Bank borrowings	234,439	298,085
Current portion
Bank borrowings – scheduled repayments within one year	39,500	30,000
Working capital facility	2,000	–
	275,939	328,085

The principal terms of the outstanding facility as at 31 December 2023 are as follows:

• The facility’s main currency is US$ and is repayable with a Secured Overnight Financing Rate (SOFR) plus a margin based on a ratchet

depending on leverage levels.

• Following the cessation of the LIBOR on 30 June 2023, the reference rate in the Common Terms Agreement has been changed to the

SOFR as the new benchmark rate.

• As of the second quarter of 2023, the Group has achieved a reduction in the net leverage ratio to below 4.0, and PIK is no longer accrued.

As a result, the margin rate on the loan has been decreased from 4% to 3.1%.

• The facility remains secured by mortgages over its whole fleet with a net book value at 31 December 2023 of US$ 562.2 million

(31 December 2022: US$ 549.7 million) (Note 5). Additionally, gross trade receivables, amounting to US$ 32.9 million (31 December 2022:

US$ 35.2 million) have been assigned as security against the loans extended by the Group’s banking syndicate (Note 9).

• The Group has also provided security against gross cash balances, being cash balances amounting to US$ 8.7 million (31 December

2022: US$ 12.3 million) (Note 12) before the restricted amounts related to visa deposits held with the Ministry of Labour in the UAE which

are included in deposits. These have been assigned as security against the loans extended by the Group’s banking syndicate.

• As an equity raise of US $50.0 million did not take place by 31 December 2022, 87.6 million warrants were issued on 2 January 2023,

giving debt holders the right to 137,075,773 million shares at a strike price of 5.75 pence per share.

The facility is subject to certain financial covenants including: Debt Service Cover, Interest Cover, and Net Leverage Ratio, which are tested

bi-annually in June and December. There are also additional covenants relating to general and administrative costs, capital expenditure and

Security Cover (loan to value) which are tested annually in December. Further, there were restrictions to payment of dividends until the net

leverage ratio falls below 4.0 times, a level reached in second quarter of 2023. All applicable financial covenants assigned to the Group’s debt

facility were met as of 31 December 2023.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

FOR THE YEAR ENDED 31 DECEMBER 2023

113Annual Report 2023

Financial Statements

		Outstanding amount
	Current	Non-current	Total
	US$’000	US$’000	US$’000	Security	Maturity
31 December 2023:
Term loan – scheduled repayments within one year	39,500	–	39,500	Secured	June 2025
Term loan – scheduled repayments within more than one year	–	234,439	234,439	Secured	June 2025
Working capital facility – scheduled repayment within one year	2,000	–	2,000	Secured	June 2025
	41,500	234,439	275,939
31 December 2022:
Term loan – scheduled repayments within one year	30,000	–	30,000	Secured	June 2025
Term loan – scheduled repayments within more than one year	–	298,085	298,085	Secured	June 2025
Working capital facility – scheduled repayment more than one year	–	–	–	Secured	June 2025
	30,000	298,085	328,085

23 Lease liabilities

	2023	2022
	US$’000	US$’000
As at 1 January	3,522	2,924
Recognition of new lease liability additions	3,231	3,122
Interest on lease liabilities (Note 35)	245	170
Principal element of lease payments	(3,330)	(2,524)
Derecognition of lease liability	(67)	–
Interest paid	(245)	(170)
As at 31 December	3,356	3,522
Maturity analysis:
Year 1	1,623	1,845
Year 2	1,297	834
Year 3 – 5	436	692
Onwards	–	151
	3,356	3,522
Split between:
Current	1,623	1,845
Non – current	1,733	1,677
	3,356	3,522

24 Related party transactions

Related parties comprise the Group’s major shareholders, Directors and entities related to them, companies under common ownership and/

or common management and control, their partners and key management personnel. Pricing policies and terms of related party transactions

are approved by the Group’s Board.

Balances and transactions between the Group and its subsidiaries, which are related parties, have been eliminated on consolidation and are

not disclosed in this note.

Key management personnel:

As at 31 December 2023, there were 2.6 million shares held by Directors (31 December 2022: 2.6 million). Refer to the Governance Report on

page 70.

Related parties

The Group’s principal subsidiaries are outlined in Note 3. The related parties comprising of the Group’s major shareholders are outlined in the

Directors Report on page 73. The other related parties during the year were:

Partner in relation to UAE Operations	Relationship
National Catering Company Limited WLL	Affiliate of a significant shareholder of the Company
Sigma Enterprise Company LLC	Affiliate of a significant shareholder of the Company
Aman Integrated Solutions LLC	Affiliate of a significant shareholder of the Company

The amounts outstanding to National Catering Company Limited WLL as at 31 December 2023 was US$ 0.5 million (2022: US$ 0.8 million)

included in trade and other payables (Note 21).

114 Gulf Marine Services PLC

24 Related party transactions continued

The amount outstanding to Sigma Enterprise Company LLC as at 31 December 2023 was US$ 0.5 million, (2022: US$ 1.8 million) included in

trade and other payables (Note 21).

The amounts outstanding to Aman Integrated Solutions LLC as at 31 December 2023 was US$ 3k (2022: US$ nil) included in trade and other

payables (Note 21).

During 2023, there were no transactions with Seafox international or any of its subsidiaries (2022: US $nil).

Significant transactions with the related party during the year:

	2023	2022
	US$’000	US$’000
National Catering Company Limited WLL – Catering services	581	1,232
Sigma Enterprise Company LLC – Vessel maintenance and overhaul services	2,372	1,930
Aman Integrated Solutions LLC – Laboratory services	18	7

Compensation of key management personnel

The remuneration of Directors and other members of key management personnel during the year were as follows:

	2023	2022
	US$’000	US$’000
Short-term benefits	983	617
End of service benefits	24	24
	1,007	641

Compensation of key management personnel represents the charge to the profit or loss in respect of the remuneration of the executive

Directors. At 31 December 2023, there were four executive Directors (2022: four). Further details of remuneration of the Board and key

management personnel relating to 2023 are contained in the Directors’ Remuneration Report on page 57.

25 Contingent liabilities

At 31 December 2023, the banks acting for Gulf Marine Middle East FZE, one of the subsidiaries of the Group, had issued performance

bonds amounting to US$ 19.6 million (31 December 2022: US$ 18.0 million), all of which were counter-indemnified by other subsidiaries of

the Group.

26 Commitments

	2023	2022
	US$’000	US$’000
Capital commitments	7,825	6,221

Capital commitments comprise mainly capital expenditure, which has been contractually agreed with suppliers for future periods for

equipment or the upgrade of existing vessels.

27 Financial instruments

Categories of financial instruments

	2023	2022
	US$’000	US$’000
Financial assets:
Current assets at amortised cost:
Cash and cash equivalents (Note 12)	8,666	12,275
Trade receivables and other receivables (Note 9,10)*	33,388	34,567
Current assets recorded at FVTPL:
Interest rate swap (N ote 11)	–	386
Total financial assets	42,054	47, 228

* Trade and other receivables exclude prepayments and advances to suppliers.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

FOR THE YEAR ENDED 31 DECEMBER 2023

115Annual Report 2023

Financial Statements

	2023		2022
	US$’000		US$’000
Financial liabilities:
Derivatives recorded at FVTPL:
Warrants (No te 11)	14,275	3,19	8
Financial liabilities recorded at amortised cost:
Trade and other payables (Note 21)*	31,116		26,986
Lease liabilities (Note 23)	3,356		3,522
Current bank borrowings – scheduled repayments within one year (Note 22)	41,500		30,000
Non-current bank borrowings – scheduled repayments more than one year (Note 22)	234,439		298,085
Total financial liabilities	324,686		361,791

* Trade and other payables excludes amounts of deferred revenue and VAT payable.

The following table combines information about the following;

• Fair values of financial instruments (except financial instruments when carrying amount approximates their fair value); and

• Fair value hierarchy levels of financial liabilities for which fair value was disclosed.

	2023		2022
	US$’000		US$’000
Financial assets:
Recognised at level 2 of the fair value hierarchy:
Interest rate swap (N ote 11)	–		386
Financial liabilities:
Recognised at level 3 of the fair value hierarchy:
Warrants (No te 11)	14,275	3,19	8

The fair value of financial instruments classified as level 3 are, in certain circumstances, measured using valuation techniques that incorporate

assumptions that are not evidenced by the prices from observable current market transactions in the same instrument and are not based on

observable market data.

The fair value of the Group’s warrants at 31 December 2023 has been arrived at on the basis of a valuation carried out at that date by

a third-party expert, an independent valuer not connected with the Group. The valuation conforms to International Valuation Standards.

The fair value was determined using a Monte-Carlo simulation.

Favourable and unfavourable changes in the value of financial instruments are determined on the basis of changes in the value of the

instruments as a result of varying the levels of the unobservable parameters, quantification of which is judgmental. There have been no

transfers between Level 2 and Level 3 during the years ended 31 December 2023 and 31 December 2022.

Capital risk management

The Group manages its capital to support its ability to continue as a going concern while maximising the return on equity. The Group does

not have a formalised optimal target capital structure or target ratios in connection with its capital risk management objectives. The capital

structure of the Group consists of net bank debt and total equity. The Group continues to take measures to de-leverage the Company and

intends to continue to do so in the coming years.

Material accounting policies

Details of the material accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the

basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are

disclosed in Note 3 to the consolidated financial statements.

Financial risk management objectives

The Group is exposed to the following risks related to financial instruments – credit risk, liquidity risk, interest rate risk and foreign currency

risk. Management actively monitors and manages these financial risks relating to the Group.

Credit risk management

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group and arises

principally from the Group’s trade and other receivables and cash and cash equivalents.

The Group has adopted a policy of dealing when possible, with creditworthy counterparties while keen to maximize utilization for its vessels.

Cash balances held with banks are assessed to have low credit risk of default since these banks are highly regulated by the central banks of

the respective countries. At the year-end, cash at bank and in hand totaled US$ 8.7 million (2022: US$ 12.3 million), deposited with banks

with Fitch short-term ratings of F2 to F1+ (Refer to Note 12).

116 Gulf Marine Services PLC

27 Financial instruments continued

Credit risk management continued

Concentration of credit risk arises when a number of counterparties are engaged in similar business activities, or activities in the same

geographic region, or have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by

changes in economic, political or other conditions. Concentration of credit risk indicates the relative sensitivity of the Group’s performance to

developments affecting a particular industry or geographic location. During the year, vessels were chartered to 7 companies in the Arabian

Peninsula region and 2 companies in Europe, including NOCs and engineering, procurement and construction (“EPC”) contractors. At

31 December 2023, 7 companies in specific regions accounted for 99% (2022: 9 companies in specific regions accounted for 99%) of the

outstanding trade receivables.

The credit risk on liquid funds is limited because the funds are held by banks with high credit ratings assigned by international agencies.

The amount that best represents maximum credit risk exposure on financial assets at the end of the reporting period, in the event

counterparties failing to perform their obligations generally approximates their carrying value.

The Group considers cash and cash equivalents and trade and other receivables which are neither past due nor impaired to have a low credit

risk and an internal rating of ‘performing’. Performing is defined as a counterparty that has a stable financial position and which there are no

past due amounts.

Liquidity risk management

Ultimate responsibility for liquidity risk management rests with the Board of Directors. The Group manages liquidity risk by seeking to maintain

sufficient facilities to ensure availability of funds for forecast and actual cash flow requirements.

The table below summarises the maturity profile of the Group’s financial liabilities. The contractual maturities of the Group’s financial liabilities

have been determined on the basis of the remaining period at the end of the reporting period to the contractual maturity date. The maturity

profile is monitored by management to assist in ensuring adequate liquidity is maintained. Refer to Going Concern in Note 3.

The maturity profile of the assets and liabilities at the end of the reporting period based on contractual repayment arrangements was

as follows:

					Contractual cash flows
				1 to 3	4 to 12	2 to 5
		Carrying	Total	months	months	years
	Interest rate	amount	US$’000	US$’000	US$’000	US$’000
31 December 2023
Non-interest bearing financial liabilities
Trade and other payables*		31,116	31,116	31,116	–	–
Interest bearing financial liabilities	8.6% – 9.2%
Bank borrowings – principal		275,939	275,939	4,000	37,500	234,439
Interest on bank borrowings		133	32,984	5,955	17,164	9,865
Lease liabilities		3,356	3,356	618	1,155	1,583
Interest on lease liabilities		–	251	60	110	81
		310,544	343,646	41,749	55,929	245,968

				1 to 3	4 to 12	2 to 5
		Carrying	Total	months	months	years
	Interest rate	amount	US$’000	US$’000	US$’000	US$’000
31 December 2022
Non-interest bearing financial liabilities
Trade and other payables*		26,986	26,986	26,986	–	–
Interest bearing financial liabilities	3.2% – 6.7%
Bank borrowings – principal		328,085	328,085	7, 5 0 0	22,500	298,085
Interest on bank borrowings		–	40,395	2,656	7,6 0 3	3 0,136
Lease liabilities		3,522	3,522	462	1,383	1,677
Interest on lease liabilities		–	148	20	42	86
		358,593	39 9,136	37,6 24	31,528	329,984

* Trade and other payables excludes amounts of deferred revenue and VAT payable.

In addition to above table, capital commitments are expected to be settled in next twelve months.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

FOR THE YEAR ENDED 31 DECEMBER 2023

117Annual Report 2023

Financial Statements

Interest rate risk management

The Group is exposed to cash flow interest rate risk on its bank borrowings. The Group enters into floating interest rate instruments for the

same. Further, the Group had an Interest Rate Swap (IRS) arrangement, originally in place, with a notional amount of US$ 50.0 million. The

remaining notional amount hedged under the IRS as at 31 December 2023 was US$ nil (31 December 2022: US$ 23.1 million). The IRS

hedged the risk of variability in interest payments by converting a floating rate liability to a fixed rate liability. The IRS arrangement matured

during the year, therefore, the fair value of the IRS as at 31 December 2023 was US$ nil (31 December 2022: asset value US$ 0.4 million). In

2020 cash flows of the hedging relationship for the IRS were not highly probable and, therefore, hedge accounting was discontinued from

that point. A change of 100 basis points in interest rates at the reporting date would have increased/(decreased) consolidated statement of

profit or loss and other comprehensive income by US $ 3.3 million.

Foreign currency risk management

The majority of the Group’s transactions are denominated in US Dollars, UAE Dirhams, Euros and Pound Sterling. As the UAE Dirham,

Saudi Riyal and Qatari Riyal are pegged to the US Dollar, balances in UAE Dirham, Saudi Riyal and Qatari Riyal are not considered to

represent significant currency risk. Transactions in other foreign currencies entered into by the Group are short-term in nature and therefore

management considers that the currency risk associated with these transactions is limited.

The carrying amounts of the Group’s significant foreign currency denominated monetary assets include cash and cash equivalents and trade

receivables and liabilities include trade payables. The amounts at the reporting date are as follows:

	Assets		Liabilities
	31 December		31 December
	2023	2022	2023	2022
	US$’000	US$’000	US$’000	US$’000
US Dollars	21,912	26,556	3,421	13,146
UAE Dirhams	1,154	283	6,482	1,110
Saudi Riyals	8,531	10,332	1,307	–
Pound Sterling	12	31	2,003	1,218
Euros	6,141	4,535	–	–
Qatari Riyals	3,694	6,237	–	317
Norwegian Krone	–	2	–	–
Others	–	26	–	–
	41,444	48,002	13,213	15,791

At 31 December 2023, if the exchange rate of the currencies other than the UAE Dirham, Saudi Riyal and Qatari Riyal had increased/

decreased by 10% against the US Dollar, with all other variables held constant, the Group’s profit for the year would have been higher/lower

by US$ 0.4 million (2022: higher/lower by US$ 0.9 million) mainly as a result of foreign exchange loss or gain on translation of Euro and

Pound Sterling denominated balances.

28 Long term incentive plans

The Group had Long Term Incentive Plans (“LTIPs”) which were granted to senior management, managers and senior offshore officers.

The employment condition attached to the Groups LTIP’s was that each eligible employee of the Company must remain in employment

during the three-year vesting period. For 2019 and 2020 awards, LTIPs 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 2023, the market vesting conditions for the LTIP awards granted in 2020 were not met, and all

LTIP awards issued in 2020 were forfeited.

During the year ended 31 December 2022, additional LTIPs awards were granted to the Chairman and Senior Management. The awards were

to vest over three years subject to the same employment conditions 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 criterion had not been met all LTIP awards issued in 2022 were forfeited.

118 Gulf Marine Services PLC

28 Long term incentive plans continued

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 statistical method, 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 Group’s subsidiaries without charge, the share-based payment is

capitalised as part of the cost of investment in subsidiaries.

The number of share awards granted by the Group during the year is given in the table below:

	2023	2022
	000’s	000’s
At the beginning of the year	1,176,014	2,499,714
Granted in the year	–	9,460,000
Cash settled in the year	–	(921,310)
Forfeited in the year	(1,176,014)	(9,862,390)
At the end of the year	–	1,176,014

The weighted average remaining contractual life for the vesting period outstanding as at 31 December 2023 was nil years (31 December

2022: 0.1 years). The weighted average fair value of shares granted during the period to 31 December 2023 was US$ nil (31 December 2022:

US$ 0.06 million).

	LTIP	LTIP	LTIP
Grant date	14 Jun 2022	29 May 2020	15 Nov 2019
Share price	£0.06	£0.09	£0.08
Exercise price	£0.00	£0.00	£0.00
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 by considering the historical share price movements

for a three-year period up to the grant date (and of each of the companies in the peer 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.

29 Dividends

There was no dividend declared or paid in 2023 (2022: nil). No final dividend in respect of the year ended 31 December 2023 is to be

proposed at the 2023 AGM. The Directors have approved a residual dividend policy which seeks to strike a balance between funding

growth initiatives and providing returns to shareholders. Management is currently evaluating the timing for its implementation.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

FOR THE YEAR ENDED 31 DECEMBER 2023

119Annual Report 2023

Financial Statements

30 Segment reporting

The Group has identified that the Directors and senior management team are the chief operating decision makers in accordance with the

requirements of IFRS 8 ‘Operating Segments’. Segment performance is assessed based upon adjusted gross profit/(loss), which represents

gross profit/(loss) before depreciation and amortisation and loss on impairment of assets. The reportable segments have been identified by

Directors and senior management based on the size and type of asset in operation.

The operating and reportable segments of the Group are (i) K-Class vessels, which include the Kamikaze, Kikuyu, Kawawa, Kudeta, Keloa

and Pepper vessels (ii) S-Class vessels, which include the Shamal, Scirocco and Sharqi vessels, and (iii) E-Class vessels, which include the

Endeavour, Endurance, Enterprise and Evolution vessels.

All of these operating segments earn revenue related to the hiring of vessels and related services including charter hire income, messing and

accommodation services, personnel hire and hire of equipment. The accounting policies of the operating segments are the same as the

Group’s accounting policies described in Note 3.

				Gross profit before adjustments for
				depreciation, amortisation and
	Revenue			impairment charges
	2023	2022	2023	2022
	US$’000	US$’000	US$’000	US$’000
E-Class vessels	60,955	51,135	41,864	32,024
S-Class vessels	35,018	33,986	23,217	23,899
K-Class vessels	55,630	48,036	33,375	27,827
	151,603	133,157	98,456	83,750
Depreciation charged to cost of sales			(24,153)	(23,567)
Amortisation charged to cost of sales			(4,687)	(5,613)
Expected credit losses			(207)	(1,824)
Adjusted gross profit			69,409	52,746
Impairment loss			(3,565)	(13,192)
Reversal of impairment			36,993	20,980
Gross profit			102,837	60,534
Finance expense			(31,431)	(17, 6 5 6 )
Impact of change in fair value of warrants			(11,077)	(2,481)
Other general and administrative expenses			(14,645)	(13,212)
Foreign exchange loss, net			(987)	(138)
Other income			12	68
Finance income			221	11
Profit for the year before taxation			44,930	27,126

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

Segment assets and liabilities, including depreciation, amortisation and additions to non-current assets, are not reported to the key decision

makers on a segmental basis and are therefore, not disclosed.

Information about major customers

During the year, four customers (2022: four) individually accounted for more than 10% of the Group’s revenues. The related revenue figures for

these major customers, the identity of which may vary by year, was US$ 49.7 million, US$ 38.1 million, US$ 25.3 million and US$ 15.4 million

(2022: US$ 9.0 million, US$ 22.1 million, US$ 43.1 million and US$ 22.4 million).

120 Gulf Marine Services PLC

30 Segment reporting continued

Geographical segments

Revenue by geographical segment is based on the geographical location of the customer as shown below.

	2023	2022
	US$’000	US$’000
United Arab Emirates	58,452	51,848
Saudi Arabia	38,088	22,645
Qatar	40,680	44,259
Total – Arabian Peninsula region	137,220	118,752
Total – Europe	14,383	14,405
Worldwide Total	151,603	133,157

Type of work

The Group operates in both the oil and gas and renewables sector. Oil and gas revenues are driven from both client operating cost

expenditure and capex expenditure. Renewables are primarily driven by windfarm developments from client expenditure. Details are

shown below.

	2023	2022
	US$’000	US$’000
Oil and Gas	137,220	118,752
Renewables	14,383	14,405
Total	151,603	133,157

Reversal of impairment of US$ 37.0 million and impairment charge of US$ 3.6 million was recognised in respect of property and equipment

(Note 5) (2022: Reversal of impairment of US$ 21.0 million and impairment charge of US$ 13.2 million) attributable to the following

reportable segments:

	2023	2022
	US$’000	US$’000
E-Class vessels	(16,340)	(3,319)
S-Class vessels	(4,462)	4,631
K-Class vessels	(12,626)	(9,100)
	(33,428)	( 7,78	8 )

	E-Class vessels	S-Class vessels	K-Class vessels		Total
	US$’000	US$’000	US$’000		US$’000
2023
Depreciation charged to cost of sales	12,892	5,660	5,601		24,153
Amortisation charged to cost of sales	2,035	692	1,960		4,687
Net reversal of impairment	(16,340)	(4,462)	(12,626)		(33,428)
2022
Depreciation charged to cost of sales	12,694	5,829	5,044		23,567
Amortisation charged to cost of sales	2,302	839	2,472		5,613
Impairment charge/(reversal of impairment charge) – net	(3,319)	4,631	(9	,10 0)	( 7,788 )

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

FOR THE YEAR ENDED 31 DECEMBER 2023

121Annual Report 2023

Financial Statements

31 Presentation of adjusted non-GAAP results

The following table provides a reconciliation between the Group’s adjusted non-GAAP and statutory financial results:

				Year ended 31 December 2023						Year ended 31 December 2022
	Adjusted				Adjusted
	non-GAAP		Adjusting	Statutory	non-GAAP				Adjusting	Statutory
	results		items	total	results				items	total
	US$’000		US$’000	US$’000	US$’000				US$’000	US$’000
Revenue	151,603		–	151,603	133,157				–	133,157
Cost of sales
– Vessel operating expenses before depreciation, amortisation and impairment	(53,147)		–	(53,147)	(49,407)				–	(49,407)
– Depreciation and amortisation	(28,840)		–	(28,840)	(2	9,18	0)		–	(29,180)
Expected credit losses	(207)		–	(207)			(1,824)		–	(1,824)
Net reversal of impairment*	–		33,428	33,428			–	7,7	8 8	7,7	8 8
Gross profit	69,409		33,428	102,837			52,746	7,788			60,534
General and administrative
– Amortisation	(3,18	8)	–	(3,188)			(2,635)		–		(2,635)
– Depreciation		(145)	–	(145)			(128)		–		(128)
– Other administrative costs		(10,727)	–	(10,727)			(10,449)		–		(10,449)
– Exceptional legal costs**		–	(585)	(585)			–		–		–
Operating profit		55,349	32,843	88,192			39,534	7,788			47, 3 22
Finance income		221	–	221			11		–		11
Finance expense		(31,431)	–	(31,431)			(17,6 5 6)		–		(17,6 5 6)
Impact of change in fair value of warrants		(11,077)	–	(11,077)			(2,481)		–		(2,481)
Other income		12	–	12			68		–		68
Foreign exchange loss, net		(987)	–	(987)			(138)		–		(138)
Profit before taxation		12,087	32,843	44,930			19,338	7,788		2	7,12	6
Taxation (charge)/credit
– Taxation charge		(2,329)	–	(2,329)			(1,724)		–			(1,724)
– Exceptional tax expense**		–	(533)	(533)			–		–			–
Profit for the year		9,758	32,310	42,068			17,614	7,788				25,402
Profit attributable to:
Owners of the Company		9,032	32,310	41,342			17,5 3 8	7,78		8		25,326
Non-controlling interests		726	–	726			76			–		76
Earnings per share (basic)		0.89	3.18	4.07			1.73		0.76			2.49
Earnings per share (diluted)		0.86	3.06	3.92			1.71		0.76			2.47
Supplementary non statutory information
Operating profit		55,349	32,843	88,192			39,534	7,7		8 8		47, 322
Add: Depreciation and amortisation		32,173	–	32 ,173			31,944			–		31,944
Adjusted EBITDA		87,522	32,843	120,365			71,478		7,78	8		79,266

* The reversal of impairment credit/impairment charge on certain vessels have been added back to gross profit to arrive at adjusted gross profit for the year ended

31 December 2023 and 2022 (refer to Note 5 for further details). Management has adjusted this due to the nature of the transaction which it believes is not directly

related to operations management are able to influence. This measure provides additional information on the core profitability of the Group.

** These exceptional legal cost and exceptional tax expense relates to ZATCA transfer pricing case legal fee and expected tax outcome as explained in Note 8.

122 Gulf Marine Services PLC

31 Presentation of adjusted non-GAAP results continued

			Year ended 31 December 2023		Year ended 31 December 2022
	Adjusted			Adjusted
	non-GAAP	Adjusting	Statutory	non-GAAP	Adjusting		Statutory
	results	items	total	results		items	total
	US$’000	US$’000	US$’000	US$’000		US$’000	US$’000
Cash flow reconciliation:
Profit for the year	9,758	32,310	42,068	17,614	7,7	8 8	25,402
Adjustments for:
Net reversal of impairment*	–	(33,428)	(33,428)		( 7,7	8 8 )	( 7,788 )
Finance expenses	31,431	–	31,431	17,6 5 6		–	17,6 5 6
Impact of change in fair value of warrants	11,077	–	11,077	2,481		–	2,481
Other adjustments**	34,145	1,118	35,263	35,276		–	35,276
Cash flow from operating activities before movement
in working capital	86,411	–	86,411	73,027		–	73,027
Change in trade and other receivables	2,003	–	2,003	5,610		–	5,610
Change in trade and other payables	8,140	–	8,140	5,005		–	5,005
Cash generated from operations	96,554	–	96,554	83,642		–	83,642
Income tax paid	(2 ,151)	–	(2,151)	(1,077)		–	(1,077)
Net cash flows from operating activities	94,403	–	94,403	82,565		–	82,565
Net cash flows used in investing activities	(12,788)	–	(12,788)	(6,304)		–	(6,304)
Payment of issue costs on bank borrowings	(374)	–	(374)	(148)		–	(148)
Other cash flows used in financing activities	(84,850)	–	(84,850)	(72,109)		–	(72,109)
Net cash flows used in financing activities	(85,224)	–	(85,224)	(72,257)		–	(72,257)
Net change in cash and cash equivalents	(3,609)	–	(3,609)	4,004		–	4,004

* The reversal of impairment credit/impairment charge on certain vessels and related assets have been added back to cash flow from operating activities before

movement in working capital for the year ended 31 December 2023 and 2022 (refer to Note 5 for further details).

** These exceptional legal cost and exceptional tax expense relates to ZATCA transfer pricing case legal fee and expected tax outcome as explained in Note 8.

32 Earnings per share

	2023	2022
Profit for the purpose of basic and diluted earnings per share being profit for the year attributable to Owners
of the Company (US$’000)	41,342	25,326
Profit for the purpose of adjusted basic and diluted earnings per share (US$’000) (Note 31)	9,032	17,5 3 8
Weighted average number of shares (‘000)	1,016,415	1,016,415
Weighted average diluted number of shares in issue (‘000)	1,055,003	1,024,124
Basic earnings per share (cents)	4.07	2.49
Diluted earnings per share (cents)	3.92	2.47
Adjusted earnings per share (cents)	0.89	1.73
Adjusted diluted earnings per share (cents)	0.86	1.71

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company (as disclosed in the statement of

comprehensive income) by the weighted average number of ordinary shares in issue during the year.

Adjusted earnings per share is calculated on the same basis but uses the profit for the purpose of basic earnings per share (shown above)

adjusted by adding back the non-operational items, which were recognised in the consolidated statement of profit or loss and other

comprehensive income (Note 31). The adjusted earnings per share is presented as the Directors consider it provides an additional indication

of the underlying performance of the Group.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

FOR THE YEAR ENDED 31 DECEMBER 2023

123Annual Report 2023

Financial Statements

Diluted earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number

of ordinary shares in issue during the year, adjusted for the weighted average effect of outstanding warrants and LTIPs during the year.

Adjusted diluted earnings per share is calculated on the same basis but uses adjusted profit (Note 31) attributable to equity holders of

the Group.

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

	2023		2022
	’000s		’000s
Weighted average basic number of shares in issue	1,016,415		1,016,415
Weighted average effect of LTIPs	–	7,7	0 9
Weighted average effect of warrants	38,588		–
Weighted average diluted number of shares in issue	1,055,003		1,024,124

33 Revenue

All revenue in the above table is in scope of IFRS 15 with the exception of lease income which is in scope of IFRS 16.

	2023	2022
	US$’000	US$’000
Charter hire	76,111	70,295
Lease income	57,073	44,543
Messing and accommodation	9,173	12,74	6
Manpower income	5,418		3,516
Mobilisation and demobilisation	2,255		1,281
Sundry income	1,573		776
	151,603		133,157
Revenue recognised – over time	149,871		131,958
Revenue recognised – point in time	1,732		1,199
	151,603		133,157

Included in mobilisation and demobilisation income is an amount of US$ 0.6 million (2022 US$ 0.6 million) that was included as deferred

revenue at the beginning of the financial year.

Lease income:

	2023	2022
	US$’000	US$’000
Maturity analysis:
Year 1	68,207	5 7,6 6 5
Year 2	56,551	36,696
Year 3 – 5	73,649	32,947
	198,407	12 7, 3 0 8
Split between:
Current	68,207	5 7,6 6 5
Non-current	130,200	69,643
	198,407	12 7, 3 0 8

Further descriptions on the above types of revenue have been provided in Note 3.

124 Gulf Marine Services PLC

34 Finance income

	2023	2022
	US$’000	US$’000
Bank interest	221	11

35 Finance expense

	2023	2022
	US$’000	US$’000
Interest on bank borrowings	29,456	17, 2 31
Gain on IRS reclassified to profit or loss	279	279
Net loss/(gain) on changes in fair value of interest rate swap (N ot e 11)	59	(1,078)
Interest on lease liabilities (Note 23)	245	170
Other finance expenses	1,392	1,054
	31,431	17, 6 5 6

36 Profit for the year

The profit for the year is stated after charging/(crediting):

	2023	2022
	US$’000	US$’000
Total staff costs (see below)	31,230	27, 3 5 0
Depreciation of property and equipment (Note 5)	24,297	23,695
Amortisation of dry-docking expenditure (Note 6)	4,687	5,613
Depreciation of right-of-use assets (Note 7)	3,188	2,635
Net charge of expected credit losses (Note 9)	207	1,824
Auditor’s remuneration (see below)	1,127	787
Net foreign exchange loss	987	138
Other income	(12)	(68)
Expense relating to short term leases or leases of low value assets (Note 7)	228	965
Reversal of impairment loss (Note 5)	(33,428)	( 7,7 8 8)

The average number of full time equivalent employees (excluding non-executive Directors) by geographic area was:

	2023	2022
	Number	Number
Arabian Peninsula region	598	539
Rest of the world	30	28
	628	567

The total number of full-time equivalent employees (including executive Directors) as at 31 December 2023 was 660 (31 December 2022:

594). The number of full-time employees increased in the year due to an increase in offshore headcount from the second half of the year.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

FOR THE YEAR ENDED 31 DECEMBER 2023

125Annual Report 2023

Financial Statements

Their aggregate remuneration comprised:

	2023	2022
	US$’000	US$’000
Wages and salaries	30,477	26,845
End of service benefit (Note 20)	723	270
Share based payment charge	17	45
Employment taxes*	13	190
	31,230	27,3 5 0

* Employment taxes include US$ 6K (2022: US $ 0.17 million) in respect of social security costs for our crew working in France.

The analysis of the auditor’s remuneration is as follows:

	2023	2022
	US$’000	US$’000
Group audit fees	700	520
Overruns and out of pocket expenses in relation to 2022 Group audit	177	–
Subsidiary audit fees	100	100
Total audit fees	977	620
Audit-related assurance services	150	167
Total fees	1,127	787

37 Changes in liabilities arising from financing activities

The table below details changes in the Group’s liabilities arising from financing activities, including both cash and non-cash changes.

Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the Group’s

consolidated statement of cash flows as cash flows from financing activities.

		Lease	Bank
	Derivatives	liabilities	borrowings
	(Note 11)	(Note 23)	(Note 22)
	US$’000	US$’000	US$’000
At 1 January 2022	1,793	2,924	379,526
Financing cash flows
Repayment of bank borrowings	–	–	(51,445)
Principal elements of lease payments	–	(2,524)	–
Settlement of derivatives	(384)	–	–
Interest paid	–	(170)	(17, 2 2 7 )
Total financing cashflows	(384)	(2,694)	(68,672)
Non-cash changes:
Recognition of new lease liability additions	–	3,122	–
Interest on lease liabilities (Note 35)	–	170	–
Interest on bank borrowings (Note 35)	–	–	17, 231
Net gain on change in fair value of IRS (N ote 11)	(1,078)	–	–
Impact of change in fair value of warrants (N o te 11)	2,481	–	–
Total non-cash changes	1,403	3,292	17, 2 31
At 31 December 2022	2,812	3,522	328,085
Financing cash flows
Repayment of bank borrowings	–	–	(56,174)
Working capital facility			2,000
Principal elements of lease payments	–	(3,330)	–
Settlement of derivatives	327	–	–
Interest paid	–	(245)	(27,428)
Total financing cashflows	327	(3,575)	(81,602)
Non-cash changes:
Recognition of new lease liability additions	–	3,231	–
Derecognition of lease liability	–	(67)	–
Interest on lease liabilities (Note 35)	–	245	–
Interest on bank borrowings (Note 35)	–	–	29,456
Net gain on change in fair value of IRS (N ote 11)	59	–	–
Impact of change in fair value of warrants (N o te 11)	11,077	–	–
Total non-cash changes	11,136	3,409	29,456
At 31 December 2023	14,275	3,356	275,939

126 Gulf Marine Services PLC

38 Events after the reporting period

There were no subsequent events, that impact to these consolidated financial statements after the reporting period.

39 Reclassification

Certain figures have been reclassified since the comparative consolidated financial statements as presented below. We believe the revised

presentation gives users better information to understand these consolidated financial statements given the materiality of the warrants in the

current period.

	Before		After
	reclassification	Reclassifications	reclassification
	US$’000	US$’000	US$’000
Consolidated statement of profit or loss and other comprehensive income
Finance expense (Note 35)	(20,137)	2,481	(17,6 5 6)
Impact of change in fair value of warrants	–	(2,481)	(2,481)

A transposition error was identified in relation to the presentation of derivative financial instruments on the face of the consolidated statement

of financial position in the prior period. A current derivative liability ($3.2m) was included in both the current liability and non-current liability

section of the statement of financial position. This has been corrected in the comparative amounts in the current year.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

FOR THE YEAR ENDED 31 DECEMBER 2023

127Annual Report 2023

Financial Statements

COMPANY STATEMENT OF FINANCIAL POSITION

FOR THE YEAR ENDED 31 DECEMBER 2023

Notes

2023

US$’000

2022

US$’000

Non-current assets

Investment in subsidiaries 5 368,666 248,580

Other receivables 7 93,943 6 7, 6 6 3

Total non-current assets 462,609 316,243

Current assets

Other receivables 7 143 159

Cash and cash equivalents 6 25 2

Total current assets 168 161

Creditors: Amounts falling due within one year

Other payables 9 91,464 61,631

Warrants 10 14,275 3,198

Net current liabilities 105,571 64,668

Net assets 357,038 251,575

Equity

Share capital – Ordinary 11 3 0,117 30,117

Capital redemption reserve 11 46,445 46,445

Share premium account 11 99,105 99,105

Share based payment reserve – 3,631

Retained earnings 181,371 72,277

Total equity 357,038 251,575

The Company reported a profit for the financial year ended 31 December 2023 of US$ 105.5 million (2022: Profit US$ 14.9 million).

The separate financial statements of Gulf Marine Services PLC (registered number 08860816) were approved by the Board of Directors and

authorised for issue on 03 April 2024. Signed on behalf of the Board of Directors.

Jyrki Koskelo Mansour Al Alami

Independent non-executive Director Executive Chairman

The attached Notes 1 to 15 form an integral part of these separate financial statements.

128 Gulf Marine Services PLC

capital–

Ordinary

US$’000

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 2022 30,117 46,445 − 99,105 3,647 5 7,410 236,724

Profit for the year − − − − − 14,867 14,867

Other comprehensive income

for the year − − − − – − –

Total comprehensive income

for the year − – – − − 14,867 14,867

Transactions with owners of the Company

Capital reorganisation (Not e 11) – (46,445) 46,445 − − − –

Share based payment charge (Note 13) – – − − 45 − 45

Cash settlement of share-based

payments (Note 13) – – − − (61) − (61)

Total transactions with owners of

the Company – (46,445) 46,445 − (16) − (16)

At 31 December 2022 30,117 – 46,445 99,105 3,631 72,277 251,575

Profit for the year − − − − − 105,463 105,463

Other comprehensive income

for the year − − − − – – –

Total comprehensive income

for the year – – – – – 105,463 105,463

Transactions with owners of the Company

Share based payment charge (Note 13) – – – – 17 (17) –

Transfer of share option reserve

(Note 13) – – – – (3,648) 3,648 –

Total transactions with owners of

the Company – – – – (3,631) 3,631 –

At 31 December 2023 30,117 – 46,445 99,105 – 181,371 357,038

The attached notes 1 to 15 form an integral part of these separate financial statements.

COMPANY STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2023

129Annual Report 2023

Financial Statements

NOTES TO COMPANY FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

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 shareholder pattern of the Group is

disclosed on page 73 of the annual report. The consolidated Group accounts are publicly available.

2 Material 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.