Quarterly Report • Feb 28, 2019
Quarterly Report
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Songa Bulk ASA Financial Report Q4 2018
| SONGA BULK FOURTH QUARTER 2018 FINANCIAL HIGHLIGHTS |
|
|---|---|
| FOURTH QUARTER 2018 EVENTS | |
| FOURTH QUARTER 2018 RESULTS | |
| REMAINING ASSETS | |
| FORWARD-LOOKING STATEMENTS | |
| RISK FACTORS MAIN RISK FACTORS |
|
| FINANCIAL INFORMATION CONDENSED STATEMENT OF COMPREHENSIVE INCOME |
|
| CONDENSED STATEMENT OF FINANCIAL POSITION | |
| CONDENSED STATEMENT OF CHANGES IN EQUITY | |
| CONDENSED STATEMENT OF CASH FLOWS | |
| NOTES ……………………………………………………………………………………………… |
| in \$ thousands | ||
|---|---|---|
| Financial performance | Q4 2018 | Q3 2018 |
| Loss from continuing operations | -50 | -50 |
| Profit (-loss) from discontinued operations | -684 | 24 863 |
| Net profit (-loss) | -734 | 24 813 |
| Financial position | 31 December 2018 | 30 September 2018 |
| Total assets | 11 187 | 22 904 |
| Cash and cash equivalents | 10 570 | 10 591 |
| Total equity | 799 | 21 300 |
| Cash flow statement | Q4 2018 | Q3 2018 |
| Net cash flow from operating activities from discontinued operations | -22 | -6 551 |
| Net cash flow from investing activities from discontinued operations | - | 144 550 |
| Net cash flow from financing activities from discontinued operations | - | -143 520 |
| Net change in cash and cash equivalents from discontinued operations | -22 | -5 521 |
Net loss in Q4 2018 was \$0.7 million, compared to a profit of \$24.8 million in Q3 2018. Except for a small amount for general and administrative expenses, being the cost of owning and operating an empty company, all items are considered being results from discontinued operation and classified accordingly. The profit in Q3 2018 was mainly related to gain on sale of vessels.
The Company's total assets amounted to \$11.2 million at 31 December 2018, down from \$22.9 million in last quarter due to distribution of an extraordinary dividend.
Cash and cash equivalents at the end of Q4 2018 were \$10.6 million, unchanged from the end of Q3 2018.
On the date of this report the remaining assets in the Company consist of approximately 23 418 shares of Star Bulk Carriers Corp, and a cash balance of \$0.7 million. The Company has resolved to distribute approximately 8 200 of the remaining balance of Star Bulk shares to the shareholders of Songa Bulk ASA. These shares represent distribution to shareholders that did not submit the representation and warranties letter and will be transferred to Star Bulk Carriers Corp together with the accompanying dividend liability.
Forward-looking statements presented in this report are based on various assumptions. The assumptions were reasonable when made, but are subject to uncertainties and contingencies that are difficult or impossible to predict. Songa Bulk ASA cannot give assurances that expectations regarding the outlook will be achieved or accomplished.
Risk Factors
MAIN RISK FACTORS The Company is through its ownership of shares in Star Bulk exposed to the dry bulk market.
| in \$ thousands | Note | Q4 2018 | Q4 2017 | YTD Q4 2018 | YTD Q4 2017 |
|---|---|---|---|---|---|
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||
| General and administrative expenses | 50 | 50 | 200 | 200 | |
| Total operating expenses | 50 | 50 | 200 | 200 | |
| Operating loss | -50 | -50 | -200 | -200 | |
| Loss before taxes | -50 | -50 | -200 | -200 | |
| Tax expense | - | - | - | - | |
| Loss from continuing operations | 4 | -50 | -50 | -200 | -200 |
| Profit (-loss) from discontinued operations | -684 | 3 093 | 22 686 | 588 | |
| Net profit (-loss) | -734 | 3 043 | 22 486 | 388 | |
| Total comprehensive income (-loss) | -734 | 3 043 | 22 486 | 388 | |
| Basic and diluted earnings from | |||||
| discontinued operations – \$ per share | -0.020 | 0.085 | 0.627 | -0.012 | |
| Total basic and diluted earnings – \$ per | |||||
| share | -0.020 | 0.085 | 0.627 | -0.012 |
| in \$ thousands | Note | 31 December 2018 | 31 December 2017 |
|---|---|---|---|
| (Unaudited) | (Audited) | ||
| Vessels | - | 266 770 | |
| Deposit vessels | - | 3 055 | |
| Total non-current assets | 2 | - | 269 825 |
| Inventories | - | 2 233 | |
| Trade receivables | - | 1 312 | |
| Other receivables | 70 | 2 501 | |
| Financial assets through profit or loss | 548 | - | |
| Cash and cash equivalents | 10 570 | 41 017 | |
| Total current assets | 11 187 | 47 063 | |
| TOTAL ASSETS | 11 187 | 316 888 | |
| Share capital | 121 | 21 620 | |
| Share premium | - | 153 619 | |
| Other paid-in capital | - | 574 | |
| Accumulated profit (-deficit) | 678 | -1 648 | |
| Total equity | 3 | 799 | 174 165 |
| Interest-bearing debt | - | 136 776 | |
| Financial liabilities at fair value through profit or loss | - | 490 | |
| Total non-current liabilities | - | 137 266 | |
| Trade payables | 100 | 1 745 | |
| Income taxes payable | 211 | 124 | |
| Dividends payable | 9 702 | - | |
| Other liabilities | 375 | 3 588 | |
| Total current liabilities | 10 388 | 5 457 | |
| Total liabilities | 10 388 | 142 723 | |
| TOTAL EQUITY AND LIABILITIES | 11 187 | 316 888 |
| in \$ thousands | Share | Share | Other paid-in | Retained | Total equity |
|---|---|---|---|---|---|
| capital | premium | capital | earnings | ||
| (Unaudi | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |
| ted) | |||||
| Incorporation | 3 | - | - | - | 3 |
| Share issuance 4 November 2016 | 9 082 | 65 188 | - | - | 74 270 |
| Share issuance costs | - | -1 432 | - | - | -1 432 |
| Warrants issued to employees | - | - | 400 | - | 400 |
| Net loss 2016 | - | - | - | -2 036 | -2 036 |
| Equity 31 December 2016 | 9 085 | 63 756 | 400 | -2 036 | 71 205 |
| Share issuance 31 January 2017 | 600 | 4 400 | - | - | 5 000 |
| Share issuance 17 February 2017 | 11 935 | 88 311 | - | - | 100 246 |
| Share issuance costs | - | -2 848 | - | - | -2 848 |
| Warrants issued to employees | - | - | 174 | - | 174 |
| Net profit 2017 | - | - | - | 388 | 388 |
| Equity 31 December 2017 | 21 620 | 153 619 | 574 | -1 648 | 174 165 |
| Dividend 22 March 2018 | - | -3 586 | - | - | -3 586 |
| Dividend 6 July 2018 | -150 033 | -574 | -393 | -151 000 | |
| Share capital reduction 17 August 2018 | -21 499 | - | - | - | -21 499 |
| Extraordinary dividend 3 October 2018 | - | - | - | -10 446 | -10 446 |
| Extraordinary dividend 19 December 2018 | -9 321 | -9 321 | |||
| Net profit YTD Q4 2018 | - | - | - | 22 486 | 22 486 |
| Equity 31 December 2018 | 121 | - | - | 678 | 799 |
| in \$ thousands | YTD Q4 2018 | YTD Q4 2017 |
|---|---|---|
| (Unaudited) | (Audited) | |
| Profit before taxes | 22 486 | 394 |
| Gain from sale of vessels | -24 405 | -1 968 |
| Depreciation | 4 654 | 5 450 |
| Change in inventories | 2 233 | -2 207 |
| Net change in trade receivables/payables | -333 | -247 |
| Employee benefit expenses in connection with issuance of warrants | - | 174 |
| Change in financial liabilities at fair value through profit or loss | -490 | 163 |
| Net change in other current items | -1 255 | 1 454 |
| Net cash flow from operating activities from discontinued operations* | 2 890 | 3 214 |
| Sale of vessels | 144 550 | 13 615 |
| Purchase of vessels | -28 355 | -268 449 |
| Paid deposit on vessels | - | -3 055 |
| Dry docking paid | -2 426 | -460 |
| Net cash flow from investment activities from discontinued operations | 113 769 | -258 349 |
| Proceeds from share issuance | - | 105 244 |
| Share issuance costs | - | -2 846 |
| Proceeds from issuance of debt | - | 137 625 |
| Debt issuance costs | - | -1 559 |
| Repayment of interest-bearing debt | -143 520 | - |
| Paid dividends | -3 586 | - |
| Net cash flow from financing activities from discontinued operations | -147 106 | 238 464 |
| Net change in cash and cash equivalents | -30 447 | -16 671 |
| Cash and bank deposits at beginning of period | 41 017 | 57 688 |
| Cash and bank deposits at end of period | 10 570 | 41 017 |
*included in the net cash flow from operating activities from discontinued operations is \$200 thousand in operating expenses from continuing operations.
These interim financial statements are prepared in accordance with IAS 34 Interim Financial Reporting.
The condensed consolidated interim financial reporting should be read in conjunction with the annual financial statements for the year ended 31 December 2017, which have been prepared in accordance with IFRS, as adopted by the EU.
Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or loss after tax from discontinued operations in the statement of profit or loss.
Voyage charter revenues are recognized using the percentage of completion method on a load-to-discharge basis. Cost related to fulfilment of the contract incurred prior to loading is capitalized as mobilization costs and amortized over the associated period for which revenue is recognized. Voyage expenses incurred as repositioning for non-committed freight contracts are expensed as incurred. Other revenue from services, such as demurrage, is recognized when earned and is included in freight revenue.
IFRS 9 replaces the provisions of IAS 39 that relate to the recognition, classification and measurement of financial assets and financial liabilities, derecognition of financial instruments, impairment of financial assets and hedge accounting.
The group adopted the simplified expected credit loss model for its trade receivables with only minor effects.
Shares in Star Bulk are valued at fair value with changes in fair value recognized through profit of loss. The shares that have been resolved distributed as dividend in the period, but not yet distributed, are valued according to IFRIC 17 with shares valued at fair value recognized through profit or loss, and the accompanying dividend debt at fair value with changes recognized in equity.
No assets held by the group were subject to reclassifications in IFRS 9.
The following new or amendments to standards and interpretations have been issued and become effective in years beginning on or after 1 January 2019, assuming European Union adoption: IFRS 16 – Leases.
IFRS 16 was issued in January 2016. It will result in almost all leases being recognized on the balance sheet by lessees, as the distinction between operating and finance leases is removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are recognized. The only exceptions are short-term (less than 12 months) and low-value leases.
Songa Bulk ASA has made a preliminary assessment showing no material effects at implementation of the standard.
| in \$ thousands | YTD Q4 2018 |
2017 |
|---|---|---|
| Closing balance previous period total non-current assets | 269 825 | 14 963 |
| Purchase price vessels delivered in the period and other additions | 31 410 | 272 370 |
| Paid deposits previous periods on vessels delivered in the period | -3 055 | -3 855 |
| Paid deposits on vessels for delivery in future periods | - | 3 055 |
| Book value of vessels sold in the period | - | -11 655 |
| Dry-docking and other additions in the period | 2 426 | 397 |
| Depreciation in the period | -4 654 | -5 450 |
| Carrying value of vessels sold | -295 952 | - |
| Closing balance total non-current assets | - | 269 825 |
As at 31 December 2018, the Company's share capital consists of 35 860 000 shares, each at a nominal value of NOK 0.02789. All issued shares are fully paid.
In the annual general meeting of the Company held on 5 June 2018, the shareholders resolved to reduce the share capital of the company by NOK 178 300 000 (approximately \$21 million), from NOK 179 300 000 to NOK 1 000 000. The share capital reduction was registered with the Norwegian Register of Business Enterprises on 21 August 2018.
On 14 May 2018, the Company entered into an agreement with Star Bulk Carriers Corp. (Star Bulk) to sell all its vessels to Star Bulk against a consideration of 13 688 000 shares of Star Bulk and \$144.55 million in cash. The transaction was closed on 6 July 2018 and all vessels were delivered to Star Bulk.
Financial information relating to the discontinued operation:
| YTD Q4 2018 | YTD Q4 2017 | |
|---|---|---|
| Operating income | 34 040 | 26 713 |
| Gain from sale of vessels | 24 405 | 1 968 |
| Operating expenses | 24 511 | 24 587 |
| Operating profit (-loss) | 33 934 | 4 094 |
| Net financial income (-expenses) | -11 148 | -3 500 |
| Profit (-loss) before taxes | 22 786 | 594 |
| Tax expense | 100 | 6 |
| Net profit (-loss) of discontinued operation | 22 686 | 588 |
Set out below is a comparison by category for carrying amounts and fair values of all of the Company's financial instruments that are carried in the financial statements. The estimated fair value amounts of the financial instruments have been determined using appropriate market information and valuation techniques.
| 31 December 2018 | 31 December 2017 | |||
|---|---|---|---|---|
| In USD | Carrying amount | Fair value | Carrying amount | Fair Value |
| Financial assets: | ||||
| Trade receivables | - | - | 1 312 | 1 312 |
| Other receivables* | 68 | 68 | 1 741 | 1 741 |
| Financial assets through profit or loss | 548 | 548 | - | - |
| Cash and cash equivalents | 10 570 | 10 570 | 41 017 | 41 017 |
| Financial liabilities: | ||||
| Interest-bearing debt | - | - | 138 000 | 138 000 |
| Financial liabilities at fair value through | ||||
| Profit or loss | - | - | 490 | 490 |
| Trade payables | 100 | 100 | 1 745 | 1 745 |
| Income taxes payable | 211 | 211 | 124 | 124 |
| Other current liabilities | 375 | 375 | 2 665 | 2 665 |
*The difference between the balance sheet item other receivables and other receivables in the table above is prepaid expenses which are not considered a financial instrument.
The different levels for fair value estimation have been defined as follows:
Level 1: Quoted prices in active markets for identical assets or liabilities
Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly
Level 3: Unobservable input for the asset or liability
Fair value equals carrying value for all financial instruments. Cash and cash equivalents and financial assets through profit or loss are valued at level 1.
The Company has purchased corporate services from Arne Blystad AS under the corporate service agreement as mentioned in the annual report for 2017.
The Company has purchased technical management services from Songa Shipmanagement Ltd for the vessels Songa Maru, Songa Genesis, Songa Delmar, Songa Hadong, Songa Opus, Songa Devi, Songa Mountain, Songa Sky and Songa Claudine under the technical management agreement as mentioned in the annual report for 2017.
On 4 January 2019 the Company distributed a cash dividend of NOK 2.25 per share to the shareholders, equalling a total distribution of \$9.3 million.
On 29 January a total of 23 820 shares of Star Bulk were distributed to the shareholders in connection with the dividend resolution on 6 July 2018, the share capital reduction resolved on 5 June 2018 and the extraordinary dividend resolved on 3 October 2018. These shares were distributed to shareholders that did not submit the representation and warranties letter within the initial deadline dates for distributions, but have submitted such letter prior to 18 January 2019.
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