Interim / Quarterly Report • Nov 10, 2016
Interim / Quarterly Report
Open in ViewerOpens in native device viewer
INTERIM REPORT
Q3
2016
Viking Supply Ships AB (publ) is a Swedish 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 500 employees and the turnover in 2015 was MSEK 1,114. 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 Visiting address: E-mail: [email protected] Lilla Bommen 6 www.vikingsupply.com Box 11397, SE-411 04 Gothenburg, Sweden
For further information, please contact CEO, Bengt A. Rem, ph. +47 23 11 70 00 or IR & Treasury Director, Morten G. Aggvin, ph. +47 41 04 71 25.
| 3 | |
|---|---|
| Q3 2016 | 4 |
| SUMMARY OF EVENTS IN Q3 | 4 |
| SUBSEQUENT EVENTS | 5 |
| LIQUIDITY AND GOING CONCERN | 5 |
| RESULTS AND FINANCE | 6 |
| OPERATIONAL HIGHLIGHTS FOR Q3 | 6 |
| FINANCIAL POSITION AND CAPITAL | |
| STRUCTURE | 8 |
| 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 | 22 |
The third quarter resulted in a negative result for the Group. This was mainly a result of an impairment of the PSV fleet as well as unrealized currency effects. Despite challenging market conditions, the revenue remained at the same level as in the third quarter of 2015. Effects from cost reductions implemented through the year had a positive impact on the EBITDA of MSEK 85 (48). For the third quarter, profit after tax for the Group was MSEK -93 (-282). In November 2016, the Group finalized the financial restructuring, subject to the completion of an equity issue at an agreed level in Viking Supply Ships AB (VSS AB), to be finalized before year-end 2016. The restructuring will provide VSS AB with a stable financial platform until 2020, subject certain vessel income levels.
During the third quarter three AHTS vessels completed their term contracts and all seven AHTS vessels currently in operation are hence located in the North Sea spot market. The North Sea spot market was relatively strong in July, but despite a stable activity level through the quarter, rate levels fell back during the rest of the quarter.
During 2016 it was decided to discontinue the remaining operations in TransAtlantic AB (TA AB) in order to meet financing commitments related to these operations. The decision has led to initiated discussions and negotiations with employees, partners and other stakeholders. At the end of the third quarter the Group assess that the discontinuation is likely to be completed within the next 12 months, subject outcome of the ongoing discussions and negotiations. Due to this, the Group will in its financial reports as from third quarter 2016 recognize TA AB as discontinued operations and assets held for sale according to IFRS 5 "Assets held for sale and
discontinued operations". The discontinuing of the operations in TA AB will enable the Group to fully focus on its offshore operations.
During the third quarter a bondholders meeting adopted a proposed resolution as part of the long term financial restructuring of Viking Supply Ships A/S (VSS A/S). After the end of the quarter, VSS A/S concluded on an agreement with the new owners of Odin Viking to amend the terms in the bareboat charter party. This finalizes the financial restructuring of VSS A/S, subject to the successful completion of an equity issue at an agreed level in VSS AB.
The spot market has continued the slightly positive trend seen in 2016, but influx of vessels from other regions is putting the rate level under pressure. Although there are signs of an improved market balance within the oil market, VSS A/S anticipates that the general offshore market will remain challenging through 2017 due to oversupply within the industry.
There is however positive indications that the activity level within important core areas to VSS A/S, such as the Barents Sea and Canada will increase, which will be of significant importance for the company. The supply of vessels within this segment is limited compared to the overall market and the future development is substantially more driven by vessel demand. With the completion of the financial restructuring, VSS A/S is well positioned for the future development within the harsh environment offshore industry.
Gothenburg, 10 November 2016.
Bengt A. Rem CEO and President
Q3
• During Q3 2016 an agreement was entered into for the sale of the RoRo-vessel TransReel, which was delivered to its new owners in October 2016. The sale is expected to give a positive result of MSEK 11 in Q4, but as the funds will be used to cover amortizations of vessel loans it will not have any liquidity effect.
Q3
• On 18 October 2016, a bankruptcy petition was approved towards the owner of Odin Viking, Norseman Offshore AS. On 9 November, Odin Viking SPV AS, a company owned by Kistefos AS, concluded on an agreement with the bankruptcy trustee, where after Odin Viking SPV AS purchased Odin Viking and acquired the bareboat charter party. On 9 November 2016, Odin Viking SPV AS and VSS A/S concluded on an agreement to amend the terms in the bareboat charter party, including a significant reduction in bareboat rate.
The condensed interim financial statements for the nine months ending 30 September 2016 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 the coming 12 months. This conclusion is based on Management's assessment that the conditions for completing the debt restructuring can and will be fulfilled, the current outlook for 2016/2017 and the current uncertainties and risks (see note 1, Liquidity and going concern).
| KEY FINANCIALS | Q3 2016 | Q3 2015 |
|---|---|---|
| Net sales, MSEK 1) | 235 | 232 |
| EBITDA, MSEK 1) | 85 | 48 |
| Result after tax, MSEK 2) | -93 | -282 |
| Earnings per share after tax, SEK 2) | -0.5 | -1.6 |
| Shareholders´equity per share, SEK | 6.6 | 8.7 |
| Return on equity, % 2) | -30.8 | -57,0 |
| Equity ratio, % 3) | 30.2 | 35.3 |
| Market adjusted equity ratio, % 3) | 38.5 | 44.4 |
1) Excludes discontinued operations
2) Includes discontinued operations
3) The calculation includes assets held for sale
Q3
Total revenue for the Group for the nine-month period 2016 was for continuing operations MSEK 685 (836).
The Group's EBITDA for the nine months was for continuing operations MSEK 212 (225).
Net financial items were for continuing operations MSEK -110 (-132). Financial items include unrealized currency losses of MSEK -29 (-44) and realized value-adjustments on interest rate swaps of MSEK -4 (-1).
The Group's result after tax for year-to-date including discontinued operations was MSEK -261 (-317). The result for year-to-date was negatively impacted by impairment losses of the two bulk vessels TransAndromeda and TransCapricorn with a total of MSEK 7, an impairment loss of the RoLo vessel TransFighter of MSEK 12 and by an impairment loss on the PSV fleet of MSEK 200.
Total AHTS revenue was MSEK 198 (200) in Q3. Total EBITDA was MSEK 90 (75).
During Q3, four vessels have been operating in the North Sea spot market, while three vessels have been operating on term contracts. During the quarter three term vessels completed their contracts and all seven vessels currently in operation are hence located in the North Sea spot market. One AHTS vessel has remained in lay-up during the quarter.
The North Sea spot market was relatively strong in July, but despite a stable activity level through the quarter, rate levels fell back during the rest of the quarter. Further, a number of vessels entered the North Sea market, which resulted in a softer market balance.
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 (62,500) | 100 (90) | |||||||||
| AHTS vessels on the spot market | 38,700 (16,600) | 56 (34) | |||||||||
| Total AHTS fleet | 53,300 (49,300) | 65 (63) | |||||||||
| Table above excludes one laid-up vessel. | |||||||||||
| Firm contract | Option | Spot | Layup | ||||||||
| AHTS | OCT '16 | NOV '16 | DEC '16 | JAN '17 | FEB '17 | MAR '17 | APR '17 | MAY '17 | JUNE '17 AUG '17 | SEP '17 | |
| 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 2016. |
Q3
Total PSV revenue was MSEK 0 (9) in Q3. Total EBITDA was MSEK -4 (-26). Due to the challenging market conditions, an impairment loss related to the PSV fleet has been recognized during Q3 2016 of MSEK 55.
VSS A/S does not have any PSVs in operation, but will continue to monitor the market for long term contract opportunities for these vessels.
The total PSV contract backlog at the end of the quarter was MSEK 0.
Figures in the tables are as of 30 September 2016.
Total Services and Ship Management revenue was MSEK 37 (23) in Q3. Total EBITDA was MSEK -1 (-1).
During Q2, Viking Ice Consultancy (VIC) entered into three consultancy contracts, which has provided the company with work during Q3. VIC will continue to develop and pursue 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 in order to meet financing commitments related to these operations. The decision has led to the initiations of discussions and negotiations with employees, partners and other stakeholders. At the end of Q3 2016 the Group assess' that discontinuation is likely to be completed within the next 12 months, subject the outcome of the ongoing discussions and negotiations. Due to this, the Group will in its financial reports as from Q3 2016 recognize 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 subsidiary TransAtlantic AB recorded revenues of MSEK 93 (226) in Q3. EBITDA was MSEK -5 (-10).
The restructuring process within TA AB has continued during Q3. An agreement was entered into during the quarter for the sale of the RoRo-vessel TransReel, which was delivered to its new owners in October 2016. The sale is expected to give a positive result of MSEK 11 in Q4, but as the funds will be used to cover amortizations of vessel loans it will not have any liquidity effect.
At the end of the third quarter, the Group's equity amounted to MSEK 1,169 (equivalent to 6.59 SEK/share). The Equity decreased during the first nine month by net MSEK 217 due to the loss for the period of MSEK 261, expenses of 2 MSEK related to the planned new share issue and a positive change in the translation reserve of MSEK 46 attributable to currency differences on net investments in subsidiaries, mainly related to the strengthened USD against SEK.
Gross investments during the first nine months amounted to MSEK 5 (121) mainly related to dockings. The divestments during the first half year have brought liquidity of MSEK 97 to the Group. The divestments relates to released cash earlier blocked as additional security for vessel loans, sales of bonds and the sale of the short sea bulk vessels TransAndromeda and TransCapricorn. The positive change in working capital during the quarter mainly relates to payments from customers, please also see the condensed consolidated cash-flow statement.
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 10 November, 2016.
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.
Gothenburg, 10 November 2016 Viking Supply Ships AB
Q3
Folke Patriksson Erik Borgen Håkan Larsson Chairman Board member Board member
Magnus Sonnorp Bengt A. Rem Christer Lindgren
Board member CEO/Board member Employee representative
In conjunction with the publication of this interim report, an earnings call will take place on 10 November 2016 at 10.00 am (CET) with Viking Supply Ships AB's CEO Bengt A. Rem, 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.
| 14 February 2017 | Q4 Interim report |
|---|---|
| 30 May 2017 | 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
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.
Q3
We have reviewed the interim report for Viking Supply Ships AB for the period January 1, 2016 to September 30, 2016. 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.
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.
Based on our review, 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.
Without having any effect on our conclusion above we would like to draw attention to the fact that as stated in the interim report, the Company reported a loss for the period.
Note 1 of the interim report also states that management assess that with a continued belief in being able to secure contracts in the core business the criterias for going concern are fulfilled for the parent company and the Group for the next twelve months. This conclusion is based on management's assessment that the financial restructuring can, and will be finalized, an overall assessment of the outlook for 2016/2017 as well as the risks and uncertainties that exist.
In summary this means that before all agreements in connection with the financial restructuring have been signed and the share issue has been completed, there is an uncertainty regarding the company's financing.
Stockholm on November 9, 2016
Rödl & Partner Nordic AB Mathias Racz Authorized Public Accountant
| (MSEK) | Note | Q3 2016 | Q3 2015 | Q1-Q3 2016 | Q1-Q3 2015 | FY 2015 |
|---|---|---|---|---|---|---|
| Net sales | 235 | 232 | 685 | 836 | 1,114 | |
| Other operating revenue | 0 | 0 | 0 | 0 | 4 | |
| Direct voyage cost | -7 | -11 | -25 | -38 | -55 | |
| Personnel costs | -81 | -121 | -279 | -391 | -529 | |
| Other costs | -62 | -52 | -169 | -182 | -242 | |
| Depreciation/impairment | 2 | -95 | -232 | -323 | -330 | -444 |
| Operating result | -10 | -184 | -111 | -105 | -152 | |
| Net financial items | -65 | -71 | -110 | -132 | -177 | |
| Result before tax | -75 | -255 | -221 | -237 | -329 | |
| Tax | 8 | 2 | -1 | -1 | -2 | -3 |
| Result from continuing operations | 3 | -73 | -256 | -222 | -239 | -332 |
| Result from discontinued operations | 4 | -20 | -26 | -39 | -78 | -108 |
| Result for the period | -93 | -282 | -261 | -317 | -440 | |
| Earnings attributable to Parent Company's share | ||||||
| holders, per share in SEK (before and after dilution): | ||||||
| -Result from continuing operations | -0.4 | -1.4 | -1.3 | -1.4 | -1.9 | |
| -Result from discontinued operations | -0.1 | -0.2 | -0.2 | -0.4 | -0.6 | |
| Total | -0.5 | -1.6 | -1.5 | -1.8 | -2.5 |
| Note | Q3 2016 | Q3 2015 | Q1-Q3 2016 | Q1-Q3 2015 | FY 2015 |
|---|---|---|---|---|---|
| -93 | -282 | -261 | -317 | -440 | |
| - | - | - | - | 2 | |
| 15 | -112 | 46 | -76 | -120 | |
| 15 | -112 | 46 | -76 | -118 | |
| -78 | -394 | -215 | -393 | -558 | |
Q3
| MSEK | Note | Q3 2016 | Q3 2015 | FY 2015 |
|---|---|---|---|---|
| Vessels | 2 | 3,101 | 3,660 | 3,470 |
| Other tangible fixed assets | 2 | 3 | 2 | |
| Intangible fixed assets | - | 1 | 1 | |
| Financial assets | 136 | 237 | 183 | |
| Total fixed assets | 3,239 | 3,901 | 3,656 | |
| Other current assets | 6 | 497 | 497 | 461 |
| Assets held for sale | 4 | 137 | - | - |
| Total current assets | 634 | 497 | 461 | |
| TOTAL ASSETS | 3 | 3,873 | 4,398 | 4,117 |
| Shareholders' equity | 1,169 | 1,551 | 1,386 | |
| Long-term liabilities | 5 | 35 | 1,851 | 1,008 |
| Other current liabilities | 5 | 2,472 | 996 | 1,723 |
| Liabilities related to assets held for sale | 4 | 197 | - | - |
| Total current liabilities | 2,669 | 996 | 1,723 | |
| TOTAL EQUITY, PROVISIONS AND LIABILITIES | 3,873 | 4,398 | 4,117 |
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 14 (20). 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 2016 | Q3 2015 | Q1-Q3 2016 | Q1-Q3 2015 | FY 2015 |
|---|---|---|---|---|---|---|
| Cash flow from operations before changes in working capital |
42 | 22 | 112 | 161 | 262 | |
| Changes in working capital | 127 | 13 | 27 | 69 | 173 | |
| Cash flow from current operations | 169 | 35 | 139 | 230 | 435 | |
| Cash flow from investing activities | -1 | 14 | 51 | -113 | -217 | |
| Cash flow from financing activities | 0 | -69 | 0 | -336 | -419 | |
| Changes in cash and cash equivalents from continuing operations |
168 | -20 | 190 | -219 | -201 | |
| Cash-flow from discontinued operations | ||||||
| Cash flow from current operations | -6 | -20 | -14 | -51 | -83 | |
| Cash flow from investing activities | 0 | 0 | 41 | 36 | 72 | |
| Cash flow from financing activities | 0 | -3 | -27 | -46 | -58 | |
| Changes in cash and cash equivalents from discontinued operations |
4 | -6 | -23 | 0 | -61 | -69 |
| Cash and cash equivalents at beginning of period | 227 | 233 | 195 | 450 | 450 | |
| Exchange-rate difference in cash and cash equiva lents |
5 | -2 | 9 | 18 | 15 | |
| CASH AND CASH EQUIVALENTS AT END OF PERIOD |
6 | 394 | 188 | 394 | 188 | 195 |
| Shareholders' equity (MSEK) | Note | Q3 2016 | Q3 2015 | Q1-Q3 2016 | Q1-Q3 2015 | FY 2015 |
|---|---|---|---|---|---|---|
| Equity at beginning of period | 1,249 | 1,945 | 1,386 | 2,042 | 2,042 | |
| Dividend | - | - | - | -98 | -98 | |
| New share issue 1) | -2 | - | -2 | - | - | |
| Total comprehensive income for the period | -78 | -394 | -215 | -393 | -558 | |
| SHAREHOLDERS' EQUITY AT END OF PERIOD | 1,169 | 1,551 | 1,169 | 1,551 | 1,386 |
1) Expenses related to the planned new share issue.
Q3
| Share capital (MSEK) | Note | Q3 2016 | Q3 2015 | Q1-Q3 2016 | Q1-Q3 2015 | FY 2015 |
|---|---|---|---|---|---|---|
| Share capital at beginning of period | 177 | 177 | 177 | 177 | 177 | |
| Share capital at end of period | 177 | 177 | 177 | 177 | 177 | |
| Number of shares ('000) | Note | Q3 2016 | Q3 2015 | Q1-Q3 2016 | Q1-Q3 2015 | FY 2015 |
| Number of outstanding shares at beginning of period | 177,444 | 177,444 | 177,444 | 177,444 | 177,444 | |
| Total number of shares at end of period | 177,444 | 177,444 | 177,444 | 177,444 | 177,444 | |
| Average number of shares outstanding | 177,444 | 177,444 | 177,444 | 177,444 | 177,444 | |
| (SEK) | Note | Q3 2016 | Q3 2015 | Q1-Q3 2016 | Q1-Q3 2015 | FY 2015 |
|---|---|---|---|---|---|---|
| EBITDA 1) | 0.5 | 0.3 | 1.2 | 1.3 | 1.6 | |
| Result after tax (EPS) 1) | -0.4 | -1.4 | -1.3 | -1.4 | -1.9 | |
| Equity 2) | 6.6 | 8.7 | 6.6 | 8.7 | 7.8 | |
| Operating cash flow 1) | 0.1 | -0.1 | 0.6 | 0.5 | 0.6 | |
| Total cash flow 1) | 1.0 | 0.1 | 1.1 | -1.2 | -1.1 |
1) Calculated on continuing operations
2) The calculation includes assets held for sale
The Parent Company's result after tax for the nine-month period was MSEK -309 (-87). The result was negatively impacted by an impairment of shares in subsidiaries of -306 MSEK, which mainly relates to impairment of fleet values in underlying operations.
The activity in the Parent Company mainly consists of the shareholdings in VSS A/S and TA AB, as well as limited Group wide administration.
At the end of Q3 the Parent Company's equity was MSEK 1,679 (1,990 on Dec 31, 2015), and total assets were MSEK 2,046 (2,337 on Dec 31, 2015). The equity ratio on the balance day was 82% (85 on Dec 31, 2015). Cash and cash equivalents at the end of the period was MSEK 29 (34 on Dec 31, 2015) of which 28 MSEK comprised of client funds.
Q3
| Note | Q3 2016 | Q3 2015 | Q1-Q3 2016 | Q1-Q3 2015 | FY 2015 |
|---|---|---|---|---|---|
| 102 | 86 | 272 | 261 | 344 | |
| - | - | - | - | 1 | |
| - | 0 | -1 | -1 | -2 | |
| -104 | -87 | -274 | -260 | -342 | |
| -2 | -1 | -3 | 0 | 1 | |
| -134 | -243 | -306 | -87 | -291 | |
| -136 | -244 | -309 | -87 | -290 | |
| - | - | - | - | -40 | |
| -136 | -244 | -309 | -87 | -330 | |
| - | - | - | - | 1 | |
| -329 | |||||
| -136 | -244 | -309 | -87 |
| (MSEK) Note |
Q3 2016 | Q3 2015 | FY 2015 |
|---|---|---|---|
| Financial fixed assets | 1,893 | 2,438 | 2,193 |
| Current assets | 153 | 43 | 144 |
| TOTAL ASSETS | 2,046 | 2,481 | 2,337 |
| Shareholders' equity | 1,679 | 2,232 | 1,990 |
| Provisions | 7 | 8 | 7 |
| Long-term liabilities | 165 | 167 | 163 |
| Current liabilities | 195 | 74 | 177 |
| TOTAL SHAREHOLDERS' EQUITY, PROVISIONS AND LIABILITIES | 2,046 | 2,481 | 2,337 |
| (MSEK) | Note | Q3 2016 | Q3 2015 | Q1-Q3 2016 | Q1-Q3 2015 | FY 2015 |
|---|---|---|---|---|---|---|
| Equity at beginning of period | 1,817 | 2,476 | 1,990 | 2,417 | 2,417 | |
| Dividend | - | - | - | -98 | -98 | |
| New share issue 1) | -2 | - | -2 | - | - | |
| Total comprehensive income for the period | -136 | -244 | -309 | -87 | -329 | |
| SHAREHOLDERS' EQUITY AT END OF PERIOD | 1,679 | 2,232 | 1,679 | 2,232 | 1,990 |
1) Transaction cost related to planned equity issue 2016.
Q3
The deteriorated market conditions, including downward pressure on rates and utilization, decreasing vessel values and contract backlog, have negatively impacted the liquidity, earnings and financial position of VSS A/S during 2015. As a consequence, VSS A/S in Q4 2015 initiated a dialogue with its lenders to secure a long-term stable financing solution. As at 31 December 2015 VSS A/S did not have sufficient liquidity to service its debt obligations as they fell due, including the requirements to deposit additional cash or security as required under contract coverage- and loan-to-value clauses in Q1 2016. Further in 2016, VSS A/S has not been able to comply with events of default provisions in loan agreements, which render all borrowings short-term and payable on demand by the lenders, including loans amounting to MSEK 887, which as at 31 December 2015 had been classified as long-term debt in the balance sheet.
VSS A/S has during the majority of 2016 been in an ongoing dialogue with its lenders and has during most of the year since February 2016 been in a standstill position, during which VSS A/S has not paid installments to its lenders. These events have created uncertainty as to the VSS A/S 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 May 2016, VSS A/S agreed the main principles for a restructuring agreement with the bank lenders. The term sheet with these main principles was signed on 12 July 2016. In August VSS A/S reached an agreement with the bondholders' committee regarding a revised proposal for restructuring of the bond issue and a bondholders' meeting was summoned. On 15 September 2016 a bondholders meeting was held. The proposed resolution obtained 98.26% of the votes, and the proposal was adopted according to the voting requirements of the Bond Agreement.
On 18 October 2016, a bankruptcy petition was approved towards the owner of Odin Viking, Norseman Offshore AS. On 9 November, Odin Viking SPV AS, a company owned by Kistefos AS, concluded on an agreement with the bankruptcy trustee, where after Odin Viking SPV AS purchased Odin Viking and acquired the bareboat charter party. On 9 November 2016, Odin Viking SPV AS and VSS A/S concluded on an agreement to amend the terms in the bareboat charter party.
This finalized the financial restructuring of VSS A/S, subject to an equity issue at an agreed level in Viking Supply Ships AB and a subsequent equity injection by the parent company into VSS A/S, where the majority shareholder Kistefos AS has already informed VSS A/S and the lenders that it will and has the ability to guarantee its 70% pro-rata share of 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 final agreement includes the following key terms:
VSS A/S is given an option to purchase Odin Viking from Odin Viking SPV AS at the agreed price of USD 1 at the end of the charter party.
Odin Viking SPV AS is entitled to a payment of MUSD 2.4, which will be settled by the issuance of new shares in Viking Supply Ships AB (publ) at the value of SEK 1.50 per share.
Although not yet completed and therefore uncertainty exists at this point in time, Management is confident that conditions precedent can and will be met and accordingly an Agreement entered into since this will serve the economic interests of the stakeholders with which negotiations are still ongoing.
VSS A/S has been in a continuing standstill position with its lenders since February 2016, under which VSS A/S has only serviced its interest commitments. Until the restructuring is executed, VSS A/S is unable to fully service its debt obligations as they fall due, and therefore is dependent on maintaining this level of debt service. It is Management's assessment that the restructuring will be finally completed during Q4 2016. Further, the primary uncertainties and risks in relation to the going concern considerations include a continued weakening of the market conditions.
Based on the above and a continued belief in securing contracts within the core market segment, Management has concluded that both the company and VSS A/S Group despite the significant uncertainty will be able to continue as going concern at least the coming 12 months. This conclusion is based on Management's assessment that the conditions for completing the debt restructuring can and will be fulfilled, the current outlook for 2016/2017 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.
The key assumptions used in the value in use calculation and in the assessment of owned vessels, for 2016 are as follows:
Further, in order to support the value in use calculations, valuations for the owned vessels are obtained from internationally acknowledged shipbrokers on a quarterly basis.
In Q3 2016 Management evaluated the PSV fleet and concluded that the PSV vessels are impaired resulting in an impairment loss of MSEK 55. The impairment loss of MSEK 55 comes in addition to the impairment loss of MSEK 145 in Q2 2016.
The conclusion is based on a calculated value in use based on discounted cash flows using the principles set out above. Based on fixtures rates, utilization, contract coverage, cost levels and currency exchange levels VSS A/S 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 and considering the fact that the last two PSV vessels have also been laid up in Q1 2016. The cash flow projection shows negative cash flows for 2016-17 due to all PSV vessels in warm lay-up in 2016 and poor market conditions expected in 2017 with step-wise improving rates and utilization in 2018 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 impairment test also consists of an assessment of average external vessel valuations from internationally acknowledged shipbrokers showing a total PSV fleet value of MSEK 428 (ranging from MSEK 493 to MSEK 364). 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 calculated value in use of MSEK 471 is lower than the original carrying amount of the owned PSV fleet (MSEK 484) at the end of Q3 2016, an impairment charge of 55 MSEK has been recognized. Due to the sensitivity in the underlying assumptions in the value in use calculation an additional impairment charge of MSEK 42 has been recognized.
VSS A/S will continue to closely monitor the market development and impairment exposure of the PSV fleet's carrying amount.
In Q3 2016 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 2,674) by 19% 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 | 198 | 0 | 4 | 33 | 235 |
| EBITDA | 90 | -4 | 0 | -1 | 85 |
| Result before tax | -13 | -63 | 0 | 1 | -75 |
| Total assets | 3,294 | 442 | 0 | 0 | 3,736 |
| Year to date MSEK |
AHTS | PSV | Services | Ship Management |
Total |
| Net sales | 574 | 3 | 5 | 103 | 685 |
| EBITDA | 245 | -28 | -4 | -1 | 212 |
| Result before tax | -12 | -207 | -4 | 2 | -221 |
| Total assets | 3,294 | 442 | 0 | 0 | 3,736 |
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. The decision has led to the initiations of discussions and negotiations with employees, partners and other stakeholders. At the end of Q3 2016 the Group assess that discontinuation is likely to be completed within the next 12 months, subject the outcome of the ongoing discussions and negotiations. Due to this, the Group will in its financial reports as from Q3 2016 recognize TA AB
The remaining operations, classified as discontinued operations and assets held for sale, comprised at the end of the quarter of two owned RoRo-vessels, the special purpose vessel TransFighter and TransReel. TransFighter has been unemployed since the first quarter 2016, and TA AB has during the year worked intensively to seek employment for the vessel, but current efforts are directed towards a sale of TransFighter. After the end of the third quarter TransReel was sold. The sales cash proceeds from the sale were entirely used to repay shiploans. Further, the segment comprise of three RoRo-vessels long term chartered on bareboat basis, which are subleased on time-charter basis. These charter contracts are signed by VSS AB, but are seen as a business component in the TransAtlantic segment and are also included in the discontinuation strategy. Finally, the segment comprise of six 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.
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. The revaluation has during the quarter resulted in a write-down of the vessel TransFighter by MSEK 12.
| (MSEK) | Q3 2016 | Q3 2015 | Q1-Q3 2016 | Q1-Q3 2015 | FY 2015 |
|---|---|---|---|---|---|
| Net sales | 93 | 226 | 260 | 684 | 863 |
| Other operating revenue | 0 | 0 | 0 | 0 | 37 |
| Direct voyage cost | -1 | -89 | -6 | -286 | -345 |
| Personnel costs | -3 | -35 | -5 | -113 | -140 |
| Other costs | -94 | -112 | -257 | -328 | -439 |
| Depreciation/impairment | -2 | -17 | -15 | -24 | -30 |
| Impairment to fair value less selling costs 1) | -12 | - | -12 | - | - |
| Operating result | -19 | -27 | -35 | -67 | -54 |
| Net financial items | -1 | 1 | -4 | -11 | -14 |
| Result before tax | -20 | -26 | -39 | -78 | -68 |
| Tax | 0 | 0 | 0 | 0 | -40 |
| RESULT FROM DISCONTINUED OPERATIONS | -20 | -26 | -39 | -78 | -108 |
| Earnings attributable to Parent Company's shareholders, per share in SEK (before and after dilution): -Result from discontinued operations |
-0.1 | -0.2 | -0.2 | -0.4 | -0.6 |
1) Not tax deductible
Q3
| (MSEK) | Q3 2016 |
|---|---|
| Vessels | 67 |
| Other tangible fixed assets | 0 |
| Intangible fixed assets | 1 |
| Financial assets | 21 |
| Total fixed assets | 89 |
| Current assets | 48 |
| ASSETS HELD FOR SALE | 137 |
| Long-term liabilities | 1 |
| Current liabilities | 196 |
| LIABILITIES RELATED TO ASSETS HELD FOR SALE | 197 |
| (MSEK) | Q3 2016 | Q3 2015 | Q1-Q3 2016 | Q1-Q3 2015 | FY 2015 |
|---|---|---|---|---|---|
| Cash flow from current operations | -6 | -20 | -14 | -51 | -83 |
| Cash flow from investing activities | 0 | 0 | 41 | 36 | 72 |
| Cash flow from financing activities | 0 | -3 | -27 | -46 | -58 |
| NET CASH FLOW FROM DISCONTINUED OPERATIONS | -6 | -23 | 0 | -61 | -69 |
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 including discontinued operations was MSEK 2,380 (2,334 on Dec 31, 2015).
The interest bearing liabilities are associated with financial covenants, according to which the Group must fulfil certain key ratios. At 31 December 2015, all such financial covenants were in compliance (see note 1, liquidity and going concern).
In addition hereto, the interest bearing liabilities are also associated with loan clauses, such as contract coverage clauses and loan-to-value clauses, according to which the Group had to fulfil certain ratios of contract coverage and loan-to-value ratios, pursuant to the individual loan agreements. If these ratios were not met, the Group had to deposit cash or provide additional security in accordance with the terms in the relevant loan agreements. Any such amount in deposit would vary up or down and the variation was dependent upon currency exchange rates, amortizations under the loan and development in vessel valuations obtained from external shipbrokers. If the ratios of contract coverage and loan-to-value, pursuant to the terms in the individual loan agreements, yet again are met then the obligation of providing additional security will cease. At the balance date, the Group had provided the lenders with a total of MSEK 77 in additional security.
Calculations of contract coverage and loan-to-value ratios as at 31 December 2015 showed a requirement for the Group to deposit cash or provide additional security during Q1 2016, partly to be remedied before the end of January 2016. Further in 2016, the Group has not been able to comply with events of default provisions in loan agreements, which render all VSS A/S borrowings short-term and payable on demand by the lenders.
In March 2012 Viking Supply Ships A/S issued a 5 year senior unsecured bond loan in the Norwegian capital market, with maturity in March 2017, totaling MNOK 300. The bond agreement has a limit of MNOK 750. The bond was listed on Nordic ABM in Oslo on 28 June 2012. In March 2013 an additional MNOK 85 was drawn in a tap issue. As at balance date, Viking Supply Ships is holding nominal MNOK 189 of this bond, implying MNOK 196 is outstanding. As a result of an agreement that has been resolved by the bondholders in conjunction with the key terms of the debt restructuring plan, the bond agreement will be changed in 2016 (see note 1, Liquidity and going concern).
At the expiration and redelivery of two bareboat vessels in TA AB there was a residual value guarantee commitment for the Group in favor of the financing bank. The commitment amounts to a total of MSEK 67. The bank has agreed that the payment is postponed to no later than in Q4 2016. Further, in a loan agreement within TA AB there is a loan-to-value clause that the bank has invoked and requested an instalment of MSEK 49. The bank has agreed to give TA AB time to pursue opportunities to free up liquidity to reduce the loan.
The Group has 45% (44) of its interest bearing debt in USD, 17% (19) in GBP, 0% (1) in EUR and 38% (36) in NOK. The Group has 100% (90) of the total loan portfolio swapped into fixed interest rates within the interval of 90 days up to three years and 0% (10) of the total loan portfolio swapped into fixed interest rates for more than 3 years.
| MSEK | Q3 2016 | Q3 2015 | FY 2015 |
|---|---|---|---|
| Long-term bond loan | - | 194 | 189 |
| Short-term bond loan | 212 | - | - |
| Long-term debt to credit institutions | - | 1,553 | 796 |
| Short-term debt to credit institutions | 2,168 | 734 | 1,349 |
| TOTAL INTEREST BEARING LIABILITIES | 2,380 | 2,481 | 2,334 |
Q3
Consolidated cash and cash equivalents available at the end of the quarter amounted to MSEK 394 (195). Cash assets include client funds of MSEK 53.
| MSEK | Q3 2016 | Q3 2015 | FY 2015 |
|---|---|---|---|
| Restricted cash 1) | 77 | 82 | 104 |
| Free cash and cash equivalents | 394 | 188 | 195 |
| TOTAL | 471 | 270 | 299 |
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 Groups liquidity is due to the market conditions strained and is in the current market unable to fulfill existing covenant undertakings in loan agreements. A solution with the lenders is necessary and accordingly, a dialogue with the lenders was initiated during Q4 2015, with an ambition to secure a long-term stable financing solution (see note 1, Liquidity and going concern).
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 business activities in the TransAtlantic segment operate 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.
Q3
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 1,053 (1,061 on Dec 31, 2015). 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 3 (3 on Dec 31, 2015).
As part of the restructuring process in the Group, the majority shareholder, Kistefos AS, has entered into agreements with some of the Group's financing counterparts. As a consequence, the Group has entered into agreements on market terms with Kistefos AS. The compensation in these agreements has been agreed to an annualized fee of 12% covering the associated risk and exposure. The compensation for the nine month period 2016 amounted to 9 MSEK.
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.
Viking Supply Ships applies IFRS 5 Non-current Assets Held for Sale and Discontinued Operations in accounting for discontinued operations for the segment TransAtlantic AB. Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than from continuing use. An asset is classified as held for sale if it is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets and its sale must be highly probable. These assets are recognized on a separate line as current assets or current liabilities in the consolidated balance sheet. On initial classification as held for sale, non-current assets are recognized at the lower of carrying amount and fair value less costs to sell. A discontinued operation is a component of the Group´s business that represents a separate business segment or major line of business within a geographical area of operations or a subsidiary acquired exclusively with a view to sell. Classification as a discontinued operation occurs upon disposal or, if earlier, when the operation meets the criteria to be classified as held for sale. When an operation is classified as discontinued, the presentation of the consolidated income statement for the comparative year is changed so that the discontinued operation is recognized as if it had been discontinued at the star of the comparative period. The presentation of the consolidated balance sheet for preceding periods is not changed in a corresponding manner.
Based on the significant changes occurring during 2015 in the market in which the company operates and the increased volatility in exchange rates, management has evaluated the functional currency for the company. Having considered the aggregate effect of all relevant factors, management has concluded that the functional currency of the company is USD. The evaluation included all factors of the primary economic environment in which Viking Supply Ships A/S operates including vessel values, financing, income and expenses. The change in functional currency reflects the accumulation over time of changes in those factors. It was determined that the functional currency had changed at the beginning of 2016. Similar analysis has been performed for the subsidiaries Viking Supply Ships 5 ApS (owner of three AHTS vessels) and Viking Supply Ships PSV AS (owner of the PSV fleet). The outcome of this analysis meant that the functional currency of these companies has changed to USD at the same time as for Viking Supply Ships A/S. In accordance with IAS 21 changes of functional currencies will be accounted for prospectively from 1 January 2016.
Except from the above noted, the same accounting policies for both the Group and the Parent Company have been applied as those used in the most recent Annual Report.
VSS 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 VSS A/S and the Group. VSS 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.
The average number of full time employees in the Group for the first nine months was 460 (Jan-Dec 2015: 740).
Share distribution on September 30, 2016: Number of Series A shares 11,634,946 Number of Series B shares, listed 165,809,372 Total number of shares 177,444,318
Q3
AHTS Anchor Handling Tug Supply vessel
Is the sum of shareholder's equity and interest-bearing loans
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
OPERATING PROFIT/LOSS
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
Profit before interest and tax (EBIT) divided by average capital employed
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
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.