TIDMGYG
RNS Number : 5118W
GYG PLC
26 April 2021
The information contained within this announcement is deemed by
the Company to constitute inside information for the purposes of
Article 7 of Regulation (EU) 596/2014, as it forms part of domestic
law by virtue of the European Union (Withdrawal) Act 2018. Upon the
publication of this announcement via the Regulatory Information
Service, this inside information is now considered to be in the
public domain.
26 April 2021
GYG plc
("GYG", the "Company" or the "Group")
2020 Final Results
Robust operational performance delivered in conjunction with
efficiency program delivering an improved adjusted EBITDA
margin
GYG (AIM: GYG), the market leading global superyacht service and
supply group, today announces its audited Final Results for the
year ended 31 December 2020.
Financial Highlights
-- Group revenue decreased 7.7% to EUR58.9m (FY19: EUR63.8m)
o Coatings (Refit and New Build) revenue decreased 5.4% to
EUR50.8m (FY19: EUR53.7m)
o Supply revenue decrease 19.8% to EUR8.1m (FY19: EUR10.1m)
-- Adjusted EBITDA(1) increased 15.6% to EUR5.2m (FY19: EUR4.5m)
-- Exceptional costs of EUR1.0m driven mainly by COVID
-- Operating profit decrease of 7.7% to EUR1.2m (FY19: EUR1.3m)
-- Profit before tax decreased to EUR0.2m (FY19: EUR0.8m)
-- Net debt position(2) of EUR11.8m at 31 December 2020 (FY19: EUR8.2m)
-- Cash of EUR3.6m at 31 December 2020 (EUR5.5m at 31 December 2019)
-- Amended banking facilities agreed with improved repayment terms
Operational Highlights
-- Robust performance despite COVID-19 disruption with record
level Order Book at EUR 41.1m at 31 March 2021
-- Active on an unprecedented eight New Build projects during
the year in the premium segment across Northern Europe, with work
continuing on five of these into 2021
-- Largest turnkey Refit project for a 115+ metre yacht in Germany started in Q4 2020
-- Exclusive distribution agreement signed with ALTRAD plettac
assco GmbH to distribute its specialised scaffolding equipment in
the USA
-- Expanded customer base and service offering in the Supply
division with renewed focus on CRM systems, site consolidation and
increased collaboration with Coatings division
-- Entered partnership agreement with AkzoNobel to develop and
bring to market a unique application methodology for its
revolutionary new sprayable filler product
-- Continued to build on IT infrastructure upgrades through
system developments leading to improvements in operational planning
and control
-- Continued focus on strategic initiatives to drive operational
efficiencies and utilise new innovative technologies, has delivered
further improvements in EBITDA margin
Order Book
The Order Book(3) at 31 March:
Order Book at: Total Order Current Year Forward Order
Book Book*
31 March 2019 EUR38.8m EUR16.7m EUR22.1m
------------ ------------- --------------
31 March 2020 EUR35.6m EUR17.4m EUR18.3m
------------ ------------- --------------
31 March 2021 EUR41.1m EUR24.5m EUR16.6m
------------ ------------- --------------
* Forward Order Book represents orders scheduled for completion
in 2022 onwards
-- Record total Order Book at 31 March 2021, 15.4% increase ahead of same period last year
-- Current year Order Book increased 40.1% from 31 March 2020
Current Trading and Outlook
-- Positive start to the year with Q1 2021 revenue 21% ahead of
same period in 2020 (some of which moved from Q4 into Q1 as
previously reported) with improved margin performance despite
ongoing disruptions
-- Further progress in New Build shipyard relationships and
strong sales momentum drives favourable mix of New Build and Refit
contracts throughout year ahead, improving visibility and
opportunities for additional efficiency gains
-- Ongoing discussions with Nobiskrug administrator and related
yacht owners give the Directors confidence that a positive outcome
will be achieved
-- Supply division demonstrating encouraging progress following rebrand and restructure
-- We continue to assess further organic and inorganic growth opportunities
-- Notwithstanding any ongoing impact from the pandemic, given
the strength of the forward Order Book and strong start to the year
the Board looks to the year ahead with cautious optimism
(1) Adjusted EBITDA is defined as operating profit before
depreciation, amortisation, impairment, performance
share plan costs and exceptional items. This is an alternative
performance measure used by Directors to assess the
operating performance of the Group
(2) Net debt position is defined as the net cash and cash
equivalent balances, less short and long-term borrowings
and obligations under leases. This is an alternative
performance measure used by investors, financial analysts,
rating agencies, creditors and other parties to ascertain
a company's debt position
(3) Order Book is defined as contracted but unrecognised
revenue from New Build and Refit projects. It does not
include revenue already recognised during the year and
it does not include any future value for revenue in
the Supply division
Remy Millott, Chief Executive of GYG plc, commented:
"2020 has been an exceptional year of trading considering the
operational challenges created by COVID-19. I am proud of how GYG
has responded and adapted to the considerable disruptions. We have
focused on maintaining our premium service to clients and I would
like to thank the whole team for their incredible hard work and
effort. Despite these unprecedented events, our market position and
fundamentals remain strong but also demonstrate how our
diversified, global model has created an opportunity to grow our
market share and improve our operational model. As a direct result
of management's strategy to drive market share in New Build and the
ongoing new business development programmes we have been working
through since 2019, our Order Book continued to build throughout
the year.
"I am pleased with the strong start to the year; the record
Order Book and favourable sales mix provides greater visibility
enabling us to further improve operational efficiencies and
continue to focus on enhancing margins."
For further information, please contact:
GYG plc via FTI Consulting
Remy Millott, Chief Executive Officer Tel: +44 (0) 20 3727
Kevin McNair, Chief Financial Officer 1000
N+1 Singer Tel: +44 (0) 20 7496
Tom Salvesen 3054
Peter Steel, Sebastian Burke
FTI Consulting Tel: +44 (0) 20 3727
Alex Beagley 1000
Fiona Walker gyg@fticonsulting.com
Rafaella de Freitas
Notes to Editors:
GYG is the market leading global superyacht service and supply
group with operations across the Mediterranean, Northern Europe and
the United States. The Company trades under Pinmar, Pinmar Yacht
Supply and Technocraft brands and its operations are split
between:
-- Coatings: Operating under the 40 year old Pinmar brand, this
division works across two segments of the superyacht market, New
Build and Refit. A New Build project involves the fairing and
painting of new superyachts in the latter stages of a multiyear
construction process. In the Refit division, the Group undertakes a
variety of activities including repainting, finishing and caulking
as well as bespoke scaffold containment systems and hardware
removal (under the Technocraft brand) on a regular basis.
Superyachts also require a major inspection and service every five
years to comply with maritime, insurance and industry regulations,
which will often include a substantial refit maintenance
programme.
-- Supply: Trading under Pinmar Yacht Supply, this division
operates the sale and delivery of maintenance materials,
consumables, spare parts and equipment to superyachts and trade
customers both via direct yacht sales and from retail stores across
Europe's main shipyards.
Technical innovation lies at the heart of GYG, and the Group
continues to innovate and invest in new application technology and
training, leveraging its strong relationship with all the main
superyacht paint manufacturers. Remaining at the forefront of
application technology and quality standards is a key pillar of
GYG's unique proposition, particularly to the New Build market.
Forward looking statements
All statements other than statements of historical fact included
in this announcement, including, without limitation, those
regarding the Group's financial position, business strategy, plans
and objectives of management for future operations or statements
relating to expectations in relation to shareholder returns,
dividends or any statements preceded by, followed by or that
include the words "targets", "estimates", "envisages", "believes",
"expects", "aims", "intends", "plans", "will", "may",
"anticipates", "would", "could" or similar expressions or the
negative thereof, are forward looking statements.
Such forward looking statements involve known and unknown risks,
uncertainties and other important factors beyond the Group's
control that could cause the actual results and performance to be
materially different from future results and performance expressed
or implied by such forward looking statements. Such forward looking
statements are based on numerous assumptions regarding the Group's
present and future business strategies and the environment in which
the Group will operate in the future.
These forward-looking statements speak only as of the date of
this announcement. The Company expressly disclaims any obligation
or undertaking to disseminate any updates or revisions to any
forward-looking statements contained herein to reflect any change
in the Company's expectations with regard thereto, any new
information or any change in events, conditions or circumstances on
which any such statements are based, unless required to do so by
law or any appropriate regulatory authority.
Nothing in this announcement shall constitute a profit forecast
under rule 28 of the City Code on Takeovers and Mergers.
CHAIRMAN'S STATEMENT
In what has been the most challenging year in recent memory, I
would like to acknowledge the tremendous efforts by all GYG
employees and thank our customers and industry partners for their
continued support. Our thoughts are with those whose lives have
been impacted directly by the ongoing pandemic and our thanks go to
all those continuously working to reduce the threat of
COVID-19.
This last year proved the value of our strategic focus in 2019
on growing our addressable market, streamlining Company processes
and core busines activities, improving operational efficiencies and
preparing our IT infrastructure to support our growth ambitions.
Although no one could have quite predicted the enormous impact that
the world has experienced over the last 12 months, this put the
Company in a strong position to leverage its scale and effectively
manage the considerable disruptions to our business and
industry.
FINANCIAL RESULTS
Group turnover for the year was EUR58.9m, a decrease of 7.7%
over the EUR63.8m reported for 2019. The Group entered 2020 with
its strongest ever Order Book and this decrease in revenue reflects
the direct impact of the pandemic on the Group. Pleasingly, no
revenues were cancelled, however, some projects were delayed from
Q4 2020 into Q1 2021. The Coatings division revenue decreased 5.4%
to EUR50.8m (FY19: EUR53.7m). The Supply division revenue was down
19.8% to EUR8.1m (FY19: EUR10.1m), reflecting the considerable
disruption to the retail sector during this time.
Despite the exceptional trading conditions experienced, in-line
with our stated strategy, management delivered a significant
improvement in the Group's operational efficiency resulting in a
15.6% increase in Adjusted EBITDA to EUR5.2m (FY19: EUR4.5m), and
an operating profit before tax of EUR1.2m (FY19: EUR1.3m). The 170
bps improvement in adjusted EBITDA margin to 8.8% (FY19: 7.1%)
reflects the Group's strategic focus on continual improvement in
operational performance, including innovative new technologies.
These results demonstrate an outstanding effort from the whole
team. The increase in adjusted EBITDA and operating profit
highlights the significant progress that the Group has continued to
make from the foundations set in 2019 and shows further delivery of
the Board's strategy to improve margins, embrace innovation and
enhance both the quality and sustainability of earnings.
DIVID
The Board believes it was in the best interest of the Company
not to declare an interim dividend in 2020 or propose a dividend
for the full year, as the Group continues to strengthen the balance
sheet and expand the scale of its activities. However, it remains
the Board's intention to return to the dividend list at the
earliest appropriate opportunity.
FINANCIAL POSITION
The Group's overall financial position remained relatively solid
in the year. The reduced revenues as a result of the pandemic
impacted operating cashflows during the year and as a result, net
borrowings increased to EUR8.8m (FY19: EUR4.4m).
On 30 June 2020, as part of its response to the pandemic, the
Group entered into new borrowing facilities of EUR3.0m through a
Spanish government sponsored programme. The new facilities have a
12-month repayment holiday and are then repaid over the subsequent
24 months.
Post period end, in March 2021, the Group amended its existing
borrowing facilities with its lenders. Under the terms of the
amended agreement, Facility B, which was due to be repaid in March
2021, is now repayable in four tranches of EUR1.0m starting in June
2021 and ending in December 2022. Facility A was repaid in early
April 2021.
As part of the amendment, an additional EUR1.0m of revolving
credit, factoring and discounting facilities were made available to
the Group. The continued support from the Group's lenders provides
further stability and strength to the balance sheet as we emerge
from the pandemic.
PEOPLE AND ORGANISATIONAL DEVELOPMENT
I am humbled by the resilience and compassion of our employees
in what has been the most extraordinary year that many of us have
experienced. The team have adapted quickly to differing lockdown
restrictions and travel parameters across our diverse geographic
operations and have done so with professionalism and
dedication.
Management have made significant progress in strengthening the
team particularly in response to our increased level of New Build
activity across Northern Europe, along with improving core
processes and controls. The team are currently investigating
opportunities to upgrade IT systems to increase automation, improve
operational efficiency and scale for future growth.
ENVIRONMENTAL ISSUES AND CLIMATE CHANGE
GYG recognises climate change as the biggest environmental
threat the world currently faces and something that the Group must
play an active role in trying to mitigate across its operations.
Accordingly, in conjunction with our assessment and adoption of new
technologies, the Group has commenced its first review of how all
our businesses contribute towards climate change. As the largest
division of the Group's activities, the initial priority is to
focus on our Coatings operations where we already utilise the
electrostatic paint application, which improves paint-transfer
efficiency and significantly reduces the potential environmental
impact of overspray.
During 2021 we will set out the parts of our Coatings operations
that have the greatest environmental impact. This will include the
preparation and application of coatings in both the New Build and
Refit markets as well as transport and logistics. The goal is to
assess appropriate KPIs specific to our environmental impacts,
measure our performance against those KPIs throughout 2021 as part
of a baselining exercise, and then develop plans for mitigating
those impacts in the future. We will report on our performance
against those KPIs on an annual basis going forward.
BREXIT
The Group invested time through the year to ensure that the
appropriate planning and contingency processes were in place in
advance of the UK's departure from the European Union. Due to the
geographic spread of the Group's operations across Europe and the
US, the Board does not believe that Brexit has or will have a
material impact on the Group's future prospects.
OUTLOOK
The Group has enjoyed a strong start to the current financial
year with Q1 revenue 21% ahead of the same period last year,
including some benefit from revenue deferred from Q4 as previously
reported. Notwithstanding any further impact from the pandemic,
this positive start to the year combined with a favourable sales
mix and continued growth in our forward Order Book results in the
Board looking to the future with confidence.
Shareholders will be aware that, on 9 April 2021, the Group was
notified that one of the Company's major shareholders, Harwood
Capital, was in the preliminary stages of evaluating a possible
offer for the entire issued and to be issued share capital of the
Company. As of today, Harwood has made no further announcements in
relation to this possible offer. Following publication of these
results, it is the Board's intention to engage with independent
shareholders to appraise them further of the current trading and
prospects for GYG. When we have feedback from independent
shareholders in relation to the Group's prospects and their
attitude towards the unsolicited possible offer, we will make a
further announcement.
Stephen Murphy
Non-Executive Chairman
CHIEF EXECUTIVE'S REPORT
The operating environment during the year was dominated by the
COVID-19 pandemic and its impact around the world. Overall, the
Group delivered a robust performance despite the considerable
disruption caused by the pandemic, reflecting the strategic focus
and measures taken to improve operational efficiency in 2019, which
continued into 2020. As a result of these measures, the Group was
in a far stronger position to effectively manage and overcome these
challenges and starts the current financial year in a strong
position.
We started 2020 with a record Order Book and continued to build
on this throughout the year, with a particular focus on higher
value, longer-term New Build contracts. We are currently working on
several significant turnkey Refit projects, utilising the
full-service range including bespoke scaffolding, containment,
hardware removal, caulking and complete repainting alongside five
New Build projects. In addition to evolving a favourable sales mix,
we remain focused on driving further operational efficiencies and
margin improvements across the Group. Despite the challenges we
have faced, the market fundamentals remain strong, and our record
Order Book not only demonstrates our client's conviction in the
outlook for the industry but also provides better visibility,
facilitates efficient planning, and gives us confidence for further
market share gains in the year ahead.
Since the start of the COVID-19 pandemic our priority has been
the health and safety of our colleagues, our customers, and the
wider community in which we operate. The Group has worked
tirelessly across our operations, contending with changing
restrictions, quarantines and lockdowns in different jurisdictions
and I would like to thank our employees for their resilience,
adaptability and professionalism during this time.
During the year, new working practises and protocols were needed
to improve working conditions and to adhere to social distancing in
our workplaces. The big initiative we took was to completely reform
and expand our Headquarters in Palma, which has allowed us to bring
more colleagues and departments together safely in this building.
Our organisational structure has also been refined in line with
this initiative, with a focus on efficient reporting lines and
cross-department collaboration.
COVID-19
The Group responded quickly and effectively to mitigate the
impacts of COVID-19 and saw a positive client response.
Please refer to our COVID-19 Statement for further details.
FINANCIAL OVERVIEW
The Group delivered revenues of EUR58.9m in the year ended 31
December 2020 (FY19: EUR63.8m), a decrease of 7.7% but with a 15.6%
increase in adjusted EBITDA to EUR5.2m (FY19: EUR4.5m), and a
decrease of 7.7% in operating profit to EUR1.2m (FY19: EUR1.3m. Our
gross margins also improved with our average gross margin for 2020
at 29.9%, up from 23.5% in FY19. This increase in adjusted EBITDA
and gross margin reflects the committed approach to improving
efficiencies and our focus on cost reduction initiatives throughout
the year. We ended the year with cash of EUR3.6m (FY19: EUR5.5m)
and net debt of EUR11.8m, up from EUR8.2m in FY19.
This represents a commendable performance, which has been
delivered in the most extraordinary trading environment that the
Group has ever experienced, with its operations impacted by
differing lockdown and travel restrictions across Europe and the US
throughout the year.
Overall, demand for the Group's specialist services remained
strong with some owners using the travel restrictions as an
opportunity to complete maintenance work during the normally
quieter summer months. However, as per previous guidance, some Q4
projects were delayed into Q1 2021 with an associated deferral in
revenues, which will therefore benefit future periods.
DIVISIONAL REVIEW
GYG's activities are segmented between two divisions, Coatings
and Supply. For the year ended 31 December 2020 the Coatings
division delivered revenues of EUR50.8m (FY19: EUR53.7m), a
reduction of 5.4%, but an 11.1% increase in adjusted EBITDA to
EUR4.0m (FY19: EUR3.6m). The Supply division delivered a 19.8%
reduction in revenues to EUR8.1m (FY19: EUR10.1m) and a 22.2%
increase in adjusted EBITDA to EUR1.1m (FY19: EUR0.9m).
COATINGS DIVISION
The Group's Coatings division operates under the 40 year old
Pinmar brand and works globally across two segments of the
superyacht market, namely New Build and Refit. With a long and
well-respected history, Pinmar is recognised as the market-leading
brand in superyacht painting with a reputation for premium quality
having completed the fairing and finishing on many of the world's
most prestigious superyachts.
A typical New Build project will involve the Group fairing and
painting a new superyacht as part of the construction process.
Starting with the bare substrate of steel or aluminium, specialist
teams work in phases to smooth out any irregularities in the
surface material and provide a solid base to build up the different
layers of the paint system ready for the final visible topcoat.
Each layer has distinct application and curing requirements and is
crucial to the success of the overall system. The exterior finish
of a superyacht is a key part of the construction process ensuring
the physical integrity and performance of its hull and
superstructure whilst being fundamental to the aesthetics of the
finished yacht.
The construction of a 100m New Build yacht would typically take
30 months up to delivery, with fairing and painting contributing a
considerable amount of the overall project schedule at 10-12
months. The Group is typically engaged to provide a quote for a
shipyard up to 2 years before the build is due to start, while the
shipyard is still in the bidding process for the project. GYG
services are traditionally contracted at the beginning of the build
process, with the fairing phase commencing on average 12-16 months
into the project. To that end, New Build projects typically offer a
higher value, longer-term revenue stream for the Group in addition
to future repeat revenues as potential Refit projects.
A Refit project can see the Group undertake a variety of
activities including bespoke scaffolding and containment, hardware
removal, caulking (sealing joints and seams against leakage) and
repainting and finishing, which, if using GYG's advanced
scaffolding system, can be done while the vessel is in the water as
well as on a quayside or in a dry dock. Superyachts require a major
Refit inspection and service every five years to comply with
maritime, insurance and industry regulations. Consequently, owners
often use the major service periods as an opportunity to repaint
their superyachts due to significant cost savings and schedule
synergies by combining such activities. Regular paint work is one
of the highest single costs of yacht ownership, however it is
critical to support the life of the yacht and to maintain an
exceptional appearance, especially for those yachts in the fleet
which undertake activity in the charter market.
The size and complexity of new superyachts continues to
increase; in 2010 the average length of a Pinmar project was 54
metres, today it is close to 80 metres. This presents new
challenges for paint applicators especially with respect to time
and quality. In response to these challenges, the Group is always
at the forefront of innovation and continually works with leading
industry partners to introduce market leading technology into our
processes such as electrostatic paint application, and
ground-breaking new products such as the Awlgrip HDT range and most
recently Awlgrip Awlfair Sprayable Filler, a product and
application methodology that promises a step change in performance
when filling and fairing New Build projects.
The Group's scaffolding brand, Technocraft, pioneered the
development of yacht scaffold and containment systems within
Europe. The advanced modular construction allows for the entire
scaffold structure to be supported by the yacht itself, removing
the dependency on floating raft bases when conducting an in-water
Refit, which in turn allows for much larger yachts to be repainted
in the water. Offering this paint and scaffolding services as a
turnkey solution is unique to GYG; Technocraft's ability to
facilitate in-water refit enables the Group to work on considerably
larger yachts and provides a competitive advantage when pitching
and tendering for Refit projects. Technocraft services as part of a
Group turnkey Refit solution contribute on average 15-20% to the
total contract revenue.
Introduced in 2011, the Pinmar Paint Standard was the industry's
first comprehensive statement of how a client's expected paint
finish should be measured and agreed. Designed to be universally
understood, it remains the most exacting and comprehensive
guideline in existence and defines the high standard achievable on
Pinmar paint applications.
Prompted both by the entry of new paint manufacturers to the
market and changes to the technical formulation and performance of
superyacht paint products, the Pinmar Paint Standard 2.0 was
launched in 2017 to give Pinmar clients an even better
understanding of the quality and performance of their paint work,
together with improved peace of mind during the warranty period and
beyond.
The Group also offers a global warranty package of up to 24
months on New Build yachts and up to 18 months on Refit work with a
unique geographic network of after-sale refit locations on both
sides of the Atlantic. Our warranty packages are backed up by
product manufacturers and are available with an optional coatings
insurance policy which strengthens client confidence and reduces
costs and reputational risk for shipyards. In conjunction with the
Pinmar Paint Standard we are proud of our recognised high quality
of work and have an exceptionally low warranty claims history.
The Group's ability to provide all the above services results in
its uniquely placed position to provide a complete turnkey solution
across all of our major global hubs. This provides undeniable
benefits for the client.
New Build
The Group enjoyed a significant increase in its market share of
the higher value New Build segment in 2020 as a direct result of
management's successful strategy in 2018 to develop relationships
directly with the leading New Build shipyards in Northern Europe
and has achieved preferred supplier relationships with a large
number of targeted yards.
GYG's geographical New Build market share grows depending on the
propensity of shipyards within a given region to focus on large
custom projects. Our independent market research estimates that
between 2018 and 2022, the German New Build market is projected to
deliver 21 projects, with GYG holding a 19.0% market share. When
one considers the Dutch market, which has a far more diverse
product offering including the full spectrum of sizes, GYG's market
share accounts for 5.7% of the 87 projects delivered. When
expressed by size ranges rather than geographical regions, GYG
holds an estimated 8.9% market share in the 70-90m segment and
24.0% for 90m+ projects delivered or in build between 2018 and
2022.
During 2020, the Coatings division was active on an
unprecedented eight New Build projects across Northern Europe, five
of which were yachts between 70 metres and 100 metres and three 100
metre+. This record level of New Build work delivered revenues of
EUR13.3m, an increase of 18.8% over 2019 (FY19: EUR11.2m). Five of
these projects have continued into 2021, including the major New
Build contract signed in H1 2020 for an 80+ metre yacht in a
shipyard new to the Group. In Q2 2021, we will commence work on the
previously announced 100+ metre New Build yacht in Europe.
There is plenty of headroom for continued growth both within the
shipyards that the Group currently serves and through developing
further new relationships with other leading yards. We have
successfully recruited the middle management required to sustain an
increase in activity across these new yards. The Group has been
invited to tender for an increased number of contracts since
becoming a preferred paint partner contracted directly by the
shipyards, which has resulted in a significant uplift in our win
rate and delivered a stronger forward Order Book for New Build in
2021 and beyond, as detailed below.
Refit
The strong sales momentum in Refit from 2019 continued into 2020
with the signing of several major new Refit contracts across our
European operational bases.
On 22 October 2020, we announced the signing of a major Refit
contract for a 115+ metre yacht in Germany with works started in Q4
2020 and due to complete in H1 2021. This is the Group's largest
turnkey project to date where it will provide a number of Refit
services including bespoke scaffolding using our unique Technocraft
modular system, hardware removal, caulking and complete repainting.
The project consisted of 646 tonnes of scaffolding: 531 tonnes for
the main structure and an extra 115 tonnes for the roof. We used a
unique hard roof rather than a plastic containment, reducing any
chances of weather-related impacts or damages. The scale and
timeline of this project highlights the Group's ability to deploy
its unique turnkey solution efficiently and at scale across
Europe.
On 10 December 2020, we announced the signing of another turnkey
Refit contract for a 100+ metre yacht scheduled to commence in
Europe in 2022. Not only does this repeat business demonstrate our
client's satisfaction for the level of service we provide,
including the efficient deployment of our unique turnkey solution,
but also by signing contracts for work commencing in 2022 it
highlights their confidence in the outlook for the industry,
further improving management's forward visibility of the Order
Book.
The Group generated Refit revenues of EUR37.4m in 2020, a
decrease of 12% against 2019 (FY19: EUR42.5m). Uncertainty around
freedom of movement due to COVID-19 restrictions impacted the
normal Mediterranean cruising patterns and led to an increase in
Refit work over the summer months, which are traditionally quieter
periods for Refit. However, this increase in activity was mitigated
by several projects being delayed from Q4 into Q1 2021, with an
associated deferral in revenues to be recognised in future
periods.
Having a strong, consistent and visible Order Book for Refit,
which is consistently growing through repeat business from clients,
enables the operations department to plan and control manpower,
materials and equipment much more efficiently. As crew members and
management teams work across new yachts, this promotes our services
to new clients and similarly, as Captains move to new vessels, this
too acts as a likely new business stream as they remain loyal to
the premium GYG service. With better in-house intelligence afforded
to us by the CRM system we can track the vessels in the active
superyacht fleet which are approaching the window for Refit work as
part of their 5-year maintenance cycle. This allows the commercial
department to proactively engage with clients much earlier in the
bidding process.
Concentrated efforts to improve the resource utilisation,
materials management and information systems made since 2019 are
evident in the improved adjusted EBITDA and gross margins
recognised in 2020. Several new working practices have been
introduced such as setting challenging man-hour budgets using new
chronograms and monitoring the project efficiencies weekly to check
that stated objectives are being achieved with the manpower
stretch. In conjunction with the stretch, we have implemented a
stringent manpower planning program. We also move labour from
project to project in a very proactive way, reducing downtime so
less overall labour is needed each month resulting in significant
improvements in efficiency.
SUPPLY DIVISION
2020 was a challenging year for the Supply division, with
turnover decreasing by 19.8% to EUR8.1m (FY19: EUR10.1m),
reflecting the global challenges faced across the retail sector due
to the strict COVID-19 restrictions.
During these unprecedented times, similar to all retail outlets,
all Pinmar Yacht Supply shops had to completely close for two weeks
in April and trading was disrupted for a further two months by only
being allowed to operate as 'click & collect' outlets. As such,
the Group witnessed a shift from traditional retail and ad hoc
purchasing to the adoption of more strategic buying practices,
supported by digital communications and transactions. Like most
businesses, superyachts are streamlining their supply chain by
selecting key suppliers who can provide them a fast, efficient, and
personalised service, with direct delivery to the yacht's current
or future location. These practices have remained in place after
the easing of restrictions, as the advantages became clear to
captains, pursers, and fleet procurement managers.
In direct response to this, the Group announced the
re-positioning of Pinmar Yacht Supply during 2020 to the superyacht
market with a new leadership team, new branding, and better
presentation of our retail facilities. The division's focus on
direct yacht sales while reducing retail space and consolidating
our product lines has seen very positive results. The new Pinmar
Yacht Supply branding is now carried across digital media, shops,
retail partners, distribution centres and the delivery fleet.
Pinmar Yacht Supply's flagship superyacht retail store inside
the MB92 Barcelona yard has undergone a major refresh which
enhances the experience for yacht crews. The Mallorca retail stores
in Palma and the STP shipyard also underwent substantial
improvements to create a better experience for clients and to
provide facilities for Pinmar Yacht Supply account managers to meet
with superyacht captains and crew to discuss current and future
purchasing requirements. The retail stores will continue to service
the daily chandlery needs of yachts in Refit, carrying a focused
range of key marine brands offering products including paints and
varnishes, cleaning consumables and deck maintenance materials and
tools.
Through intelligence sharing on our in-house CRM platform and
the integration of the Supply services into the sales process of
the Coatings division, the Group can provide its customers with
ongoing expert product knowledge and advice to secure future supply
orders.
The trade business continues to benefit from improvements in
account management and business development. A consolidation of
warehousing capacity, coupled with organisational changes to
purchase and supply chain management, have led to efficiency gains
and cost reductions together with improvements in stock management
and logistics reflected in the increase in adjusted EBITDA to
EUR1.2m (FY19: EUR0.9m). We are seeing benefits such as reducing
our high stock levels, clearing obsolete stock, and having better
efficiency when supplying large orders across a sustained period
and reclaiming unused materials from large projects.
We remain optimistic about the prospects for this division in
2021 and beyond as retail adjusts to the new normal and we take
advantage of the new strategy with a focus on commercial
improvement and delivering value to our customers, with a new
leadership team focusing on the servicing of superyachts'
purchasing requirements.
OPERATIONAL REVIEW
The implementation of process and system improvements, including
IT infrastructure, during 2019 provided a solid foundation to
deliver further operational efficiencies in 2020, which has been
reflected in our improved adjusted EBITDA margin.
Greater visibility in the Order Book and rigorous monitoring of
manpower and asset utilisation rates has improved performance.
Manpower is the single highest cost in any contract and the area
where management see most ability to improve efficiencies. The
rigorous focus on manpower ratios constitutes one of the key
drivers behind margin improvement. The Board has seen the benefits
of these programmes continue in the first few months of 2021.
In September 2020, the Group signed an exclusive distribution
agreement with ALTRAD plettac assco GmbH ("Plettac") to distribute
its specialised scaffolding equipment in the USA. This is a
significant opportunity for the Group to offer this cutting-edge
equipment into one of the world's largest markets, clearly
differentiating GYG from other providers in the US, enabling the
Group to work on larger yachts and provide its turnkey solution in
the US. The scaffolding material arrived in the US at the beginning
of the calendar year 2021 and is being used on two projects so far
with a good reaction from the shipyards, who are keen to see
further roll out of this scaffolding in the future.
GYG continues to develop its human resources function through a
combination of structured in-house training programmes and
strategic recruitment. We are continuing to strengthen the
management team introducing a mix of industry experience and
related business expertise and remain comfortable with workload
capacity at this current time.
Our IT team continues to work on a programme of system
developments to automate business processes, consolidate legacy
systems and provide better management information leading to
improvements in operational planning and control. The significant
upgrade of our core IT infrastructure in 2019 and an investment in
video conferencing equipment allowed us to restructure our working
practices to minimise the effects of remote working and
considerably reduce travel expenditure.
We have successfully adapted our operational model in response
to the lessons learnt during the COVID-19 pandemic and continue our
ongoing programmes to improve our business processes, systems and
infrastructure to support growth and increase the efficiency of the
Group.
ENVIRONMENT AND SUSTAINABILITY
During the various lockdowns seen across the world in 2020 it
became strikingly apparent the damage being done to our planet,
simply by living our daily lives. Whilst large parts of the world
were restricted to their homes, we saw wildlife return in huge
numbers and a noticeable reduction in pollution levels across all
metrices. There is now a real focus on preserving our environment
and we are supportive of a sustainability movement in the yachting
industry.
The Group has in place an Environmental Management System
certified by Lloyds Register following ISO 14001:2015 international
standards. We currently have many in-house projects underway to
reduce our impact on the environment, with the most recent
initiative focusing on replacing all fluorescent and sodium vapour
lamps with LED lighting. We refresh our fleet of company vehicles
when possible to modern, low emission models, and our paint
facility in Palma has switched energy suppliers to one with a 100%
certified renewable origin.
We partner with paint manufacturers, equipment manufacturers,
and suppliers who are working to improve the industry's attitude to
the environment, and our Supply division has responded to customer
demand to stock eco-friendly solutions by launching a new refill
station with a range of 'green' day-to-day cleaning products from a
key supplier, promoting both ecological products and a reduction in
single use plastics. We continue to champion innovative technical
solutions such as electrostatic paint application, which offers a
60% improvement in paint-transfer efficiency and significantly
reduces the potential environmental impact of overspray.
GYG is part of several local business clusters with other key
players in the yachting industry across its operations. The cluster
based around the La Ciotat Shipyard in France is working to make
the shipyard more sustainable through several projects including
shared water treatment and waste recycling. Working with our
partners at MB92 Group, we are collaborating on two trial projects
to further improve our existing extraction and filtration systems
with an additional dust chamber to capture any left-over toxic
gases. If the trials prove successful, then all future projects at
MB92 facilities will employ this method.
As always, we want to be at the forefront of the industry, and
we will embrace any positive changes that reduce the Group and
wider industry's impact on the environment.
MARKET DEVELOPMENTS
According to data provided by our independent market research in
the pre-pandemic environment, 2020 was scheduled to be the most
productive year in terms of 40m+ New Build deliveries since 2011
and the equal 4th most productive New Build year in history, while
the Refit market expected c.350 yachts to require paint work as
part of their 5-year cycle. The reality, however, proved to be very
different as significant delays hit the manufacturing process
across Europe and labour movement was severely restricted due to
health and safety protocols in each country. With that said, the
market proved to be far more resilient than historical precedent
would have suggested.
In any given year, it is to be expected that the New Build
market will fail to deliver around 20% of the projects that were
forecast by the builders themselves, as project schedules shift and
'speculation' builds are paused awaiting a buyer. This is based on
historical performance and is a robust hypothesis. As such, even
without the impact of the pandemic, it is likely that the delivery
figures for 2020 would have been closer to 70 units, which is in
line with historical precedent and indicative of the market's
stability.
In 2020, a total of 54 40m+ superyachts were delivered, a 37.9%
decrease from its predicted figure as a direct result of the impact
of the pandemic. However, when one compares this to the more
realistic figure of 70, a decrease in performance of 22.8% suggests
that the market performed surprisingly well in these unprecedented
conditions.
As the market recovers, our latest research forecasts a spike in
cumulative New Build output in 2021 caused chiefly by the number of
delayed project deliveries as a result of the pandemic. The Order
Book for deliveries scheduled up to 2025 averages 65 units per
annum, a slight increase on the previous five-year average of 63.4.
The number of yachts due for Refit paintwork is projected to grow
from 2020 to 2025 by an average of 17.7%, with the larger size
70-90m and 90m+ segments (GYG's sweet spot) expected to see the
most growth over this time, with 32.0% and 38.5% respectively.
GROWTH STRATEGY
Coatings
We continue to see positive results from our New Build strategy
and are confident that our focus on securing preferred supplier
status within the key Northern European shipyards remains critical
to delivering long-term growth. These yards represent the premium
segment of the 70m+ superyacht New Build market and are the most
suited to GYG's high quality and technically advanced fairing and
painting services, especially as the complexity of ships under
construction increases. We have made very good progress in securing
preferred supplier relationships with targeted yards that value
disciplined project management, high-capacity ability,
deliverability, and premium quality craftsmanship. The Group has
achieved a significant increase in its market share of this premium
market segment with plenty of headroom for continued growth both
within the yards it currently serves and through developing
targeted new relationships with other leading shipbuilders.
We remain closely aligned to our key Refit shipyard partners and
continue to invest in our own facilities and resources to
complement the growth at our strategic locations, in line with the
ever-growing superyacht fleet and their increasingly demanding
Refit programmes. Our Refit strategy of promoting turnkey solutions
across our geographic locations utilising our entire portfolio of
services is proving attractive to large superyachts, especially
those working to tight Refit schedules, who will benefit from the
streamlined workflow, efficient decision making, and coordinated
after-service and global warranty afforded by our offering.
Our strong relationships with the major fleet management
companies continue to evolve as we see an increasing number of our
target yachts coming under professional management. Again, our
strategy to offer an integrated repair and supply solution to the
large managed fleets provides management companies with a unique
proposition and integrated solution.
Innovation
Technical innovation lies at the heart of GYG's offering, and
the Group continues to innovate and invest in new application
technology and training, leveraging its strong relationship with
all the main superyacht paint manufacturers. Remaining at the
forefront of application technology and quality standards is a key
pillar of GYG's unique proposition, particularly to the New Build
market.
In 2020, the Group partnered with AkzoNobel, the market leading
yacht coatings specialist, to develop and trial the optimal
application methodology for its revolutionary new sprayable filler
product, Awlgrip Awlfair SF. This advanced new superyacht fairing
product, which has been in the development stage for over five
years, is applied by pressurised airless spray rather than by hand,
which allows for wet-on-wet application and up to two coatings per
day without the need for sanding between coats. The spray
application also eliminates air pockets, resulting in reduced
reworking and improved aesthetics.
This new product marks a significant development for paint
applicators as it will provide a step change to the quality of the
fairing and will maximise the speed and efficiency of the
application process, significantly cutting project lengths. The
Group was pleased to announce in December 2020 that this
revolutionary technology will be used on two of the Group's New
Build projects one of which being M/Y Black Shark, which is being
built by the Nobiskrug shipyard in Germany. It is a result of this
continued focus on innovation both internally and with industry
leading partners which further differentiates GYG, setting it apart
from others in the sector.
The Group is also looking to take advantage of the knowledge
gained from its extensive experience utilising the electrostatic
method for applying topcoat paints. By implementing this
application technique during the earlier primer phases of the paint
system, which are still applied using the conventional spray
method, the benefits of materials savings, improved working
conditions, a smoother application and a reduced environmental
impact that come from electrostatic application can be realised
further into the paint process.
Supply
Our growth plan for the Supply division centres around the
recent realignment of Pinmar Yacht Supply's brand and strategy,
with greater focus on servicing the evolving purchasing needs of
superyachts and extending our service proposition beyond our
physical locations so we can capture a greater share of their
annual spend.
A key part of the strategy is the collaboration of the Group's
Supply division with its Coatings division, with the commercial
teams taking a larger role in offering supply services to yachts
under refit.
The Group continues to explore potential acquisition
opportunities to enable expansion into new markets geographically
or into new products and services that complement the Group's
existing operations. The current environment looks favourable to
identify earnings enhancing growth opportunities across the
Group.
CURRENT TRADING AND OUTLOOK
I am delighted that the Group delivered such a commendable 2020
performance in the most extraordinary trading environment that GYG
has ever experienced.
Despite these challenges, the Group has experienced a strong
start to 2021 with Q1 revenues 21% ahead of Q1 2020. Yacht owners
are keen to return to a more normal cruising/charter season in 2021
and are taking a 'prepare now, enjoy later' approach which has led
to a high number of Refit contracts in Q1 which we expect will
continue into Q2. In addition, the market fundamentals remain
strong and our record Order Book provides better visibility,
facilitates efficient planning, and gives us confidence for further
market share gains in the year ahead.
The Total Order Book at 31 March 2021 stands at EUR41.1m which
is 15% ahead of the same point in the prior year (31 March 2020:
EUR35.6m). The Order Book for 2021 is currently EUR24.5m which is a
41% increase when compared to 31 March 2020 Order Book of
EUR17.4m.
Order Book at: Total Order Current Year Forward Order
Book Book
31 March 2019 EUR38.8m EUR16.7m EUR22.1m
------------ ------------- --------------
31 March 2020 EUR35.6m EUR17.4m EUR18.3m
------------ ------------- --------------
31 March 2021 EUR41.1m EUR24.5m EUR16.6m*
------------ ------------- --------------
* Forward Order Book represents orders scheduled for completion
in 2022 onwards
Looking ahead, as previously reported, we have seen a
significant uplift in the volume of New Build contracts won by the
Group, in addition to the expected flow of Refit projects. These
larger, higher value New Build contracts provide further evidence
of the Group's growing market share and will bring a greater degree
of revenue visibility as well as being a driver for medium-term
growth.
The Group has successfully implemented adjustments to its
operating protocols enabling it to continue production safely and
efficiently in the new paradigm. It has emerged from a difficult
2020 with solid momentum and is well placed to fulfil its strong
Order Book and deliver sustainable long-term growth.
Remy Millott
Chief Executive Officer
FINANCIAL REVIEW
FINANCIAL PERFORMANCE
Year ended
31 December 2020 Coatings Supply Total reportable segments
EUR000 EUR000 EUR000
Revenue 50,760 8,138 58,898
========= ======= ==========================
Adjusted EBITDA 4,216 1,181 5,163
-------------------- --------- ------- --------------------------
Year ended
31 December 2019 Coatings Supply Total reportable segments
EUR000 EUR000 EUR000
Revenue 53,718 10,109 63,827
========= ======= ==========================
Adjusted EBITDA 3,628 880 4,508
-------------------- --------- ------- --------------------------
Revenue in the year ended 31 December 2020 decreased 7.7% to
EUR58.9m (FY19: EUR63.8m). This was driven by a 5.4% decrease in
turnover in the Coatings division and a 19.8% decrease in the
Supply Division. Having started 2020 with the strongest Order Book
in the Group's history, the decrease in revenue reflects the impact
of COVID pandemic on Group trading. Within Coatings, no contracts
were lost or cancelled due to the pandemic but a number of projects
suffered delay in completion and a number of new projects started
later than originally scheduled. In Supply, trading was restricted
when the lockdowns which occurred in Spain during the early stage
of the pandemic forced the closure of the Group's retail outlets
and our ability to deliver products directly to customers was
limited by restrictions in the haulage sector.
As a result of increased operating efficiencies and the decrease
in revenue, operating costs (not including exceptional items,
impairment, performance share plan costs, depreciation and
amortisation), decreased by 7.8% from EUR62.6m in FY19 to EUR57.7m
in FY20. The Group's operating margins began improving in 2019 and
this improvement continued throughout 2020, resulting in:
-- an operating profit of EUR1.2m in the year (FY19: EUR1.3m);
-- an adjusted EBITDA of EUR5.2m (FY19: EUR4.5m); and
-- a net profit, excluding exceptional items, impairment and
performance share plan costs, for the year of EUR1.4m (FY19:
EUR1.1m).
The exceptional items of EUR1.0m in the year (FY19: EUR0.3m)
related principally to additional costs incurred directly as a
result of the pandemic. These costs are described in greater detail
in the Covid Report. Additionally, there were some restructuring
costs as part of a cost saving plan. These arose as the Group
reorganised parts of its operations in response to the pandemic and
to ensure that the Group was more resilient post pandemic.
Financial expenses of EUR1.1m in the year (FY19: EUR0.8m) mainly
related to interest on the syndicated loan signed in March 2016,
various working capital facilities, finance leases and foreign
exchange rate.
EARNINGS PER SHARE AND DIVIDS
Net profit for the year was EUR0.3m (2019: EUR0.7m). Profit per
share was EUR0.00 (FY19: EUR0.02 per share) and adjusted basic
profit per share was EUR0.0 7 (FY19: EUR0.06).
Basic earnings/(losses) per share are calculated by dividing net
profit/(loss) for the year attributable to the Group (i.e. after
tax and non-controlling interests) by the weighted average number
of shares outstanding during that year.
Diluted earnings/(losses) per share have been calculated on a
similar basis taking into account dilutive potential shares.
Adjusted basic earnings are presented to eliminate the effect of
the exceptional items, amortisation and impairment of intangible
assets, gains on financial instruments and performance share plan
costs (considering the tax effect of these adjustments).
Year ended Year ended
31 December 31 December
2020 2019
-------------- --------------
Earnings for the period attributable
to shareholders (EUR000) 252 753
Weighted average number of shares 46,640,000 46,640,000
Basic earnings per share (EUR) 0.00 0.02
============== ==============
Adjusted basic earnings per share
(EUR) 0.07 0. 06
============== ==============
Dilutive weighted average number
of shares 47,987,728 47,777,975
-------------- --------------
Diluted earnings per share (EUR) 0.00 0.02
============== ==============
Adjusted diluted earnings per
share (EUR) 0. 07 0. 06
============== ==============
The Board believed it was in the best interest of the Company
not to pay a dividend in relation to FY20, however, it is the
Board's intention to return to the dividend list at the earliest
appropriate opportunity.
FINANCIAL POSITION
Cash and cash equivalents totalled EUR3.6m at 31 December 2020
compared to EUR5.5m as at 31 December 2019. The decrease year on
year was driven principally by the delay to revenues from 2020 into
2021 and the increased pressure on working capital amongst clients
and suppliers. As a result, the net debt as at 31 December 2020 was
EUR11.8m, compared to EUR8.2m as at 31 December 2019.
Total net assets on the balance sheet were EUR13.6m as at 31
December 2020, compared to EUR13.3m as at 31 December 2019.
SUBSEQUENT EVENTS
On 12 April 2021, the Group was informed that Nobiskrug shipyard
in Germany, where it was working on three projects, had entered
into an insolvency process to allow it to restructure itself. The
Group's existing financial exposure to this yard at the time of
this announcement was EUR2.8 million (excluding VAT). Subsequent
discussions with the ultimate owners of the projects in this yard
lead the Directors to remain confident that the projects will all
be completed and most, if not all, of the outstanding amount will
be recovered in due course. That having been said, there is a
material risk that the Group may need to write off some part of
this balance.
CASH FLOW
Net cash from operating activities was EUR0.3m for the year
(FY19: positive EUR2.9m). Net cash used in investing activities was
EUR3.4m for the year (FY19: EUR0.7m). Net cash used in financing
activities was EUR1.2m for the year (FY19: negative EUR1.8m) mainly
corresponding to the repayment of existing borrowings and finance
leases.
Overall net cash inflow for the year was EUR1.9m compared to
EUR0.5m for FY19.
FINANCIAL OUTLOOK
As set out in the Chief Executive's Report, the Directors are
confident about the Group's prospects going forward. That having
been said, the uncertainty surrounding the future evolution of the
COVID pandemic is significant and is discussed in detail in the
notes to the accounts. For this reason, the audit opinion in the
2020 accounts contains an emphasis of matter in respect of going
concern as it relates to a change of ownership risk and severe but
plausible downside risk although the audit opinion will remain
unqualified.
In March 2021, the Group amended its borrowing facilities with
its existing lenders. Under the terms of the amended agreement,
Facility B, which was due to be repaid in March 2021, is now
repayable in four tranches of EUR1.0 million starting in June 2021
and ending in December 2022. Facility A was repaid in early April
2021. As part of the amendment, an additional EUR1.0 million of
revolving credit, factoring and discounting facilities were made
available to the Group.
As things stand today, the Directors are confident of the
Group's ability to trade successfully through this going forward
but, like all businesses, we are operating in a rapidly changing
environment with a material element of unknown risk.
Kevin McNair
Chief Financial Officer
COVID-19 REPORT
In Q1 of 2020, the COVID pandemic rapidly spread across Europe
and the US. The Group developed a strategy for responding to the
pandemic based on three pillars:
-- Looking after the health and wellbeing of our staff,
-- Working with our clients and suppliers to ensure that we were
able to continue delivering high quality products and services in a
challenging and dynamic environment, and
-- Reshaping our business and reducing costs to give us the
flexibility required to respond to the pandemic and rapidly
changing commercial situation.
Each of the countries where we operate was impacted in different
ways based on the timing and speed of the pandemic and the response
of local government and the shipyards where we work. What was
relatively consistent across all sites was the actions we took
within each of the pillars.
Health and wellbeing of our staff
-- Immediately implementing government regulations and
guidelines with respect to sanitation, social distancing and travel
restrictions
-- Providing training on best practice as it evolved and
personal protective equipment to all staff
-- All staff who could realistically work from home did followed
by an ongoing move back into the offices with new attendance
patterns
-- Regular communication with staff on safety protocols, changes
in the structure and operations of the Group
-- Access to testing facilities as well and physical and mental health support
-- Recruiting additional Health & Safety staff to help
protect staff both within our offices and within client
environments
Working with our clients and suppliers
-- Working with clients and suppliers to implement new safety protocols and share best practice
-- Rescheduling or adapting travel and production plans in
response to the restrictions and social distancing requirements
-- Addressing logistical challenges as airlines, ports and
hauliers altered, reduced or suspended services
-- In the supply division, moving away from a traditional retail
model to a more flexible fulfilment model which could operate under
the harshest lockdown restrictions
Restructuring and cost reduction
-- Cost of living increases and bonuses for the period suspended
-- Production and supply activities suspended in response to
regulatory changes or client requirements
-- Utilising, where available, COVID related government support
programmes to maintain employment levels
-- Investment projects delayed until greater clarity was
possible in terms of the medium term impact
-- Office and retail footprint reduced significantly
-- Recruitment plans postponed until H2 2020
Financial impact
Although the Directors are confident that the Group responded
rapidly and effectively to the evolving pandemic, there were still
material financial impacts on the Group during the period. GYG
entered 2020 with the strongest Order Book in its history but the
onset of the pandemic led to significant delays in ongoing projects
and the starts of other projects were postponed and owners of
vessels and shipyards responded in their own fashion. The Coatings
division did not lose any contracts as a result but the Directors
believe that between EUR4 million and EUR6 million of revenue
shifted from 2020 into 2021.
On the cost side of the equation, the Group incurred significant
additional costs as it responded to the pandemic and the changes in
operating practices. Some of those costs were new or additional
costs that were specifically related to COVID such as PCR testing,
specialised cleaning services or additional PPE for all staff.
Other existing costs increased significantly due to new safety
protocols. A good example of that is the requirement for us to move
and house workers who were travelling on a socially distanced
basis. Rather than moving four employees in a rental car from one
country to another, we could only move two people per vehicle. At
different times, we would have to quarantine our own staff or
subcontractors for anywhere from five days to two weeks before they
could enter certain countries or work in certain shipyards.
Lastly, there was a loss of efficiency in certain parts of the
Group resulting from new safety practices. In many shipyards, our
workers were required to have their temperatures taken each day
before a shift started. Social distancing restricted the numbers of
workers we could have within any enclosed environment at one
time.
All in, the Directors believe that the total costs included in
these three different categories come to approximately EUR1.5
million during the year. Of this figure, EUR0.8 million was
included in exceptional items within the financial statements. The
balance was treated as ordinary operating expenses for the
year.
Moving forward, the Group is in a strong position to deal with
the ongoing pandemic. Barring any unforeseen developments, the
impact of COVID on the Group's financial results should not be
significant. With advanced planning and careful management many of
the costs incurred in 2020 can either be avoided or covered through
revised contractual arrangements. The ongoing rollout of the
various vaccines which are available will also hopefully reduce the
impact of the pandemic on operations.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2020
Note(s) Year ended Year ended
31 December 31 December
2020 2019
EUR 000 EUR 000
--------
Continuing operations
Revenue 4 58,898 63,827
Operating costs (57,665) (62,568)
Adjusted EBITDA 5,163 4,508
Depreciation and amortisation 12,13 (2,995) (2,808)
Performance share plan 23 90 (108)
Exceptional items 6 (1,025) (333)
-------------------------------------------- -------- ------------- -----------------
Operating profit 5 1,233 1,259
Gain on financial instruments 22 - 379
Finance costs - net 9 (1,050) (810)
Profit before tax 183 828
------------- -----------------
Tax 10 69 (145)
Profit for the period 252 683
------------- -----------------
Items that may be reclassified
subsequently
to profit or loss:
Exchange differences
on translation of foreign operations 57 (33)
Total comprehensive profit / (loss)
for the period 309 650
============================================ ============= =================
Profit / (loss) for the period
attributable to:
Owners of the company 252 753
Non-controlling interest - (70)
Total comprehensive profit / (loss)
for the period attributable to:
Owners of the company 309 720
Non-controlling interest - (70)
Earnings per share for profit attributable
to the ordinary equity holders
of the company EUR 11
Basic 0.00 0.02
Diluted 0.00 0.02
------------- -----------------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2020
2020 2019
Note EUR 000 EUR 000
ASSETS
--------------------------------- --------- ---------
Non-current assets
Goodwill 12 9,270 9,350
Other intangible assets 12 10,096 10,448
Property, plant and equipment 13 11,169 10,353
Other financial assets 24 197 144
Deferred tax assets 10 429 508
Total non-current assets 31,161 30,803
--------------------------------- ------ --------- ---------
Current assets
Inventories 14 3,129 2,535
Other financial assets 6 -
Trade and other receivables 15 11,070 7,999
Current tax receivable 15 687 657
Cash and cash equivalents 16 3,600 5,529
Total current assets 18,492 16,720
--------------------------------- ------ --------- ---------
TOTAL ASSETS 49,653 47,523
================================= ====== ========= =========
Note 2020 2019
EUR 000 EUR 000
Current liabilities
Trade, deferred income and other
payables 18 (15,724) (15,176)
Current tax liabilities 18 (2,407) (2,292)
Obligations under leases 17 (2,035) (1,571)
Borrowings 17 (9,789) (5,062)
Provisions 19 (356) (468)
Derivative financial instruments 24 (2) (14)
Total current liabilities (30,313) (24,583)
------------------------------------ ------ --------- ---------
Net current liabilities (11,821) (7,863)
------------------------------------ ------ --------- ---------
Non-current liabilities
Obligations under leases 17 (904) (2,184)
Borrowings 17 (2,572) (4,915)
Deferred tax liabilities 10 (2,359) (2,555)
Long-term provisions 19 (19) (19)
Total non-current liabilities (5,854) (9,673)
------------------------------------ ------ --------- ---------
Total liabilities (36,167) (34,256)
==================================== ====== ========= =========
Net assets 13,486 13,267
==================================== ====== ========= =========
EQUITY
------------------------------------ ------ --------- ---------
Share capital 20 106 106
Share premium 7,035 7,035
Retained earnings 5,959 5,707
Translation reserve (13) (70)
Capital redemption reserve 114 114
Share based payment reserve 285 375
------------------------------------ ------ --------- ---------
Equity attributable to owners
of the Company 13,486 13,267
------------------------------------ ------ --------- ---------
Total equity 20 13,486 13,267
==================================== ====== ========= =========
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2020
Share Share Retained Translation Capital Share Total Non-controlling Put TOTAL
capital premium earnings reserves redemption based EUR interests option EQUITY
EUR EUR 000 EUR 000 EUR 000 reserve payment 000 EUR 000 reserve EUR
000 EUR 000 reserve EUR 000 000
EUR 000
Balance at 1
January 2019 106 7,035 5,894 (37) 114 267 13,379 93 (963) 12,509
======== ======== ========= ============ =========== ======== ======= ================ ======== =======
Acquisition of
non-controlling
interest (note
21) - - (940) - - - (940) (23) 963 -
Credit to equity
for share
based payments - - - - - 108 108 - - 108
Transactions
with owners
in their
capacity of
owners - - (940) - - 108 (832) (23) 963 108
Profit/(loss)
for the year - - 753 (33) - - 720 (70) - 650
Total
comprehensive
profit/(loss)
for the period - - 753 (33) - - 720 (70) - 650
-------- -------- --------- ------------ ----------- -------- ------- ---------------- -------- -------
Balance at 31
December 2019 106 7,035 5,707 (70) 114 375 13,267 - - 13,267
======== ======== ========= ============ =========== ======== ======= ================ ======== =======
Charge to equity
for share
based payments - - - - - (90) (90) - - (90)
Transactions
with owners
in their
capacity of
owners - - - - - (90) (90) - - (90)
Profit for the
year - - 252 - - 252 - - 252
Other
comprehensive
income
for the period - - - 57 - - 57 57
Total
comprehensive
income
for the period - - 252 57 - - 309 - - 309
-------- -------- --------- ------------ ----------- -------- ------- ---------------- -------- -------
Balance at 31
December 2020 106 7,035 5,959 (13) 114 285 13,486 - - 13,486
======== ======== ========= ============ =========== ======== ======= ================ ======== =======
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 December 2020
2020 2019
Note EUR 000 EUR 000
----- ---------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES (I) 22 (104) 2,960
==================================================================== ========== =========
- Purchase of intangible assets (599) (82)
- Purchase of property, plant and equipment (2.786) (739)
- Acquisition of other investments (53) -
- Proceeds from disposal of property, plant and equipment 3 92
CASH FLOWS USED IN INVESTING ACTIVITIES (II) (3,435) (729)
==================================================================== ========== =========
- Proceeds from obligations under leases 745 -
- Proceeds from bank borrowings and credit facilities 4,206 2,925
- Repayment of obligations under leases (1,505) (1,631)
- Repayment of borrowings (1,836) (2,927)
- Payments to acquire shares from non-controlling interests - (167)
CASH FLOWS USED IN FINANCING ACTIVITIES (III) 1,610 (1,800)
==================================================================== ========== =========
Effect of foreign exchange rate changes (IV) - 29
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS (I+II+III+IV) (1,929) 460
==================================================================== ========== =========
Cash and cash equivalents at the beginning of the year 5,529 5,069
Cash and cash equivalents at the end of the year 3,600 5,529
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2020
1. General information
GYG plc (hereinafter the "Company") was incorporated on 11
February 2016, as a private company limited by shares, as Dunwilco
2016 Limited under the United Kingdom Companies Act 2006.
Subsequently, on 21 May 2016, the Company's corporate name was
changed to Global Yachting Group Limited, on 25 May 2017 to GYG
Limited, on 22 June 2017 the Company re-registered as a public
limited company and on 5 July 2017 the Company completed an Initial
Public Offering ("IPO") and was admitted to the AIM Market of the
London Stock Exchange. The address of the registered office is
Cannon Place, 78 Cannon Street, London EC4N 6AF, United
Kingdom.
The principal activity of the Group is superyacht painting,
supply and maintenance, offering services globally through
operations in the Mediterranean, Northern Europe and the United
States.
These consolidated financial statements are presented in Euro
which is the currency of the primary economic environment in which
the Group operates.
2. Significant accounting policies
2.1. Basis of preparation
These consolidated financial statements were prepared by the
Board of Directors in accordance with the application of
International Financial Reporting Standards (IFRSs) in conformity
with the requirements of the Companies Act 2006 and the
interpretations issued by the IFRS Interpretations Committee (IFRS
IC).
The consolidated financial statements have been prepared under
the historical cost convention unless indicated otherwise in the
notes to the consolidated financial statements.
The principal accounting policies adopted are set out and have
been applied consistently.
2.2. Adoption of international financial reporting standards
In the current year, IFRS 1, IFRS 3 and IFRS 9 amendments are
effective from 1 January 2020 but they do not have a material
effect on the Group's financial statements.
In the year 2019, the Group adopted the amendments to IFRSs
issued by the International Accounting Standards Board (IASB) that
are mandatory effective for an accounting period that begins on or
after 1 January 2019, none of which had a significant effect on the
results or net assets of the Group, except for the following:
IFRS 16 "Leases"
IFRS 16 is the IASB's replacement of IAS 17. Its application is
effective for reporting periods beginning on or after January 1,
2019, with early adoption permitted. IFRS 16 eliminates the
classification of leases as either operating leases or finance
leases for a lessee. Leases are 'capitalised' by recognising the
present value of the lease payments and showing them as a
right-of-use asset either separately or together with property,
plant and equipment (criteria applied by the Group). IFRS 16
replaces the straight-line operating lease expense for those leases
applying IAS 17 with a depreciation charge for the lease asset
(included within operating costs) and an interest expense on the
lease liability (included within finance costs). The Group has
applied the standard from its mandatory adoption date of 1 January
2019, using the modified retrospective approach and measuring the
asset at an amount equal to the present value of the remaining
lease payments discounted using an incremental borrowing rate,
adjusted by the amount of any prepaid or accrued lease payments and
no adjustment has been registered to the opening balances of
retained earnings.
The Group has applied the below practical expedients permitted
under the modified retrospective approach:
- Exclude leases for measurement and recognition for leases
where the term ends within 12 months from date of initial
application.
- Apply a single discount rate (incremental borrowing rate) to a
portfolio of leases with similar characteristics, based on current
rates paid to comparable borrowings.
The impact on the balance sheet as of 1 January 2019 for the
adoption of IFRS 16 is summarised as follows:
IFRS 16
adoption effect
-----------------
EUR 000
-----------------
Non-current assets: Property,
plant and equipment - R ight
of use asset 2,859
Current liabilities: Lease
liabilities (758)
Non-current liabilities: Lease
liabilities (2,102)
-----------------
2.3. Going concern
These financial statements have been prepared on a going concern
basis, which assumes the Group and parent company will continue to
be able to meet their liabilities as they fall due, for at least 12
months of the date of approval of these financial statements.
The Group has a strong Order Book, and contracted revenue for
2021 in excess of EUR40m, and initial performance during January
and February 2021 has been positive with revenue and EBITDA ahead
of our base case forecasts.
The Group meets its day-to-day working capital requirements from
cash flows generated from operations and banking facilities.
During the year the Group has undertaken the following in terms
of its borrowing facilities:
-- In June 2020, the Group entered into an additional new EUR3
million bank facility with its existing banking Group. These new
facilities have a grace period of 12 months, followed by 48 monthly
instalments to repay the facility. There are no covenants attached
to this facility.
-- In March 2021, the Group settled one of its loan agreements with a final payment of EUR0.9m.
-- The existing bank borrowings amount to EUR4m, which were due
for repayment in March 2021. This facility was renegotiated in
March 2021 extending the facility to December 2022, requiring four
EUR1m payments every six months commencing in June 2021. There are
covenants attached to this facility.
In evaluating the going concern assumption, management prepared
a base case profit and loss and cash flow forecasts to June 2022
(the going concern assessment period), including assessing
compliance with borrowing covenants. This forecast based upon the
strong contracted Order Book, demonstrates good levels of cash flow
headroom and covenant compliance throughout the going concern
window. The forecasts include a number of material assumptions, the
most significant relating to winning new revenue contracts, the
forecasting of the timing the work will be undertaken and the
margin that will be achieved on these contracts.
Management have also prepared two severe but plausible downside
scenarios, including a c.7% reduction in revenue and a 2% reduction
in margin. Under both scenarios, if management took no further
action the Group would continue to have sufficient cashflow
headroom throughout the going concern assessment period, but the
scenarios indicate potential breaches in borrowing covenants.
Management have then overlaid a number of actions within their
control they could undertake if business performance was in line
with the severe but plausible downside, these include not paying
discretionary bonuses, reducing or delaying capital expenditure and
delaying the payment of creditors. If management undertook these
actions in these severe but plausible downside scenarios, it would
result in headroom over the borrowing covenants throughout the
going concern window.
In addition, the recent news of the customer Nobiskrug filing
for insolvency, as referenced in the Financial Review, increases
the risk of revenue delays or cancellation and potential bad debt
exposure. Depending on the outcome of the insolvency, these factors
taken into account with a severe but plausible downside could
result in a breach of covenant that may not be mitigated by
management actions. A breach of covenant is an event of default,
and would require management to seek a waiver from the Group's
lenders, renegotiate the facilities with those lenders or repay the
group's existing lenders and seek sources of alternative
funding.
As referenced in the Chairman's Statement, the Group have
received an unsolicited approach from one of the Group's major
shareholders. The notice indicated that the shareholder is in the
preliminary stages of evaluating a possible offer for the entire
issued share capital of the business. The Directors have assessed
the possible offer which does not constitute a firm intention to
make an offer, and have reviewed the potential impact on the
Group's going concern assessment if the offer were to progress and
complete before June 2022. The Group's main borrowing facility
amounting to EUR4m, includes a change of ownership clause, and if
the Group's ownership were to change this would require the Group
to seek a waiver for this clause or to repay or refinance these
borrowing facilities. If a refinancing were required, the
facilities could be under different terms and conditions from the
existing facilities.
Given the information available, current trading and orders
being received, the Directors are confident that the forecasts will
be met, and sufficient liquidity will be available to meet
liabilities as they fall due and meet covenant compliance, and
therefore believe it is appropriate to prepare the financial
statements on a going concern basis. However, these forecasts for
which covenant compliance is assessed, include a number of
significant assumptions with regards to winning new customer
contracts, the forecasting of timing work will be undertaken and
the margin that will be achieved on these contracts. In addition,
if the Group's ownership structure were to change which would
trigger the need for refinancing, the Group may not have sufficient
cash resources to settle the borrowing facility if it were not
refinanced, or may not be able to adhere to any changes in terms
and conditions of new facilities. These factors indicate the
existence of material uncertainties which may cast significant
doubt as to the Group's and parent company's ability to continue as
a going concern. The financial statements do not include the
adjustments that would
result if the Group and parent company were unable to continue
as a going concern.
2.4. Basis of consolidation
The Group financial statements incorporate the financial
statements of the Company and enterprises controlled by the Company
(and its subsidiaries) made up to 31 December each period.
Control is achieved where the Company has the power to govern
the financial and operating policies of an investee entity to
obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the
period are included in the consolidated statement of 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 financial information of subsidiaries
to bring the accounting policies used into line with those used by
the Group. All intra-group transactions, balances, income and
expenses are eliminated on consolidation process.
2.5. Business combinations
Acquisitions of subsidiaries and businesses are accounted for
using the acquisition method. The consideration for each
acquisition is measured as 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 acquire. Acquisition-related costs are recognised in profit
or loss as incurred.
The acquirer's identifiable assets, liabilities and contingent
liabilities that meet the conditions for recognition under IFRS 3
are recognised at their fair value at the acquisition date.
2.6. Intangible assets
Intangible assets acquired separately
Intangible assets with finite useful lives that are acquired
separately are carried at cost less accumulated amortisation and
accumulated impairment losses. Amortisation is recognised on a
straight-line basis over their estimated useful economic lives. The
estimated useful economic life and amortisation method are reviewed
at the end of each reporting period, with the effect of any changes
in estimate being accounted for on a prospective basis. Intangible
assets with indefinite useful economic lives that are acquired
separately are carried at cost less accumulated impairment
losses.
Computer software is valued at acquisition cost, amortisation is
registered as a function of the useful economic life determined
between 3 and 5 years.
Goodwill
Goodwill arising in a business combination is recognised as an
asset at the date that control is acquired (the acquisition date).
Goodwill is measured as the excess of the sum of the consideration
transferred, the amount of any non-controlling interest in the
acquisition and the fair value of the acquirer's previously held
equity interest (if any) in the entity over the net of the
acquisition-date fair value of the identifiable assets acquired and
the liabilities assumed.
Goodwill is not amortised but is reviewed for impairment at
least annually. For the purpose of impairment testing, goodwill is
allocated to each of the Group's cash-generating units ("CGUs")
expected to benefit from the synergies of the combination. CGUs to
which goodwill has been allocated are tested for impairment
annually, or more frequently when there is an indication that the
unit may be impaired. If the recoverable amount of the CGU is less
than the carrying amount of the unit, the impairment loss is
allocated first to reduce the carrying amount of any goodwill
allocated to the unit and then to the other assets of the unit pro
rata on the basis of the carrying amount of each asset in the unit.
An impairment loss recognised for goodwill is not reversed in a
subsequent period.
On disposal of a subsidiary, the attributable amount of goodwill
is included in the determination of the profit or loss on
disposal.
Intangible assets acquired in a business combination
Intangible assets acquired in a business combination and
recognised separately from goodwill are initially recognised at
their fair value at the acquisition date (which is regarded as
their cost).
Subsequent to initial recognition, intangible assets acquired in
a business combination are reported at cost less accumulated
amortisation and accumulated impairment losses, on the same basis
as intangible assets that are acquired separately.
Order backlog has an estimated useful economic life of less than
one year. Customer relationships and brands have an estimated
useful economic life of 15 years.
Derecognition of intangible assets
An Intangible asset is derecognised on disposal, or when no
future economic benefits are expected from use or disposal. Gains
or losses arising from de-recognition of an intangible asset,
measured as the difference between the net disposal proceeds and
the carrying amount of the asset, are recognised in profit or loss
when the asset is derecognised.
2.7. Revenue recognition
The Group recognises revenue based on the consideration to which
the Group expects to be entitled in a contract with a customer and
following the five-step model defined by the IFRS 15:
- Step 1: Identify the contract with a customer
- Step 2: Identify the performance obligations in the contract
- Step 3: Determine the transaction price
- Step 4: Allocate the transaction price to the performance obligations in the contracts.
- Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation
The Group recognises revenue from the following activities:
Rendering of services
Revenue is recognised for these services based on the stage of
completion. The directors have assessed that the stage of
competition of a contract is determined as follows:
-- Revenue is recognised by reference to the stage of completion
of the refit or new build project, determined as the proportion of
the total time expected on the project that has elapsed at the end
of the reporting period;
-- revenue from time and material contracts is recognised at the
contractual rates as labour hours and direct expenses are incurred;
and
-- servicing fees included in the price of products sold are
recognised by reference to the proportion of the total cost of
providing the servicing for the product sold.
-- This is considered a faithful depiction of the transfer of
goods and services to the customer as the contracts are initially
priced on the basis of anticipated costs to complete the projects
and therefore also represents the amount to which the Group would
be entitled based on its performance to date.
This input method is an appropriate measure of the progress
towards complete satisfaction of the performance obligations
established in the contract under IFRS 15.
Sale of goods
The Group sells maintenance materials, consumables, spare parts
and equipment to customers through its retail outlets as well as
shipping products. For sales of such products to retail customers,
revenue is recognised when control of goods has transferred, being
at the point the customer purchases the goods at the retail outlet
or when the goods have been shipped to the specific location.
2.8. Leases
The group leases various offices, warehouses and equipment.
As indicated in note 2.2 above, the Group has adopted IFRS 16
Leases retrospectively from 1 January 2019, but has not restated
comparatives for the 2018 reporting year, as permitted under the
specific transition provisions in the standard.
From 1 January 2019, leases are recognised as a right-of-use
asset and a corresponding liability at the date at which the leased
asset is available for use by the Group. Assets and liabilities
arising from a lease are initially measured on a present value
basis.
The lease payments are discounted using the interest rate
implicit in the lease. If that rate cannot be readily determined,
which is generally the case for leases in the Group, the Group's
incremental borrowing rate is used, being the rate that it would
have to pay to borrow the funds necessary to obtain an asset of
similar value to the right-of-use asset in a similar economic
environment with similar terms, security and conditions.
Right-of-use assets are generally depreciated over the shorter
of the asset's useful life and the lease term on a straight-line
basis.
Until 31 December 2018, leases were classified as finance leases
whenever the terms of the lease transferred substantially all the
risks and rewards of ownership to the Group. All other leases were
classified as operating leases.
Assets held under finance leases were recognised as assets of
the Group at their fair value or, if lower, at the present value of
the minimum lease payments, each determined at the inception of the
lease. The corresponding liability to the lessor was included in
the balance sheet as obligations under finance leases.
Rentals payable under operating leases were charged to the
consolidated statement of comprehensive income on a straight-line
basis over the term of the relevant lease except where another more
systematic basis is more representative of the time pattern in
which economic benefits from the lease asset are consumed.
2.9. Exceptional items
Certain items are presented in the Consolidated Statement of
Comprehensive Income as exceptional where, in the judgement of the
Directors, by virtue of their nature, size or incidence, in order
to obtain a clear and consistent presentation of the Group's
underlying business performance they need to be disclosed
separately. These are items that fall outside the normal day to day
operations of the business and the Directors believe are unlikely
to ever occur again. Examples of items which may give rise to
disclosure as exceptional items include restructuring costs if the
restructuring involves a fundamental change to the Group's business
model and transaction fees if the transaction involves a
significant change to the structure or investment case for the
Group. See note 6 for further details.
2.10. Adjusted EBITDA
Adjusted Earnings before Interest, Taxation, Depreciation and
Amortisation ("Adjusted EBITDA") is a non-IFRS measure used by
Directors to assess the operating performance of the Group.
The "Adjusted EBITDA" is also used as a metric to determine
management remuneration as well as being measured within the
financial covenants calculations.
"Adjusted EBITDA" is defined as operating profit before
depreciation and amortisation, impairment, performance share plan
and exceptional items.
As a non-IFRS measure, the Company's calculation of "Adjusted
EBITDA" may be different from the calculation used by other
companies and therefore comparability may be limited.
2.11. Foreign currency
For the purpose of presenting these financial statements, the
assets and liabilities of the Group's foreign operations are
translated at exchange rates prevailing on the balance sheet date.
Income and expense items are translated at the average exchange
rates for the period, unless exchange rates fluctuate significantly
during that period, in which case the exchange rates at the date of
transactions are used.
At each period end date, monetary assets and liabilities that
are denominated in foreign currencies are re-translated at the
rates prevailing on the period end date. Non-monetary assets and
liabilities carried at fair value that are denominated in foreign
currencies are translated at the rates prevailing at the date when
the fair value was determined. Gains and losses arising on
retranslation are included in net profit or loss for the period,
except for exchange differences arising on non-monetary assets and
liabilities, except for exchange differences arising on changes in
in fair value of non-monetary assets and liabilities that are
recognised directly in equity.
2.12. Taxation
The tax expense represents the sum of the tax currently payable
and deferred tax.
2.12.1. Current Tax
The tax currently payable is based on taxable profit for the
period. Taxable profit differs from net profit as reported in the
consolidated statement of comprehensive income because it excludes
items of income or expense that are taxable or deductible in other
periods and it further excludes items that are never taxable or
deductible. The Group's liability for current tax is calculated
using tax rates that have been enacted or substantively enacted by
the balance sheet date.
The Spanish subsidiaries group companies, are included in a
consolidated tax return within fiscal group under Spanish
regulation.
2.12.2. Deferred Tax
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profit, and is accounted for using the
balance sheet liability method. Deferred tax liabilities are
generally recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which
deductible temporary differences can be utilised.
Such assets and liabilities are not recognised if the temporary
difference arises from the initial recognition of 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 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 consolidated statement of comprehensive
income, 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.
2.13. Property, plant and equipment
Property, plant and equipment are stated at cost less
accumulated depreciation and any recognised impairment loss.
Depreciation is recognised so as to write off the cost of assets
(other than land and assets under construction) less their residual
values over their useful economic lives, using the straight-line
method in the following bases:
Useful
economic
lives (years)
Property 10 - 33
Plant and equipment 3 - 10
Other plant, tools
and furniture 4 - 10
Other tangible assets 3 - 20
---------------
The estimated useful economic lives, residual values and
depreciation method are reviewed at the end of each reporting
period, with the effect of any changes in estimate accounted for on
a prospective basis.
Assets held under finance leases are depreciated over their
expected useful lives on the same basis as owned assets. However,
when there is no reasonable certainty that ownership will be
obtained by the end of the lease term, assets are depreciated over
the shorter of the lease term and their useful lives.
The gain or loss arising on the disposal or retirement of an
item of property, plant and equipment is determined as the
difference between the sales proceeds and the carrying amount of
the asset and is recognised in profit or loss.
2.14. Impairment of tangible and intangible assets excluding goodwill
At each balance sheet date, the Group reviews the carrying
amounts of its tangible and intangible assets to determine whether
there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated to determine the extent of the
impairment loss (if any). Where the asset does not generate cash
flows that are independent from other assets, the Group estimates
the recoverable amount of the cash-generating unit to which the
asset belongs.
An intangible asset with an indefinite useful life is tested for
impairment at least annually and whenever there is an indication
that the asset may be impaired.
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 that reflects current market assessments of
the time value of money and the risks specific to the asset for
which the estimates of future cash flows have not been
adjusted.
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.
2.15. Inventories
Inventories are stated at the lower cost and net realisable
value. Costs of inventories are determined on weighted average
price basis. Net realisable value represents the estimated selling
price for inventories less all estimated costs of completion and
costs necessary to make the sale.
2.16. 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 that
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
balance sheet date, 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 some or all of the economic benefits required to settle a
provision are expected to be recovered from a third party, a
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.
2.17. Financial assets
The Group classifies its financial assets as those to be
measured at amortised cost.
Recognition and derecognition
Sales of financial assets are recognised when the Group commits
to purchase or sell the asset. Financial assets are derecognised
when the rights to receive cash flows from the financial assets
have expired or have been transferred and the Group has transferred
substantially all the risks and rewards of ownership.
Measurement
At initial recognition, the Group measures a financial asset at
its fair value. Transaction costs that are directly attributable to
the acquisition of the financial asset are included in the fair
value initial assessment of fair value.
Trade and other receivables
Trade receivables are amounts due from customers for goods sold
or services performed in the ordinary course of business. They are
generally due for settlement within 30 days and are therefore all
classified as current. Trade receivables are recognised initially
at the amount of consideration that is unconditional, unless they
contain significant financing components, when they are recognised
at fair value. The group holds trade and other receivables with the
objective of collecting the contractual cash flows and therefore
measures them subsequently at amortised cost using the effective
interest method.
The effective interest method is a method of calculating the
amortised cost of a debt instrument and of allocating interest
income over the relevant period. The effective interest rate is the
rate that exactly discounts estimated future cash receipts
(including all fees and points paid or received that form an
integral part of the effective interest rate, transaction costs and
other premiums or discounts) through the expected life of the debt
instrument, or, where appropriate, a shorter period, to the net
carrying amount on initial recognition.
2.18. Cash and cash equivalents
Cash and cash equivalents comprise cash and short-term bank
deposits with an original maturity of three months or less. The
carrying amount of these assets is equal to their fair value.
2.19. Loans and receivables - long term
Loans and receivables - long term are non-derivative financial
assets with fixed or determinable payments that are not quoted in
an active market. Loans and receivables are measured at amortised
cost using the effective interest method, less any impairment.
Interest income is recognised by applying the effective interest
rate.
Financial liabilities
Financial liabilities (including borrowings and trade and other
payables) are subsequently measured at amortised cost using the
effective interest method.
Derivative financial instruments
The Group enters into interest rate swaps to manage its exposure
to interest rate and foreign exchange rates risks.
Derivatives are initially recognised at fair value at the date
derivative contracts are entered into and are subsequently
remeasured to their fair value at the end of each reporting period.
The resulting gain or loss is recognised in profit or loss
immediately.
Fair value measurement
All financial instruments for which fair value is measured or
disclosed in the financial statements are categorised within the
fair value hierarchy, described as follows:
- Level 1 fair value measurements are those derived from quoted
prices (unadjusted) in active markets for identical assets or
liabilities;
- Level 2 fair value measurements are those derived from inputs
other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly or
indirectly; and
- Level 3 fair value measurements are those derived from
valuation techniques that include inputs for the asset or liability
that are not based on observable market data (unobservable
inputs).
2.20. Related party transactions
The Group performs all its transactions with related parties on
an arm's length basis. The Group carries out all its related-party
transactions (financial, commercial or otherwise) by setting
transfer prices stipulated by the OECD to regulate transactions
with subsidiaries.
2.21. Consolidated cash flow statements
In these financial statements cash and cash equivalents comprise
cash and short-term bank deposits with an original maturity of
three months or less, net of outstanding bank overdrafts. The
carrying amount of these assets is approximately equal to their
fair value.
The consolidated cash flow statements have been prepared using
the indirect method and the terms used are defined as follows:
-- Cash flows: inflows and outflows of cash and cash
equivalents, which are short-term, highly liquid investments that
are subject to an insignificant risk of changes in value.
-- Operating activities: the principal revenue-producing
activities of the entities composing the consolidated Group and
other activities that are not investing or financing
activities.
-- Investing activities: the acquisition and disposal of
long-term assets and other investments not included in cash and
cash equivalents, if they have a direct impact on current cash
flows.
-- Financing activities: activities that result in changes in
the size and composition of the equity and liabilities that are not
operating activities, if they have a direct impact on current cash
flows.
2.22. Share-based payments
Equity-settled share-based payments to employees and other
entities are measured at the fair value of the equity instruments
at the grant date. The fair value excludes the effect of non-market
vesting conditions. Details regarding the determination of the fair
value of equity-settled share-based payments are set out in note
24.
The fair value determined at the grant date of the
equity-settled share-based payments is expensed on a straight-line
basis over the vesting period, based on the Group's estimate of
equity instruments that will eventually vest. At each balance sheet
date, the Group revises its estimate of the number of equity
instruments expected to vest as a result of the effect of
non-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.
Equity-settled share-based payment transactions with parties
other than employees are measured at the fair value of the services
received, except where the fair value cannot be estimated reliably,
in which case they are measured at the fair value of the equity
instruments granted, measured at the date the counterparty renders
the service.
2.23. Government Grants
Government grants are recognised where there is reasonable
assurance that the grant will be received. Grants that compensate
the Group for expenses incurred are recognised in the Income
statement in the relevant financial statement caption on a
systematic basis in the periods in which the expenses are
recognised.
3. Critical accounting judgements and key sources of estimation uncertainty
In the application of the Group's accounting policies, which are
described in note 2, the Directors are required to make judgements,
estimates and assumptions about the carrying amounts of assets and
liabilities that are not readily apparent from other sources. The
estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant.
Actual results may differ from these estimates.
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.
3.1 Critical judgements in applying the Group's accounting
policies
The following are the critical judgements, apart from those
involving estimations (which are dealt with separately below), that
the Directors have made in the process of applying the Group's
accounting policies and that have the most significant effect on
the amounts recognised in the financial statements.
Information on the funding position and going concern assessment
of the Group is set out in the detail in the Section "Going
Concern".
3.2 Key sources of estimation uncertainty
The accounting for long term contracts requires management to
apply judgement in estimating the total revenue and total costs
expected on each project and also to estimate the stage of
completion. Such estimates are revised as a project progresses to
reflect the current status of the project and the latest
information available to management. Project management teams
perform regular reviews to ensure the latest estimates are
appropriate.
3.2.1 Revenue recognition
Revenue from contracts to provide services is recognised by
reference to the stage of completion of the contract, determined as
the proportion of the total labour hours expected to provide the
service that have elapsed at the end of the reporting period. This
requires the Directors to estimate labour hours to complete, based
on the Company's experience and professional judgement.
A 1% decrease in margin on each ongoing long-term contract would
change the balance of contract assets/contract liabilities by
EUR614k.
3.2.2 Impairment of goodwill
Determining whether goodwill is impaired requires an estimation
of the value in use of the cash-generating units to which goodwill
has been allocated. The value in use calculation requires the
Directors to estimate the future cash flows expected to arise from
the cash-generating unit and a suitable discount rate in order to
calculate present value,
The key assumptions for determining the value in use include the
pre-tax discount rate, which has been estimated at 16.25% for the
goodwill registered for each of the Coatings and Supply segments
(and at 17.25% for ACA Marine, SAS) and a long-term growth rate of
3.0%. These estimates, including the methodology used, may have a
significant impact on the registered values and impairment losses.
Management has concluded that the estimated growth rate used does
not exceed the average long-term growth rate for the relevant
markets where the group operates (Europe and USA). Following the
impact of the COVID pandemic over the past several months,
Management are comfortable that these assumptions are still
reasonable. (see note 12)
4. Segment information
The Groups reportable segments are determined by the internal
reporting regularly provided to the Group's Chief Operating
Decision Maker. The Chief Operating Decision Maker, who is
responsible for allocating resources and assessing performance of
the operating segments, has been identified as the Board of
Directors .
The Board of Directors has determined that, based on the Group's
management and internal reporting structure, the Group has two
reportable segments, Coatings - the provision of painting and other
finishing services to yachts and superyachts and Supply - the
distribution of yachting supplies to trade and other customers.
Any transaction between reportable segments is performed on an
arm's length basis.
4.1. Business segments
Segment information about the above businesses is presented
below for the year ended 31 December 2020 and 2019 :
Year ended 31 December 2020
Coatings Supply Total reportable
segments
EUR 000 EUR 000 EUR 000
--------- -------- -----------------
Revenue 50,760 8,138 58,898
========= ======== =================
Gross Profit 15,845 2,302 18,147
========= ======== =================
Adjusted EBITDA 4,033 1,130 5,163
Depreciation and amortisation (2,995)
Performance share plan 90
Exceptional items (1,025)
Operating Profit 1,233
Finance costs (1,050)
Profit before tax 185
=================
Year ended 31 December 2019
Total reportable
Coatings Supply segments
--------- -------- -----------------
EUR 000 EUR 000 EUR 000
Revenue 53,718 10,109 63,827
========= ======== =================
Gross profit 12,731 2,254 14,985
========= ======== =================
Adjusted EBITDA 3,628 880 4,508
Depreciation and amortisation (2,808)
Performance share plan (108)
Exceptional items (333)
Operating profit 1,259
Gain on financial instruments 379
Finance costs (810)
Profit before tax 828
=================
Segment results include items directly attributable to a segment
as well as those that can be allocated on a reasonable basis.
At 31 December 2020 and 2019 the Group has the following
specific assets allocated to the business segments:
31 December 2020
Coatings Supply Total reportable
segments
EUR 000 EUR 000 EUR 000
--------- -------- -----------------
Goodwill 8,422 848 9,270
Inventories 814 2,315 3,129
Trade and other receivables 10,436 1,320 11,757
Trade, deferred income
and other payables (14,548) (3,584) (18,131)
========= ======== =================
31 December 2019
Total reportable
Coatings Supply segments
--------- -------- -----------------
EUR 000 EUR 000 EUR 000
Goodwill 8,502 848 9,350
Inventories 157 2,378 2,535
Trade and other receivables 7,493 1,163 8,656
Trade, deferred income and other
payables (14,041) (3,427) (17,468)
========= ======== =================
Assets, including PPE and certain intangibles, are used across
the Group and are not, therefore, attributable to any specific
segment.
4.2. Geographical location
Revenues from external customers attributed to the Group's
country of domicile and attributed to foreign countries from which
the Group derives revenue is presented below.
Year ended Year ended
31 December 31 December
2020 2019
------------- -------------
EUR 000 EUR 000
------------- -------------
Spain 25,148 31,434
United Kingdom 628 128
Rest of Europe 24,239 23,659
Rest of World 8,883 8,606
58,898 63,827
============= =============
At 31 December 2020 the Group has non-current assets allocated
to Europe and "Rest of the World" for an amount of EUR 29,415
thousand and EUR1,986 thousand, respectively ( EUR 28,591 thousand
and EUR2,212 thousand, respectively, at 31 December 2019).
4.3. Information about major customers
There are no revenues from transactions with individual
customers which contribute 10% or more to the Group's revenue for
the period ended 31 December 2020. For the year ended 31 December
2019 there was one relevant customer whose revenues contributed 10%
or more to the Group's revenue, related to the Coatings segment and
representing a total amount of EUR7,636 thousand.
5. Operating profit
Operating profit has been arrived at after
crediting/(charging):
Year ended Year ended
31 December 31 December
2020 2019
------------- -------------
EUR 000 EUR 000
------------- -------------
Net foreign exchange (losses)
/ gain (15) 27
Depreciation of property,
plant and equipment (1,996) (1,861)
Amortisation of intangible
assets (969) (947)
Leases (see note 13) (883) (285)
Gain / (losses) on disposals 38 209
Impairment on trade receivables (32) (76)
Cost of materials (11,341) (12,776)
Staff costs (see note 8) (20,400) (20,678)
============= =============
6. Exceptional items
Year ended Year ended
31 December 31 December
2020 2019
------------- -------------
EUR 000 EUR 000
------------- -------------
Covid -19 (812) -
------------- -------------
Restructuring
costs (213) (333)
------------- -------------
(1,025) (333)
------------- -------------
Excluding the impact of the exceptional items shown above, the
operating profit for 2020 was EUR 2,258 million.
Covid-19
During 2020, the Group incurred significant costs that were a
direct result of the COVID pandemic. These costs fall into three
broad categories: new costs, incremental employee related costs and
additional non-employee costs. The Group also benefited from a
government backed program in the USA. These COVID related costs and
benefit have been treated as exceptional.
The Group's workforce is highly mobile, regularly moving between
countries, shipyards and ships, mingling with significant numbers
of other people, and working in close proximity. The pandemic meant
that they operate in an environment where there were significant
new burdens in terms of personal protective equipment, social
distancing and testing. Travel was significantly disrupted and then
affected by the varying social distancing measures required by
different countries and shipyards.
New costs
In response to the pandemic, the Group incurred new costs for
products and services that it had to procure which were not part of
ordinary trading. These included testing (PCR, lateral flow, blood
tests, etc.), PPE for the parts of the workforce that had not
previously required it, screens to provide protective environments
within offices and other workplaces. Environmental cleaning
services intended to sterilize work areas were utilised in certain
environments. These costs totalled EUR105,438 during 2020.
Additional workforce costs
The largest impact on employee related costs during 2020 was
driven by the use of quarantine to try and reduce infection rates.
The Group's highly mobile workforce was required to regularly
quarantine upon entering a country, before entering a shipyard or
upon returning to Spain. Positive tests for infection of one team
member frequently led to whole teams being quarantined for up to
two weeks. In these scenarios the company was required to bring in
additional flexible labour to maintain production schedules while
employees and existing sub-contractors were quarantined. To
mitigate the costs of quarantine, the Group offered incentives to
employees while travelling to stay abroad for longer periods and
avoid having to quarantine as frequently.
The overall impact of these employee related costs was an
increase in manpower of EUR 425,696 . This does not include the
costs of employees who became ill with COVID which were treated as
ordinary employee expenses.
Additional non-employee costs
Following the introduction of social distancing as a way to try
and reduce infection rates, the Group had to significantly alter
its working protocols. Where previously, we had been able to rent
space within shipyards for storage or changing facilities, we
suddenly had to increase this space to ensure reduced worker
density.
Most seriously impacted by these changes were the Group's travel
arrangements. Where previously, we could accommodate four employees
in an apartment on a project, we had to reduce this number to two,
effectively doubling the accommodation costs on the project. When
moving workers to countries, shipyards accommodation, we had to
reduce occupancy levels in vehicles by at least 50%.
During parts of March and April, two significant shipyards where
the Group operates were shut completely. During this time, the
Group sent their workforce home but was required by the shipyards
to provide full-time security within the yard to meet health,
safety and environmental requirements.
Combined, these non-employee related costs totalled EUR 542,465
during 2020.
Loan Forgiveness
In the USA, a government funded support programme known as the
Paycheck Protection Program (PPP) was put in place in 2020 in
response to COVID. Under the terms of the PPP, companies could take
out a loan principally for the purposes of maintaining existing
employment levels. Under certain conditions, the loan would
subsequently be forgiven. In August 2020, Pinmar USA received
EUR400,159 as part of PPP. The company was subsequently determined
to have met the conditions of the program and the loan was
forgiven. The has been offset against exceptional COVID costs.
Restructuring costs
Restructuring costs for the year 2020 and 2019 were part of a
group-wide cost saving plan which included redundancies and other
costs associated with reorganisation and restructuring of certain
parts of the Group.
The tax effect of the above exceptional costs amounted to EUR213
thousand for the year ended 31 December 2020 (EUR72 thousand for
the year ended 31 December 2019).
7. Auditors' remuneration
The fees for audit and non-audit services provided by the
auditors of the Group's consolidated financial statements and of
certain individual financial statements of the consolidated
companies, PricewaterhouseCoopers LLP., and by companies belonging
to PricewaterhouseCoopers's network, were as follows:
Year ended Year ended
31 December 31 December
2020 2019
------------- -------------
EUR 000 EUR 000
------------- -------------
Fees payable to the Company's
auditors for the audit of the
parent company and consolidated
financial statements 85 75
Fees payable to the Company's
auditors for the audit of company's
subsidiaries 122 108
Fees payable to the company's 108 -
auditors for prior year variations
Fees payable to the Company's
auditors for other services:
Other related assurance services 67 51
Other non-audit services 32 21
414 255
============= =============
8. Staff costs
The average number of employees (including Executive Directors)
was:
Year ended Year ended
31 December 31 December
2020 2019
------------- -------------
Senior Management 12 13
Sales & Administration 91 81
Production 292 296
395 390
============= =============
Their aggregate remuneration comprised:
Year ended Year ended
31 December 31 December
2020 2019
------------- -------------
EUR 000 EUR 000
------------- -------------
Wages 16,345 16,697
Social security
costs 4,055 3,981
------------- -------------
20,400 20,678
============= =============
Directors' emoluments:
Year ended Year ended
31 December 31 December
2020 2019
------------- -------------
EUR 000 EUR 000
------------- -------------
Directors' emoluments
Salaries, fees and
bonus (*) 868 1,136
Performance share
plan costs 194 88
-------------
Highest paid Director
Salaries, fees and
bonus 263 359
Performance share
plan costs 105 48
------------- -------------
(*) In the year ended 31 December 2019, as a consultant, Kevin
McNair also received payment of EUR121,900 in respect of his role
as Interim Chief Financial Officer.
The performance share plan costs detailed in the above table
correspond to the expense registered during the year. No share
options have been exercised in 2020 and 2019.
Further information about the remuneration of individual
directors is provided in the audited part of the Directors'
Remuneration Report.
9. Finance costs
Year ended Year ended
31 December 31 December
2020 2019
------------- -------------
EUR 000 EUR 000
------------- -------------
Interest on bank overdrafts
and loans 880 331
Unwinding of capitalised loan
issue costs (note 17) - 305
Interest on obligations under
leases 19 83
Other financial costs - net 151 91
============= =============
1,050 810
10. Tax
10.1 Tax recognised in profit or loss
Year ended Year ended
31 December 31 December
2020 2019
------------- -------------
EUR 000 EUR 000
------------- -------------
Corporation Tax
Current year (47) (55)
Prior years - -
------------- -------------
(47) (55)
------------- -------------
Deferred tax
Timing differences 196 157
Tax losses (80) (247)
------------- -------------
116 (90)
------------- -------------
Total 69 (145)
============= =============
Spanish Corporation tax is calculated at 25% of the estimated
taxable profit for the year. Taxation for other jurisdictions is
calculated at the rates prevailing in the respective
jurisdictions.
The income tax expense for the year can be reconciled to the
accounting profit/(loss) as follows:
Year ended Year ended
31 December 31 December
2020 2019
------------- -------------
EUR 000 EUR 000
------------- -------------
Profit/(Loss) before
tax from continuing
operations 183 828
------------- -------------
Tax at the Spanish corporation
tax rate (25%) (46) (207)
Overseas tax differences 32 6
Tax effect of incomes
/ (expenses) that are
not considered in determining
tax profit 77 3
Utilisation of previously
unrecognised losses - 82
Other differences 6 (29)
Total 69 (145)
------------- -------------
10.2 Deferred tax balances
The following is an analysis of deferred tax assets/
(liabilities) presented in the consolidated statement of financial
position:
31 December 2020
Opening Recognised Closing
Balance in profit Other Balance
or loss
--------- ----------- -------- -------------
EUR 000 EUR 000 EUR 000 EUR 000
Property, plant
& equipment 74 34 - 108
Tax losses 1,224 (115) - 1,109
Intangible and
tangible assets (3,345) 197 - (3,148)
Net (2,047) 116 - (1,929)
========= =========== ======== =========
Deferred tax
assets 508 (80) - 429
========= =========== ======== =========
Deferred tax
liabilities (2,555) 196 - (2,359)
========= =========== ======== =========
31 December 2019
Opening Recognised Closing
Balance in profit Other Balance
or loss
--------- ----------- -------- -------------
EUR 000 EUR 000 EUR 000 EUR 000
Property, plant
& equipment 114 (40) - 74
Tax losses 1,471 (247) - 1,224
Intangible and
tangible assets (3,542) 197 - (3,345)
Net (1,957) (90) - (2,047)
========= =========== ======== =========
Deferred tax
assets 261 (25) 272 508
========= =========== ======== =========
Deferred tax
liabilities (2,218) (65) (272) (2,555)
========= =========== ======== =========
The deferred tax assets have been offset against the deferred
tax liabilities recognised in the same tax jurisdictions that are
expected to unwind against the same taxable income. Deferred tax
assets are calculated at the existing tax rates for the specific
jurisdiction where the losses have occurred.
The deferred tax assets from tax losses are related to tax
losses from Spain and other countries like France and United States
with no time limit for their application.
31 December 31 December
2020 2019
------------ ------------
EUR 000 EUR 000
------------ ------------
Between two and five - -
years
More than five years 1,109 1,224
1,109 1,224
============ ============
10.3 Unrecognised deductible temporary differences, unused tax losses and unused tax credits
31 December 31 December
2020 2019
------------ ------------
EUR 000 EUR 000
------------ ------------
Tax losses 242 251
242 251
============ ============
11. Earnings per share for profit attributable to the ordinary
equity holders of the company EUR
From continuing operations
Adjusted basic earnings are presented to eliminate the effect of
the exceptional items, amortisation and impairment of intangible
assets, gains on financial instruments and performance share plan
costs (considering the tax effect of these adjustments):
Year ended Year ended
31 December 31 December
2020 2019
------------- -------------
EUR 000 EUR 000
------------- -------------
Earnings attributable to shareholders 252 753
------------- -------------
Amortisation of intangible assets and
depreciation of tangible assets 2,995 2,808
Performance share plan (90) 108
Exceptional items 1,025 333
Tax effect of above adjustments (1,297) (1,056)
------------- -------------
Adjusted basic earnings 2,886 2,946
------------- -------------
Basic earnings per share are calculated by dividing net profit
for the year attributable to the Group (i.e. after tax and
non-controlling interests) by the weighted average number of shares
outstanding during that year.
Diluted profit per share have been calculated on a similar basis
taking into account dilutive potential shares under the agreements
disclosed in note 23.
Year ended Year ended
31 December 31 December
2020 2019
------------- -------------
Earnings for the period attributable
to shareholders (EUR000) 252 753
Weighted average number of shares 46,640,000 46,640,000
Basic earnings per share (EUR) 0.00 0.02
============= =============
Adjusted basic earnings per share
(EUR) 0.07 0.06
============= =============
Dilutive weighted average number
of shares 47,987,728 47,777,975
------------- -------------
Diluted earnings per share (EUR) 0.00 0.02
============= =============
Adjusted diluted earnings per share
(EUR) 0.07 0.06
============= =============
12. Goodwill and Intangible assets
Goodwill
Goodwill
EUR 000
---------------------- ---------
Cost
At 1 January 2019 9,333
Exchange differences 17
---------
At 31 December 2019 9,350
=========
Exchange differences (80)
---------
At 31 December 2020 9,270
=========
Carrying amount
At 31 December 2020 9,270
=========
At 31 December 2019 9,350
=========
Goodwill acquired in a business combination is allocated, at
acquisition, to the cash generating units (CGUs) or group of units
that are expected to benefit from that business combination. The
carrying amount of goodwill has been allocated as follows:
31 December 31 December
2020 2019
------------ ------------
EUR 000 EUR 000
------------ ------------
Coatings 8,422 8,502
Supply 848 848
9,270 9,350
============ ============
Other intangible assets
Customer Software Total
relationships,
brands
and backlog
EUR 000 EUR 000 EUR 000
-------------------------- ---------------- --------- --------
Cost
At 1 January 2019 15,233 220 15,453
Additions - 82 82
--------------------------
At 31 December 2019 15,233 302 15,535
Additions - 617 617
-------------------------- ---------------- --------- --------
At 31 December 2020 15,233 919 16,152
-------------------------- ---------------- --------- --------
Accumulated amortisation
At 1 January 2019 3,992 148 4,140
Charge of the period 923 24 947
-------------------------- ---------------- --------- --------
At 31 December 2019 4,915 172 5,087
Charge of the period 922 47 969
-------------------------- ---------------- --------- --------
At 31 December 2020 5,837 219 6,056
-------------------------- ---------------- --------- --------
Carrying amount
At 31 December 2020 9,396 700 10,096
-------------------------- ---------------- --------- --------
At 31 December 2019 10,318 130 10,448
-------------------------- ---------------- --------- --------
Impairment reviews
The Group performs an annual impairment review for goodwill and
other intangible assets, or more frequently if there are
indications that these might be impaired.
Testing is carried out by allocating the carrying value of these
assets to cash-generating units (CGUs) and determining the
recoverable amounts of those CGUs. The recoverable amount is the
higher of the fair value minus the costs of selling and its value
in use. Value in use calculations are based on cash-flow
discounting methods.
The discounted cash-flows are calculated based on 3-year
projections of the budgets approved by the Board of Directors.
These cash-flows consider past experience and represent the best
estimate of management on future market developments and Group
performance.
The key assumptions for determining the value in use include the
pre-tax discount rate, which has been estimated at 16.25% for the
goodwill registered for each of the Coatings and Supply segments
(and at 17.25% for ACA Marine, SAS) and a long-term growth rate of
3.0%. These estimates, including the methodology used, may have a
significant impact on the registered values and impairment losses.
Management has concluded that the estimated growth rate used does
not exceed the average long-term growth rate for the relevant
markets where the group operates (Europe and USA). Following the
impact of the COVID pandemic over the past several months,
Management are comfortable that these assumptions are still
reasonable.
The Group has conducted an analysis of the sensitivity of the
impairment test to changes in the key assumptions used to determine
the recoverable amount for each of the group of CGUs to which
goodwill and other intangible assets are allocated.
As part of this scenario analyses, the Directors considered the
impact on the recoverable amounts of the assets based upon the
following changes to the two key assumptions set out above for both
of the periods under review:
-- Long-term growth rate: reduced from 3.0% to 2.0%
-- Pre-tax discount rate: increased from 16.25% to 20.0%
If we reduce the long-term growth rate by 1% and increase the
pre-tax discount rate by 4.75% the level of headroom would decrease
by EUR10.1 million.
Under neither of these scenarios did the recoverable amounts
fall below or anywhere near the carrying value of the assets. As a
result of this analysis, the Directors believe that any reasonably
possible change in the key assumptions would not cause the
aggregate carrying amount to exceed the aggregate recoverable
amount of the related CGUs.
13. Property, plant & equipment
PROPERTY, PLANT &
EQUIPMENT
Property Plant Other Other tangible Total
and equipment plant, assets
tools,
and furniture
EUR 000 EUR 000 EUR 000 EUR 000 EUR 000
-------------------------- --------- --------------- --------------- --------------- --------
Cost
At 1 January 2019 2,613 1,951 3,613 9,870 18,047
Additions 57 258 267 157 739
IFRS 16 - Right of
use assets - Additions 3,380 - - - 3,380
Disposals (108) (1) (136) (32) (277)
Exchange differences - 3 (1) 1 3
At 31 December 2019 5,942 2,211 3,743 9,996 21,892
Reclassifications 47 28 (61) (14) -
Additions 71 203 127 2,386 2,786
IFRS 16 - Right of
use assets - Additions 516 - - - 516
Disposals - (12) (11) (343) (366)
IFRS 16 - Right of
use assets - Disposals (426) - - - -
Exchange differences - -40 -1 -9 -50
-------------------------- --------- --------------- --------------- --------------- --------
At 31 December 2020 6,184 2,390 3,796 12,016 24,387
-------------------------- --------- --------------- --------------- --------------- --------
Accumulated amortisation
At 1 January 2019 1,029 1,207 2,731 4,902 9,869
Charge for the year 85 182 176 496 939
IFRS 16 - Right of
use assets - Charges 922 - - - 922
Disposals (57) - (104) (32) (193)
At 31 December 2019 1,979 1,391 2,803 5,366 11,539
Charge of the period 112 200 208 594 1,114
IFRS 16 - Right of
use assets - Charges 882 - - - 882
Disposals - (11) (11) (326) (348)
Exchange differences - 26 0 4 30
-------------------------- --------- --------------- --------------- --------------- --------
At 31 December 2020 2,974 1,607 3,000 5,637 13,218
-------------------------- --------- --------------- --------------- --------------- --------
Carrying amount
At 31 December 2019 3,963 820 940 4,630 10,353
-------------------------- --------- --------------- --------------- --------------- --------
At 31 December 2020 3,211 783 796 6,379 11,169
-------------------------- --------- --------------- --------------- --------------- --------
Property, plant and equipment consists of different categories
of tangible assets which are used across the Group in the delivery
of goods and services. Other tangible assets consist primarily of
scaffolding equipment.
The main additions for the year ended 31 December 2020 and 2019
correspond to the acquisition of machinery and other equipment.
Leases
This note provides information for the leases where the group is
a lessee. The amounts recognised in the balance sheet are as
follows:
31 December 31 December
2020 2019
------------ ------------
EUR 000 EUR 000
------------ ------------
Non-current assets: Property,
plant and equipment - Right of
use asset 2,906 3,600
Current liabilities: Lease liabilities (2,035) (1,571)
Non-current liabilities: Lease
liabilities (904) (2,184)
------------ ------------
The following table sets out a maturity analysis of lease
payments related to IFRS16, showing the undiscounted lease payments
to be received after the reporting date. In order to see
information about obligations under leases reference to note
17.2
In thousands of euro 2020 2019
Less than a year 1,004 981
One to five years 717 1,656
More than five years - 28
---------------------- ------ ----------------
During 2020, the Group conducted a sensitivity analysis which
results that a change of a 1% in the incremental borrowing rate
would have the following impact on the Group financial
statements:
Year ended
31 December
2020
-------------
EUR 000
-------------
Balance Sheet 1% 3%
Increase/(decrease)
in Right of
Use assets 24 (24)
Increase/(decrease)
in lease liabilities 9 (9)
-------------
Profit for the
year
Increase/(decrease)
in depreciation (3) 3
14. Inventories
31 December 31 December
2020 2019
------------ ------------
EUR 000 EUR 000
------------ ------------
Raw materials 894 187
Goods for
resale 2,235 2,348
3,129 2,535
============ ============
The cost of inventories recognised as an expense during the year
amounted to EUR11,341 thousand (EUR12,776 thousand in 2019).
15. Trade and other receivables
31 December 2020 31 December 2019
----------------- -----------------
EUR 000 EUR 000
----------------- -----------------
Trade receivables 5,798 6,561
Contract assets 4,018 1,128
Other receivables 1,254 310
Tax receivables 687 657
11,757 8,656
================= =================
Trade and other receivables are all current and any fair value
difference is not material. Trade receivables are considered past
due once they have passed their contracted due date.
Amounts invoiced to customers are due in 30 days. The Group
recognises an allowance for doubtful debts of 100% against those
receivables overdue that after a specific analysis are considered
not recoverable.
Trade receivables disclosed above include amounts (see below for
aged analysis) which are past due at the reporting date but against
which the Group has not recognised an allowance for doubtful
receivables because there has not been a significant change in
credit quality of the customers and the amounts are still
considered recoverable.
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.
Amounts receivable from customers can be analysed as
follows:
31 December 31 December
2020 2019
------------ ------------
EUR 000 EUR 000
------------ ------------
Amount receivable not past
due 1,235 4,352
Amount receivable past due
but not impaired 4,563 2,209
Amount receivable impaired
(gross) 216 222
Less impairment -216 -222
5,798 6,561
============ ============
Neither the amounts due from service contract customers nor
receivables from other debts are past due or impaired in the
current and prior periods.
The ageing of past due but not impaired receivables is as
follows:
31 December 31 December
2020 2019
------------ ------------
EUR 000 EUR 000
------------ ------------
<60 days 4,240 948
61-90 days 73 679
>91 days 250 582
4,563 2,209
============ ============
The movement in the allowance recorded for doubtful debts is as
follows:
31 December 31 December
2020 2019
------------ ------------
EUR 000 EUR 000
------------ ------------
Balance at the beginning
of the year (222) (146)
Transfer (29) (44)
Amounts written off
during the year as
uncollectible 29 44
Impairment losses
(recognised) (32) (76)
Amounts recovered 38 -
during the year
(216) (222)
============ ============
Contract assets
The contract assets primarily relate to the Group's right to
consideration for construction work completed but not invoiced at
the balance sheet date. The contract assets are included within the
caption "Trade and other receivable". The balance increased during
the year by EUR 2.9 million as the Group has work more during the
period than amount billed which is reflected in the increase in
trade receivables.
16. Cash and cash equivalents
31 December 31 December
2020 2019
------------ ------------
EUR 000 EUR 000
------------ ------------
Cash and cash
equivalents 3,600 5,529
3,600 5,529
============ ============
Cash and cash equivalents comprise cash and short-term bank
deposits with an original maturity of three months or less. The
carrying amount of these assets is approximately equal to their
fair value.
17. Borrowings and obligations under leases
31 December 31 December
2020 2019
EUR 000 EUR 000
Syndicated loan 4,918 6,788
ICO loan 3,000 -
Capitalised costs - net (109) (313)
Revolving credit facility 1,311 527
Factoring facility 3,179 2,714
Other financial liabilities 63 261
Total borrowings 12,361 9,977
============ ============
Amount due for settlement
within 12 months 9,789 5,062
============ ============
Amount due for settlement
after 12 months 2,572 4,915
The difference in capitalised costs - net set out above and the
figure in note 9 relates relates to fees charged to the Group by
the banks for a modification of the syndicated loan facility.
31 December 31 December
2020 2019
------------ ------------
EUR 000 EUR 000
Obligations under leases 2,939 3,755
Total obligations under
leases 2,939 3,755
============ ============
Amount due for settlement
within 12 months 2,035 1,571
============ ============
Amount due for settlement
after 12 months 904 2,184
============ ============
17.1 Summary of the borrowing arrangements
Syndicated loan -
On 3 March 2016, the Group subsidiary, Hemisphere Coating
Services, S.L.U., signed a syndicated loan agreement with three
financial institutions, expiring on March 2021.
This syndicated loan is guaranteed by certain of the Group
subsidiaries and consists of two different facilities:
-- Facility A: loan for a total amount of EUR9,180 thousand with
biannual maturities of EUR918 thousand until expiration on March
2021 since the beginning of the contract.
-- Facility B: loan for a total amount of EUR4,000 thousand
maturing at the end of the contract on March 2021 (see note
2.3).
Both facilities bear interest at EURIBOR +3%.
The loan requires compliance with certain financial covenants.
At 31 December 2020, considering the underperformance a waiver has
been signed with the financial institutions for the whole period.
For the year ended at 31 December 2020 the Group have obtained a
waiver for financial covenants.
ICO Loan -
On 29 June 2020, the Group entered into floating rate syndicated
financing agreements of EUR3.0 million of new borrowing facilities
through the Spanish government's ICO loan facility. The ICO in
Spain guarantees 70 per cent of the value of loans.
Under the terms of these ICO loans, there is no repayment during
the twelve months following execution and the outstanding balance
is repaid over the subsequent 48 months via equal monthly
payments.
The ICO facilities bear interest at 4%. The amount drawn on 31
December 2020 was EUR3.0 million.
Additionally, the Group has at its disposal:
-- Revolving credit facilities up to EUR 2.0 million.
-- Factoring and discounting facilities up to EUR 12.5 million.
-- Bank guarantees up to EUR4.3 million, of which EUR2.5 million
were drawn as of 31 December 2020.
As a result of the above agreements, at year end the Group has
bank facilities totalling EUR14.5 million of which EUR7.8 million
were drawn and EUR6.7 million were undrawn as of 31 December
2020.
17.2 Obligations under leases
From 1 January 2019, the Group has recognised right-of-use
assets for these leases, except for short term and low-value
leases, see note 13 for further information.
As of 31 December 2020, the Group had the following minimum
lease payments due to lessors in accordance with current contracts
in place:
Minimum lease
payments
--------------
As at
31 December
2020
--------------
EUR 000
Amounts payable under Obligations under
leases:
Within one year 2,035
In the second to fifth years inclusive 904
After five years 0
2,939
==============
As of 31 December 2019, the Group had the following minimum
finance lease payments due to lessors (including, where applicable,
the purchase options) in accordance with current contracts in
place:
Minimum lease payments
-----------------------
As at
31 December 2019
-----------------------
EUR 000
Amounts payable under Obligations under leases:
Within one year 1,571
In the second to fifth years inclusive 2,156
After five years 28
3,755
=======================
The financial lease contracts are formalised in euros and have
fixed interest rates in accordance with the financial market.
18. Trade and other payables
31 December 31 December
2020 2019
------------ ------------
EUR 000 EUR 000
Trade payables 12,020 9,231
Contract liabilities
- Deferred income 3,639 5,372
Wages and salaries 2 573
Tax payables 2,470 2,292
18,131 17,468
============ ============
Under the caption "Contract liabilities - Deferred income" are
contractual advances from customers related to on-going and future
projects. This number decreased by EUR1,733 thousands as the Group
received less in deposits from clients during the period than it
did in 2019. As revenue is recognised in relation to these
contracts, the liability is decreased by an equal amount until the
liability is fully extinguished.
Trade average credit period taken for trade purchases is
established between 30 and 60 days. The Group has financial risk
management policies in place to ensure that all payables are paid
within the pre-agreed credit terms.
The directors consider that the carrying amount of trade
payables approximates to their fair value.
19. Provisions
EUR 000
--------------
At 1 January
2019 1,168
--------------
Charge for
the year 119
Released (800)
At 31 December 2019 487
--------------
Charge for
the year 271
Released (383)
At 31 December 2020 375
--------------
Current 356
==============
Non-current 19
==============
31 December 31 December
2020 2019
------------ ------------
EUR 000 EUR 000
Guarantee provision 356 468
Legal and tax
provision 19 19
Contractual claims - -
375 487
============ ============
As of 31 December 2020, the Group has a current provision
amounting to EUR356 thousand (2019: EUR468 thousand), for
re-painting guarantees contemplated in the contractual agreements
with clients for the painting of boats and vessels. This provision
is calculated as an average percentage of the guarantees borne in
the past three years compared to the total turnover for the
corresponding year.
As of 31 December 2018, the Group had a non-current provision of
EUR800 thousand relating to contractual claims made by a shipyard
against the Group in relation to a refit project that the Group
undertook. The Group also had a receivable for EUR800 thousand from
the paint manufacturer that provided the paint that was used in the
project that was subject to the claim. On February 2020, the Group
signed a settlement agreement with the shipyard which had made the
claim. Under the terms of the settlement, the claim against the
Group was dropped and the Group undertook to drop the claim against
the paint manufacturer. The Group also undertook to repaint the
vessel which was the subject of the claim at some point within the
next five years on commercial terms which the Directors to believe
to be acceptable.
At 31 December 2020 the Group and its legal advisers consider
that the provisions recorded are sufficient for covering future
obligations.
20. Equity
At 31 December 2019 and 2020 the Company's share capital
amounted to EUR106 thousand represented by 46,640,000 ordinary
shares with a par value of GBP 0.002, issued and fully paid up.
No dividend was declared or paid during the year ended 31
December 2020.
At 31 December 2020 the Group registered a share based payment
reserve amounting to EUR286 thousand based on the agreements
disclosed in note 23.
21. Acquisitions
On 30 June 2019, the Group completed the acquisition of ACA
Marine, SAS, acquiring the remaining 30% from Atko, SARL of the
issued share capital for an amount of EUR167 thousand. This
agreement included the cancellation of the Put and Call Option
Agreement that was in place, and therefore those balances related
to the ACA Put Option registered under the captions "Put option
reserve" and "Other financial liabilities" in the prior year were
adjusted, generating a gain of EUR379 thousand.
22. Notes to the Cash Flow Statement
2020 2019
EUR 000 EUR 000
Profit / (loss) for the year before
tax 183 828
--------- ---------
- Depreciation and amortisation 2,995 2,808
- Performance share plan (90) 108
- Gain on financial instruments - (379)
- Finance costs 1,050 810
- Exchange differences - (27)
--------- ---------
Adjustments to profit / (loss) 3,955 3,320
--------- ---------
- Decrease in inventories (594) 12
- (Increase)/decrease in trade
and other receivables (2,682) (549)
- Increase in trade and other
payables 554 520
Changes in working capital (2,722) (17)
--------- ---------
- Interest paid (1,050) (491)
- Income tax paid (470) (680)
--------- ---------
Other cash flows used in operating
activities (1,520) (1,171)
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES (104) 2,960
========= =========
23. Share-based payments
Performance Share Plan
The Company established a Performance Share Plan (the "PSP") for
Directors and other selected senior management, which was adopted
by the Board on 23 June 2017.
This award grants an option to acquire ordinary shares in the
capital of the Company at a price of GBP0.002 per ordinary share,
subject to the Performance Target. The award will normally vest on
the third anniversary of grant or, if later, when the Remuneration
Committee determines the extent to which any performance conditions
have been satisfied. These will be exercisable up until the tenth
anniversary of grant unless they lapse earlier.
In 2020, the 2017 plan has been cancelled because the
performance conditions have not been satisfied.
The Company established a Performance Share Plan (the "PSP") for
Directors and other selected senior management, which was adopted
by the Board on 18 August 2020.
This award grants an option to acquire ordinary shares in the
capital of the Company at a price of GBP0.002 per ordinary share,
subject to the Performance Target. The award will normally vest on
the third anniversary of grant or, if later, when the Remuneration
Committee determines the extent to which any performance conditions
have been satisfied. These will be exercisable up until the tenth
anniversary of grant unless they lapse earlier.
Details of the share options outstanding during the year are as
follows:
Number of Weighted
share options average
exercise
price (pence)
-------------------------- --------------- ---------------
Outstanding at 1 January
2019 257,950 0.2
Outstanding at 31
December 2019 557,334 0.2
-------------------------- --------------- ---------------
Granted during the
year 518,822 0.2
Cancelled during the (259,569) -
year
Outstanding at 31
December 2020 816,587 0.2
-------------------------- --------------- ---------------
Assumptions used in the Black-Scholes model to determine the
fair value:
2019 PSP 2020 PSP
------------------------ --------- ---------
Share price at grant
date (pence) 63.5 150
Exercise price (pence) 0.2 0.2
Option life (years) 3 3
Risk-free interest
rate (%) 0.63% 0.63%
Expected volatility
(%) 77.5% 66.7%
Expected dividend
yield (%) 5.6% 0%
------------------------ --------- ---------
Expected volatility was determined by calculating the historical
volatility of the Group's share price since the Company was
admitted to the AIM Market.
In 2020 the Group has recognised a credit amounting to EUR 90
thousand for these plans. In 2019 the Group recognised an expense
amounting to EUR 108 thousand for this plan.
Warrant
The Company granted a warrant to Zeus Capital to subscribe for
such number of ordinary shares as is equal to 1 per cent of the
enlarged share capital of the Company following completion of the
placing. The warrant shall be exercisable in whole or in part at
any time during the period of 5 years from the first anniversary of
Admission. The warrant shall be exercisable at the placing price
multiplied by 105%.
Details of the share options outstanding during the year are as
follows:
Number of Weighted
share options average
exercise
price (pence)
------------------- --------------- ---------------
Outstanding at 31
December 2019 466,400 105
------------------- --------------- ---------------
Outstanding at 31
December 2020 466,400 105
------------------- --------------- ---------------
Assumptions used in the Black-Scholes model to determine the
fair value:
Share price at grant
date (pence) 100
Exercise price (pence) 105
Option life (years) 5
Risk-free interest
rate (%) 2.50%
Expected volatility
(%) 28.60%
------------------------ -------
In 2017 the Group recognised an expense amounting to EUR92
thousand for this warrant.
24. Financial instruments
Capital risk management
The Group manages its capital to ensure that entities in the
Group will be able to continue as going concerns while maximising
the return to shareholders through the optimisation of the debt and
equity balance. The Directors regularly review the working capital
forecasts of the Group to understand the impact of Group
performance and outside factors, such as the COVID pandemic, on the
liquidity position of the Group. Where necessary, the Directors
alter the balance of different types of equity that the Group can
access.
The capital structure of the Group consists of net debt
(borrowings disclosed in note 17) and equity of the Group.
Significant accounting policies
Details of the significant accounting policies and methods
adopted (including the criteria for recognition, the basis of
measurement and the bases for recognition of income and expenses)
for each class of financial asset, financial liability and equity
instrument are disclosed in note 2.
Categories of financial instruments
31 December 31 December
2020 2019
EUR 000 EUR 000
------------ ------------
Financial assets
At amortised cost
Cash and other financial assets (note
16) 3,600 5,529
Loans and receivables - long term 197 144
Trade and other receivables (note 15) 11,756 8,656
15,553 14,329
============ ============
Financial liabilities
At amortised cost
Amortised cost - borrowings (note 17) 9,203 7,002
Finance lease liabilities (note 17) 24 -
Obligations under leases (note 17) 2,939 3,755
Other financial liabilities (note 17) 38 36
Liabilities under factoring facilities 3,179 2,714
Trade, deferred income and other payables
(note 18) 18,084 17,468
At fair value through P&L
Derivative instruments not designated
hedge accounting relationships 2 14
33,469 30,989
============ ============
The carrying value of all financial assets and financial
liabilities equate to the fair value.
Management of the Group's financial risks is centralised in the
Group's Finance Department, which has established mechanisms to
monitor interest rate and exchange rate exposure, as well as credit
and liquidity risk. The main financial risks affecting the Group
are indicated below:
1. Credit risk
Credit risk arises from cash and cash equivalents and credit
exposure to customers, including outstanding receivables. Credit
risk is managed on a group basis.
For banks and financial institutions, only those with a Moody's
rating of Aaa (or equivalent) or with which the Group has an
existing borrowing relationship are accepted.
Clients within the Coatings sector are either ultra-high net
worth individuals, the companies through which they own their boats
or shipyards that act as main contractors on behalf of the boat
owners. The credit risk of the first two categories is extremely
low. The risk is also mitigated by the fact that the Group has to
complete a project before the owner can use the vessel again. The
staged payments typical in these types of contracts means that
there is very little exposure to unpaid receivables by the end of a
project.
The Group regularly reviews the credit ratings of each shipyard
with whom in contracts to understand any potential credit risk
associated with them. Individual risk limits are set based on
external ratings in accordance with limits set by the board.
Credit exposure within the supply business comprises trade
receivables with yachts and their owners which are described above.
Trade customers (e.g. not yachts) have individual credit limits
based on public ratings and payment history. The compliance with
credit limits by Supply customers is regularly monitored by line
management. For some trade receivables the group may obtain
security in the form of guarantees, deeds of undertaking or letters
of credit which can be called upon if the counterparty is in
default under the terms of the agreement.
Sales to retail customers are required to be settled in cash or
using major credit cards, mitigating credit risk. There are no
significant concentrations of credit risk, whether through exposure
to individual customers, specific industry sectors and/or
regions.
The Group's treatment of bad debts and potential bad debts
during the periods under review for trade and other receivables,
including an analysis of past due amounts, is set out in note
15.
2. Liquidity risk
The Group manages liquidity risk by maintaining sufficient cash
and equivalents and the availability of funding through an adequate
amount of committed credit facilities to meet obligations when
due.
At the end of the reporting period, the Group held cash and cash
equivalents of EUR3.6 million (2019: EUR5.5 million) that are
expected to readily generate cash inflows for managing liquidity
risk. Due to the dynamic nature of the underlying businesses, group
treasury maintains flexibility in funding by maintaining
availability under committed credit lines. Management monitors
rolling forecasts of the group's liquidity reserve (comprising the
undrawn borrowing facilities below) and cash and cash equivalents
on the basis of expected cash flows. This is carried out by
management at Group level.
In addition, the group's liquidity management policy involves
projecting cash flows in major currencies and considering the level
of liquid assets necessary to meet these, monitoring balance sheet
liquidity ratios against external regulatory requirements and
maintaining debt financing plans.
Financing arrangements
The Group had access to EUR14.5 million of working capital
facilities at 31 December 2020. The Group's working capital
facilities are subject to annual review and renewal.
The tables below analyse the Group's financial liabilities into
relevant maturity groupings based on their contractual maturities
for: all non-derivative financial liabilities and net settled
derivative financial instruments for which the contractual
maturities are essential for an understanding of the timing of the
cash flows. The amounts disclosed in the table are the contractual
undiscounted cash flows. For interest rate swaps, the cash flows
have been estimated using forward interest rates applicable at the
end of the reporting period.
Contractual Less than Greater Carrying
maturities of 12 months than 12 amount
financial months
liabilities at
31 December 2020
------------------------------------------------ -------- -----------------------------------------
EUR 000 EUR 000 EUR 000
------------------------------------------------ -------- -----------------------------------------
Non-derivatives
Trade payables 18,084 - 18,084
Borrowings 4,346 2,627 6,973
Liabilities
under factoring
facilities 3,179 - 3,179
Lease
liabilities 2,035 904 2,939
------------------------------------------------ -------- -----------------------------------------
Total 27,644 3,531 31,175
Derivatives
Interest rate 2 - 2
swap
------------------------------------------------ -------- -----------------------------------------
Total 2 - 2
Contractual Less than Greater Carrying
maturities of 12 months than 12 amount
financial months
liabilities at
31 December 2019
------------------------------------------------ -------- -----------------------------------------
EUR 000 EUR 000 EUR 000
------------------------------------------------ -------- -----------------------------------------
Non-derivatives
Trade payables 17,468 - 17,468
Borrowings 5,062 4,915 9,977
Liabilities
under factoring
facilities 2,714 - 2,714
Lease
liabilities 1,571 2,184 3,755
------------------------------------------------ -------- -----------------------------------------
Total 26,815 7,099 33,914
Derivatives
Interest rate
swap 14 - 14
------------------------------------------------ -------- -----------------------------------------
Total 14 - 14
3. Currency risk
The Group operates primarily in euro and US Dollar. The Group
mitigates the risk by incurring costs in currencies matching its
revenues. Any remaining transactional foreign currency exposure is
not considered to be material and is not hedged. As at 31 December
2020, the Group had not derivative contracts for currency hedging
purposes.
4. Market risk
The Group's activities expose it primarily to the financial
risks of changes in interest rates. The Group's management focusses
on the uncertainty of financial markets and attempts to minimise
the potential adverse effects on its profitability. The Group
enters into derivative financial instruments to manage its exposure
to interest rate risk, with three Interest Rate Swaps to mitigate
the risk of rising interest rates.
4.1. Interest rate risk
As of 31 December 2020 and 2019, the main borrowing corresponds
to the syndicated loan which bear a variable interest.
4.1.1. Sensitivity analysis:
A change of a 0.5% in interest rates would have the following
impact on the Group financial statements:
Year ended Year ended
31 December 31 December
2020 2019
------------- -------------
EUR 000 EUR 000
------------- -------------
Profit for the
year
Increase in
rates (39) (37)
Decrease in
rates 39 37
------------- -------------
This calculation assumes that the change occurred at the balance
sheet date and had been applied to risk exposures existing at that
date. This analysis also assumes that all other variables remain
constant and considers the effect of financial instruments with
variable interest.
5. Capital management
The primary objective of the Group's capital management is to
ensure that it has the capital required to operate and grow the
business at a reasonable cost of capital without incurring undue
financial risks. The syndicated loan also requires compliance with
certain financial covenants. For the year ended at 31 December 2020
the Group have obtained a waiver for financial covenants.
25. Subsidiaries
The Group consists of a parent company, GYG plc, incorporated in
the UK and a number of subsidiaries held directly by GYG plc, which
operate and are incorporated mainly in Spain but also in some other
countries around the world.
A list of the Company's subsidiaries is included below:
Name Principal Registered Office Ownership
activity
Civisello Inversiones, Global Building. Muelle Viejo. Palma
S.L.U. Holding de Mallorca. Spain. 100%
Hemisphere Yachting Global Building. Muelle Viejo. Palma
Services, S.L.U. Holding de Mallorca. Spain. 100%
Hemisphere Coating Global Building. Muelle Viejo. Palma
Services, S.L.U. Coating de Mallorca. Spain. 100%
Hemisphere Central Global Building. Muelle Viejo. Palma
Services, S.L.U. Central Services de Mallorca. Spain. 100%
Pinmar Yacht Supply, Camino Escollera, 5. Palma de Mallorca.
S.L. Supply Spain 100%
Avenue 2010. Riviera Beach. FL 33404.
Pinmar USA, Inc. Coating USA. 100%
Global Yachting Group, Station Road 55. Buckinghamshire.
Ltd Coating UK. 100%
Cannon Place 78. Cannon Street.
ACA Marine, Ltd Holding London. UK. 100%
------------------ ----------------------------------------- ----------
Hemisphere Yachting
Services, GmbH Coating Lehmweg 17, 20251 Hamburg. Germany. 100%
------------------ ----------------------------------------- ----------
Hemisphere Coating Herikerbergweg 238. 11O1CM Amsterdam.
Services, B.V. Coating Netherlands. 100%
------------------ ----------------------------------------- ----------
Hemisphere Coating
Services, S.A.S. (previously 46 Quai Francois Mitterrand. 13600
ACA Marine, SAS) Coating La Ciotat. France. 100%
------------------ ----------------------------------------- ----------
The Group financial statements incorporate the financial
statements of the parent Company, GYG plc and the above
subsidiaries.
For the year ending 31 December 2020 the following subsidiaries
of the Company were entitled to exemption from audit under s479 A
of the Companies Act 2006 related to subsidiary companies:
Companies House Registration
Name Principal Number Ownership
activity
Global Yachting Group,
Ltd Coating 9533209 100%
------------- ----------------------------- ------------
ACA Marine, Ltd Holding 10649007 100%
------------- ----------------------------- ------------
26. Related party transactions
Services provided
Year ended Year ended
31 December 31 December
2020 2019
------------- -------------
EUR 000 EUR 000
------------- -------------
Global Yacht Finishing,
S.L. 41 49
41 49
============= =============
Services received
Year ended Year ended
31 December 2020 31 December
2019
------------------ -------------
EUR 000 EUR 000
------------------ -------------
AKC Management Services,
Ltd. 183 199
Quoque Ltd. 316 181
Global Yacht Finishing,
S.L. 329 357
828 737
================== =============
GYG leases offices from Global Yacht Finishing, S.L. (Rupert
Savage is a director of both GYG and Global Yacht Finishing).
Quoque Ltd (company owned by a close family member of the Chief
Executive Officer) has provided consulting services in relation to
ERP design and implementation. These services are reviewed and
approved prior to commencement by the non-executive directors. In
addition to the amounts listed above for services received, the
Group reimbursed or paid for various accommodation and travel
expenses of EUR34 thousand in 2020 (EUR23 thousand in 2019) for
Quoque employees in the performance of those services.
During the year GYG contracted with AKC Management Services Ltd.
for the provision of management services amounting to EUR183
thousand, of which there were no amount outstanding at the year end
(Kevin McNair is a director of both GYG and AKC Management Services
Ltd). Kevin McNair did not receive a salary from GYG.
All these transactions were undertaken on an arm's length basis
and on normal commercial terms. The Directors who are independent
of any related party review the commercial terms of any contract or
transaction prior to the Group entering into the relevant contract.
They base their decisions upon prior commercial experience and,
when necessary, outside advice.
Balances
31 December 31 December
2020 2019
------------ ------------
EUR 000 EUR 000
------------ ------------
Atko, S.A.R.L. - -
AKC Management Services
Ltd. - (47)
Quoque Ltd. (25) -
Global Yacht Finishing,
S.L. (92) (29)
(117) (76)
------------ ------------
Remuneration of key management personnel
The remuneration of Executive Directors and Non-Executive
Directors, who are the key management personnel of the group, is
set out below.
Year ended Year ended
31 December 31 December
2020 2019
------------- ---------------
EUR 000 EUR 000
------------- -----------------
Salaries, fees and
bonus 868 1,136
------------- -----------------
The above amounts include "salaries, fees and bonus" paid in GBP
amounting to GBP150 thousand in 2019 and 2020.
In the year ended 31 December 2019, as a consultant, Kevin
McNair also received payment of EUR121,900 in respect of his role
as Interim Chief Financial Officer.
Further information about the remuneration of individual
Directors is provided in the audited part of the Directors'
Remuneration report.
27. Post Balance sheets events
In February 2021, the Group repurchased shares with a value of
GBP490.
In March 2021, the Group amended its borrowing facilities with
its existing lenders. Under the terms of the amended agreement,
Facility B, which was due to be repaid in March 2021, is now
repayable in four tranches of EUR1.0 million starting in June 2021
and ending in December 2022. Facility A was repaid in early April
2021. As part of the amendment, an additional EUR1.0 million of
revolving credit, factoring and discounting facilities were made
available to the Group.
On 9 April 2021, the Group was notified that one of the
Company's major shareholders, Harwood Capital, was in the
preliminary stages of evaluating a possible offer for the entire
issued and to be issued share capital of the Company. As of today,
Harwood has made no further announcements in relation to this
possible offer. Following publication of these results, it is the
Board's intention to engage with independent shareholders to
appraise them further of the current trading and prospects for GYG.
When we have feedback from independent shareholders in relation to
the Group's prospects and their attitude towards the unsolicited
possible offer, we will make a further announcement.
On 12 April 2021, the Group was informed that Nobiskrug shipyard
in Germany, where it was working on three projects, had entered
into an insolvency process to allow it to restructure itself. The
Group's existing financial exposure to this yard at the time of
this announcement was EUR2.8 million (excluding VAT; all of which
relate to 2021). Subsequent discussions with the ultimate owners of
the projects in this yard lead the Directors to remain confident
that the projects will all be completed and most, if not all, of
the outstanding amount will be recovered in due course. No
allowance for impairment has been made in these consolidated
financial statements.
No other events have occurred after 31 December 2020 that might
significantly influence the information reflected in these
consolidated financial statements.
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END
FR KELFLFZLXBBZ
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