Abu Dhabi, UAEThursday 17 October 2019

Abu Dhabi's Gulf Marine Services confident on turnaround prospects

Company secures support of lenders despite a four-fold increase in first half losses

Gulf Marine Services delayed publication of its half-year accounts until it secured new agreements with its bankers. Mona Al Marzooqi / The National
Gulf Marine Services delayed publication of its half-year accounts until it secured new agreements with its bankers. Mona Al Marzooqi / The National

Gulf Marine Services announced a near four-fold increase in losses for the first half of 2019, but said it had made "considerable progress" in turning around the business by stabilising finances and cutting costs.

The Abu Dhabi company, which provides vessels for the offshore oil and gas industry, recorded a $16.9 million (Dh62.1m) loss in the six months to June 30, compared to a $4.4m loss in the corresponding period last year. Revenue was 2 per cent lower year-on-year at $55m.

"We're making considerable progress in GMS, overhauling governance and leadership, reducing our costs and stabilising our financial position," the company's chairman, Tim Summers, said in a telephone interview with The National.

GMS delayed the publication of its results until it gained agreement from its lenders for waivers over potential covenant breaches. The company said in a statement last week that it had successfully secured the waivers, agreed the rollover of a $25m working capital facility and gained access to other sources of finance that would "underpin liquidity and support the growth of its business" until the end of this year.

Since the start of 2019, the heavily-indebted company has replaced most of its board and senior management, with Mr Summers stepping in as executive chairman last month following the resignation of its chief executive.

The company previously faced pressure from activist investors unhappy with its performance, but Mr Summers said a repositioning plan unveiled earlier this year that helped it identify cost savings of $6m has helped it make progress.

"You will see today we announced that ($6m) will be exceeded and we have a new target of $8.5m on an annualised basis and we will continue to work on that," said Mr Summers. "That is the most important thing — to be competitive in what is a very different marketplace to 2014/15. We have taken action on our organisational size and structure, on our third party spend and supply chain … and we are working on our operational footprint in the Middle East to make it more cost-effective as an operator while maintaining safe and reliable operations for our customers."

Mr Summers declined to expand on whether the negotiations with banks involved selling assets to reduce liabilities, stating it was working through "a variety of solutions" with its syndicate of six lenders.

However, he said the overall marketplace for its vessels was stable and showing signs of improvement in the Middle East.

"Adnoc are out with an 11-barge tender at the moment which we are bidding on, as you would expect, and Aramco are also out in the marketplace over the last week with a seven-barge tender," said Mr Summers. "In both cases, just under half of those barges are incremental demand over and above their existing fleet. So they are clearly stepping up activity."

Steve Kersley, GMS's new chief financial officer, who joined in May, said the company's conversations with its banking syndicate so far have shown "positive intent".

"They see us as a good company," he said. "This is fundamentally a very strong operating business. Our Ebitda margins are high. Not only that, this is a business where there is an enormous amount of opportunity for us to improve performance. We're confident we can cut a constructive deal."

Updated: September 30, 2019 05:29 PM

SHARE

SHARE