Quarterly Report • May 4, 2018
Quarterly Report
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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 2017 was MSEK 331. 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 | |
|---|---|
| Q1 2018 | 4 |
| SUMMARY OF EVENTS IN Q1 | 4 |
| SUBSEQUENT EVENTS | 4 |
| LIQUIDITY AND GOING CONCERN | 5 |
| RESULTS AND FINANCE | 5 |
| OPERATIONAL HIGHLIGHTS FOR Q1 | 6 |
| FINANCIAL POSITION AND CAPITAL STRUCTURE |
7 |
| CONDENSED CONSOLIDATED | |
| PROFIT AND LOSS ACCOUNT | 9 |
| CONDENSED CONSOLIDATED | |
| STATEMENT OF COMPREHENSIVE INCOME |
9 |
| CONDENSED CONSOLIDATED | |
| BALANCE SHEET | 10 |
| CONDENSED CONSOLIDATED | |
| CASH FLOW STATEMENT | 10 |
| CHANGES IN THE GROUP'S | |
| SHAREHOLDERS' EQUITY | 11 |
| DATA PER SHARE | 11 |
| PARENT COMPANY | 12 |
| PARENT COMPANY INCOME STATEMENT |
12 |
| PARENT COMPANY BALANCE | |
| SHEET | 12 |
| CHANGES IN PARENT COMPANY | |
| SHAREHOLDERS' EQUITY | 13 |
| NOTES TO THE CONDENSED | |
| CONSOLIDATED FINANCIAL | |
| STATEMENTS | 14 |
| DEFINITIONS | 21 |
The first quarter resulted in a loss for the Group. The offshore market has continued to be weakened by the low activity level, which impacted the Group's revenue, totalling MSEK 84 (90) for the quarter. Cost saving initiatives implemented during the last two years have positively impacted the operational results, however EBITDA was still negative with MSEK -34 (-61). For the first quarter, profit after tax for the Group was MSEK -85 (-2).
Viking Supply Ships A/S has during January 2018 obtained credit committee approval from all senior lenders and has signed a restructuring term sheet and amended loan agreements. This finalized the financial restructuring. Further, during January, the equity issues, which were part of the restructuring agreement, were completed, providing the Group with additional liquidity. Following the equity issues, the equity in Viking Supply Ships increased with MSEK 131. The restructuring agreement will provide Viking Supply Ships with a stable platform to navigate through the potential challenging market until 2020.
As described in the 2017 fourth quarter financial report, it was in the beginning of 2018 decided to re-locate Viking Supply Ships A/S' headquarter to Kristiansand (Norway). This is another step to streamline the organization and further emphasizes the commercial focus of the Group. In combination with the above mentioned financial restructuring, this will ensure that Viking Supply Ships will be able to take advantage of future market opportunities. The office in Copenhagen will be closed down during June 2018. The Group's headquarter will remain in Stenungsund, Sweden, while the Offshore activities will be managed from Kristiansand, Norway.
Viking Supply Ships A/S has over the last year reduced its exposure towards the North Sea spot market, as certain vessels has been laid up to reduce operational expenses. The fixture of Brage Viking for a medium term contract within one of the Group's core regions was therefore appreciated. The vessel has been operating under this contract since late January.
With the oil price having returned to a level which enables the oil companies to plan for new investments, the overall activity within the industry is expected to increase gradually. Rig activity in the North Sea region is expected to increase during the coming summer season, but the market is expected to remain seasonal, with reduced activity during the winter months. Although the Group is cautiously optimistic about a market recovery, the volatility, combined with ample supply of vessels indicates that the revenue levels within the offshore market will remain unsatisfactory in the near term. Statements from the industry point at increased investment levels in multiple offshore regions from 2019, which will hopefully provide a foundation for the market to stabilize at an improved level.
Viking Supply Ships sees increased interest within the harsh environment offshore regions, backed by increased tendering activity for the coming seasons. The Group has a clear ambition to secure term coverage for parts of its fleet, and is well positioned to take advantage of future market opportunities within these areas.
Gothenburg, 4 May 2018.
Trond Myklebust CEO and President
Q1
• In late 2016 Viking Supply Ships entered into a strategic cooperation with Sevnor Ltd. to explore future market opportunities in the Russian market. Both parties are satisfied with how the cooperation has worked and have thus decided to further develop the cooperation. As a result, Mr. Tom Babinski, Chief Commercial Officer (CCO) in Sevnor will as of now also act as CCO for Viking Supply Ships. Previous to his employment in Sevnor, Mr. Babinski was employed in Viking Supply Ships from 2009-2016, both as Chartering Director and as CCO. Viking Supply Ships will as part of the cooperation also provide certain services to Sevnor.
The condensed interim financial statements for the period ending 31 March 2018 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 31 March 2019. This conclusion is based on the finalized debt restructuring, the current outlook for 2018/2019 and the current uncertainties and risks (see note 1, Liquidity and going concern).
| KEY FINANCIALS | Q1 2018 | Q1 2017 |
|---|---|---|
| Net sales, MSEK 1) | 84 | 90 |
| EBITDA, MSEK 1) | -34 | -61 |
| Result after tax, MSEK 2) | -85 | -2 |
| Earnings per share after tax, SEK 2) | -10.0 | -0.7 |
| Shareholders´equity per share, SEK 4) | 108.4 | 340.3 |
| Return on equity, % 2) | -9.6 | -0.8 |
| Equity ratio, % 3) | 35.0 | 40.9 |
| Market adjusted equity ratio, % 3) | 37.1 | 45.1 |
1) Excludes discontinued operations
Q1
2) Includes discontinued operations
3) The calculation includes assets held for sale
4) Retroactive adjustment of key ratios has been made as a result of the reverse share split (1:100) implemented in January 2018.
Total revenue for the Group for the year was for continuing operations MSEK 84 (90).
The Group's EBITDA for the year was for continuing operations MSEK -34 (-61).
Net financial items were for continuing operations MSEK -18 (96). Financial items for the first quarter of 2017 include a gain from bond settlement of MSEK 112.
The Group's result after tax including discontinued operations was MSEK -85 (-2).
Q1
Total AHTS revenue was MSEK 43 (47) in Q1. Total EBITDA was MSEK -30 (-57).
During Q1, two vessels have been operating in the North Sea spot market. Brage Viking has for the majority of the quarter been operating on a term contract. Three AHTS vessels have remained in lay-up during the quarter, while two vessels have been positioned in Landskrona, Sweden as part of mobilization for a potential term contract.
The North Sea spot market was weak throughout the quarter. Despite being positively impacted by the increased term coverage, the weak market has caused both fixture rates and utilization to remain on unsatisfactory levels.
The total AHTS contract backlog at the end of the quarter was MSEK 33 including options.
| AHTS Q1 | Fixture rates (USD) | Utilization (%) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| AHTS vessels on term charters | 49,000 (-) | 100 (-) | ||||||||||
| AHTS vessels on the spot market | 22,100 (36,400) | 36 (23) | ||||||||||
| Total AHTS fleet | 33,600 (36,400) | 46 (23) | ||||||||||
| The table above excludes three laid-up vessels. | ||||||||||||
| Firm contract | Option | Spot | Layup | |||||||||
| AHTS | APR | MAY | JUN | JUL | AUG | SEP | OCT | NOV | DEC | JAN | FEB | MAR |
| Tor Viking | ||||||||||||
| Balder Viking | ||||||||||||
| Vidar Viking | ||||||||||||
| Odin Viking | ||||||||||||
| Loke Viking | ||||||||||||
| Njord Viking | ||||||||||||
| Magne Viking | ||||||||||||
| Brage Viking | 1 1 |
1. Oil Major, firm 82 days + 58 days option Figures in the tables are as of 31 March 2018.
Total PSV revenue was MSEK 0 (0) in Q1. Total EBITDA was MSEK -3 (-4).
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.
Total Services and Ship Management revenue was MSEK 41 (43) in Q1. Total EBITDA was MSEK -1 (0).
Viking Ice Consultancy (VIC) has during the first quarter continued the work 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 previous segment TransAtlantic AB has in this financial report been recognized 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).
Q1
The remaining activities within the small bulk segment recorded revenues of MSEK 8 (12) in Q1. EBITDA was MSEK -1 (-1).
At the end of the period, the Group's equity amounted to MSEK 1 011 (equivalent to 108.4 SEK/share). The equity increased during the quarter by net MSEK 40 due to the new share issue of MSEK 122 net after expenses, the loss for the period of MSEK 85 and a positive change in the translation reserve of MSEK 3 attributable to currency differences on net investments in subsidiaries. Further information of the concluded new share issues can be found in section "Changes in the Group´s shareholders´ equity" on page 11.
The in January 2018 completed equity issues of total MSEK 126, net after expenses, brought liquidity to the Group of total MSEK 120.
Gross investments during Q1 amounted to MSEK 0 (1).
The loan amortizations during Q1 amounted to MSEK 39 (38).
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 4 May, 2018.
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.
This interim report is unaudited.
Gothenburg, 4 May 2018
Viking Supply Ships AB
Bengt A. Rem Folke Patriksson Erik Borgen Chairman Deputy chairman Board member
Board member Board member CEO
Håkan Larsson Magnus Sonnorp Trond Myklebust
Christer Lindgren Employee representative
In conjunction with the publication of this interim report, an earnings call will take place on 4 May 2018 at 10.00 am (CET) with Viking Supply Ships AB's VD Trond Myklebust and CFO Ulrik Hegelund. In connection with the conference, a presentation will be available on the company's website, www.vikingsupply.com. Please see Investor Relations/Reporting Center.
30 May Annual General Meeting 8 August Q2 Interim report 9 November Q3 Interim report
Q1
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
| (MSEK) Note |
Q1 2018 | Q1 2017 | Q1-Q4 2017 |
|---|---|---|---|
| Net sales | 84 | 90 | 331 |
| Other operating revenue | 0 | 0 | 0 |
| Direct voyage cost | -7 | -9 | -34 |
| Personnel costs | -78 | -100 | -334 |
| Other costs | -33 | -42 | -148 |
| Depreciation/impairment 2 |
-32 | -37 | -194 |
| Operating result | -66 | -98 | -379 |
| Net financial items | -18 | 96 | 48 |
| Result before tax | -84 | -2 | -331 |
| Tax 8 |
0 | 1 | 1 |
| Result from continuing operations 3 |
-84 | -1 | -330 |
| Result from discontinued operations 4 |
-1 | -1 | -2 |
| Result for the period | -85 | -2 | -332 |
| Earnings attributable to Parent Company's share | |||
| holders, per share in SEK (before and after dilution): | |||
| -Result from continuing operations | -9.9 | -0.4 | -80.8 |
| -Result from discontinued operations | -0.2 | -0.2 | -0.6 |
| Total 1) | -10.0 | -0.7 | -81.3 |
1) Retroactive adjustment of key ratios has been made as a result of the reverse share split (1:100) implemented in January 2018.
| MSEK | Note | Q1 2018 | Q1 2017 | Q1-Q4 2017 |
|---|---|---|---|---|
| Result for the period | -85 | -2 | -332 | |
| Other comprehensive income for the period: | ||||
| Items that will not be restored to the income statemement | ||||
| Revaluation of net pension obligations | - | - | 0 | |
| Items that later can be restored to the income statemement | ||||
| Change in translation reserve, net | 3 | -44 | -141 | |
| Other comprehensive income | 3 | -44 | -141 | |
| Total comprehensive income for the period | -82 | -46 | -473 | |
Q1
| MSEK | Note | Q1 2018 | FY 2017 |
|---|---|---|---|
| Vessels | 2 | 2,692 | 2,715 |
| Other tangible fixed assets | 1 | 1 | |
| Financial assets | 15 | 15 | |
| Total fixed assets | 2,708 | 2,731 | |
| Other current assets | 6 | 167 | 138 |
| Assets held for sale | 4 | 17 | 16 |
| Total current assets | 184 | 154 | |
| TOTAL ASSETS | 3 | 2,892 | 2,885 |
| Shareholders' equity | 1,011 | 971 | |
| Long-term liabilities | 5 | 1,786 | 20 |
| Other current liabilities | 5 | 92 | 1,891 |
| Liabilities related to assets held for sale | 4 | 3 | 3 |
| Total current liabilities | 95 | 1,894 | |
| TOTAL EQUITY, PROVISIONS AND LIABILITIES | 2,892 | 2,885 |
Q1
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 3 (5). 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 | Q1 2018 | Q1 2017 | Q1-Q4 2017 |
|---|---|---|---|---|
| Cash flow from operations before changes in working capital | -42 | -78 | -239 | |
| Changes in working capital | -27 | -57 | -31 | |
| Cash flow from current operations | -69 | -135 | -270 | |
| Cash flow from investing activities | 0 | -1 | -1 | |
| Cash flow from financing activities | 81 | 26 | 55 | |
| Changes in cash and cash equivalents from continuing operations | 12 | -110 | -216 | |
| Cash-flow from discontinued operations: | ||||
| Cash flow from current operations | 2 | -1 | -4 | |
| Cash flow from investing activities | 0 | 0 | 0 | |
| Cash flow from financing activities | 2 | 0 | 0 | |
| Changes in cash and cash equivalents from discontinued operations | 4 | 4 | -1 | -4 |
| Cash and cash equivalents at beginning of period | 34 | 273 | 273 | |
| Exchange-rate difference in cash and cash equivalents | 0 | -7 | -19 | |
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | 6 | 50 | 155 | 34 |
| Shareholders' equity (MSEK) | Note | Q1 2018 | Q1 2017 | Q1-Q4 2017 |
|---|---|---|---|---|
| Equity at beginning of period 1) | 971 | 1,440 | 1,440 | |
| New Share Issue, net after expenses 1) 2) | 122 | - | 4 | |
| Total comprehensive income for the period | -82 | -46 | -473 | |
| SHAREHOLDERS' EQUITY AT END OF PERIOD | 1,011 | 1,394 | 971 |
1) Shares equivalent to MSEK 7, of the total new share issue of MSEK 131, was subscribed and paid for and thus included in the Group´s closing shareholders´ equity at 31 December 2017.
2) The amount in Q1 2018 includes issue expenses of MSEK 2, and in Q1-Q4 2017 of MSEK 3.
| Share capital (MSEK) Note |
Q1 2018 | Q1 2017 | Q1-Q4 2017 |
|---|---|---|---|
| Share capital at beginning of period | 410 | 344 | 344 |
| Reduction to unrestricted reserve 2) | -307 | - | - |
| New share issue 1) | 131 | 66 | 66 |
| Bonus issue 2) | 176 | - | - |
| Share capital at end of period | 410 | 410 | 410 |
1) The share issue of total MSEK 131 comprised a MSEK 123 rights issue, a MSEK 7 share issue with payment against set-off to Viking Invest AS for financial services and a MSEK 1 share issue payment against set-off to Viking Invest AS for guarantee fee for the guarantee undertaking. 2) The reduction to unrestricted reserve and the bonus issue has been carried out to conserve the share capital before the new share issues and the reverse spit.
| Number of shares ('000) | Note | Q1 2018 | Q1 2017 | Q1-Q4 2017 |
|---|---|---|---|---|
| Number of outstanding shares at beginning of period | 409,593 | 343,545 | 343,545 | |
| Number of new shares issued 1) | 523,141 | 66,048 | 66,048 | |
| Reversed split 2) | -923,407 | - | - | |
| Total number of shares at end of period | 9,327 | 409,593 | 409,593 | |
| Average number of shares outstanding | 8,514 | 405,297 | 408,534 |
1) In January 2018 following new share issues were completed:
Q1
| (SEK) | Note | Q1 2018 | Q1 2017 | Q1-Q4 2017 |
|---|---|---|---|---|
| EBITDA 2) | -4.0 | -14.9 | -45.1 | |
| Result after tax (EPS) 2) | -9.9 | -0.4 | -80.8 | |
| Equity 3) | 108.4 | 340.3 | 237.2 | |
| Operating cash flow 2) | -6.2 | 8.7 | -33.6 | |
| Total cash flow 2) | 1.4 | -27.4 | -53.0 |
1) Retroactive adjustment of key ratios has been made as a result of the reverse share split (1:100) implemented in January 2018.
2) Calculated on continuing operations
3) The calculation includes assets held for sale
Q1
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 Parent Company's result after tax for Q1 was MSEK 0 (-1).
At the end of the first quarter the Parent Company's equity was MSEK 1,126 (1,005 on Dec 31, 2017), and total assets were MSEK 1,177 (1,090 on Dec 31, 2017). The equity increased during the year by net MSEK 121 due to the result for the period and the completed new share issues of MSEK 121, net after expenses.
The in January 2018 completed equity issues brought liquidity to the Group of total MSEK 120 net after expenses. The cash proceeds from these new share issues have been used to repay a shareholders loan of MSEK 33, and the remainder has been distributed to Viking Supply Ships A/S as part of the financial restructuring. For further information also see note 1, Liquidity and going concern.
The equity ratio on the balance day was 96 % (92 on Dec 31, 2017). Cash and cash equivalents at the end of the period was MSEK 0 (0 on Dec 31, 2017).
| (MSEK) | Note | Q1 2018 | Q1 2017 | Q1-Q4 2017 |
|---|---|---|---|---|
| Net sales | 2 | 2 | 9 | |
| Personnel costs | - | - | - | |
| Other costs | -2 | -2 | -9 | |
| Operating result | 0 | 0 | 0 | |
| Net financial items | - | -1 | -986 | |
| Result before tax | 0 | -1 | -986 | |
| Tax on result for the year | - | - | - | |
| RESULT FOR THE PERIOD | 0 | -1 | -986 | |
| Other comprehensive income for the period: | ||||
| Items that will not be restored to the income statemement | ||||
| Revaluation of net pension obligations | - | 0 | 0 | |
| TOTAL COMPREHENSIVE INCOME FOR THE PERIOD | 0 | -1 | -986 |
| (MSEK) | Note | Q1 2018 | Q4 2017 |
|---|---|---|---|
| Financial fixed assets | 1,169 | 1,048 | |
| Current assets | 8 | 42 | |
| TOTAL ASSETS | 1,177 | 1,090 | |
| Shareholders' equity | 1,126 | 1,005 | |
| Provisions | 6 | 6 | |
| Long-term liabilities | 13 | 13 | |
| Current liabilities | 32 | 66 | |
| TOTAL SHAREHOLDERS' EQUITY, PROVISIONS AND LIABILITIES | 1,177 | 1,090 | |
| (MSEK) Note |
Q1 2018 | Q1 2017 | Q1-Q4 2017 |
|---|---|---|---|
| Equity at beginning of period 1) | 1,005 | 1,986 | 1,986 |
| New share issue 1) 2) | 121 | - | 5 |
| Total comprehensive income for the period | 0 | -1 | -986 |
| SHAREHOLDERS' EQUITY AT END OF PERIOD | 1,126 | 1,985 | 1,005 |
1) Shares equivalent to MSEK 7, of the total new share issue of MSEK 131, was subscribed and paid for and thus included in the Group´s closing shareholders´ equity on 31 December 2017.
2) The amount in Q1 2018 includes issue expenses of MSEK 2, and in Q1-Q4 2017 of MSEK 3.
Q1
Q1
The continued challenging market conditions, including downward pressure on rates and utilization, impacted the Group's liquidity in 2017. As a consequence, shortly after the end of Q2 2017, a dialogue was initiated with the lenders to secure a long-term stable financing solution.
In December 2017 Viking Supply Ships received confirmation that it had obtained support for a restructuring proposal from all senior lenders. A final restructuring agreement was subject to final approval from the senior lenders' credit committees. In January 2018 credit committee approvals from all senior lenders were obtained, and a restructuring term sheet was signed. The signed restructuring term sheet, together with the completed equity issue in Viking Supply Ships AB and subsequent equity injection into Viking Supply Ships A/S, finalized the financial restructuring.
The share issues in Viking Supply Ships AB that formed part of the Viking Supply Ships A/S' financial restructuring comprised the following:
The final agreement included the following key terms:
The restructuring agreement will provide the Group with a stable platform to navigate through the potential challenging market until 2020.
In order for the Group to have sufficient liquidity and equity to get through the challenging market situation, the Group has not only in 2016 but also in 2017 completed comprehensive restructuring programs, including cost reducing efforts which includes lay-up of vessels, bond delisting, renegotiation of existing loan facilities and injection of new equity. The Group operates in highly competitive markets and the operation is exposed to various operational and financial risks. Viking Supply Ships maintains a positive long term outlook for the offshore industry and is of the opinion that there will be increasing activity in the arctic and subarctic regions during the next few years. Based on the result expectations, the financial situation of the Group, the current risks and a continued belief in securing contracts within the core market segment, the Board of Directors and Management have concluded that both the company and the Group will be able to continue as going concern at least until 31 March 2019. This conclusion is based on Management's assessment of the current outlook for 2018/2019 and the uncertainties and risks described in this report.
Q1
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").
The Group 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 the Group has deemed it appropriate to consider each group of vessels as a separate cash generating unit. As a result, impairment tests are performed 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 2018 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 2018-19 due to all PSV vessels in warm lay-up in 2018/ first half of 2019 and poor market conditions expected in the second half of 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 310.
The impairment test also consists of an assessment of average external vessel valuations, less cost to sell, from internationally acknowledged shipbrokers showing a total PSV fleet value of MSEK 286 (ranging from MSEK 269 to MSEK 304). 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 310 is higher than the carrying amount of MSEK 309 at the end of Q1 2018, no impairment charge has been recognized.
The Group will continue to closely monitor the market development and impairment exposure of the PSV fleet's carrying amount.
In Q1 2018 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 independent internationally acknowledged shipbrokers showing a total AHTS fleet value in excess of the carrying amount of the owned AHTS fleet (MSEK 2 383).
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.
| Q1 | Ship | Continuing | |||
|---|---|---|---|---|---|
| MSEK | AHTS | PSV | Services | Management | operations |
| Net sales | 43 | 0 | 1 | 40 | 84 |
| EBITDA | -30 | -3 | -1 | 0 | -34 |
| Result before tax | -73 | -10 | -1 | 0 | -84 |
| Total assets | 2,541 | 334 | 0 | 0 | 2,875 |
There have been no significant transactions between the segments.
Q1
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.
The remaining operations, classified as discontinued operations and assets held for sale, comprised at the end of the quarter of three 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 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.
| (MSEK) | Q1 2018 | Q1 2017 | Q1-Q4 2017 |
|---|---|---|---|
| Net sales | 8 | 12 | 50 |
| Other operating revenue | -8 | -13 | -51 |
| Operating result | 0 | -1 | -1 |
| Net financial items | -1 | 0 | -1 |
| Result before tax | -1 | -1 | -2 |
| Tax | 0 | 0 | 0 |
| RESULT FROM DISCONTINUED OPERATIONS | -1 | -1 | -2 |
| Earnings attributable to Parent Company's shareholders, | |||
| per share in SEK (before and after dilution): | |||
| -Result from discontinued operations 1) | -0,2 | -0,2 | -0,6 |
1) Retroactive adjustment of key ratios has been made as a result of the reverse share split (1:100) implemented in January 2018.
| (MSEK) | Q1 2018 | FY 2017 |
|---|---|---|
| Other tangible fixed assets | 0 | 0 |
| Intangible fixed assets | 1 | 1 |
| Financial assets | 8 | 9 |
| Total fixed assets | 9 | 10 |
| Current assets | 8 | 16 |
| ASSETS HELD FOR SALE | 17 | 26 |
| Current liabilities | 3 | 15 |
| LIABILITIES RELATED TO ASSETS HELD FOR SALE | 3 | 15 |
| (MSEK) | Q1 2018 | Q1 2017 | Q1-Q4 2017 |
|---|---|---|---|
| Cash flow from current operations | 2 | -1 | -4 |
| Cash flow from investing activities | 0 | 0 | 0 |
| Cash flow from financing activities | 2 | 0 | 0 |
| NET CASH FLOW FROM DISCONTINUED OPERATIONS | 4 | -1 | -4 |
Q1
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 year was MSEK 1,768 (1,748 on Dec 31, 2017).
As part of the in January 2018 concluded financial restructuring the following has taken place in terms of the interest bearing liabilities:
Following the financial restructuring, loans previously classified as short-term have been reclassified as longterm debt in the balance sheet.
The Group has 99% (99%) of its interest-bearing debt in USD 1% in NOK (1%). 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 | Q1 2018 | Q1 2017 | Q4 2017 |
|---|---|---|---|
| Long-term debt to credit institutions | 1,761 | 1,787 | - |
| Short-term debt to credit institutions | 7 | 65 | 1,715 |
| Other short term interest bearing liabilities | - | - | 33 |
| TOTAL INTEREST BEARING LIABILITIES | 1,768 | 1,852 | 1,748 |
Q1
Consolidated cash and cash equivalents available at the end of the Q1 amounted to MSEK 50 (34). The cash assets include client funds of MSEK 10 (24).
| MSEK | Q1 2018 | Q1 2017 | Q4 2017 |
|---|---|---|---|
| Free cash and cash equivalents | 50 | 155 | 34 |
| TOTAL | 50 | 155 | 34 |
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.
Q1
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 1,058 (1,057 on Dec 31, 2017). 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, 2017).
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 191 until expiry on 2 August 2024. The Group has until March 31, 2018 accrued charter hire of total MSEK 7. As part of the financial restructuring agreement, this bareboat charter contract has been amended, please also see note 5. The Group has during the fourth quarter raised a short-term loan of 33 MSEK on marked conditions from a subsidiary to Kistefos AS, Viking Invest AS. The loan carried an interest-rate of 12 % and was repaid in January 2018. Kistefos AS has during the fourth quarter 2017, through consultancy agreements, made financial services available during the restructuring process for which a compensation of MSEK 7 has been set off as a part of the share issues in January 2018. Further Viking Invest AS has, as a part of the restructuring process, entered into a share subscription guarantee agreement. The compensation for this guarantee amounted to MSEK 1 and was set off as part of the share issues in January 2018.
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.
From 1 January 2018 Viking Supply Ships applies IFRS 9, Financial Instruments. The new standard has not entailed any significant change in the accounting of Viking Supply Ships financial assets. The new write-down model for accounts receivable involves fundamental differences in how and when a write-down of a customer receivable is reported. The new principles have no effect on the Group's financial position, as credit losses have historically been very limited. The accounting of the Group's financial liabilities consisting of mainly interestbearing liabilities, interest-rate derivatives recognized at fair value through profit or loss and other short-term liabilities have not been impacted by the new standard. The Group does not apply hedge accounting, whereby the Group is not affected by the new principles for hedge accounting.
Viking Supply Ships also applies IFRS 15 Revenues from agreements with customers from January 1, 2018. The majority of the Group's revenues consist of time-charter revenues from vessels. The revenues are recognized progressively after the performance commitment is transferred to the customer, which means no changes compared to the previous accounting principles. It is concluded that the new standard will not have a significant impact on the Group's revenue recognition. Due to the non-material effects of the new standard, no recalculation of previous periods has been carried out.
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.
Q1
The average number of full time employees in the Group for Q1 was 352 (Jan-Dec 2017: 364).
Share distribution on 31 March, 2018: Number of Series A shares 455,055 Number of Series B shares, listed 8,872,285 Total number of shares 9,327,340
Q1
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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