Quarterly Report • Dec 18, 2017
Quarterly Report
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INTERIM REPORT
Viking Supply Ships AB (publ) is a Swedish shipping company with headquarter in Gothenburg, Sweden. Viking Supply Ships AB (publ) is organized into four segments: Anchor Handling Tug Supply vessels (AHTS), Platform Supply Vessels (PSV), Services as well as Ship Management. The operations are focused on offshore and icebreaking primarily in Arctic and subarctic areas. The company has in total about 400 employees and the turnover in 2016 was MSEK 760. The company's B-share is listed on NASDAQ OMX Stockholm, segment Small Cap, www.vikingsupply.com.
Viking Supply Ships AB (publ) Tel: +46 31–763 23 00 Idrottsvägen 1 E-mail: [email protected] SE-444 31 Stenungsund, Sweden www.vikingsupply.com
For further information, please contact CEO, Trond Myklebust, ph. +47 23 11 70 00 or IR & Treasury Director, Morten G. Aggvin, ph. +47 41 04 71 25.
| 3 | |
|---|---|
| Q3 2017 | 4 |
| SUMMARY OF EVENTS IN Q3 | 4 |
| SUBSEQUENT EVENTS | 4 |
| LIQUIDITY AND GOING CONCERN | 5 |
| RESULTS AND FINANCE | 5 |
| OPERATIONAL HIGHLIGHTS FOR Q3 | 6 |
| FINANCIAL POSITION AND CAPITAL STRUCTURE |
7 |
| AUDITORS REPORT | 9 |
| CONDENSED CONSOLIDATED PROFIT AND LOSS ACCOUNT |
10 |
| CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE |
|
| INCOME | 10 |
| CONDENSED CONSOLIDATED BALANCE SHEET |
11 |
| CONDENSED CONSOLIDATED CASH FLOW STATEMENT |
11 |
| CHANGES IN THE GROUP'S SHAREHOLDERS' EQUITY |
12 |
| DATA PER SHARE | 12 |
| PARENT COMPANY | 12 |
| PARENT COMPANY INCOME STATEMENT |
13 |
| PARENT COMPANY BALANCE SHEET |
13 |
| CHANGES IN PARENT COMPANY SHAREHOLDERS' EQUITY |
13 |
| NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL |
|
| STATEMENTS | 14 |
| DEFINITIONS | 21 |
The third quarter resulted in a negative result for the Group. The downturn within the North Sea market continued throughout the quarter, which impacted the Group's revenue, totalling MSEK 93 (235) for the quarter. Despite positive contributions from cost saving initiatives, EBITDA was MSEK -18 (85). For the third quarter, profi t after tax for the Group was MSEK -99 (-93).
The downturn within the offshore industry has had an adverse effect on the Group's fi nancial position since 2015. The restructuring completed in late 2016 was assumed to provide Viking Supply Ships with a stable fi nancial platform until 2020, subject certain revenue assumptions. However, as Viking Supply Ships has not been successful in securing term contracts for the fl eet, combined with the continued challenging market conditions in the North Sea, Viking Supply Ships shortly after the end of the second quarter of 2017 initiated a new dialogue with its senior lenders and majority shareholder to secure the future existence of the Group. In December 2017, Viking Supply Ships A/S obtained support for a restructuring proposal from all senior lenders. Subject to fi nal approval from the senior lenders' credit committees, the Group therefore expects the fi nancial restructuring to be fi nalized within short. The main principles of the restructuring agreement includes that Viking Supply Ships will receive MUSD 15 in new equity through the already announced rights issue. In addition there will be signifi cant reductions in interest payments and amortizations during a period until Q1 2020. Financial covenants on the loan facilities are also amended to provide Viking Supply Ships A/S with ample room to operate under the present challenging market conditions, subject certain revenue levels being maintained.
Over the last couple of years, the Group has completed a series of cost saving programs, through which both operational and administrative expenses have been reduced
signifi cantly. Unfortunately this has also resulted in parts of the fl eet being laid up. With the prolonged downturn and weak outlook for the coming months, Viking Supply Ships has in October 2017 decided to further reduce its exposure towards the North Sea spot market by placing the AHTS Loke Viking in stand-by mode in Sweden. Although Viking Supply Ships has been successful in reassigning around half of the crew on Loke Viking to other vessels in the fl eet, this means that around half the crew will be made redundant. The Group considers this to be a highly unfortunate situation, but necessary in order to preserve liquidity and contribute to an improved market balance in the North Sea market. Viking Supply Ships will maintain its efforts to secure term contracts to its fl eet in order to re-activate the vessels laid up. Viking Supply Ships has also continued its focus to reduce its administrative expenses and will continue to work hard to ensure an effi cient organization going forward.
Viking Supply Ships expects that the North Sea offshore market will remain highly challenging at least until spring 2018. There are signs that the rig-demand will improve towards the second half of 2018, but with the current oversupply of vessels globally, it remains unclear as to which degree this will have a positive impact on the North Sea market in the foreseeable future.
Viking Supply Ships does however see increased tendering activity within its core regions of harsh environment offshore. Viking Supply Ships is currently pursuing several contract opportunities and has a clear ambition to secure term contracts for parts of the fl eet for 2018.
Gothenburg, 18 December, 2017.
Trond Myklebust CEO and President
Q3
The condensed interim financial statements for the nine months ending 30 September 2017 have been prepared using the going concern assumption.
Based on a continued belief in securing contracts within the core market segment, Management has concluded that both the company and the Group will be able to continue as going concern at least until 30 September 2018. This conclusion is based on the expected finalized debt restructuring, the current outlook for 2017/2018 and the current uncertainties and risks (see note 1, Liquidity and going concern).
| KEY FINANCIALS | Q3 2017 | Q3 2016 |
|---|---|---|
| Net sales, MSEK 1) | 93 | 235 |
| EBITDA, MSEK 1) | -18 | 85 |
| Result after tax, MSEK 2) | -99 | -93 |
| Earnings per share after tax, SEK 2) | -0.2 | -0.5 |
| Shareholders´equity per share, SEK | 2.7 | 6.6 |
| Return on equity, % 2) | -34.5 | -30.8 |
| Equity ratio, % 3) | 37.5 | 30.2 |
| Market adjusted equity ratio, % 3) | 40.3 | 38.5 |
1) Excludes discontinued operations
Q3
2) Includes discontinued operations
3) The calculation includes assets held for sale
Total revenue for the Group for the first nine months was for continuing operations MSEK 264 (685).
The Group's EBITDA for the nine month period was for continuing operations MSEK -124 (212).
Net financial items were for continuing operations MSEK 66 (-110). Financial items include a gain from bond settlement of MSEK 110.
The Group's result after tax including discontinued operations was MSEK -200 (-261). The result for year-to-date was in addition to earlier mentioned financial items negatively impacted by an impairment loss on the PSV fleet of MSEK 32.
Q3
Total AHTS revenue was MSEK 61 (198) in Q3. Total EBITDA was MSEK -16 (90).
During Q3, six vessels have been operating in the North Sea spot market. Two AHTS vessels have remained in lay-up during the quarter.
The North Sea spot market was soft throughout the quarter. As a result, neither fixture levels nor utilization has been satisfactory.
The total AHTS contract backlog at the end of the quarter was MSEK 0.
| AHTS Q3 | Fixture rates (USD) | Utilization (%) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| AHTS vessels on term charters | - (72,500) | - (100) | ||||||||||
| AHTS vessels on the spot market | 37,500 (38,700) | 36 (56) | ||||||||||
| Total AHTS fleet | 37,500 (53,300) | 36 (65) | ||||||||||
| Table above excludes two laid-up vessel. | ||||||||||||
| Firm contract | Option | Spot | Layup | |||||||||
| AHTS | OCT | NOV | DEC | JAN | FEB | MAR | APR | MAY | JUN | JUL | AUG | SEP |
| Tor Viking | ||||||||||||
| Balder Viking | ||||||||||||
| Vidar Viking | ||||||||||||
| Odin Viking | ||||||||||||
| Loke Viking | ||||||||||||
| Njord Viking | ||||||||||||
| Magne Viking | ||||||||||||
| Brage Viking |
Figures in the tables are as of 30 September 2017.
Total PSV revenue was MSEK 0 (0) in Q3. Total EBITDA was MSEK -3 (-4).
Viking Supply Ships A/S does not have any PSVs in operation, but will continue to monitor the market for long term contract opportunities for these vessels. During Q3 an impairment charge of MSEK -32 was recognized related to the PSV fleet.
The total PSV contract backlog at the end of the quarter was MSEK 0.
| PSV Q3 | Fixture rates (USD) | Utilization (%) |
|---|---|---|
| PSV vessels on term charters | - (-) | 0 (0) |
| PSV vessels in the spot market | - (-) | 0 (0) |
| Total PSV fleet | - (-) | 0 (0) |
Table above excludes laid-up vessels.
Figures in the tables are as of 30 September 2017.
Q3
Total Services and Ship Management revenue was MSEK 32 (37) in Q3. Total EBITDA was MSEK 1 (-1).
Viking Ice Consultancy (VIC) has during the third quarter worked on several smaller consultancy contracts, with a focus on ice management and implementation of the Polar Code. VIC will continue to develop and pursue further contract opportunities going forward.
The operations within the ship management segment proceeded as planned throughout the quarter.
During 2016 it was decided to discontinue the remaining operations in the subsidiary TransAtlantic AB (TA AB). At the end of Q3 2016 the Group assessed that discontinuation was likely to be completed within the next 12 months. Due to this, the Group has in its financial reports as from Q3 2016 recognized TA AB as discontinued operations and assets held for sale, according to IFRS 5 Assets Held for Sale and Discontinued Operations (see note 4, Discontinued operation and assets held for sale).
The remaining activities within the small bulk segment recorded revenues of MSEK 12 (93) in Q3. EBITDA was MSEK 0 (-5).
At the end of the third quarter, the Group's equity amounted to MSEK 1,086 (equivalent to 2.7 SEK/share). The Equity decreased during the first nine months by net MSEK 354 due to the loss for the nine month period of MSEK 200 and a negative change in the translation reserve of MSEK 154 attributable to currency differences on net investments in subsidiaries, mainly related to the weakened USD against SEK.
The completed equity issue, of total 340 MSEK, brought liquidity to the Group of total MSEK 250 of which MSEK 207 was obtained in December 2016 and the remaining MSEK 43 in the beginning of January 2017. In January the outstanding bond debt, including accrued coupon interest, of total MSEK 220 was settled partly by cash redemption of total MSEK 38, and by way of the final set-off equity issue of MSEK 57. The redeemed bonds resulted in a financial gain of 110 MSEK.
Gross investments during the first nine months amounted to MSEK 1 (5).
The scheduled loan amortizations during the first nine months amounted to MSEK 41. A new loan of MSEK 21 was raised during the same period.
For further information of the Group´s financial position see note 5, Interest bearing liabilities and note 6, Cash and cash equivalents.
Viking Supply Ships AB is obliged to publish this report in accordance with the Swedish Securities Act and/ or the Swedish Financial Instruments Trading Act. This report has been prepared in both Swedish and English versions. In case of variations in the contents between the two versions, the Swedish version shall govern. This report was submitted for publication at 8:30 am (CET) on 18 December 2017.
The undersigned certify that the interim report gives a true and fair picture of the Group's financial position and results, and describes material risks and uncertainties facing the Parent Company and the companies included in the Group. The Board of directors expects that the necessary credit committee approvals are obtained within short whereby the group's debt maturity will be repaired according to table 5.2.
Gothenburg, 18 December 2017
Viking Supply Ships AB
Bengt A. Rem Folke Patriksson Erik Borgen Chairman Deputy chairman Board member
Håkan Larsson Magnus Sonnorp Trond Myklebust Board member Board member CEO
Christer Lindgren Employee representative
In conjunction with the publication of this interim report, an earnings call will take place on 18 December 2017 at 10.00 am (CET) with Viking Supply Ships AB's CFO Ulrik Hegelund and IR Director Morten G. Aggvin. In connection with the conference, a presentation will be available on the company's website, www.vikingsupply. com. Please see Investor Relations/Reporting Center.
13 February 2018 Q4 Interim report 30 May 2018 Annual General Meeting
Please contact CFO, Ulrik Hegelund, ph. +45 41 77 83 97 or IR & Treasury Director, Morten G. Aggvin, ph. +47 41 04 71 25
The interim report is available on the company's website: www.vikingsupply.com
årsredovisningslagen Till styrelsen av Viking Supply Ships AB (publ) Inledning Viking Supply Ships AB (publ), org. nr. 556161-0113 Following is the auditors' review report of interim financial information prepared in accordance with IAS 34 and Ch. 9 of the Swedish Annual Accounts Act.
september 2017 och perioden 01.01.2017-30.9.2017. Det är styrelsen och verkställande direktören som har ansvaret för att upprätta och presentera denna delårsrapport i enlighet med IAS 34 och årsredovisningslagen. Vårt ansvar är att uttala en slutsats om denna delårsrapport grundad på vår översiktliga granskning. We have reviewed the interim report for Viking Supply Ships AB for the period 1 January 2017 to September 30, 2017. The Board of Directors and the Managing Director are responsible for the preparation and presentation of this interim report in accordance with IAS 34 and the Swedish Annual Accounts Act. Our responsibility is to express a conclusion on this interim report based on our review.
Den översiktliga granskningens inriktning och omfattning Med undantag för vad som framgår av nästa stycke har vi utfört vår översiktliga granskning i enlighet med International Standard on Review Engagements ISRE 2410 Översiktlig granskning av finansiell delårsinformation utförd av företagets valda revisor. En översiktlig granskning består av att göra förfrågningar, i första hand till personer som är ansvariga för finansiella frågor och redovisningsfrågor, att utföra analytisk granskning och att vidta andra översiktliga granskningsåtgärder. En översiktlig granskning har en annan inriktning och en betydligt mindre omfattning jämfört med den inriktning och omfattning som en revision enligt ISA och god revisionssed i övrigt har. De granskningsåtgärder som vidtas vid en översiktlig granskning gör det inte möjligt för oss att skaffa oss en sådan säkerhet att vi blir medvetna om alla viktiga omständigheter som skulle kunna ha blivit identifierade om en revision With the exception of what is stated in the next paragraph we conducted our review in accordance with the International Standard on Review Engagements, ISRE 2410 Review of Interim Financial Statements Performed by the Independent Auditor of the Entity. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and other generally accepted auditing standards in Sweden. The procedures performed in a review do not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Therefore, the conclusion expressed based on a review does not give the same level of assurance as a conclusion expressed based on an audit.
Grund för en uttalad slutsats med reservation Som anges i bolagets delårsrapport, baseras fortsatta driften på företagsledningens antagande att processen om finansiell omstrukturering blir avslutad inom närmaste tiden. Den formella dokumentationen som är nödvändig för att slutföra den finansiella omstruktureringen av koncernen i form av skriftliga godkännanden av långivarnas kreditkommittéer, är per datum för denna rapports avgivande ännu inte undertecknade vilket utgör en begränsning inför vårt uttalande om koncernens fortsatta drift. Som anges i delårsrapporten rapporterar bolaget och koncernen en förlust för perioden, negativa kassaflöden från kärnverksamheten och att koncernen har varit tvungen att omförhandla dess As stated in the company's interim financial statements going concern is based on management's assumption that the process of financial restructuring will be finalized within the nearest future. The formal documentation necessary to finalize financial restructuring of the group, written approval by the credit committee of the banks, is not in place at the date of this review report which constitutes a restriction when expressing an opinion on the groups going concern. As stated in the interim report, the group and the company report a loss for the period, cash flow from consolidated operations is negative and that the group had to renegotiate its external financing after it was not able to meet loan covenants during 2017. In connection with what is mentioned in note 1 these events and conditions indicate that there is a significant factor of uncertainty that may lead to considerable doubt on the company's ability to continue the business and formal documentation to support going concern is not yet in place.
förmåga att fortsätta verksamheten och väsentlig dokumentation som stödjer fortsatt drift ännu inte är på plats. Slutsats med reservation Med reservation för de begränsningar som omnämns i stycket ovan och de begränsningar inför att Aside of the constraints mentioned in the paragraph above and the constraints on expressing an opinion on the groups going concern, nothing has come to our attention that causes us to believe that the interim report is not prepared, in all material aspects, in accordance with IAS 34 and the Swedish Annual Accounts Act regarding the Group, and in accordance with the Swedish Annual Accounts Act regarding the Parent Company.
uttala oss om koncernens förmåga till fortsatt drift har det inte kommit fram några omständigheter som ger oss anledning att anse att den bifogade delårsrapporten inte, i allt väsentligt, är upprättad i enlighet med IAS 34 och årsredovisningslagen. Stockholm on 17 December 2017 Rödl & Partner Nordic AB
Stockholm den 17 December 2017 Rödl & Partner Nordic AB Mathias Racz Authorized public accountant
| (MSEK) | Note | Q3 2017 | Q3 2016 | Q1-Q3 2017 | Q1-Q3 2016 | Q1-Q4 2016 |
|---|---|---|---|---|---|---|
| Net sales | 93 | 235 | 264 | 685 | 760 | |
| Other operating revenue | 0 | 0 | 0 | 0 | 0 | |
| Direct voyage cost | -8 | -7 | -25 | -25 | -36 | |
| Personnel costs | -75 | -81 | -263 | -279 | -386 | |
| Other costs | -28 | -62 | -100 | -169 | -177 | |
| Depreciation/impairment | 2 | -67 | -95 | -141 | -323 | -409 |
| Operating result | -85 | -10 | -265 | -111 | -248 | |
| Net financial items | -14 | -65 | 66 | -110 | -126 | |
| Result before tax | -99 | -75 | -199 | -221 | -374 | |
| Tax | 8 | 0 | 2 | 1 | -1 | 4 |
| Result from continuing operations | 3 | -99 | -73 | -198 | -222 | -370 |
| Result from discontinued operations | 4 | 0 | -20 | -2 | -39 | -36 |
| Result for the period | -99 | -93 | -200 | -261 | -406 | |
| Earnings attributable to Parent Company's share | ||||||
| holders, per share in SEK (before and after dilution): | ||||||
| -Result from continuing operations | -0.3 | -0.4 | -0.5 | -1.3 | -2.0 | |
| -Result from discontinued operations | 0.0 | -0.1 | 0.0 | -0.2 | -0.2 | |
| Total | -0.3 | -0.5 | -0.5 | -1.5 | -2.2 |
| Note | Q3 2017 | Q3 2016 | Q1-Q3 2017 | Q1-Q3 2016 | Q1-Q4 2016 |
|---|---|---|---|---|---|
| -99 | -93 | -200 | -261 | -406 | |
| - | - | - | - | 1 | |
| -55 | 15 | -154 | 46 | 119 | |
| -55 | 15 | -154 | 46 | 120 | |
| -154 | -78 | -354 | -215 | -286 | |
Q3
| MSEK | Note | Q3 2017 | FY 2016 |
|---|---|---|---|
| Vessels | 2 | 2,739 | 3,229 |
| Other tangible fixed assets | 1 | 0 | |
| Financial assets | 18 | 16 | |
| Total fixed assets | 2,758 | 3,245 | |
| Other current assets | 6 | 123 | 422 |
| Assets held for sale | 4 | 18 | 26 |
| Total current assets | 141 | 448 | |
| TOTAL ASSETS | 3 | 2,899 | 3,693 |
| Shareholders' equity | 1,086 | 1,440 | |
| Long-term liabilities | 5 | 22 | 1,896 |
| Other current liabilities | 5 | 1,788 | 342 |
| Liabilities related to assets held for sale | 4 | 3 | 15 |
| Total current liabilities | 1,791 | 357 | |
| TOTAL EQUITY, PROVISIONS AND LIABILITIES | 2,899 | 3,693 |
Q3
The valuation of financial assets and liabilities in the balance sheet is based on acquisition value or fair value. The valuation of FX derivatives and interest rate derivatives is based on fair value. The balance items "Long-term liabilities" include derivatives of MSEK 7 (14). Valuation of other financial assets and liability items in the balance sheets are based on acquisition value.
The valuation of financial instruments is based on classification in three levels: Level 1, fair values based on market values, where the instruments are traded on an active market are available. Level 2, no market values based on an active market are available, valuations are instead based on measurements of discounted cash flows. Level 3, at least one variable is based on own assessments. The fair value valuation of the Group´s FXand interest rate instruments are based on input according to level 2.
| MSEK | Note | Q3 2017 | Q3 2016 | Q1-Q3 2017 | Q1-Q3 2016 | Q1-Q4 2016 |
|---|---|---|---|---|---|---|
| Cash flow from operations before changes in working capital |
-31 | 42 | -168 | 112 | 55 | |
| Changes in working capital | 3 | 127 | -70 | 27 | 13 | |
| Cash flow from current operations | -28 | 169 | -238 | 139 | 68 | |
| Cash flow from investing activities | 1 | -1 | 0 | 51 | 124 | |
| Cash flow from financing activities | -2 | 0 | 23 | 0 | -21 | |
| Changes in cash and cash equivalents from continuing operations |
-29 | 168 | -215 | 190 | 171 | |
| Cash-flow from discontinued operations: | ||||||
| Cash flow from current operations | -2 | -6 | -3 | -14 | -127 | |
| Cash flow from investing activities | 0 | 0 | 0 | 41 | 151 | |
| Cash flow from financing activities | 0 | 0 | 0 | -27 | -131 | |
| Changes in cash and cash equivalents from discontinued operations |
4 | -2 | -6 | -3 | 0 | -107 |
| Cash and cash equivalents at beginning of period | 71 | 227 | 273 | 195 | 195 | |
| Exchange-rate difference in cash and cash equivalents |
-10 | 5 | -25 | 9 | 14 | |
| CASH AND CASH EQUIVALENTS AT END OF PERIOD |
6 | 30 | 394 | 30 | 394 | 273 |
| Shareholders' equity (MSEK) | Note | Q3 2017 | Q3 2016 | Q1-Q3 2017 | Q1-Q3 2016 | Q1-Q4 2016 |
|---|---|---|---|---|---|---|
| Equity at beginning of period | 1,240 | 1,249 | 1,440 | 1,386 | 1,386 | |
| New share issue 1) | - | -2 | - | -2 | 340 | |
| Total comprehensive income for the period | -154 | -78 | -354 | -215 | -286 | |
| SHAREHOLDERS' EQUITY AT END OF PERIOD | 1,086 | 1,169 | 1,086 | 1,169 | 1,440 |
1) Net after expenses related to the new share issue.
Q3
| Share capital (MSEK) | Note | Q3 2017 | Q3 2016 | Q1-Q3 2017 | Q1-Q3 2016 | Q1-Q4 2016 |
|---|---|---|---|---|---|---|
| Share capital at beginning of period | 410 | 177 | 344 | 177 | 177 | |
| New share issue | - | - | 66 | - | 167 | |
| Share capital at end of period | 410 | 177 | 410 | 177 | 344 | |
| Number of shares ('000) | Note | Q3 2017 | Q3 2016 | Q1-Q3 2017 | Q1-Q3 2016 | Q1-Q4 2016 |
| Number of outstanding shares at beginning of period | 409,593 | 177,444 | 343,545 | 177,444 | 177,444 | |
| Number of new shares issued | - | - | 66,048 | - | 166,101 | |
| Total number of shares at end of period | 409,593 | 177,444 | 409,593 | 177,444 | 343,545 | |
| Average number of shares outstanding | 409,593 | 177,444 | 408,177 | 177,444 | 181,297 |
| (SEK) | Note | Q3 2017 | Q3 2016 | Q1-Q3 2017 | Q1-Q3 2016 | Q1-Q4 2016 |
|---|---|---|---|---|---|---|
| EBITDA 1) | 0.0 | 0.5 | -0.3 | 1.2 | 0.9 | |
| Result after tax (EPS) 1) | -0.3 | -0.4 | -0.5 | -1.3 | -2.0 | |
| Equity 2) | 2.7 | 6.6 | 2.7 | 6.6 | 4.2 | |
| Operating cash flow 1) | -0.1 | 0.1 | -0.1 | 0.6 | 0.2 | |
| Total cash flow 1) | -0.1 | 1.0 | -0.5 | 1.1 | 0.9 |
1) Calculated on continuing operations
2) The calculation includes assets held for sale
The Parent Company's result after tax for the first nine months was MSEK -762 (-309). The net financial items include impairment losses on shareholdings in subsidiaries of MSEK 762.
The activity in the Parent Company mainly consists of the shareholdings in Viking Supply Ships A/S and TA AB, as well as limited Group wide administration. The decline in the parent company's revenues and costs relates to the charter agreements of the three RoRo-vessels TransPaper, TransPulp and TransTimber which were novated to an external party in Q4 2016.
At the end of the third quarter the Parent Company's equity was MSEK 1,223 (1,986 on Dec 31, 2016), and total assets were MSEK 1,277 (2,055 on Dec 31, 2016). The equity decreased during the first nine months by net MSEK 762 due to the loss for the year of MSEK 762. The completed equity issue, of total 340 MSEK, brought liquidity to the Group of total MSEK 250 of which MSEK 207 was obtained in December 2016 and the remaining MSEK 43 in the beginning of January 2017. The cash proceeds from these new share issues have been distributed to the subsidiaries as part of the financial restructuring.
The equity ratio on the balance day was 96% (97 on Dec 31, 2016). Cash and cash equivalents at the end of the period was MSEK 2 (18 on Dec 31, 2016). The decline in cash holdings relates to repaid client funds.
Q3
| (MSEK) | Note | Q3 2017 | Q3 2016 | Q1-Q3 2017 | Q1-Q3 2016 | Q1-Q4 2016 |
|---|---|---|---|---|---|---|
| Net sales | 2 | 102 | 7 | 272 | 333 | |
| Personnel costs | - | 0 | - | -1 | -1 | |
| Other costs | -2 | -104 | -7 | -274 | -334 | |
| Operating result | 0 | -2 | 0 | -3 | -2 | |
| Net financial items | -287 | -134 | -762 | -306 | -342 | |
| Result before tax | -287 | -136 | -762 | -309 | -344 | |
| Tax on result for the year | - | - | - | - | - | |
| RESULT FOR THE PERIOD | -287 | -136 | -762 | -309 | -344 | |
| Other comprehensive income for the period: | ||||||
| Items that will not be restored to the income statemement |
||||||
| Revaluation of net pension obligations | - | - | - | - | 0 | |
| TOTAL COMPREHENSIVE INCOME FOR THE PERIOD |
-287 | -136 | -762 | -309 | -344 |
| (MSEK) | Note | Q3 2017 | FY 2016 |
|---|---|---|---|
| Financial fixed assets | 1,273 | 1,905 | |
| Current assets | 4 | 150 | |
| TOTAL ASSETS | 1,277 | 2,055 | |
| Shareholders' equity | 1,223 | 1,986 | |
| Provisions | 6 | 6 | |
| Long-term liabilities | 15 | 15 | |
| Current liabilities | 33 | 48 | |
| TOTAL SHAREHOLDERS' EQUITY, PROVISIONS AND LIABILITIES | 1,277 | 2,055 |
| (MSEK) | Note | Q3 2017 | Q3 2016 | Q1-Q3 2017 | Q1-Q3 2016 | Q1-Q4 2016 |
|---|---|---|---|---|---|---|
| Equity at beginning of period | 1,510 | 1,817 | 1,986 | 1,990 | 1,990 | |
| New share issue 1) | - | -2 | - | -2 | 340 | |
| Total comprehensive income for the period | -287 | -136 | -762 | -309 | -344 | |
| SHAREHOLDERS' EQUITY AT END OF PERIOD | 1,223 | 1,679 | 1,223 | 1,679 | 1,986 |
1) Net, after expenses related to the new share issue
Q3
The financial restructuring was completed on 12 January 2017 when the bond settlement by way of cash redemption and conversion to equity was completed.
The restructuring was intended to secure the Group with a stable financial platform until 2020, subject certain vessel income levels. The primary uncertainties and risks in relation to the going concern considerations included a prolonged weakening of the market conditions.
The continued challenging market conditions, including downward pressure on rates and utilization, have impacted the Group's liquidity during the first nine months of 2017. As a consequence, Viking Supply Ships A/S shortly after the end of Q2 2017 initiated a dialogue with its lenders to secure a long-term stable financing solution.
At the end of Q3 2017, Viking Supply Ships A/S was not able to comply with events of default provisions in loan agreements, which rendered all borrowings short-term and payable on demand by the lenders.
Viking Supply Ships A/S has during the majority of Q3 2017 been in an ongoing dialogue with its lenders, during which Viking Supply Ships A/S has not paid installments and interest to its lenders. These events have created uncertainty as to the Group's and the company's ability to continue as going concern, including the application of the going concern assumption as basis for preparation of the financial statements as opposed to liquidation principles, which typically will require significant impairments of vessels to their net selling price in a distressed sale situation and further require recognition of liabilities that arise on account of the inability to continue as a going concern.
In December 2017, Viking Supply Ships A/S obtained support for a restructuring proposal from all senior lenders. Subject to final approval from the senior lenders' credit committees, the Group therefore expects the financial restructuring to be finalized within short, subject to an equity issue at an agreed level in Viking Supply Ships AB and a subsequent equity injection by the parent company into Viking Supply Ships A/S, where the majority shareholder Kistefos AS has guaranteed the required equity issue in Viking Supply Ships AB.
On this basis, Management expects that the company will be able to successfully execute the required equity issue.
The share issues in Viking Supply Ships AB that form part of the Viking Supply Ships A/S' financial restructuring will comprise the following:
The final agreement includes the following key terms:
The bareboat charter in respect of the vessel Odin Viking will be amended to reflect that the charter hire of USD 10,000 per day will not be payable in cash, but added to the principal amount outstanding under the charter party as payment in kind.
The bareboat charter will be amended to reflect that Viking Supply Ships A/S will have the right to exercise the previously agreed purchase option in respect of Odin Viking before the end of the charter party. If the option is exercised, the bareboat charter will be terminated against a termination compensation equal to the accumulated and remaining charter hire.
The restructuring secures the Group ample room to operate under the present challenging market conditions, subject certain vessel income levels. The primary uncertainties and risks in relation to the going concern considerations include a prolonged weakening of the market conditions.
Based on a continued belief in securing contracts within the core market segment, Management has concluded that both the company and the Group will be able to continue as going concern at least until 30 September 2018. This conclusion is based on Management's assessment of the current outlook for 2017/2018 and the uncertainties and risks described above.
Q3
Tangible fixed assets are recognized at cost or after deductions for accumulated depreciation according to plan and possible impairment. Straight-line amortization according to plan is applied.
At each reporting date the accounts are assessed whether there is an indication that an asset may be impaired. If any such indication exists, or when impairment testing for an asset is required, estimates of the asset's recoverable amount are done. The recoverable amount is the highest of the fair market value of the asset, less cost to sell, and the net present value (NPV) of future estimated cash flow from the employment of the asset ("value in use").
Viking Supply Ships A/S is operating two groups of similar vessel types which in reality can all be used for the same kind of tasks, and are thus interchangeable. Each vessel generates its own cash streams, but the company's customers could, just as easily, have used another vessel from the relevant fleet type. Based on this Viking Supply Ships A/S has deemed it appropriate to consider each group of vessels as a separate cash generating unit. As a result, Viking Supply Ships A/S is performing impairment tests on a portfolio level rather than per vessel.
The key assumptions used in the value in use calculation and in the assessment of owned vessels, for 2017 are as follows:
As indication of fair market value valuations of owned vessels are obtained from internationally acknowledged shipbrokers on a quarterly basis.
Based on fixtures rates, utilization, contract coverage, cost levels and currency exchange levels the Group has prepared discounted cash flow calculations covering the remaining useful lives of the vessels. All significant assumptions have been estimated using Management's best estimate in a challenging market. The cash flow projection shows negative cash flows for 2017-19 due to all PSV vessels in warm lay-up in 2017/2018 and poor market conditions expected in 2019 with step-wise improving rates and utilization in 2020 and going forward. The value in use calculation based on discounted cash flows is very sensitive to changes in the underlying assumptions including the pace and timing of assumed market recovery and redeployment of vessels, which is uncertain due to the current challenging market conditions. The calculated value in use is MSEK 326.
The impairment test also consists of an assessment of average external vessel valuations, less cost to sell, from two internationally acknowledged shipbrokers showing a total PSV fleet value of MSEK 228 (ranging from MSEK 135 to MSEK 322). The valuations obtained from these shipbrokers are subject to more uncertainty than normal due to lack of sales and purchase transactions for comparable vessels.
Since the recoverable amount of MSEK 326 is lower than the carrying amount of MSEK 358 at the end of Q3 2017, an impairment charge of MSEK 32 has been recognized.
The Group will continue to closely monitor the market development and impairment exposure of the PSV fleet's carrying amount.
In Q3 2017 Management evaluated the AHTS fleet and concluded that the AHTS vessels are not impaired. Value in use calculations prepared for the AHTS fleet showed no indications that the carrying amount may not be fully recoverable. This was further supported by the external vessel valuations from two independent internationally acknowledged shipbrokers showing a total AHTS fleet value in excess of the carrying amount of the owned AHTS fleet (MSEK 2 413) by 6% on average.
The segment information about continuing operations is presented in four segments:
-The segments AHTS and PSV comprise 13 offshore vessels that are equipped for and have the capacity to operate in areas with harsh environment, further 7 of the Anchor Handling Tug Supply (AHTS) vessels are equipped to operate in Arctic areas.
-The segment Services provides ice management services and logistical support in the Arctic regions.
-The segment Ship Management is involved in commercial management of five icebreakers owned by the Swedish Maritime Administration.
For information about the previous segment TransAtlantic, which from this financial report is classified as discontinued operation and assets held for sale, please see note 4.
| Q3 MSEK |
AHTS | PSV | Services | Ship Management |
Continuing operations |
|---|---|---|---|---|---|
| Net sales | 61 | 0 | 4 | 28 | 93 |
| EBITDA | -16 | -3 | 1 | 0 | -18 |
| Result before tax | -58 | -42 | 1 | 0 | -99 |
| Total assets | 2,531 | 350 | 0 | 0 | 2,881 |
| Year to date | Ship | Continuing | |||
|---|---|---|---|---|---|
| MSEK | AHTS | PSV | Services | Management | operations |
| Net sales | 150 | 0 | 13 | 101 | 264 |
| EBITDA | -116 | -8 | 1 | -1 | -124 |
| Result before tax | -139 | -60 | 1 | -1 | -199 |
| Total assets | 2,531 | 350 | 0 | 0 | 2,881 |
There have been no significant transactions between the segments.
During 2016 it was decided to discontinue the remaining operations in the subsidiary TransAtlantic AB in order to meet financing commitments related to these operations. At the end of Q3 2016 the Group assessed that discontinuation was likely to be completed within the next 12 months, subject the outcome of the ongoing discussions and negotiations. Due to this, the Group have in its financial reports as from Q3 2016 recognized TA AB as discontinued operations and assets held for sale, according to IFRS 5 Assets held for sale and discontinued operation, which means that TA AB is reported as a one-line item in the consolidated profit and loss statements. Assets and liabilities related to TA AB are also presented in two rows in the consolidated balance sheet. The consolidated cash flow statement is presented including TA AB, but with additional information about cash-flow from current operation and investing- and financing activities of TA AB. Comparative figures for prior periods are also presented in accordance with this classification in the consolidated profit and loss statement and cash-flow statement.
The remaining operations, classified as discontinued operations and assets held for sale, comprised at the end of the quarter of five small bulk vessels bareboat-chartered by TA AB from a company in which TA AB owns 38% of the shares. The vessels are chartered out on a long-term time-charter.
After the end of the quarter, two of the remaining vessels,TransSonoro and TransVolante, were sold. The vessels have been delivered to its new owners and the sale will have a limited positive financial effect.
Discontinued operations are in accordance with IFRS 5 measured at the lower of carrying amount and fair value less costs to sell. The assessment of the valuations of the remaining vessels assets are supported by independent broker valuations and an overall assessment from ongoing sales processes.
| (MSEK) | Q3 2017 | Q3 2016 | Q1-Q3 2017 | Q1-Q3 2016 | Q1-Q4 2016 |
|---|---|---|---|---|---|
| Net sales | 12 | 93 | 37 | 260 | 309 |
| Other operating revenue | 0 | 0 | 0 | 0 | 34 |
| Direct voyage cost | 0 | -1 | 0 | -6 | -4 |
| Personnel costs | 0 | -3 | 0 | -5 | -9 |
| Other costs | -12 | -94 | -39 | -257 | -330 |
| Depreciation/impairment | - | -7 | 19 | -27 | -8 |
| Impairment to fair value less selling costs 1) | - | -7 | -19 | - | -19 |
| Operating result | 0 | -19 | -2 | -35 | -27 |
| Net financial items | 0 | -1 | 0 | -4 | -9 |
| Result before tax | 0 | -20 | -2 | -39 | -36 |
| Tax | 0 | 0 | 0 | 0 | 0 |
| RESULT FROM DISCONTINUED OPERATIONS | 0 | -20 | -2 | -39 | -36 |
| Earnings attributable to Parent Company's shareholders, | |||||
| per share in SEK (before and after dilution): | |||||
| -Result from discontinued operations | 0.0 | -0.1 | 0.0 | -0.2 | -0.2 |
1) Not tax deductible
| (MSEK) | Q3 2017 | FY 2016 |
|---|---|---|
| Other tangible fixed assets | 0 | 0 |
| Intangible fixed assets | 1 | 1 |
| Financial assets | 9 | 9 |
| Total fixed assets | 10 | 10 |
| Current assets | 8 | 16 |
| ASSETS HELD FOR SALE | 18 | 26 |
| Current liabilities | 3 | 15 |
| LIABILITIES RELATED TO ASSETS HELD FOR SALE | 3 | 15 |
| (MSEK) | Q3 2017 | Q3 2016 | Q1-Q3 2017 | Q1-Q3 2016 | Q1-Q4 2016 |
|---|---|---|---|---|---|
| Cash flow from current operations | -2 | -6 | -3 | -14 | -127 |
| Cash flow from investing activities | 0 | 0 | 0 | 41 | 151 |
| Cash flow from financing activities | 0 | 0 | 0 | -27 | -131 |
| NET CASH FLOW FROM DISCONTINUED OPERATIONS | -2 | -6 | -3 | 0 | -107 |
The vessels owned by the Group are financed through bank loans with pledge in the vessels. Further securities have been given in the form of pledge in revenue and insurance policies. The total interest-bearing debt at the end of the quarter was MSEK 1,697 (1,927 on Dec 31, 2016).
The interest bearing liabilities are associated with financial covenants, according to which the Group must fulfill certain key ratios. Due to the current weak market conditions, Viking Supply Ships A/S at the end of Q2 2017 registered a breach on its twelve month rolling EBITDA ratio which is to be positive.
Viking Supply Ships A/S has during the majority of Q3 2017 been in an ongoing dialogue with its lenders, during which Viking Supply Ships A/S has not paid installments and interest to its lenders.
At the end of Q3 2017, Viking Supply Ships A/S was not able to comply with events of default provisions in loan agreements, which rendered all borrowings short-term and payable on demand by the lenders (see note 1, liquidity and going concern).
As part of the financial restructuring the following has taken place in terms of the interest bearing liabilities:
As part of the 2016 financial restructuring the cash redemption of the bond was partly funded by a loan of MNOK 20 provided by one of Viking Supply Ships A/S' existing lenders. The loan was received in January 2017.
As a result of an agreement that was resolved by the bondholders in conjunction with the key terms of the 2016 debt restructuring plan, the bond agreement was changed in 2016 and the bond was delisted from Nordic ABM on 12 January 2017.
The Group has 99% (45%) of its interest-bearing debt in USD, 0% (17%) in GBP and 1% in NOK (38%). The Group has 100% (100) of the total loan portfolio swapped into fixed interest rates within the interval of 90 days up to three years and 0% (0) of the total loan portfolio swapped into fixed interest rates for more than 3 years.
| MSEK | Q3 2017 | Q3 2016 | FY 2016 |
|---|---|---|---|
| Short-term bond loan | - | 212 | - |
| Long-term debt to credit institutions | - | - | 1,868 |
| Short-term debt to credit institutions | 1,697 | 2,168 | 59 |
| TOTAL INTEREST BEARING LIABILITIES | 1,697 | 2,380 | 1,927 |
Q3
Consolidated cash and cash equivalents available at the end of the year amounted to MSEK 30 (273). The cash assets include client funds of MSEK 19.
| MSEK | Q3 2017 | Q3 2016 | FY 2016 |
|---|---|---|---|
| Restricted cash 1) | - | 77 | - |
| Free cash and cash equivalents | 30 | 394 | 273 |
| TOTAL | 30 | 471 | 273 |
1) The amount is included in the item "Financial Assets" in the balance sheet.
The Group operates in highly competitive markets and is exposed to various operational and financial risk factors. The financial risk is mainly related to liquidity risk, funding risk and currency risk. The Group works actively to identify, assess and manage these risks.
The main operational risk factors relate to the overall macroeconomic market conditions, degree of competition, flow of goods in prioritized market segments and finally the overall balance of supply and demand of vessels, affecting rates and profit margins. The objective of the overall risk management policy of the Group is to ensure a balanced risk and return relationship.
The offshore market is to a high degree dependent on the investment level in the oil industry which in turn is driven by the oil price development on the global market. The recent decline in the offshore market has impacted the Group´s profitability and liquidity. The Group has a clear focus on increasing the number of vessels on term contracts within the offshore operations to mitigate fluctuations in rates and utilization.
The remaining business activity in the TransAtlantic segment operates in a competitive market with profit margins under pressure.
Long-term loans are the principal form of financing. Accordingly, interest rate fluctuations have an impact on the Groups earnings and cash flow. To reduce this risk the Group aims to actively manage the interest exposure through various types of hedging instruments.
The foreign exchange risk is primarily reduced by matching the exposure to revenues in various currencies with costs in the corresponding currency. In the same manner, assets in a certain currency are primarily matched with liabilities in the same currency.
Viking Supply Ships AB is a limited liability company registered in Sweden, with its domicile in Gothenburg, and corporate registration number 556161-0113. Viking Supply Ships AB is listed on the Small Cap list of the NASDAQ OMX Nordic Exchange in Stockholm under the ticker VSSAB.
The general situation for the Group is that taxes payable are limited to foreign entities. The tax losses carry forward for Swedish entities amounted at end of the period to MSEK 1,049 (1,048 on Dec 31, 2016). There are no tax assets capitalized in the balance sheet related to these tax losses carry forward. The recognized deferred tax liability for the operations outside Sweden amounted to MSEK 0 (0 on Dec 31, 2016).
The Group has entered into a long-term bareboat charter agreement with a subsidiary to Kistefos AS, Odin Viking SPV AS, in relation to hire of the AHTS vessel Odin Viking. The nominal minimum lease hire payments amount to MSEK 204 until expiry on 2 August 2024. The Group has until September 30, 2017 paid charter hire of total MSEK 24. As part of the financial restructuring agreement, this bareboat charter contract will be cancelled.
This interim report for the Group was prepared in accordance with the application of IAS 34 Interim Financial Reporting and applicable rules in the Swedish Annual Accounts Act and for the Parent Company, in accordance with the Swedish Annual Accounts Act and the Swedish Financial Reporting Board's recommendation RFR 2 Accounting for Legal Entities. The accounting policies applied for the Group and the parent company correspond, unless otherwise stated below, with the accounting policies applied in the preparation of the latest annual report.
The same accounting policies for both the Group and the Parent Company have been applied as those used in the most recent Annual Report.
Viking Supply Ships A/S publishes a separate report as a result of the issued debt certificates. Some values in that report are not comparable to the values in this report, as a result of different acquisition values and depreciation schedules between Viking Supply Ships A/S and the Group. Viking Supply Ships A/S has as of Q3 2011 been built through Group-internal transfers of vessels and operations at then current market prices, which is why differences in acquisition values have arisen.
Q3
The average number of full time employees in the Group for the first nine months was 396 (Jan-Dec 2016: 464).
| Total number of shares | 409,592,960 | |||
|---|---|---|---|---|
| Number of Series B shares, listed | 388,908,612 | |||
| Number of Series A shares | 20,684,348 | |||
| Share distribution on September 30, 2017: |
Q3
Anchor Handling Tug Supply vessel
Profit after financial items less 1) current tax, 2) tax on profit for the year (current and deferred tax) in accordance with the consolidated income statement
Earnings before interest and taxes
Earnings before interest, taxes, depreciation and amortization, corresponding to profit/loss before capital expenses and tax
Shareholders' equity divided by total assets
Viking Supply Ships AB, a Limited Liability Company registered in Sweden, with all subsidiaries
International Financial Reporting Standards – an international accounting standard used by all listed companies. Some older standards included in IFRS include IAS (International Accounting Standards)
Shareholders' equity divided by total assets, adjusted for asset market valuations
Profit/loss after financial income/expense adjusted for capital gains/losses, depreciation/amortization and impairment
Operating cost consists of crew, technical and administration costs
Profit/loss before financial items and tax
Offshore Support Vessels
Profit after financial items divided by net sales
Platform Supply Vessel
Profit after financial items less tax on profit for the year, divided by average shareholders' equity
Roll-on/roll-off ships are vessels designed to carry wheeled cargo, such as automobiles, trucks etc.
Cash flow from operating activities, investing activities and financing activities
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