TIDMGYG
RNS Number : 4536J
GYG PLC
27 April 2022
The information contained within this announcement is deemed by
the Company to constitute inside information for the purposes of
Article 7 of Regulation (EU) 596/2014, as it forms part of domestic
law by virtue of the European Union (Withdrawal) Act 2018. Upon the
publication of this announcement via the Regulatory Information
Service, this inside information is now considered to be in the
public domain.
27 April 2022
GYG plc
("GYG", the "Company" or the "Group")
2021 Final Results
GYG (AIM: GYG), the market leading global superyacht service and
supply group, today announces its audited Final Results for the
year ended 31 December 2021.
Financial Highlights
-- Group revenue increased 6.7% to EUR62.8m (FY20: EUR58.9m)
o Coatings (Refit and New Build) revenue increased 4.3% to
EUR52.9m (FY20: EUR50.8m)
o Supply revenue increased 21.6% to EUR9.9m (FY20: EUR8.1m)
-- Adjusted EBITDA(1) decreased to EUR0.5m (FY20: EUR5.2m)
-- Exceptional costs of EUR3.1m driven mainly by COVID-19 and the Nobiskrug insolvency(2)
-- Operating loss of EUR6.1m (FY20: operating profit of EUR1.2m)
-- Loss before tax of EUR7.2m (FY20: profit before tax of EUR0.2m)
-- Net debt position(3) of EUR18.7m at 31 December 2021 (FY20: EUR11.7m)
-- Cash of EUR0.4m at 31 December 2021 (EUR3.6m at 31 December 2020)
Operational Highlights
-- Resilient revenue performance in 2021, effectively managing
the considerable disruption caused by the ongoing impact of the
pandemic, the Nobiskrug shipyard insolvency and industry supply
chain challenges which all impacted margins and profitability
-- Record level of New Build work with revenues of EUR13.8m,
increasing GYG's market share in sector after directly engaging
with Northern Europe yards
-- Significant uptake of shipyards outside of Spain taking
advantage of innovative turnkey packages
1 Adjusted EBITDA is defined as operating profit before
depreciation, amortisation, impairment, performance share
plan costs and exceptional items. This is an alternative
performance measure used by the Directors to assess the
operating performance of the Group.
2 Nobiskrug: the shipyard filed for insolvency in April
2021. In July 2021, the North German shipbuilding company,
Flensburger Schiffbau-Gesellschaft, was announced as the
new owner of the Nobiskrug yard.
3 Net debt position is defined as the net cash and cash
equivalent balances, less short and long-term borrowings
and obligations under leases. This is an alternative performance
measure used by investors, financial analysts, rating agencies,
creditors and other parties to ascertain a company's debt
position.
Order Book
The Total Order Book as of February 2022 stands at EUR55.4m, up
3% year-on-year (January 2021: EUR53.8m)
Order Book at: Total Order Book Forward Order Current Year
Book*
---------------- ----------------- -------------- -------------
January 2019 EUR33.9m EUR8.6m EUR25.3m
----------------- -------------- -------------
January 2020 EUR44.4m EUR11.6m EUR32.8m
----------------- -------------- -------------
January 2021 EUR53.8m EUR13.2m EUR40.6m
---------------- ----------------- -------------- -------------
February 2022 EUR55.4m EUR18.5m EUR36.9m
----------------- -------------- -------------
* Forward Order Book represents orders scheduled for completion
in 2023 onwards, excluding the Supply division
Current Trading and Outlook
-- Record level Order Book of EUR55.4m at February 2022, up 3%
year-on-year (January 2021: EUR53.8m)
-- Further grown market share and despite challenges,
strengthened goodwill across existing and new client base
-- Agreement reached with the new owners of the Nobiskrug
shipyard resulted in new contracts signed and payment received for
historical work
-- Works restarted on the large Refit contract in Nobiskrug with
the turnkey project now scheduled for completion in H1 2022
-- Strong pipeline of potential projects in aggregate EUR200m potential
-- Current trading in 2022 is satisfactory and in line with
Group forecasts, with margins expected to improve following the
execution of operational efficiency measures
Remy Millott, Chief Executive of GYG plc, commented:
" 2021 was the most challenging trading environment the Group
has experienced as a result of the continued pandemic-related
restrictions, ongoing supply chain shortages and the disruption
from the administration of the Nobiskrug shipyard, which we are
pleased to have now resolved with the new owner. Despite these
unprecedented pressures, we are pleased to have delivered top-line
growth with our Order Book sitting at a record level of EUR55.4m
alongside a strong pipeline of prospective work, spanning over 185
projects amounting to around EUR200 million potential revenue.
"This new financial year has started robustly where our
attention is firmly centred on improving the Group's profitability
levels and improving margins with action already taken in terms of
operational efficiencies and initiatives. GYG is highly regarded
across the industry and as we continue to build and grow existing
and new relationships with shipyards and suppliers, alongside the
organic growth of the superyacht industry, we are well positioned
to benefit from arising opportunities and grow our market share. I
am grateful for the dedication of our employees who worked
efficiently to manage the considerable disruptions cause by the
events out of our control and continued to provide exceptional
levels of client service throughout the year."
For further information, please contact:
GYG plc via FTI Consulting
Remy Millott, Chief Executive Officer Tel: +44 (0) 20 3727
Kevin McNair, Chief Financial Officer 1000
N+1 Singer Tel: +44 (0) 20 7496
Tom Salvesen 3054
Peter Steel, Amanda Gray
FTI Consulting Tel: +44 (0) 20 3727
Alex Beagley 1000
Fiona Walker gyg@fticonsulting.com
Rafaella de Freitas
Notes to Editors:
GYG is the market leading superyacht painting, supply and
maintenance company, offering services globally through operations
in the Mediterranean, Northern Europe and the United States. The
Company's brands include Pinmar, Pinmar Yacht Supply, and
Technocraft. GYG's operations can be divided into three key sales
channels:
-- Refit: repainting and finishing of superyachts, normally as
part of a refit programme. Revenues also include scaffolding,
containment and the removal and repair of fittings
-- New Build: fairing and painting of new vessels as part of the build process
-- Supply: the sale and delivery of maintenance materials,
consumables, spare parts and equipment primarily to superyachts and
trade customers
Forward looking statements
All statements other than statements of historical fact included
in this announcement, including, without limitation, those
regarding the Group's financial position, business strategy, plans
and objectives of management for future operations or statements
relating to expectations in relation to shareholder returns,
dividends or any statements preceded by, followed by or that
include the words "targets", "estimates", "envisages", "believes",
"expects", "aims", "intends", "plans", "will", "may",
"anticipates", "would", "could" or similar expressions or the
negative thereof, are forward looking statements.
Such forward looking statements involve known and unknown risks,
uncertainties and other important factors beyond the Group's
control that could cause the actual results and performance to be
materially different from future results and performance expressed
or implied by such forward looking statements. Such forward looking
statements are based on numerous assumptions regarding the Group's
present and future business strategies and the environment in which
the Group will operate in the future.
These forward-looking statements speak only as of the date of
this announcement. The Company expressly disclaims any obligation
or undertaking to disseminate any updates or revisions to any
forward-looking statements contained herein to reflect any change
in the Company's expectations with regard thereto, any new
information or any change in events, conditions or circumstances on
which any such statements are based, unless required to do so by
law or any appropriate regulatory authority.
Nothing in this announcement shall constitute a profit forecast
under rule 28 of the City Code on Takeovers and Mergers.
CHAIRMAN'S STATEMENT
FINANCIAL RESULTS
Whilst the Group's revenue performance was robust, 2021 results
were the consequence of two sequential years of significant global
challenges for the business as the continuing impact of Covid
related logistics and costs, and the unexpected Nobiskrug shipyard
insolvency, impacted profitability. The challenge of managing a
business within a growth industry, whilst labour was in short
supply, meant that the Group took steps to protect its core asset,
our highly skilled employees. This will serve the Group well in the
long term and, as COVID-19 issues recede, facilitate the Group's
capabilities to take further market share and service future
growth. The strategic review undertaken in 2019 continued to
support Group turnover for the year at EUR62.8m, an increase of
6.7% over the EUR58.9m reported for 2020, evidencing the strong and
growing position within the industry. The Group entered 2021 with a
strong Order Book and the improved turnover for the year reflected
the excellent work undertaken by every department. The Coatings
division revenue increased 4.3% to EUR52.9m (FY20: EUR50.8m).
The Supply division revenue increased 21.6% to EUR9.9m (FY20:
EUR8.1m), as the retail sector saw a welcome return to normal
trading practices in 2021.
As disclosed in the Group's trading update on 9 November, the
2021 operational challenges impacted the Group's profitability and
resulted in a modest positive Adjusted EBITDA of EUR0.5m (FY20:
EUR5.2m) for the year, and an operating loss before tax of EUR6.1m
(FY20: profit before tax of EUR0.2m). Exceptional items amounted to
EUR3.1m during the period, including Covid-19 related costs of
EUR1.8m, transaction fees amounting to EUR0.4m and bad debts of
EUR0.8m relating to the Nobiskrug insolvency.
Another strong year of revenues confirmed the strength of the
Group's brands and the dedication of the entire team across the
industry to maintain high service levels, with this momentum
continuing into 2022. Despite another year of sales growth, the
operational landscape was intensely challenging during the period
and, as such, the Board are focused on setting a strategy that
reduces operational risk through 2022, through a combination of
initiatives, including the launch of an SAP provided Enterprise
Resource Planning system integrating all global business areas,
providing a powerful analytics tool for management; a restructuring
and overhaul of workforce management systems and the recent hire of
a personnel logistics manager to improve management of the Group's
core cost.
The Group continues to invest capital and resources in building
its strong reputation, delivering the Pinmar superior client
service and developing numerous growth opportunities. The impact of
the previous two years on the Group capital structure is evident,
leading the Board to review options to ensure the Group is
appropriately capitalised to capture potential growth
opportunities.
The Board has not proposed a dividend for 2021. However, the
Group continually evaluates efficient capital deployment and
remains motivated to reduce debt and strengthen the balance sheet
during 2022 and will continue to monitor appropriate capital
requirements to further advance the business. Given the investment
opportunities for growth, investors should not anticipate a
dividend in 2022.
GEOPOLITICAL EXPOSURE
Current industry estimates place the wider Russian superyacht
ownership at 7-10% of the global market and the Directors believe
the Group's current exposure is in line with these figures. To
counter any possible disruption, the team are focused on leveraging
GYG global capabilities with operations across the Mediterranean,
Northern Europe and the USA and have built a solid pipeline of
prospective work, spanning over 185 projects amounting to
approximately EUR200 million potential revenue.
PEOPLE AND ORGANISATIONAL DEVELOPMENT
Like my predecessor, I am hugely impressed by the resilience and
passion of our employees in what has been another extraordinary and
challenging year. Management and the entire operational team have
adapted quickly to further lockdown restrictions and travel
parameters across the Groups diverse geographic operations, doing
so with professionalism and dedication.
Improving core processes and controls remains a priority this
year and the team are progressing with IT systems upgrades
increasing automation, improving operational efficiency and scale
for future growth.
OUTLOOK
Our 2021 revenue performance was delivered in the most volatile
trading environment that the Group has yet experienced. Significant
external pressures remain in 2022, specifically the current
geopolitical conflict between Russia and Ukraine and the extended
global economic effects of the conflict. Whilst many factors are
outside of the Group's control, GYG has a very strong reputation
and brand and management have a wealth of experience and industry
expertise. The Group has a clear growth plan and the core
fundamentals are in place to continue serving clients to the
highest standard, delivering a superior product and ultimately
navigate the global challenges.
Management and the Board remain vigilant and focused on
delivering profitable growth and cash generation, with margins
expected to revert towards their 2020 levels in 2022, following the
execution of a variety of measures to enhance operational
efficiency.
GYG has pioneered many of the innovations and methodologies
associated with superyacht painting and is recognised as the most
technically advanced applicator in the industry, while the
stability of the retail division, Pinmar, continues to impress. The
Group continues to evaluate next generation technologies to improve
efficiency and we are confident about the prospect of growing our
Pinmar offering further.
The Group remains well positioned to capitalise on the
structural growth within our industry, especially in the premium
50m+ segment. GYG is recognised as the market leader by
international clients and has a substantial and growing pipeline of
potential contracts and a strong global order book to support
initiatives and opportunities to combat external challenges beyond
company control.
Finally, on behalf of the Board and shareholders, I extend our
thanks to Stephen Murphy who served the Group as Chairman for many
years, prior to stepping down in December 2021.
Richard McGuire
Chairman
CHIEF EXECUTIVE'S REPORT
2021 saw another year of exceptional operating challenges as the
world came to understand and adapt to the enormity of the COVID-19
pandemic and, consequently, we experienced industry circumstances
beyond our control. Despite this, GYG delivered a robust
performance in an extremely demanding environment, effectively
managing the considerable disruption caused by the ongoing impact
of the pandemic, the Nobiskrug shipyard administration, and
industry supply chain difficulties that became apparent
specifically in Q4.
As the superyacht industry experienced a boom throughout 2021,
experienced labour was in short supply. This was compounded by
COVID-19, travel restrictions and quarantine regulations across
Europe. In response, the Group took the decision not to lay off any
skilled workforce after the Nobiskrug insolvency, in order to
maintain our ability to service our clients and support future
growth, which significantly affected the profitability of the Group
during the year.
The superyacht industry's strong current growth phase saw yacht
sales up 75% in 2021 and the leading New Build shipyards operating
at full capacity for the foreseeable future. The market
fundamentals remain strong, and our growing Order Book is evidence
of our reputation for the highest operating standards and
excellence in service delivery driving increased market share. We
also welcomed a return to normal trading practices in the retail
sector as pandemic restrictions eased, which saw our Supply
division deliver a solid full year performance in line with our
expectations.
Our people continued to work tirelessly across all our
operations, specifically those organising workforce displacements
contending with ever-changing travel restrictions, quarantines,
lockdowns and stringent health and safety procedures across all
jurisdictions, and I thank them greatly for their efforts. I would
also like to take this opportunity on behalf of my Board colleagues
to welcome Richard McGuire to the Board as Chairman and to thank
Stephen Murphy once again for his support and stewardship
throughout the demanding last few years.
OVERVIEW
A positive start to 2021 trading combined with the Group's keen
focus on gross margin efficiencies gave us confidence that we were
on track for a significant improvement in performance for the full
financial year, however for reasons largely outside of our control,
external events heavily impacted us from Q2 onwards and were very
time consuming for the Board and senior management team.
On 9 April 2021, Harwood Capital, one of the Company's major
shareholders, announced that it was in the preliminary stages of
evaluating a possible offer for the entire issued and to be issued
share capital of the Company.
Shortly after Harwood Capital's announcement, the Group's
positive operational momentum generated since the start of the year
was severely disrupted by the sudden administration process
initiated on 12 April 2021 at the Nobiskrug shipyard. The Group had
three active contracts and certain invoices outstanding, relating
to work completed in 2021 at the shipyard, totalling approximately
EUR2.8m (excluding VAT).
This led to a significant loss of operational efficiency over
the ensuing months as the Group found itself with a significant
proportion of its workforce suddenly without work but with the
prospect of potentially restarting the three impacted projects in
the yard at short notice. On numerous occasions during this period,
it appeared to the Board that a satisfactory resolution was
imminent. However, the discussions took longer to conclude than
originally anticipated and the associated delays to planned work
schedules and revenue recognition created unexpected and temporary
inefficiencies which impacted the Group's margins for the remainder
of the period.
As previously announced on 29 October 2021, we received notice
that Harwood Capital was no longer considering making an offer for
GYG. Following collaborative discussions throughout the due
diligence process, the Board agreed with Harwood Capital's decision
that it was not the appropriate time to progress a potential
offer.
During the second half of the year, it became clear that the
long terms effects of the COVID-19 pandemic had caused a global
shortage of raw materials affecting, specifically but not
exclusively, those working with chemicals involving epoxies,
polyurethanes, resins and copper. These are the fundamental
ingredients used in the manufacturing of the core product lines
used by our Coatings division and distributed into the market by
our Supply division.
This shortage inevitably led to an increase in prices of the
limited raw materials in circulation to the point where we saw some
products supplied in Europe increase by up to 10% depending upon
the product and manufacturer. Our leading position allowed us to
negotiate terms with our principal paint suppliers that will
protect us against further rises until 2023 and we have factored
these price increases into all future contract proposals and price
tariffs to help further mitigate the impact.
Post period end, and as previously announced on 24 January 2022,
we were pleased to confirm that we had reached agreement with the
new owners of the Nobiskrug shipyard regarding the Refit project
(the largest of the three contracts). New contracts were signed and
GYG received a payment of approximately EUR2m relating to
historical work. Our Pinmar brand professionals have recommenced
work on the vessel, with this large turnkey project now scheduled
for completion in H1 2022.
I am pleased that we have reached a successful conclusion with
the numerous parties involved on this complex Refit project. The
agreement reflects the perseverance of the client and GYG
management to work together and deliver a clear solution from a
complicated situation. Resolving this has been a key objective for
the management team and demonstrates the importance of our position
in the market as leaders in our sector.
During another exceptionally challenging year the Group has
persevered, grown further market share, continued to enhance our
Order Book and produced high quality work, creating further
goodwill across our existing and new client base. With record
levels of superyachts over 70 metres being built, the Group has
started the new financial year well, with the platform in place to
deliver sustainable long-term profitable growth.
FINANCIAL OVERVIEW
The Group delivered revenues of EUR62.8m in the year ended 31
December 2021 (FY20: EUR58.9m), an increase of 6.7% with an
adjusted EBITDA of EUR0.5m (FY20: EUR5.2m) and an operating loss of
EUR6.1m (FY20: operating profit of EUR1.2m) mostly due to the
exceptional items related with ongoing COVID-19 health and safety
compliance and a bad debt provision of EUR772k recognised in the
period relating to the two Nobiskrug New Build projects. The Board
believes, however, that there is a realistic prospect of recovery
of the full amount of bad debt once new commercial contracts are
agreed.
Our gross margins suffered as a result of the unforeseen
inefficiencies mentioned above, with our average gross margin for
2021 at 15.8%, down from 30.7% in FY20. We ended the year with cash
of EUR0.4m (FY20: EUR3.6m) and net debt of EUR18.7m, up from
EUR11.7m in FY20. The Group's net debt position is explained in
more detail in the Financial Review. That we maintained a modest
positive adjusted EBITDA even under the varied operating challenges
in 2021 reflects the committed approach to improving efficiencies
where possible and our ongoing cost reduction initiatives
throughout the year.
The Board is confident that margins will revert towards their
2020 levels in 2022. The Board also remains confident of the
potential for the Group's strategy to deliver additional market
share gains and efficiencies, in turn underpinning the scope for
further growth and margin improvement in the medium to
longer-term.
We are currently working on several significant turnkey Refit
projects alongside a number of New Build projects and continue to
tender for exciting opportunities both with existing and new
shipyards.
DIVISIONAL REVIEW
GYG's activities are segmented between two divisions, Coatings
and Supply. For the year ended 31 December 2021 the Coatings
division delivered revenues of EUR52.9m (FY20: EUR50.8m), an
increase of 4.3%, and an adjusted EBITDA loss of EUR0.3m (FY20:
EUR4.0m). The Supply division delivered a 21.6% increase in
revenues to EUR9.9m (FY20: EUR8.1m) with an adjusted EBITDA of
EUR0.9m (FY20: EUR1.1m).
Coatings division
The Group's Coatings division operates under the premier
45-year-old Pinmar brand and works globally across two segments of
the superyacht market, namely New Build and Refit. With a long and
well-respected history, Pinmar is recognised as the market-leading
brand in superyacht painting with a reputation for premium quality
having completed the fairing and finishing on many of the world's
most prestigious superyachts.
A typical New Build project will involve the Group fairing and
painting a new superyacht as part of the construction process.
Starting with the bare substrate of steel or aluminium, specialist
teams work in phases to smooth out any irregularities in the
surface material and provide a solid base to build up the different
layers of the paint system ready for the final visible topcoat.
Each layer has distinct application and curing requirements and is
crucial to the success of the overall system. The exterior finish
of a superyacht is a key part of the construction process ensuring
the physical integrity and performance of its hull and
superstructure whilst being fundamental to the aesthetics of the
finished yacht.
The construction of a 100m New Build yacht would typically take
30 months up to delivery, with fairing and painting contributing a
considerable amount of the overall project schedule at 10-12
months. The Group is typically engaged to provide a quote for a
shipyard up to 2 years before the build is due to start, while the
shipyard is still in the bidding process for the project. GYG
services are traditionally contracted at the beginning of the build
process, with the fairing phase commencing on average 12-16 months
into the project. To that end, New Build projects typically offer a
higher value, longer-term revenue stream for the Group in addition
to future repeat revenues as potential Refit projects.
A Refit project can see the Group undertake a variety of
activities including bespoke scaffolding and containment, hardware
removal, caulking (sealing joints and seams against leakage) and
repainting and finishing, which, if using GYG's advanced
scaffolding system, can be done while the vessel is in the water as
well as on a quayside or in a dry dock. Superyachts require a major
Refit inspection and service every five years to comply with
maritime, insurance and industry regulations. Consequently, owners
often use these major service periods as an opportunity to repaint
their superyachts due to significant cost savings and schedule
synergies by combining such activities. Regular paint work is one
of the highest single costs of yacht ownership, however it is
critical to support the life of the yacht and to maintain an
exceptional appearance, especially for those yachts in the fleet
which undertake activity in the charter market.
The size and complexity of new superyachts continues to
increase; in 2012 the average length of a Pinmar project was 55
metres, today it is close to 80 metres. This presents new
challenges for paint applicators especially with respect to time
and quality. In response to these challenges, the Group is always
at the forefront of innovation and continually works with leading
industry partners to introduce market leading technology into our
processes such as electrostatic paint application, and
ground-breaking new products such as the Awlgrip HDT range and most
recently Awlgrip Awlfair Sprayable Filler, a product and
application methodology that promises a step change in performance
when filling and fairing New Build projects.
The Group's scaffolding brand, Technocraft, pioneered the
development of yacht scaffolding and containment systems within
Europe. The advanced modular construction system allows for the
entire yacht to be fully enclosed, with full access, inside a
controlled environment, for the entire refit period, either out of
the water or while still afloat. As the size of the yachts increase
these scaffold and containment structures have become a very
important part of a refit, Technocraft is now offering a hard
removable roof structure, where sections can be removed during the
refit to allow crane access to the vessel. Offering this paint and
scaffolding services as a turnkey solution is unique to GYG;
Technocraft's ability to facilitate this enables the Group to work
on considerably larger yachts and provides a competitive advantage
when pitching and tendering for Refit projects. Technocraft
services as part of a Group turnkey Refit solution contribute on
average 15-20% to the total contract revenue.
Introduced in 2011, the Pinmar Paint Standard was the industry's
first comprehensive statement of how a client's expected paint
finish should be measured and agreed. Designed to be universally
understood, it remains one of the most exacting and comprehensive
guideline in existence and defines the high standard achievable on
Pinmar paint applications.
Prompted both by the entry of new paint manufacturers to the
market and changes to the technical formulation and performance of
superyacht paint products, the Pinmar Paint Standard 2.0 was
launched in 2017 to give Pinmar clients an even better
understanding of the quality and performance of their paint work,
together with improved peace of mind during the warranty period and
beyond.
The Group also offers a global warranty package of up to 24
months on New Build yachts and up to 18 months on Refit work with a
unique geographic network of after-sale refit locations on both
sides of the Atlantic. Our warranty packages are backed up by
product manufacturers and are available with an optional coatings
insurance policy which strengthens client confidence and reduces
costs and reputational risk for shipyards. In conjunction with the
Pinmar Paint Standard we are proud of our recognised high quality
of work and have an exceptionally low warranty claims history.
The Group's ability to provide all the above services results in
its uniquely placed position to offer a complete turnkey solution
across all of our major global hubs. This provides undeniable
benefits for the client and is often a significant deciding
factor.
New Build
The Group has enjoyed a significant increase in its market share
of the higher value New Build sector recently as a result of its
strategy to directly engage with the leading New Build yards in
Northern Europe and develop long-term relationships.
The Coatings division had another strong performance in 2021
with nine New Build projects underway in various stages throughout
the year across Europe, four of which were yachts between 60 and 90
metres and five were over 90 metres.
This record level of New Build work delivered revenues of
EUR13.8m, an increase of 3.8% over 2020 (FY20: EUR13.3m). Three of
these projects continued into 2022 and the Group expects to start
two 70+ metre New Build projects in Holland in H1 2022 and is in
advanced negotiations relating to further New Build contracts
including the resolution of the two outstanding Nobiskrug
projects.
The Group's focus on quality continues to improve its industry
reputation. This has allowed it to establish itself as the leading
service provider in the sector, particularly now that many of the
Group's New Build projects have been delivered. The industry is now
recognising that GYG is a major player in the higher value New
Build sector, providing numerous opportunities for the Group to
increase its market share and drive profitable growth.
The Board is confident that there is plenty of headroom for
continued growth both within the yards that the Group currently
serves and through developing further new relationships with other
leading shipyards. The strong forward Order Book as detailed below
highlights the significance of these higher margin New Build
shipyard relationships to provide greater visibility over forward
revenues and will enable further efficiency.
The growth in the Group's market share of the New Build sector
will contribute directly to strengthen the Refit pipeline as newly
built yachts enter the required 5-year service cycle.
Refit
The strong sales momentum experienced in Refit during 2020
continued into 2021 with the Group generating Refit revenues of
EUR39.1m in 2021, an increase of 4.5% against 2020 (FY20:
EUR37.4m).
The major Refit project in Nobiskrug was expected to bolster
revenue and margins during the summer months, which tends to be a
quieter period for Refits due to normal Mediterranean cruising
patterns. With the administration of Nobiskrug in April 2021 and
renegotiations on the project contract not completed until January
this year, the remainder of that revenue will now be recognised in
H1 2022.
The Group has seen a significant uptake in the number of
shipyards outside of Spain taking advantage of GYG's new turnkey
package. This offering includes a greater number of key refit tasks
which are carried out by the Group instead of being subcontracted
out to third parties. Historically, Pinmar only offered painting
services outside of Spain but over the past two years shipyards
have contracted with GYG to complete painting, scaffolding and
containment, hardware removal and reinstallation, and provision of
infrastructure such as air extraction and specialised lighting.
This has increased the revenue per project and given GYG a much
broader engagement with these shipyards.
Despite the reduced average gross margin in 2021 as a result of
unavoidable external events, we are seeing positive results from
the new working practices introduced during the period such as
challenging man-hour budgets using new chronograms and monitoring
the project efficiencies weekly to check that stated objectives are
being achieved with the manpower stretch. In conjunction with the
stretch, we have implemented a stringent manpower planning program.
We also move labour from project to project in a very proactive
way, reducing downtime so less overall labour is needed each month
resulting in a streamlined workforce.
Having a strong, consistent and visible Order Book for Refit,
which is consistently growing through repeat business from clients,
enables the operations department to better plan and control
manpower, materials and equipment much more efficiently.
The Board is confident that there is still room for substantial
growth within the Refit segment of the market in terms of both
contract value and the number of Refits as we are recognised as a
leading full-service turnkey solution provider rather than just
paint services, and the fleet continues to expand with a steady
introduction of new superyachts each year.
Supply division
2021 saw a successful return to pre-pandemic operating practices
across the entire retail sector, with the Supply division's
turnover increasing as a result by 21.6% to EUR9.9m (FY20:
EUR8.1m), reflecting the easing of strict COVID-19 restrictions
regarding retail stores and the results of our strategic focus on
direct yacht sales.
Like most businesses, superyachts are streamlining their supply
chain by selecting key suppliers who can provide them a fast,
efficient and personalised service, with direct delivery to the
yacht's current or future location. These practices have remained
in place after the easing of restrictions, as the advantages became
clear to captains, pursers, and fleet procurement managers.
Our retail stores continue to service the daily chandlery needs
of yachts in Refit, carrying a focused range of key marine brands
offering products including paints and varnishes, cleaning
consumables and deck maintenance materials and tools. Specially
created areas also provide a better experience for clients to meet
with Pinmar Yacht Supply account managers to discuss current and
future purchasing requirements.
Yacht owners are beginning to understand that, with the depth of
knowledge, experience and skills of its dedicated staff, Pinmar
Yacht Supply can meet all their supply requirements. This will lead
to strong growth in this division for the Group.
Pinmar Yacht Supply operates a network of Official Retail
Partners in conjunction with smaller supply companies based in key
superyacht locations across Europe. During 2021 we agreed terms
with an existing member of our retail partner network in La Ciotat
to become our first Premium Retail Partner due to their recent
growth and relocation to a prime spot in the new retail village.
Under this arrangement, we provide a high volume of goods on
mutually acceptable terms using our branding in a new facility in
the expanding shipyard. This allows strong growth without the Group
having to carry additional staff and overheads.
We remain optimistic about the future prospects for this
division in 2022 and beyond as we continue to take advantage of our
strategy with a focus on commercial improvement and delivering
value to our customers, with a strong leadership team focusing on
the servicing of superyachts' purchasing requirements.
MARKET DEVELOPMENTS
According to data provided by our independent market research
last year, a spike in cumulative New Build output in 2021 was
forecast, caused chiefly by the number of delayed project
deliveries as a result of the pandemic. A total of 69 yachts of 40
metres and above were delivered in 2021, a marked improvement over
the 54 delivered in 2020, and indicative of a New Build market
restabilised following the pandemic and the knock-on effects it had
on the supply chain and labour force. Over the past five years the
40m+ fleet has grown by 13.4% at an average of 65 deliveries per
year, confirming that 2021's output of 69 yachts was above the
historic precedent.
The majority of the 40m+ fleet can be categorised in the 40-50m
sector, with 58% of the active fleet falling into this size
bracket. However, the trend towards larger New Build deliveries
continues with the 40-50m segment forecast to grow by a CAGR of 2%
between 2022 and 2026, but at the larger end of the spectrum, where
GYG operates most effectively, the 70-90m and 90m+ segments are
expected to reach a CAGR of 3.8% and 4.0% respectively over the
next five years.
This trend continues into the Refit market as new yachts enter
their regular maintenance cycle. Between now and the end of 2026,
the Refit paint market is expected to grow by approximately17.8%.
The 70-90m and 90m+ segments will see the largest growth, at 34.6%
and 42.9% respectively. The 40-50m sector is expected to increase
by 15.1%, while the 50-70m sector will grow by approximately
16.2%.
Looking directly ahead to 2022, shipyards are predicting a
record-breaking number of 122 40m+ deliveries as they look to
complete projects delayed from previous years combined with an
increased overall demand for superyachts. This is putting New Build
shipyards under increased pressure to meet delivery dates when
build slots are limited and this level of output has never been
seen previously.
We expect many of the predicted projects will experience delays
and be pushed into 2023/2024. This is normal, and historically we
have seen anywhere between 20-30% of projects moved into the
following year. In 2021, that number was closer to 40% as the
market continued to adjust to scheduling delays due to issues
related to COVID-19. A similar levelling of the numbers is expected
in 2022, resulting in a more even spread of deliveries and
therefore market value across the next few years.
Over recent years there has been a consolidation of shipyards
and a reduction in the number of New Build yards available to
potential clients. Now with the increased demand, traditionally
popular shipyards have already sold their future build slots,
allowing for the potential entry of new shipyards to take on
projects.
Furthermore, there has been more investment in infrastructure
projects to increase capacity at both large and small shipyards.
While these projects are typically longer term, they do demonstrate
the need for more build capacity globally.
Source: Superyacht Agency Market Intelligence Report, March
2022
OPERATIONAL REVIEW
GYG provides a highly skilled, mission critical service as part
of the New Build construction and Refit of superyachts. The Group
is well-positioned to benefit from strong structural growth drivers
in the premium end (50m+) of the sector, which is our key focus and
the fastest growing segment of the market as detailed above.
We saw a significant improvement in operating margins at the
start of the year, which has been management's focus for some time,
with greater visibility in the Order Book and rigorous monitoring
of manpower and asset utilisation rates improving the Group's
underlying trading performance during the Q1 period.
Notwithstanding the impact of the Nobiskrug administration, the
Group continued its operational focus to deliver improved gross
margins, a reduction in fixed costs and business process
improvements throughout the year, resulting in our modest positive
EBITDA for the year. The Board expects to see the benefits of these
programmes continue to become more apparent in 2022 as we are
confident margins will revert towards 2020 levels.
The Group continues to innovate and invest in new application
technology and employee training, leveraging its strong
relationship with all the main superyacht paint manufacturers. Our
Pinmar brand is involved with a new work placement course created
by the Servei d'Ocupació de les Illes Balears (The employment
service of the Balearic Islands) and the Balearic Marine Cluster of
which the Group is a member. This initiative consists of a
nine-month practical period based in our Son Oms Paint Facility in
Palma de Mallorca learning the processes of surface preparation for
yacht painting, with 500 hours of theoretical study running in
parallel and the possibility of a full-time placement within the
Group once the course is complete.
We continued our cost management efforts during 2021 with the
efficient restructuring and consolidation of Group workshops and
storage assets. In Palma, we reallocated resources across our
various paint facilities in the Son Oms industrial estate to better
utilise space and improve the workflow of our off-site paint and
fittings operations. We also consolidated our Technocraft scaffold
storage area and repair workshop into existing Group facilities to
reduce costs.
Due to increased demand from both our Pinmar project teams and
Pinmar Yacht Supply yacht clients and trade partners, we expanded
our warehousing in Barcelona which is located inside the ZAL Port
Barcelona. The ZAL Port (Zona d'Activitats Logístiques) is the
intermodal logistics platform of the Port of Barcelona.
Our new 1,500m(2) facility is a mix of logistics space and
offices for our materials management team and will serve as the
main hub for supplying our retail stores and portfolio of Official
Retail Partners across Europe. This prime location also allows our
team to offer a fast, reliable, and high-quality service directly
to yachts, shipyards, and trade applicators in the greater
Barcelona area.
GYG continues to develop its human resources function through a
combination of structured in-house training programmes and
strategic recruitment. We continue to strengthen the management
team introducing a mix of industry experience and related business
expertise where needed to match our levels of forecasted
activity.
We continue to work on a programme of system developments to
automate business processes, consolidate legacy systems and provide
better management information leading to improvements in
operational planning and control. The significant upgrade of our
core IT infrastructure which started in 2020 is progressing to plan
and expected to be completed in H1 2022 with the launch of our new
ERP system.
We have successfully adapted our operational model in response
to the lessons learnt during the COVID-19 pandemic and continue our
ongoing programmes to improve our business processes, systems, and
infrastructure to support growth and increase the efficiency of the
Group.
Although we have been unable to operate our planned charitable
fundraising events across the last two years due to COVID-19
restrictions, I would like to highlight a few of the charitable
contributions we have made to some very special people and
organisations during the year.
We are proud to support the Superyacht Charities foundation with
their annual Superyacht Ball and Seafarers Supper fundraising
events, which raise significant amounts of money for several good
causes as seen here - www.superyachtcharities.com/beneficiaries/
.
We sponsored the incredible Mark Delstanche as he became the
first person in the world ever to row solo and unsupported from New
York to London, a challenge which took him over three months and
raised money for several charities in the process -
www.northatlanticsolo.com .
And finally, in a case close to our hearts, we are proud to
sponsor a former employee's professional ParaBadminton career
following his recovery from a life altering traffic accident
suffered in 2020.
COVID-19
The Group responded quickly and effectively to mitigate the
impacts of COVID-19 during the initial outbreak in early 2020 and
throughout the many months since, drawing a positive client
response. While the Group is still experiencing additional costs,
administrative burdens and some travel restrictions as a result of
the pandemic, the Board does not believe that the pandemic will
have a material impact on its financial performance going forward
assuming current conditions of the pandemic continue to
improve.
Please refer to our COVID-19 Statement for further details.
ENVIRONMENT AND SUSTAINABILITY
As the world's leading superyacht service and supply group, the
Group has an obligation to demonstrate leadership to the community
in corporate sustainability and challenge industry norms in regard
to climate change; to minimize our environmental footprint, to
offer the most sustainable solutions to clients and to act with
integrity across all of our operations.
Our first Sustainability Action Plan is currently under
development and due for release in H1 2022. This plan outlines the
specific actions that GYG will undertake itself and by partnering
with other stakeholders in the period of 2022 to 2026. The
development of this plan is consistent with the actions of many
shipyards both domestically and internationally, where Climate
Action Plans and carbon footprint reduction strategies are
commonplace.
The Group has in place an Environmental Management System
certified by Lloyds Register following ISO 14001:2015 international
standards. We currently have many in-house projects underway to
reduce our impact on the environment, with the most recent
initiatives focusing on more efficient energy use, reducing
business related travel and offsetting emissions from air travel,
and modernising the company fleet vehicles to lower-emission
models.
We partner with shipyards, paint manufacturers, equipment
manufacturers, and suppliers who are working to improve the
industry's attitude to the environment, and our Supply division has
responded to customer demand to stock eco-friendly solutions by
launching a new refill station with a range of 'green' day-to-day
cleaning products. We continue to champion innovative technical
solutions such as electrostatic paint application, which offers a
60% improvement in paint-transfer efficiency and significantly
reduces the potential environmental impact of overspray.
GYG is part of several local business clusters with other key
players in the yachting industry across its operations. The cluster
based around the La Ciotat Shipyard in France is working to make
the shipyard more sustainable through several projects including
shared water treatment and waste recycling. Working with our
partners at MB92 Group, we are collaborating on two trial projects
to further improve our existing extraction and filtration systems
with an additional dust chamber to capture any left-over toxic
gases.
As a direct result of our 3-year fundraising partnership with
the Blue Marine Foundation (BLUE), which saw 25% of our Pinmar Golf
charity fundraising allocated to environmental matters, BLUE and
local partners have evaluated the extent of illegal fishing in the
Balearics and are developing a programme to reduce this impact on
marine protected areas in Mallorca and across the Balearics.
BLUE commissioned a report to present the findings of an
investigation into illegal, unreported and unregulated (IUU)
fishing in the Balearics. The report highlights the major sources
of illegally caught fish, how and where they are being caught, and
where they are being sold. A sustainable, traceable seafood label
is being developed to make buyers aware of the provenance of their
seafood, and ensuring fishers are rewarded by a fair price for
their sustainable catch as well as reduced competition from the
illegal market.
Workshops and discussions have been held with restaurants and
hotels to build a "critical mass" of businesses that support the
moves towards sustainable, traceable fish. Workshops and
discussions have been held with fishers to begin the development of
an official "code of responsible/sustainable fishing conduct," that
will exist alongside the new certification scheme. More information
on BLUE's ongoing environmental efforts can be found at
www.bluemarinefoundation.com.
As always, we want to be at the forefront of the industry, and
we will embrace any positive changes that reduce the Group and
wider industry's impact on the environment.
GROWTH STRATEGY
As indicated earlier in this report, the industry is currently
experiencing a strong growth phase with record used-yacht sales
driving Refit opportunities and New Build order books at full
capacity in the premium shipyards.
Reported by Bloomberg, citing data from maritime market data
firm Vessels Value, a total of 887 superyachts were sold in 2021.
This figure is more than 75% over 2020 sales and more than double
the number sold in 2019. Boat International's latest review of the
2022 New Build Global Order Book reports 398 projects in build or
on order over 37m, a rise of 15% over 346 in 2021. The number of
projects started without a confirmed owner (known as speculative
production) has dropped to its lowest level since Boat
International's records began, with just 25.5% of the 2022 Order
Book representing "spec" builds, down from 39.3% in 2021.
As the true extent of the COVID-19 pandemic became clear across
the world in late 2020 with lockdowns and strict travel
restrictions in place, many UHNWIs recognised superyachts as
secure, private getaways on which they could take refuge. This led
to soaring interest from new buyers within the leading New Build
shipyards, especially those producing full custom builds. As a
result, build slots for 2021 and 2022 were rapidly secured and it
is now a challenge for would-be buyers to find a semi-custom
project available for purchase before 2024, with even longer delays
before deliveries are available for full custom productions.
The Group is well placed to exploit this strong growth period in
the market, and we continue to see positive results from our New
Build strategy, confident that our focus of securing preferred
supplier status within the key Northern European shipyards remains
critical to delivering long-term growth. The Group has achieved a
significant increase in its market share of this premium market
segment over recent years with plenty of headroom for continued
growth both within the yards it currently serves and through
developing targeted new relationships with other leading
shipbuilders.
We remain closely aligned to our key Refit shipyard partners and
continue to invest in our own facilities and resources to
complement the growth at our strategic locations, in line with the
ever-growing superyacht fleet and their increasingly demanding
Refit programmes. Our Refit strategy of promoting turnkey solutions
across our geographic locations utilising our entire portfolio of
services is proving attractive to large superyachts, especially
those working to tight Refit schedules, who will benefit from the
streamlined workflow, efficient decision making, and coordinated
after-service and global warranty afforded by our offering.
La Ciotat Shipyards in France is nearing completion of its
'Project Atlas' megayacht platform which features a new 4,300 ton
syncrolift capable of lifting out yachts up to 115 metres in length
and the installation of 40,000m(2) of associated hard standing
space. This upgrade will make La Ciotat one of the most renowned
Refit shipyards in our industry and the Group, as a preferred
services supplier, is well placed to satisfy this new capacity as a
result of our investment and development. The Board expects that
this will be one of the Group's fastest growing refit hubs over the
next 12 months.
Our strong relationships with the major fleet management
companies continues to evolve as we see an increasing number of our
target yachts coming under professional management. Again, our
strategy to offer an integrated repair and supply solution to the
large managed fleets provides management companies with a unique
proposition and integrated solution.
During 2021, the Monaco Yacht Show and Fort Lauderdale
International Boat Show (FLIBS) saw a welcome return to large-scale
marine events, and we look forward to a busy programme of industry
networking events and boat shows throughout 2022. The success of
these shows, especially considering the compromises made to ensure
COVID-19 compliance, shows the value of having face time with the
leading figures within the industry and building deeper
relationships with our partners.
Our growth plan for the Supply division remains focused on
servicing the purchasing needs of the growing superyacht fleet and
extending our service proposition beyond our physical locations so
we can capture a greater share of their annual spend.
The Group continues to explore potential acquisition
opportunities to enable expansion into new markets geographically
or into new products and services that complement the Group's
existing operations. The current environment looks favourable to
identify earnings enhancing growth opportunities across the
Group.
CURRENT TRADING AND OUTLOOK
The Total Order Book as of February 2022 stands at EUR55.4m, up
3% year-on-year (January 2021: EUR53.8m). The Current Year Order
Book for 2022 is EUR36.9m, which is slightly lower than the January
2021 book following two Refit contracts being recently postponed to
2023. The Order Book represents contracts agreed at this date and
as in prior years, the Board will update the market with
significant additional contracts throughout 2022.
Order Book at: Total Order Book Forward Order Current Year
Book*
---------------- ----------------- -------------- -------------
January 2019 EUR33.9m EUR8.6m EUR25.3m
----------------- -------------- -------------
January 2020 EUR44.4m EUR11.6m EUR32.8m
----------------- -------------- -------------
January 2021 EUR53.8m EUR13.2m EUR40.6m
---------------- ----------------- -------------- -------------
February 2022 EUR55.4m EUR18.5m EUR36.9m
----------------- -------------- -------------
* Forward Order Book represents orders scheduled for completion
in 2023 onwards, excluding the Supply division
The Group remains focused on delivering operational
improvements, including the use of new technologies to aid
efficiency, and consolidating its market share in Northern Europe.
With record levels of superyachts over 70 metres being built, the
Group has started the new financial year well, with the platform in
place to deliver sustainable long-term growth.
The Group has experienced a robust start to the year in terms of
operations and contract wins. The Group has two +70 metre New Build
projects which started in Holland in March and is in advanced
negotiations relating to further New Build contracts.
No discussion of the trading outlook for the Group would be
complete without some comment on the current geopolitical
environment. Current industry estimates place the wider Russian
superyacht ownership at 7-10% of the global market and the
Directors believe the Group's current exposure is in line with
these figures. To counter any possible disruption, the team are
focused on leveraging GYG global capabilities with operations
across the Mediterranean, Northern Europe and the USA and have
built a solid pipeline of prospective work, spanning over 185
projects amounting to approximately EUR200 million of potential
revenue.
On the back of a robust Current Year Order Book, the outlook for
the Group for 2022 is encouraging for 2022. Whilst the Board
expects the impact of COVID-19 to be substantially less as we exit
the pandemic, the Board remains mindful of the potential for future
changes in lockdowns and travel restrictions as well as the wider
geo-political environment, which may affect the full year
performance.
Remy Millott
Chief Executive Officer
FINANCIAL REVIEW FOR THE YEARED 31 DECEMBER 2021
Year ended Total reportable
31 December 2021 Coatings Supply segments
EUR000 EUR000 EUR000
Revenue 52,921 9,899 62,820
========= ======= =================
Adjusted EBITDA (345) 851 506
-------------------- --------- ------- -----------------
Year ended Total reportable
31 December 2020 Coatings Supply segments
EUR000 EUR000 EUR000
Revenue 50,760 8,138 58,898
========= ======= =================
Adjusted EBITDA 4,033 1,130 5,163
-------------------- --------- ------- -----------------
Revenue in the year ended 31 December 2021 increased 6.7% to
EUR62.8m (FY20: EUR58.9m). This was driven by a 4.3% increase in
turnover in the Coatings division and a 21.6% increase in the
Supply division. Some of the growth in turnover reflects the return
to more normal trading conditions following the start of the COVID
pandemic in 2020. Added to this was the fact that the Group started
2021 with the strongest Order Book in its history.
In April 2021, the Group's largest client at the time, Nobiskrug
Shipyard GmbH went into administration. At the time, the Group had
outstanding receivables with Nobiskrug of EUR2.8m (net of VAT). The
Group had been working on a large Refit project and two smaller New
Build projects in the yard. The outstanding receivables related to
the Refit project totalled EUR2.0m and those related to the two New
Build projects totalled EUR0.8m.
The impact of the Nobiskrug administration on operating
efficiency and working capital was significant. The Group had
geared up operationally for the three projects to delivery revenue
and the associated cashflow over the subsequent months in 2021.
Despite the best efforts of all stakeholders, it took until January
2022 to resolve the contractual issues around the large refit
project. Discussions are ongoing in relation to the two new builds.
This left the Group with a larger workforce than was ideal. The
potential imminent restart of the refit project meant that
significantly downscaling the workforce would have left the Group
unable to complete the project and, eventually, the workforce would
be required for the busy refit season in Q4.
As a result of the negative impact on operating efficiencies of
Nobiskrug, operating costs (not including exceptional items,
impairment, performance share plan costs, depreciation and
amortisation) increased by 17.0% from EUR57.7m in FY20 to EUR67.5m
in FY21. The Group's operating margins accordingly decreased in
2021, resulting in:
-- an operating loss of EUR6.1m in the year (FY20: profit of EUR1.2m);
-- an adjusted EBITDA of EUR0.5m (FY20 EUR5.2m); and
-- a net loss, excluding exceptional items, impairment and
performance share plan costs, for the year of EUR3.7m(FY20: profit
of EUR1.4m).
The exceptional items of EUR3.1m in the year (FY20: EUR1.0m)
relate to additional costs incurred directly as a result of the
pandemic which the Group will not incur going forward, a provision
of EUR0.8m in relation to outstanding receivables from Nobiskrug,
and EUR0.4m of professional fees incurred as a result of the
approach from Harwood Capital.
Financial expenses of EUR1.1m in the year (FY20: EUR1.1m) mainly
related to interest on the syndicated loan signed in March 2016,
various working capital facilities, finance leases and foreign
exchange rates.
EARNINGS PER SHARE AND DIVIDS
Net loss for the year was EUR6.7m (2020: profit of EUR0.3m).
Loss per share was EUR0.14 (FY20: profit of EUR0.00 per share) and
adjusted basic loss per share was EUR0.14 (FY20: profit of
EUR0.07).
Basic earnings/(losses) per share are calculated by dividing net
profit/(loss) for the year attributable to the Group (i.e. after
tax and non-controlling interests) by the weighted average number
of shares outstanding during that year.
Diluted earnings/(losses) per share have been calculated on a
similar basis taking into account dilutive potential shares.
Adjusted basic earnings are presented to eliminate the effect of
the exceptional items, amortisation and impairment of intangible
assets, gains on financial instruments and performance share plan
costs (considering the tax effect of these adjustments).
Year ended Year ended
31 December 31 December
2021 2020
-------------- --------------
Earnings for the period attributable
to shareholders (EUR000) (6,712) 252
Weighted average number of shares 46,640,000 46,640,000
Basic earnings per share (EUR) (0.14) 0.00
============== ==============
Adjusted basic earnings per share
(EUR) (0.5) 0. 07
============== ==============
Dilutive weighted average number
of shares 47,987,728 47,987,728
-------------- --------------
Diluted earnings per share (EUR) (0.14) 0.00
============== ==============
Adjusted diluted earnings per
share (EUR) (0. 05) 0. 07
============== ==============
The Board believed it was in the best interest of the Company
not to pay a dividend in relation to FY2021, and investors should
not anticipate a dividend in 2022.
FINANCIAL POSITION
Cash and cash equivalents totalled EUR0.4m at 31 December 2021
compared to EUR3.6m as at 31 December 2020. The decrease year on
year was driven principally by increased operating costs and the
impact of the delay in payments from Nobiskrug. As a result, the
net debt as at 31 December 2021 was EUR18.7m, compared to EUR11.7m
as at 31 December 2020.
As previously mentioned, the administration at Nobiskrug had a
material, detrimental effect on the Group's working capital
position. To ensure sufficient liquidity to avoid a working capital
shortfall, North Atlantic Smaller Companies Investment Trust plc
("NASCIT", an associate of Harwood Capital LLP ("Harwood"), the
Company's second largest shareholder) provided the Group with a
short-term loan for EUR3.0 million which was repayable on 31
December 2021. The loan facility was fully drawn on 28 July 2021
and replaced in December 2021 with a loan from Harwood Capital,
subsequently restructured post year end and partially repaid. At 26
April 2022, the outstanding balance of EUR1.0 million was scheduled
to be repaid by 31 July 2022.
Total net assets on the balance sheet were EUR6.8m as at 31
December 2021, compared to EUR13.5m as at 31 December 2020.
CASH FLOW
Net cash outflow from operating activities was EUR2.7m for the
year (FY20: outflow EUR0.3m). Net cash used in investing activities
was EUR1.6m for the year (FY20: outflow EUR3.4m). Net cash used in
financing activities was EUR1.1m for the year (FY20: inflow
EUR1.6m) mainly corresponding to the new Harwood loan, increased
use of working capital facilities and new finance leases.
Overall net cash outflow for the year was EUR3.2m compared to
EUR1.9m for FY20.
SUBSEQUENT EVENTS
In January 2022, the Group reached an agreement with the new
owner of the Nobiskrug shipyard in relation to the large Refit
project. Under the terms of the new agreement, the Group agreed to
complete the project on broadly similar commercial terms to the
original contract and received payment for the outstanding invoices
in relation to that project, totalling EUR2.0m. A bad debt
provision of EUR772k was recognised during the year in relation to
the remaining outstanding invoices with Nobiskrug.
FINANCIAL OUTLOOK
As set out in the Chief Executive's Report, the Directors are
confident about the Group's prospects going forward. That having
been said, the uncertainty surrounding the current geopolitical
situation is significant and is discussed in detail in the Chief
Executive's report. For this reason, the audit opinion in the 2021
accounts contains a material uncertainty in respect of going
concern as relates to severe but plausible downside risk although
the audit opinion will remain unqualified. As mentioned in the
Chairman's statement, the Directors are reviewing the Group's
capital structure to ensure that it will optimise the Group's
ability to grow the business successfully.
The other significant external factor that is impacting the
global economy is the inflationary pressures that arose prior to
the current geopolitical problems. All major economies are
experiencing significant inflation in the cost of raw materials
which is feeding through to the costs of goods purchased. Wage
inflation is also a significant issue across Europe and the
USA.
The majority of the Group's employees are based in Spain. Wage
inflation from 2021 to 2022 was capped at approximately 2.5%. In
terms of materials, the Group is seeing prices rise by 5% to 10%
depending upon the product. We were able to negotiate terms with
our principal paint suppliers that will protect us against further
rises until 2023. The largest inflationary pressures are in the
cost of energy. GYG is not an energy intensive business so the
Directors do not believe that increased energy costs will have a
material impact on the Group's prospects in 2022.
As things stand today, the Directors are confident of the
Group's ability to trade successfully through this going forward
but, like all businesses, we are operating in a rapidly changing
environment.
Kevin McNair
Chief Financial Officer
COVID-19 REPORT
In Q1 of 2020, the COVID pandemic rapidly spread across Europe
and the US. The Group developed a strategy for responding to the
pandemic based on three pillars:
-- Looking after the health and wellbeing of our staff;
-- Working with our clients and suppliers to ensure that we were
able to continue delivering high quality products and services in a
challenging and dynamic environment; and
-- Reshaping our business and reducing costs to give us the
flexibility required to respond to the pandemic and rapidly
changing commercial situation.
Each of the countries where we operate was impacted in different
ways based on the timing and speed of the pandemic and the response
of local government and the shipyards where we work. What was
relatively consistent across all sites was the actions we took
within each of the pillars.
Over the course of 2021, the impact of the pandemic began to
lessen. Each country set its own restrictions and those evolved
throughout the year. Testing and tracing remained in place
throughout the year in every country where the Group operates. This
was a welcome alternative to the travel restrictions that had so
badly impacted 2020. The operational impact decreased with each
passing month and the successful rollout of vaccines allowed
significantly less restrictive travel and work practices as the
year progressed.
By the beginning of 2022, the impact of the pandemic, while
still present, was marginal in terms of operations. Assuming that
no further variants emerge which cause a return to previous
restrictions, the Directors do not believe that the pandemic will
have a material effect on the Group going forward.
Financial impact
Although the Directors are confident that the Group responded
rapidly and effectively to the evolving pandemic in both 2020 and
2021, there were still material financial impacts on the Group
during both periods.
On the cost side of the equation, the Group incurred significant
additional costs as it responded to the pandemic and the changes in
operating practices. Some of those costs were new or additional
costs that were specifically related to COVID such as PCR testing,
specialised cleaning services or additional PPE for all staff.
Other existing costs increased significantly due to new safety
protocols. A good example of that is the requirement for us to move
and house workers who were travelling on a socially distanced
basis. Rather than moving four employees in a rental car from one
country to another, we could only move two people per vehicle. At
different times, we would have to quarantine our own staff or
subcontractors for anywhere from five days to two weeks before they
could enter certain countries or work in certain shipyards.
Lastly, there was a loss of efficiency in certain parts of the
Group resulting from new safety practices. In many shipyards, our
workers were required to have their temperatures taken each day
before a shift started. Social distancing restricted the numbers of
workers we could have within any enclosed environment at one
time.
As mentioned previously, many of these restrictions were either
relaxed or eliminated over the course of 2021.
In 2021, the significant COVID related costs totalled EUR1.8m
(2020: EUR0.8m) and these have been treated as exceptional. These
costs in 2021 were comprised of PCR tests, additional accommodation
and associated travel costs incurred specifically as a result of
COVID. By early 2022, rules and restrictions related to COVID had
been relaxed to the point that the Group was not having to absorb
these additional costs any longer.
Moving forward, the remaining costs associated with COVID will
be treated as ordinary operating expenses. Barring any unforeseen
future developments, the impact of COVID on the Group's financial
results should be insignificant.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2021
Note(s) 31 December 31 December
2021 EUR 000 2020 EUR 000
--------
Continuing operations
Revenue 4 62,820 58,898
Operating costs 5 (68,905) (57,665)
Adjusted EBITDA 506 5,163
Depreciation and amortisation 12,13 (3,500) (2,995)
Performance share plan 22 1 90
Exceptional items 6 (3,092) (1,025)
---------------------------------------- -------- -------------- ------------------
Operating (loss)/profit 5 (6,085) 1,233
Finance costs - net 9 (1,124) (1,050)
(Loss)/profit before tax (7,209) 183
-------------- ------------------
Tax 10 497 69
(Loss)/profit for the period (6,712) 252
-------------- ------------------
Items that may be reclassified
subsequently
to profit or loss:
Exchange differences
on translation of foreign operations (19) 57
Total comprehensive profit /
(loss) for the period (6,731) 309
======================================== ============== ==================
(Loss) / profit for the period
attributable to:
Owners of the company (6,712) 252
Total comprehensive (loss) /
profit for the period attributable
to:
Owners of the company (6,731) 309
(Losses)/earnings per share for
(loss)/ profit attributable to
the ordinary equity holders of
the company EUR 11
Basic (0.14) 0.00
Diluted (0.14) 0.00
-------------- ------------------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2021
ASSETS Note 2021 2020
EUR 000 EUR 000
--------------------------------- ---------- ---------
Non-current assets
Goodwill 12 9,344 9,270
Other intangible assets 12 10,052 10,096
Property, plant and equipment 13 11,921 11,169
Other financial assets 23 225 197
Deferred tax assets 10 1,936 429
Total non-current assets 33,478 31,161
--------------------------------- ------ ---------- ---------
Current assets
Inventories 14 3,608 3,129
Other financial assets 23 130 6
Trade and other receivables 15 15,020 11,070
Current tax receivable 15 676 687
Cash and cash equivalents 16 443 3,600
Total current assets 19,877 18,492
--------------------------------- ------ ---------- ---------
TOTAL ASSETS 53,355 49,653
================================= ====== ========== =========
CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)
Note 2021 2020
EUR 000 EUR 000
------------------------------------ --------- ---------
Current liabilities
Trade, deferred income and other
payables 18 (22,550) (15,661)
Current tax liabilities 18 (2,483) (2,470)
Lease liabilities 13 (1,374) (2,035)
Borrowings 17 (12,882) (9,789)
Provisions 19 (195) (356)
Derivative financial instruments 23 - (2)
Total current liabilities (39,484) (30,313)
------------------------------------ ------ --------- ---------
Net current liabilities (19,607) (11,821)
------------------------------------ ------ --------- ---------
Non-current liabilities
Lease liabilities 13 (1,872) (904)
Borrowings 17 (3,064) (2,572)
Deferred tax liabilities 10 (2,162) (2,359)
Long-term provisions 19 (19) (19)
Total non-current liabilities (7,117) (5,854)
------------------------------------ ------ --------- ---------
Total liabilities (46,601) (36,167)
==================================== ====== ========= =========
Net assets 6,754 13,486
==================================== ====== ========= =========
EQUITY
------------------------------------ ------ --------- ---------
Share capital 20 106 106
Share premium 7,035 7,035
Retained (deficit)/earnings (753) 5,959
Translation reserve (32) (13)
Capital redemption reserve 114 114
Share based payment reserve 284 285
------------------------------------ ------ --------- ---------
Equity attributable to owners
of the Company 6,754 13,486
------------------------------------ ------ --------- ---------
Total equity 6,754 13,486
==================================== ====== ========= =========
The Consolidated financial statements were approved by the Board
of Directors on 27 April 2022 and signed on its behalf by:
Remy Millott Kevin McNair
Chief Executive Officer Chief Financial Officer
Registered Number: 10001363
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2021
Share Share Retained Translation Capital Share based Total
capital premium (deficit)/ reserves redemption payment reserve EUR
EUR 000 EUR 000 earnings EUR 000 reserve EUR 000 000
EUR 000 EUR 000
--------- --------- ------------ ------------ ------------ ----------------- --------
Balance at 1 January
2020 106 7,035 5,707 (70) 114 375 13,267
--------- --------- ------------ ------------ ------------ ----------------- --------
Charge to equity for
share based
payments - - - - - (90) (90)
Transactions with owners
in their
capacity of owners - - - - - (90) (90)
Profit for the year - - 252 - - - 252
Other comprehensive
income for
the period - - 57 - - 57
Total comprehensive
profit for
the period - - 252 57 - - 309
--------- --------- ------------ ------------ ------------ ----------------- --------
Balance at 31 December
2020 106 7,035 5,959 (13) 114 285 13,486
========= ========= ============ ============ ============ ================= ========
Charge to equity for
share based
payments - - - - - (1) (1)
Transactions with owners
in their
capacity of owners - - - - - (1) (1)
Loss for the year - - (6,712) - - - (6,712)
Other comprehensive loss
for the
period - - - (19) - - (19)
Total comprehensive loss
for the
period - - (6,712) (19) - - (6,731)
--------- --------- ------------ ------------ ------------ ----------------- --------
Balance at 31 December
2021 106 7,035 (753) (32) 114 284 6,754
========= ========= ============ ============ ============ ================= ========
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 December 2021
2021 2020
Note EUR 000 EUR 000
----- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES (I) 21 (2,766) (104)
============================================================= ========= =========
- Purchase of intangible assets (917) (599)
- Purchase of property, plant and equipment (576) (2,786)
- Acquisition of other investments (28) (53)
- Proceeds from disposal of property, plant and equipment 8 3
CASH FLOWS USED IN INVESTING ACTIVITIES (II) (1,513) (3,435)
============================================================= ========= =========
- Proceeds from obligations under leases - 745
- Proceeds from bank borrowings and credit facilities 6,459 4,206
- Repayment of obligations under leases (2,485) (1,505)
- Repayment of borrowings (2,852) (1,836)
CASH FLOWS GENERATED FROM FINANCING ACTIVITIES (III) 1,122 1,610
============================================================= ========= =========
Effect of foreign exchange rate changes (IV) - -
NET DECREASE IN CASH AND CASH EQUIVALENTS (I+II+III+IV) (3,157) (1,929)
============================================================= ========= =========
Cash and cash equivalents at the beginning of the year 3,600 5,529
Cash and cash equivalents at the end of the year 443 3,600
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
1. General information
GYG plc (hereinafter the "Company") was incorporated on 11
February 2016, as a private company limited by shares, as Dunwilco
2016 Limited under the United Kingdom Companies Act 2006.
Subsequently, on 21 May 2016, the Company's corporate name was
changed to Global Yachting Group Limited, on 25 May 2017 to GYG
Limited, on 22 June 2017 the Company re-registered as a public
company limited by shares and on 5 July 2017 the Company completed
an Initial Public Offering ("IPO") and was admitted to the AIM
Market of the London Stock Exchange. The address of the registered
office is Cannon Place, 78 Cannon Street, London EC4N 6AF, United
Kingdom.
The principal activities of the Group are superyacht painting,
supply and maintenance, offering services globally through
operations in the Mediterranean, Northern Europe and the United
States.
These consolidated financial statements are presented in Euro
which is the currency of the primary economic environment in which
the Group operates.
2. Significant accounting policies
2.1. Basis of preparation
The consolidated financial statements of the GYG plc Group has
been prepared in accordance with UK-adopted International
Accounting Standards and with the requirements of the Companies Act
2006 as applicable to companies reporting under those
standards.
On 31 December 2020, IFRS as adopted by the European Union at
that date was brought into UK law and became UK-adopted
International Accounting Standards, with future changes being
subject to endorsement by the UK Endorsement Board. GYG
transitioned to UK-adopted International Accounting Standards in
its consolidated financial statements on 1 January 2021. This
change constitutes a change in accounting framework. However, there
is no impact on recognition, measurement or disclosure in the
period reported as a result of the change in framework.
The consolidated financial statements have been prepared under
the historical cost convention unless indicated otherwise in the
notes to the consolidated financial statements.
The principal accounting policies adopted are set out and have
been applied consistently.
2.2. New accounting standards and interpretations
The Group adopted the following new pronouncements during 2021,
which did not have a material impact on the Group's financial
statement:
Certain new accounting standards, amendments to accounting
standards and interpretations have been published that are not
mandatory for 31 December 2021 reporting periods and have not been
early adopted by the group. These standards, amendments or
interpretations are not expected to have a material impact on the
entity in the current or future reporting periods an on foreseeable
future transactions.
In April 2021, the IFRS IC published its final agenda decision
on Configuration and Customisation costs in a Cloud Computing
Arrangement. The agenda decision considers how a customer accounts
for configuration or customisation costs where an intangible asset
is not recognised in a cloud computing arrangement. The agenda
decision does not have a material impact on the Group in respect of
the current period or prior periods.
Interest Rate Benchmark Reform --- Phase 2 (Amendments to IFRS
7, IFRS 4 and IFRS 16), which address the effects of the reform on
a company's financial statements that arise when an interest rate
benchmark used to calculate interest on a financial asset is
replaced with an alternative benchmark
Amendments to UK and Republic of Ireland accounting standards as
a result of the UK's exit from the European Union
Amendment to IFRS 16, which clarifies the extension of the
practical expedient where the lessee is not required to assess
whether eligible COVID-19 related rent concessions are lease
modifications
Amendments to IAS 1, which address the presentation of financial
statements on classification of liabilities
Revised Conceptual Framework for Financial Reporting (Amendments
to IFRS 9, IAS 39 and IFRS 7) The following standards and
amendments issued before 31 December 2021 with an effective date on
or after 1 January 2022 have not been early adopted by the Group,
they do not have a material impact on the Group's financial
statement:
Amendment to IAS 12 --- deferred tax related to assets and
liabilities arising from a single transaction
A number of narrow-scope amendments to IFRS 3, IAS 16, IAS 37
and some annual improvements on IFRS 1, IFRS 9, IAS 41 and IFRS
16
2.3. Going concern
These financial statements have been prepared on a going concern
basis, which assumes the Group and parent company will continue to
be able to meet their liabilities as they fall due, within 12
months of the date of approval of these financial statements.
The Group meets its day-to-day working capital requirements from
cash flows generated from operations, factoring and banking
facilities. The Group and parent company also has various committed
loan facilities which include:
-- Bank loan EUR2m - Due for repayment in two EUR1m repayments
in June 2022 and December 2022, which is subject to covenants and
repayable on demand if covenants are breached. During the year the
Group and parent company have received waivers for potential
breaches of banking covenants, but no waivers are in place for any
potential breaches occurring in the period of 12 months from the
date of approval of the financial statements;
-- Government backed COVID-19 loan facility ("ICO") EUR3.5m -
Due for repayment over 48 equal instalments commencing June 2022;
and
-- Harwood facility EUR3m - EUR2m has been repaid after the year
end and the remaining amount is due for repayment in July 2022.
In evaluating the going concern assumption, management prepared
a base case and severe but plausible downside profit and loss and
cash flow forecasts to June 2023, the going concern assessment
period. The significant assumptions in these models are the timing
work will be undertaken, the margin achieved and the impact these
have on forecasted cash flow.
The base case model demonstrates that the Group and parent
company will breach covenants on its bank loan but assumes that it
will be successful in negotiating waivers. A breach of covenant is
an event of default, and would require management to seek a
covenant waiver from the Group's lenders, renegotiate the
facilities with those lenders or repay the Group's existing lenders
and seek sources of alternative funding. Without covenant waivers
being obtained, the debt becomes repayable on demand in the event
of a breach with there being forecasted sufficient funds to repay
the debt in the base case scenario and continue to meet its
obligations as they fall due.
Management has prepared a severe but plausible downside
scenario. Under this scenario, the Group and parent company
continue to forecast a breach in covenants but, without sufficient
waivers, would not have sufficient funds to repay the underlying
loans without securing additional sources of financing. Management
are confident that a refinancing would be successful if required,
but have not yet commenced formal discussions with their lenders at
this stage and therefore there is no guarantee that such funding
will be forthcoming. Even if a waiver is obtained for the June 2022
assessment period, in a severe but plausible scenario the group and
parent company would still need to raise alternative funding during
Q3 2022 in order to meet its obligations as they fall due.
If waivers are successfully agreed with the lenders, the base
case forecast indicates that the Group will continue to operate
within its available facilities for a period of no less than 12
months from the date of approval of the financial statements,
including the settlement of the loan facilities above in line with
contractual terms.
These covenants have been forecast to be breached for each
assessment period for the past two years. The Group has
successfully obtained waivers from the banking syndicate for the
past two years and therefore management fully expect to receive a
covenant waiver for June 2022, which is the final covenant
assessment period. Management have commenced discussion with their
lenders, however a waiver has not been obtained at the date of
approval of these financial statements.
Given the information available, an expectation that any
forecast covenant breach would be waived, current trading and
orders being received, management are confident that the forecasts
will be met, and sufficient liquidity will be available to meet
liabilities as they fall due, including the payment on the existing
loan facilities, for a period of no less than 12 months from the
date of approval of these financial statements and therefore
believe it is appropriate to prepare the financial statements on a
going concern basis.
However, waivers have not yet been secured from their lenders in
respect of forecast breaches, and there is currently no commitment
for any refinancing that may be necessary in the event that waivers
are not granted.
These factors indicate the existence of a material uncertainty
which may cast significant doubt as to the Group's and parent
company's ability to continue as a going concern. The financial
statements do not include the adjustments that would result if the
Group and parent company were unable to continue as a going
concern.
2.4. Basis of consolidation
The Group financial statements incorporate the financial
statements of the Company and enterprises controlled by the Company
(and its subsidiaries) made up to 31 December each period.
Control is achieved where the Company has the power to govern
the financial and operating policies of an investee entity to
obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the
period are included in the consolidated statement of comprehensive
income from the effective date of acquisition or up to the
effective date of disposal, as appropriate. Where necessary,
adjustments are made to the financial information of subsidiaries
to bring the accounting policies used into line with those used by
the Group. All intra-group transactions, balances, income and
expenses are eliminated on consolidation process.
2.5. Business combinations
Acquisitions of subsidiaries and businesses are accounted for
using the acquisition method. The consideration for each
acquisition is measured as the aggregate of the fair values (at the
date of exchange) of assets given, liabilities incurred or assumed,
and equity instruments issued by the Group in exchange for control
of the acquire. Acquisition-related costs are recognised in profit
or loss as incurred.
The acquirer's identifiable assets, liabilities and contingent
liabilities that meet the conditions for recognition under IFRS 3
are recognised at their fair value at the acquisition date.
2.6. Intangible assets
Intangible assets acquired separately
Intangible assets with finite useful lives that are acquired
separately are carried at cost less accumulated amortisation and
accumulated impairment losses. Amortisation is recognised on a
straight-line basis over their estimated useful economic lives. The
estimated useful economic life and amortisation method are reviewed
at the end of each reporting period, with the effect of any changes
in estimate being accounted for on a prospective basis. Intangible
assets with indefinite useful economic lives that are acquired
separately are carried at cost less accumulated impairment
losses.
Computer software is valued at acquisition cost, amortisation is
registered as a function of the useful economic life determined
between 3 and 5 years.
Goodwill
Goodwill arising in a business combination is recognised as an
asset at the date that control is acquired (the acquisition date).
Goodwill is measured as the excess of the sum of the consideration
transferred, the amount of any non-controlling interest in the
acquisition and the fair value of the acquirer's previously held
equity interest (if any) in the entity over the net of the
acquisition-date fair value of the identifiable assets acquired and
the liabilities assumed.
Goodwill is not amortised but is reviewed for impairment at
least annually. For the purpose of impairment testing, goodwill is
allocated to each of the Group's cash-generating units ("CGUs")
expected to benefit from the synergies of the combination. CGUs to
which goodwill has been allocated are tested for impairment
annually, or more frequently when there is an indication that the
unit may be impaired. If the recoverable amount of the CGU is less
than the carrying amount of the unit, the impairment loss is
allocated first to reduce the carrying amount of any goodwill
allocated to the unit and then to the other assets of the unit pro
rata on the basis of the carrying amount of each asset in the unit.
An impairment loss recognised for goodwill is not reversed in a
subsequent period.
On disposal of a subsidiary, the attributable amount of goodwill
is included in the determination of the profit or loss on
disposal.
Intangible assets acquired in a business combination
Intangible assets acquired in a business combination and
recognised separately from goodwill are initially recognised at
their fair value at the acquisition date (which is regarded as
their cost).
Subsequent to initial recognition, intangible assets acquired in
a business combination are reported at cost less accumulated
amortisation and accumulated impairment losses, on the same basis
as intangible assets that are acquired separately.
Order backlog has an estimated useful economic life of less than
one year. Customer relationships and brands have an estimated
useful economic life of 15 years.
Derecognition of intangible assets
An Intangible asset is derecognised on disposal, or when no
future economic benefits are expected from use or disposal. Gains
or losses arising from de-recognition of an intangible asset,
measured as the difference between the net disposal proceeds and
the carrying amount of the asset, are recognised in profit or loss
when the asset is derecognised.
2.7. Revenue recognition
The Group recognises revenue based on the consideration to which
the Group expects to be entitled in a contract with a customer and
following the five-step model defined by the IFRS 15:
- Step 1: Identify the contract with a customer
- Step 2: Identify the performance obligations in the contract
- Step 3: Determine the transaction price
- Step 4: Allocate the transaction price to the performance obligations in the contracts.
- Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation
The Group recognises revenue from the following activities:
Rendering of services
Revenue is recognised for these services based on the stage of
completion. The directors have assessed that the stage of
competition of a contract is determined as follows:
-- Revenue is recognised by reference to the stage of completion
of the Refit or New Build project, determined as the proportion of
the total time expected on the project that has elapsed at the end
of the reporting period;
-- revenue from time and material contracts is recognised at the
contractual rates as labour hours and direct expenses are incurred;
and
-- servicing fees included in the price of products sold are
recognised by reference to the proportion of the total cost of
providing the servicing for the product sold.
-- This is considered a faithful depiction of the transfer of
goods and services to the customer as the contracts are initially
priced on the basis of anticipated costs to complete the projects
and therefore also represents the amount to which the Group would
be entitled based on its performance to date.
This input method is an appropriate measure of the progress
towards complete satisfaction of the performance obligations
established in the contract under IFRS 15.
Sale of goods
The Group sells maintenance materials, consumables, spare parts
and equipment to customers through its retail outlets as well as
shipping products. For sales of such products to retail customers,
revenue is recognised when control of goods has transferred, being
at the point the customer purchases the goods at the retail outlet
or when the goods have been shipped to the specific location.
2.8. Leases
The group leases various offices, warehouses and equipment.
Leases are recognised as a right-of-use asset and a
corresponding liability at the date at which the leased asset is
available for use by the Group. Assets and liabilities arising from
a lease are initially measured on a present value basis.
The lease payments are discounted using the interest rate
implicit in the lease. If that rate cannot be readily determined,
which is generally the case for leases in the Group, the Group's
incremental borrowing rate is used, being the rate that it would
have to pay to borrow the funds necessary to obtain an asset of
similar value to the right-of-use asset in a similar economic
environment with similar terms, security and conditions.
Right-of-use assets are generally depreciated over the shorter
of the asset's useful life and the lease term on a straight-line
basis.
Lease payments are allocated between principal and finance cost.
The finance cost is charged to profit or loss over the lease period
so as to produce a constant periodic rate of interest on the
remaining balance of the liability for each period.
2.9. Exceptional items
Certain items are presented in the Consolidated Statement of
Comprehensive Income as exceptional where, in the judgement of the
Directors, by virtue of their nature, size or incidence, in order
to obtain a clear and consistent presentation of the Group's
underlying business performance they need to be disclosed
separately. These are items that fall outside the normal day to day
operations of the business and the Directors believe are unlikely
to ever occur again. Examples of items which may give rise to
disclosure as exceptional items include restructuring costs if the
restructuring involves a fundamental change to the Group's business
model and transaction fees if the transaction involves a
significant change to the structure or investment case for the
Group. See note 6 for further details.
2.10. Adjusted EBITDA
Adjusted Earnings before Interest, Taxation, Depreciation and
Amortisation ("Adjusted EBITDA") is a non-IFRS measure used by
Directors to assess the operating performance of the Group.
The "Adjusted EBITDA" is also used as a metric to determine
management remuneration as well as being measured within the
financial covenants calculations.
"Adjusted EBITDA" is defined as operating profit before
depreciation and amortisation, impairment, performance share plan
and exceptional items.
As a non-IFRS measure, the Company's calculation of "Adjusted
EBITDA" may be different from the calculation used by other
companies and therefore comparability may be limited.
2.11. Foreign currency
For the purpose of presenting these financial statements, the
assets and liabilities of the Group's foreign operations are
translated at exchange rates prevailing on the balance sheet date.
Income and expense items are translated at the average exchange
rates for the period, unless exchange rates fluctuate significantly
during that period, in which case the exchange rates at the date of
transactions are used.
At each period end date, monetary assets and liabilities that
are denominated in foreign currencies are re-translated at the
rates prevailing on the period end date. Non-monetary assets and
liabilities carried at fair value that are denominated in foreign
currencies are translated at the rates prevailing at the date when
the fair value was determined. Gains and losses arising on
retranslation are included in net profit or loss for the period,
except for exchange differences arising on changes in fair value of
non-monetary assets and liabilities that are recognised directly in
equity.
2.12. Taxation
The tax expense represents the sum of the tax currently payable
and deferred tax.
2.12.1. Current Tax
The tax currently payable is based on taxable profit for the
period. Taxable profit differs from net profit as reported in the
consolidated statement of comprehensive income because it excludes
items of income or expense that are taxable or deductible in other
periods and it further excludes items that are never taxable or
deductible. The Group's liability for current tax is calculated
using tax rates that have been enacted or substantively enacted by
the balance sheet date.
The Spanish subsidiaries group companies, are included in a
consolidated tax return within fiscal group under Spanish
regulation.
2.12.2. Deferred Tax
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profit, and is accounted for using the
balance sheet liability method. Deferred tax liabilities are
generally recognised for all taxable temporary differences.
Deferred tax assets are recognised only if it is probable that
future taxable amounts will be available to utilise those temporary
differences and losses.
Such assets and liabilities are not recognised if the temporary
difference arises from the initial recognition of goodwill or from
the initial recognition (other than in a business combination) of
other assets and liabilities in a transaction that affects neither
the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary
differences arising on investments except where the Group is able
to control the reversal of the temporary difference and it is
probable that the temporary difference will not reverse in the
foreseeable future.
The carrying amount of deferred tax assets is reviewed at each
balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow
all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset is
realised based on tax laws and rates that have been enacted or
substantively enacted at the balance sheet date. Deferred tax is
charged or credited in the consolidated statement of comprehensive
income, except when it relates to items charged or credited in
other comprehensive income, in which case the deferred tax is also
dealt with in other comprehensive income.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes levied
by the same taxation authority and the Group intends to settle its
current tax assets and liabilities on a net basis.
2.13. Property, plant and equipment
Property, plant and equipment are stated at cost less
accumulated depreciation and any recognised impairment loss.
Depreciation is recognised so as to write off the cost of assets
(other than land and assets under construction) less their residual
values over their useful economic lives, using the straight-line
method in the following bases:
Useful
economic
lives (years)
Property 10 - 33
Plant and equipment 3 - 10
Other plant, tools
and furniture 4 - 10
Other tangible assets 3 - 20
Leases - Right of Term of
use asset lease
---------------
The estimated useful economic lives, residual values and
depreciation method are reviewed at the end of each reporting
period, with the effect of any changes in estimate accounted for on
a prospective basis.
The gain or loss arising on the disposal or retirement of an
item of property, plant and equipment is determined as the
difference between the sales proceeds and the carrying amount of
the asset and is recognised in profit or loss.
2.14. Impairment of tangible and intangible assets excluding goodwill
At each balance sheet date, the Group reviews the carrying
amounts of its tangible and intangible assets to determine whether
there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated to determine the extent of the
impairment loss (if any). Where the asset does not generate cash
flows that are independent from other assets, the Group estimates
the recoverable amount of the cash-generating unit to which the
asset belongs.
An intangible asset with an indefinite useful life is tested for
impairment at least annually and whenever there is an indication
that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset for
which the estimates of future cash flows have not been
adjusted.
If the recoverable amount of an asset (or cash-generating unit)
is estimated to be less than its carrying amount, the carrying
amount of the asset (or cash-generating unit) is reduced to its
recoverable amount. An impairment loss is recognised immediately in
profit or loss.
2.15. Inventories
Inventories are stated at the lower of cost and net realisable
value. Costs of inventories are determined on weighted average
price basis. Net realisable value represents the estimated selling
price for inventories less all estimated costs of completion and
costs necessary to make the sale.
2.16. Provisions
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event, it
is probable that the Group will be required to settle that
obligation and a reliable estimate can be made of the amount of the
obligation.
The amount recognised as a provision is the best estimate of the
consideration required to settle the present obligation at the
balance sheet date, taking into account the risks and uncertainties
surrounding the obligation. Where a provision is measured using the
cash flows estimated to settle the present obligation, its carrying
amount is the present value of those cash flows.
When some or all of the economic benefits required to settle a
provision are expected to be recovered from a third party, a
receivable is recognised as an asset if it is virtually certain
that reimbursement will be received and the amount of the
receivable can be measured reliably.
2.17. Financial assets
The Group classifies its financial assets as those to be
measured at amortised cost.
Recognition and derecognition
Sales of financial assets are recognised when the Group commits
to purchase or sell the asset. Financial assets are derecognised
when the rights to receive cash flows from the financial assets
have expired or have been transferred and the Group has transferred
substantially all the risks and rewards of ownership.
Measurement
At initial recognition, the Group measures a financial asset at
its fair value. Transaction costs that are directly attributable to
the acquisition of the financial asset are included in the fair
value initial assessment of fair value.
Trade and other receivables
Trade receivables are amounts due from customers for goods sold
or services performed in the ordinary course of business. They are
generally due for settlement within 30 days and are therefore all
classified as current. Trade receivables are recognised initially
at the amount of consideration that is unconditional, unless they
contain significant financing components, when they are recognised
at fair value. The group holds trade and other receivables with the
objective of collecting the contractual cash flows and therefore
measures them subsequently at amortised cost using the effective
interest method.
The effective interest method is a method of calculating the
amortised cost of a debt instrument and of allocating interest
income over the relevant period. The effective interest rate is the
rate that exactly discounts estimated future cash receipts
(including all fees and points paid or received that form an
integral part of the effective interest rate, transaction costs and
other premiums or discounts) through the expected life of the debt
instrument, or, where appropriate, a shorter period, to the net
carrying amount on initial recognition.
2.18. Cash and cash equivalents
Cash and cash equivalents comprise cash and short-term bank
deposits with an original maturity of three months or less. The
carrying amount of these assets is equal to their fair value.
2.19. Loans and receivables - long term
Loans and receivables - long term are non-derivative financial
assets with fixed or determinable payments that are not quoted in
an active market. Loans and receivables are measured at amortised
cost using the effective interest method, less any impairment.
Interest income is recognised by applying the effective interest
rate.
Financial liabilities
Financial liabilities (including borrowings and trade and other
payables) are subsequently measured at amortised cost using the
effective interest method.
Derivative financial instruments
The Group enters into interest rate swaps to manage its exposure
to interest rate and foreign exchange rates risks.
Derivatives are initially recognised at fair value at the date
derivative contracts are entered into and are subsequently
remeasured to their fair value at the end of each reporting period.
The resulting gain or loss is recognised in profit or loss
immediately.
Fair value measurement
All financial instruments for which fair value is measured or
disclosed in the financial statements are categorised within the
fair value hierarchy, described as follows:
- Level 1 fair value measurements are those derived from quoted
prices (unadjusted) in active markets for identical assets or
liabilities;
- Level 2 fair value measurements are those derived from inputs
other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly or
indirectly; and
- Level 3 fair value measurements are those derived from
valuation techniques that include inputs for the asset or liability
that are not based on observable market data (unobservable
inputs).
2.20. Related party transactions
The Group performs all its transactions with related parties on
an arm's length basis. The Group carries out all its related-party
transactions (financial, commercial or otherwise) by setting
transfer prices stipulated by the OECD to regulate transactions
with subsidiaries.
2.21. Consolidated cash flow statements
In these financial statements cash and cash equivalents comprise
cash and short-term bank deposits with an original maturity of
three months or less, net of outstanding bank overdrafts. The
carrying amount of these assets is approximately equal to their
fair value.
The consolidated cash flow statements have been prepared using
the indirect method and the terms used are defined as follows:
-- Cash flows: inflows and outflows of cash and cash
equivalents, which are short-term, highly liquid investments that
are subject to an insignificant risk of changes in value.
-- Operating activities: the principal revenue-producing
activities of the entities composing the consolidated Group and
other activities that are not investing or financing
activities.
-- Investing activities: the acquisition and disposal of
long-term assets and other investments not included in cash and
cash equivalents, if they have a direct impact on current cash
flows.
-- Financing activities: activities that result in changes in
the size and composition of the equity and liabilities that are not
operating activities, if they have a direct impact on current cash
flows.
2.22. Share-based payments
Equity-settled share-based payments to employees and other
entities are measured at the fair value of the equity instruments
at the grant date. The fair value excludes the effect of non-market
vesting conditions. Details regarding the determination of the fair
value of equity-settled share-based payments are set out in note
22.
The fair value determined at the grant date of the
equity-settled share-based payments is expensed on a straight-line
basis over the vesting period, based on the Group's estimate of
equity instruments that will eventually vest. At each balance sheet
date, the Group revises its estimate of the number of equity
instruments expected to vest as a result of the effect of
non-market-based vesting conditions. The impact of the revision of
the original estimates, if any, is recognised in profit or loss
such that the cumulative expense reflects the revised estimate,
with a corresponding adjustment to equity reserves.
Equity-settled share-based payment transactions with parties
other than employees are measured at the fair value of the services
received, except where the fair value cannot be estimated reliably,
in which case they are measured at the fair value of the equity
instruments granted, measured at the date the counterparty renders
the service.
2.23. Government Grants
Government grants are recognised where there is reasonable
assurance that the grant will be received. Grants that compensate
the Group for expenses incurred are recognised in the Income
statement in the relevant financial statement caption on a
systematic basis in the periods in which the expenses are
recognised.
3. Critical accounting judgements and key sources of estimation uncertainty
In the application of the Group's accounting policies, which are
described in note 2, the Directors are required to make judgements,
estimates and assumptions about the carrying amounts of assets and
liabilities that are not readily apparent from other sources. The
estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period, or in the period of the revision and future
periods if the revision affects both current and future
periods.
3.1 Critical judgements in applying the Group's accounting
policies
The following are the critical judgements, apart from those
involving estimations (which are dealt with separately below), that
the Directors have made in the process of applying the Group's
accounting policies and that have the most significant effect on
the amounts recognised in the financial statements.
Information on the funding position and going concern assessment
of the Group is set out in the detail in the Section "Going
Concern".
3.2 Key sources of estimation uncertainty
3.2.1 Revenue recognition
The accounting for long term contracts requires management to
apply judgement in estimating the total revenue and total costs
expected on each project and also to estimate the stage of
completion. Such estimates are revised as a project progresses to
reflect the current status of the project and the latest
information available to management. Project management teams
perform regular reviews to ensure the latest estimates are
appropriate.
Revenue from contracts to provide services is recognised by
reference to the stage of completion of the contract, determined as
the proportion of the total labour hours expected to provide the
service that have elapsed at the end of the reporting period. This
requires the Directors to estimate labour hours to complete, based
on the Company's experience and professional judgement.
A 1% decrease in margin on each ongoing long-term contract would
change the balance of contract assets/contract liabilities by
EUR604k.
3.2.2 Impairment of goodwill
Determining whether goodwill is impaired requires an estimation
of the value in use of the cash-generating units to which goodwill
has been allocated. The value in use calculation requires the
Directors to estimate the future cash flows expected to arise from
the cash-generating unit and a suitable discount rate in order to
calculate present value.
The key assumptions for determining the value in use include the
pre-tax discount rate, which has been estimated at 16.25% for the
goodwill registered for each of the Coatings and Supply segments
(and at 17.25% for ACA Marine, SAS) and a long-term growth rate of
3.0%. These estimates, including the methodology used, may have a
significant impact on the registered values and impairment losses.
Management has concluded that the estimated growth rate used does
not exceed the average long-term growth rate for the relevant
markets where the group operates (Europe and USA). Following the
impact of the COVID pandemic over the past several months,
Management are comfortable that these assumptions are still
reasonable.
3.2.3 Deferred tax asset
The company recognises deferred tax assets only to the extent
that it is probable that future taxable profits, feasible tax
planning strategies and deferred tax liabilities will be available
against which the tax losses can be utilised. Estimation of the
level of future taxable profits is therefore required in order to
determine the appropriate carrying value of the deferred tax asset.
If the forecast taxable profits were to fall by 10% in future years
there is no impact on the deferred tax asset recognised.
4. Segment information
The Groups reportable segments are determined by the internal
reporting regularly provided to the Group's Chief Operating
Decision Maker. The Chief Operating Decision Maker, who is
responsible for allocating resources and assessing performance of
the operating segments, has been identified as the Board of
Directors .
The Board of Directors has determined that, based on the Group's
management and internal reporting structure, the Group has two
reportable segments, Coatings - the provision of painting and other
finishing services to yachts and superyachts and Supply - the
distribution of yachting supplies to trade and other customers.
Any transaction between reportable segments is performed on an
arm's length basis.
4.1. Business segments
Segment information about the above businesses is presented
below for the year ended 31 December 2021 and 2020:
Year ended 31 December 2021
Coatings Supply Total reportable
segments
EUR 000 EUR 000 EUR 000
--------- -------- -------------------
Revenue 52,921 9,899 62,820
--------- -------- -------------------
Gross Profit 7,874 1,978 9,852
------------- -------- -----------------
Adjusted EBITDA (345) 851 506
Depreciation and amortisation (3,500)
Performance share plan 1
Exceptional items (3,092)
Operating Loss (6,085)
Finance costs (1,124)
Loss before tax (7,209)
=================
Year ended 31 December 2020
Coatings Supply Total reportable
segments
EUR 000 EUR 000 EUR 000
----------- -------- -----------------
Revenue 50,760 8,138 58,898
----------- -------- =================
Gross Profit 15,845 2,302 18,147
----------- -------- -----------------
Adjusted EBITDA 4,033 1,130 5,163
Depreciation and amortisation (2,995)
Performance share plan 90
Exceptional items (1,025)
Operating Profit 1,233
Finance costs (1,050)
Profit before tax 183
=================
Segment results include items directly attributable to a segment
as well as those that can be allocated on a reasonable basis.
At 31 December 2021 and 2020, the Group has the following
specific assets allocated to the business segments:
31 December 2021
Coatings Supply Total reportable
segments
EUR 000 EUR 000 EUR 000
--------- -------- -----------------
Goodwill 8,496 848 9,344
Inventories 1,156 2,452 3,608
Trade and other receivables 14,005 1,691 15,696
Trade, deferred income
and other payables (20,736) (4,297) (25,033)
========= ======== =================
31 December 2020
Coatings Supply Total reportable
segments
EUR 000 EUR 000 EUR 000
--------- -------- -----------------
Goodwill 8,422 848 9,270
Inventories 814 2,315 3,129
Trade and other receivables 10,437 1,320 11,757
Trade, deferred income
and other payables (14,547) (3,584) (18,131)
========= ======== =================
Assets, including PPE and certain intangibles, are used across
the Group and are not, therefore, attributable to any specific
segment.
4.2. Geographical location
Revenues from external customers attributed to the Group's
country of domicile and attributed to foreign countries from which
the Group derives revenue is presented below.
31 December 31 December
2021 2020
------------ ------------
EUR 000 EUR 000
------------ ------------
Spain 30,937 25,148
United Kingdom 1 628
Rest of Europe 25,573 24,239
Rest of World 6,309 8,883
62,820 58,898
============ ============
At 31 December 2021 the Group has non-current assets allocated
to Europe and "Rest of the World" for an amount of EUR31,072
thousand and EUR1,144 thousand, respectively (EUR29,415 thousand
and EUR1,986 thousand, respectively, at 31 December 2020).
4.3. Information about major customers
The revenues from transactions with individual customers which
contribute 10% or more to the Group's revenue for the year ended 31
December 2021 are detailed below. There are no revenues from
transactions with individual customers which contribute 10% or more
to the Group's revenue for the year ended 31 December 2020.
31 December 2021
----------------------------- -----------------
Customer
----------------------------- -----------------
Marina Barcelona 92,
S.A. 18%
Alblasserdam Yachtbuilding,
B.V. 15%
5. Operating (loss)/profit
Operating (loss)/profit has been arrived at after
(charging)/crediting:
31 December 31 December
2021 2020
------------ ------------
EUR 000 EUR 000
------------ ------------
Exceptional items (see note
6) (3,092) (1,025)
Net foreign exchange losses (39) (15)
Depreciation of property, plant
and equipment (2,539) (1,996)
Amortisation of intangible
assets (961) (969)
(Losses) / gains on disposals (8) 38
Reversal of impairment/(impairment)
on trade receivables 5 (32)
Cost of materials (13,890) (11,341)
Staff costs (see note 8) (24,293) (20,400)
============ ============
Other losses consist net foreign exchange losses and losses on
disposals.
5.1. Other operating costs
31 December 31 December
2021 2020
------------ ------------
EUR 000 EUR 000
------------ ------------
Cost of materials 13,890 11,341
Staff costs 24,293 20,400
Other costs of sales 16,426 14,114
Administrative expenses 7,705 7,880
Depreciation and amortisation 3,500 2,995
Exceptional items 3,092 1,025
Performance share plan (1) (90)
68,905 57,665
============ ============
6. Exceptional items
31 December 31 December
2021 2020
------------ ------------
EUR 000 EUR 000
------------ ------------
Harwood fees (443) -
Covid -19 (1,830) (812)
Nobiskrug bad debt (772) -
Restructuring costs (47) (213)
(3,092) (1,025)
============ ============
Excluding the impact of the exceptional items shown above, the
operating loss for 2021 was EUR2,993 thousand (2020: profit
EUR2,258 thousand).
COVID-19
During 2021, the Group incurred significant costs that were a
direct result of the COVID pandemic. These costs fall into three
broad categories: new costs, incremental employee related costs and
additional non-employee costs. In 2020 the Group also benefited
from a government backed program in the USA. These COVID related
costs and benefit have been treated as exceptional.
The Group's workforce is highly mobile, regularly moving between
countries, shipyards and ships, mingling with significant numbers
of other people, and working in close proximity. The pandemic meant
that they operate in an environment where there were significant
new burdens in terms of personal protective equipment, social
distancing and testing. Travel was significantly disrupted and then
affected by the varying social distancing measures required by
different countries and shipyards.
New costs
In response to the pandemic, the Group incurred new costs for
products and services that it had to procure which were not part of
ordinary trading. These included testing (PCR, lateral flow, blood
tests, etc.), PPE for the parts of the workforce that had not
previously required it, screens to provide protective environments
within offices and other workplaces. These costs totalled EUR470
thousand 2021 and EUR105 thousand 2020.
Additional workforce costs
The largest impact on employee related costs during 2020 was
driven by the use of quarantine to try and reduce infection rates.
The Group's highly mobile workforce was required to regularly
quarantine upon entering a country, before entering a shipyard or
upon returning to Spain. Positive tests for infection of one team
member frequently led to whole teams being quarantined for up to
two weeks. In these scenarios the company was required to bring in
additional flexible labour to maintain production schedules while
employees and existing sub-contractors were quarantined. To
mitigate the costs of quarantine, the Group offered incentives to
employees while travelling to stay abroad for longer periods and
avoid having to quarantine as frequently.
The overall impact of these employee related costs was an
increase in manpower of EUR152 thousand in 2021 and EUR425 thousand
in 2020. This does not include the costs of employees who became
ill with COVID which were treated as ordinary employee
expenses.
Additional non-employee costs
Following the introduction of social distancing in 2020, the
Group had to significantly alter its working protocols. Most
seriously impacted by these changes were the Group's travel
arrangements. Where previously we could accommodate four employees
in an apartment on a project, we had to reduce this number to two,
effectively doubling the accommodation costs on the project. In
January 2022, an agreement was reached with the Group's workforce
that has eliminated these additional accommodation costs going
forward as social distancing requirements have been relaxed in the
countries where the Group operates. Combined, these non-employee
related costs totalled EUR1,207 thousand during 2021 and EUR 542
thousand during 2020.
Loan Forgiveness
In the USA, a government funded support programme known as the
Paycheck Protection Program (PPP) was put in place in 2020 in
response to COVID. Under the terms of the PPP, companies could take
out a loan principally for the purposes of maintaining existing
employment levels. Under certain conditions, the loan would
subsequently be forgiven. In August 2020, Pinmar USA received
EUR400 thousand as part of PPP. The company was subsequently
determined to have met the conditions of the program and the loan
was forgiven. This was offset against exceptional COVID costs
during 2020.
Harwood Fees - Potential offer by Harwood Capital
On 9 April 2021 Harwood Capital, one of the Company's major
shareholders, disclosed that it was in the preliminary stages of
evaluating a possible offer for the Company for the entire issued
and to be issued share capital of the Company.
The Directors immediately commenced discussions with Harwood
regarding its intentions. As part of this exercise, the Company
also spoke with several other significant shareholders to gauge
their response to Harwood's approach. As a result of these
discussions, the Company agreed to allow Harwood a period of due
diligence so that Harwood could form a better view from which to
make any firm offer.
Following several months of due diligence and negotiations,
Harwood informed the Group on 29 October 2021 that it would not be
making a formal offer for the Group.
As part of the discussions with Harwood, to ensure compliance
with various requirements of the London Stock Exchange and to
manage the due diligence process, the Group incurred costs with
external advisers wholly and specifically in relation to the
Harwood approach. These costs, totalling EUR443 thousand, have been
treated as exceptional in 2021.
Nobiskrug GmbH
On 12 April 2021, the Nobiskrug shipyard went into
administration. At the time, the Group was working on a large Refit
project and two New Build projects in this shipyard. The total
amount due to the Group from Nobiskrug was EUR2.8 million (net of
VAT). Of this amount, EUR2.0 million related to the Refit project
and the rest related to the two New Builds.
Management immediately entered into discussions with the
administrator of the shipyard, the owner of the large Refit
project, and eventually the new owner of the shipyard in order to
reach an agreement to restart the project. As part of these
discussions, it was always agreed that the Group would receive
payment for the associated outstanding invoices. As a result of
this agreement, no bad debt provision was made in relation to these
invoices in 2021. In January 2022, the Group received payment for
the outstanding invoices and recommenced work on the Project on
broadly similar terms to the original contract.
Management also entered into discussions regarding the two New
Build projects. Due to the greater uncertainty surrounding the
restart of these two projects, a bad debt provision of EUR772
thousand was taken in 2021 to reflect the diminished recoverability
of those invoices.
This is the first instance of a shipyard going into
administration in the Group's history. The rarity of the event,
combined with the scale of the Group's exposure, led to the bad
debt provision of EUR772 thousand associated with it being treated
as exceptional.
The tax effect of the above exceptional costs amounted to EUR661
thousand for the year ended 31 December 2021 (EUR213 thousand for
the year ended 31 December 2020).
7. Auditors' remuneration
The fees for audit and non-audit services provided by the
auditors of the Group's consolidated financial statements and of
certain individual financial statements of the consolidated
companies, PricewaterhouseCoopers LLP., and by companies belonging
to PricewaterhouseCoopers's network, were as follows:
31 December 31 December
2021 2020
------------- ------------
EUR 000 EUR 000
------------- ------------
Fees payable to the Company's
auditors for the audit of the
parent company and consolidated
financial statements 153 85
Fees payable to the Company's
auditors for the audit of company's
subsidiaries 170 122
Additional fees payable to the
company's auditors for prior
year audit 41 108
Fees payable to the Company's
auditors for other services:
Other related assurance services - 67
Other non-audit services 5 32
369 414
============= ============
8. Staff costs
The monthly average number of employees (including Executive
Directors) was:
31 December 31 December
2021 2020
-------------- --------------
Senior Management 10 12
Sales & Administration 95 91
Production 327 292
432 395
============== ==============
Their aggregate remuneration comprised:
31 December 31 December
2021 2020
-------------- --------------
EUR 000 EUR 000
-------------- --------------
Wages 18,946 16,345
Social security costs 5,347 4,055
-------------- --------------
24,293 20,400
============== ==============
Directors' emoluments:
31 December 31 December
2021 2020
-------------- --------------
EUR 000 EUR 000
-------------- --------------
Directors' emoluments
Salaries, fees and
bonus 968 868
Performance share
plan costs 110 194
--------------
Highest paid Director
Salaries, fees and
bonus 281 263
Performance share
plan costs 49 105
-------------- --------------
The performance share plan costs detailed in the above table
correspond to the expense registered during the year. No share
options have been exercised in 2021 and 2020.
9. Finance costs
31 December 31 December
2021 2020
------------- -------------
EUR 000 EUR 000
------------- -------------
Interest on bank overdrafts
and loans 677 880
Unwinding of capitalised loan 197 -
issue costs (note 17)
Interest on obligations under
leases 48 19
Other financial costs - net 202 151
------------- -------------
1,124 1,050
------------- -------------
10. Tax
10.1 Tax recognised in profit or loss
31 December 31 December
2021 2020
------------- -------------
EUR 000 EUR 000
------------- -------------
Corporation Tax
Current year (142) (47)
Prior years (1,065) -
------------- -------------
(1,207) (47)
Deferred tax
Timing differences 197 196
Tax losses 1,507 (80)
------------- -------------
1,704 116
------------- -------------
Total 497 69
============= =============
Spanish Corporation tax is calculated at 25% of the estimated
taxable profit for the year. Taxation for other jurisdictions is
calculated at the rates prevailing in the respective
jurisdictions.
The income tax expense for the year can be reconciled to the
accounting (loss)/profit as follows:
31 December 31 December
2021 2020
------------ ------------
EUR 000 EUR 000
------------ ------------
Profit/(Loss) before tax
from continuing operations (7,209) 183
------------ ------------
Tax at the Spanish corporation
tax rate (25%) 1,802 (46)
Overseas tax differences (86) 32
Tax effect of incomes / (expenses)
that are not considered in
determining tax profit (1,112) 77
Utilisation of previously - -
unrecognised losses
Other differences (107) 6
Total 497 69
============ ============
10.2 Deferred tax balances
The following is an analysis of deferred tax assets/
(liabilities) presented in the consolidated statement of financial
position:
31 December 2021
Opening Recognised Closing
Balance in profit Balance
or loss
--------- ----------- ---------
EUR 000 EUR 000 EUR 000
Property, plant &
equipment 108 11 119
Tax losses 1,110 1,496 2,606
Intangible and tangible
assets (3,148) 197 (2,951)
Net (1,930) 1,704 (226)
========= =========== =========
Deferred tax assets 429 1,507 1,936
========= =========== =========
Deferred tax liabilities (2,359) 197 (2,162)
========= =========== =========
31 December 2020
Opening Recognised Closing
Balance in profit Balance
or loss
--------- ----------- -----------
EUR 000 EUR 000 EUR 000
Property, plant
& equipment 74 34 108
Tax losses 1,224 (114) 1,110
Intangible and tangible
assets (3,345) 197 (3,148)
Net (2,047) 117 (1,930)
========= =========== =========
Deferred tax assets 508 (79) 429
========= =========== =========
Deferred tax liabilities (2,555) 196 (2,359)
========= =========== =========
Deferred tax assets are calculated at the existing tax rates for
the specific jurisdiction where the losses have occurred.
The deferred tax assets from tax losses are related to tax
losses from Spain and other countries like France and United States
with no time limit for their application.
31 December 31 December
2021 2020
------------ ------------
EUR 000 EUR 000
------------ ------------
Between two and five 2,607 -
years
More than five years - 1,109
2,607 1,109
============ ============
10.3 Unrecognised deductible temporary differences, unused tax
losses and unused tax credits
31 December 31 December
2021 2020
------------ ------------
EUR 000 EUR 000
------------ ------------
Tax losses 483 242
Deductible temp. diff 193 -
676 242
============ ============
In determining the recoverable amounts of the Group's deferred
tax assets, the Group applied the future taxable income projections
from the approved business plans. Given the estimation uncertainty
of the timing and duration of the recovery from COVID-19, the Group
exercises judgement in the determination of cash flows during this
recovery and subsequent periods. In exercising this judgement,
while there are no time restrictions on the utilisation of historic
tax losses in the principal jurisdictions in which the Group
operates, future cash flow projections are forecast for a period of
up to two years from the balance sheet date.
The Spanish Tax Authority has recently conducted an audit into
certain legacy tax matters relating to a period several years prior
to the Company's IPO on AIM in 2017. The audit formal conclusion
was received on 27 July 2021 and agreement in principle has now
been reached as to the amount owed by the Company. The total amount
owed related to prior year was EUR1,285 thousand (956 thousand of
corporate tax, 186 thousand of penalties and 143 thousand of
interest expense).
11. Earnings per share for profit attributable to the ordinary equity holders of the Company
From continuing operations
Adjusted basic earnings are presented to eliminate the effect of
the exceptional items, amortisation and impairment of intangible
assets, gains on financial instruments and performance share plan
costs (considering the tax effect of these adjustments):
31 December 31 December
2021 2020
------------ --------------
EUR 000 EUR 000
------------ --------------
Earnings attributable to shareholders (6,712) 252
------------ ----------------
Amortisation of intangible assets
and depreciation of tangible assets 3,500 2,995
Performance share plan - (90)
Exceptional items 3,092 1,025
Tax effect of above adjustments (2,175) (1,297)
------------ ----------------
Adjusted basic earnings (2,295) 2,885
============ ================
Basic earnings per share are calculated by dividing net profit
for the year attributable to the Group (i.e. after tax and
non-controlling interests) by the weighted average number of shares
outstanding during that year.
Diluted earnings per share have been calculated on a similar
basis taking into account dilutive potential shares under the
agreements disclosed in note 22.
31 December 31 December
2021 2020
------------ ------------
Earnings for the period attributable
to shareholders (EUR000) (6,712) 252
Weighted average number of shares 46,640,000 46,640,000
Basic earnings per share (EUR) (0.14) 0.00
============ ============
Adjusted basic earnings per share
(EUR) (0.05) 0.07
============ ============
Dilutive weighted average number
of shares 47,987,728 47,987,728
------------ ------------
Diluted earnings per share (EUR) (0.14) 0.00
============ ============
Adjusted diluted earnings per share
(EUR) (0.05) 0.07
============ ============
12. Goodwill and Intangible assets
Goodwill
Goodwill
EUR 000
---------------------- ---------
Cost
At 1 January 2020 9,350
Exchange differences (80)
---------
At 31 December 2020 9,270
=========
Exchange differences 74
---------
At 31 December 2021 9,344
=========
Carrying amount
At 31 December 2021 9,344
=========
At 31 December 2020 9,270
=========
Goodwill acquired in a business combination is allocated, at
acquisition, to the cash generating units (CGUs) or group of units
that are expected to benefit from that business combination. The
carrying amount of goodwill has been allocated as follows:
31 December 31 December
2021 2020
------------ ------------
EUR 000 EUR 000
------------ ------------
Coatings 8,496 8,422
Supply 848 848
9,344 9,270
============ ============
Other intangible assets
Customer relationships, Software Total
brands and
backlog
EUR 000 EUR 000 EUR 000
-------------------------- ------------------------ --------- --------
Cost
At 1 January 2020 15,233 302 15,535
Additions - 617 617
--------------------------
At 31 December 2020 15,233 919 16,152
Additions - 917 917
-------------------------- ------------------------ --------- --------
At 31 December 2021 15,233 1,836 17,069
-------------------------- ------------------------ --------- --------
Accumulated amortisation
At 1 January 2020 4,915 172 5,087
Charge of the period 922 47 969
-------------------------- ------------------------ --------- --------
At 31 December 2020 5,837 219 6,056
Charge of the period 919 42 961
-------------------------- ------------------------ --------- --------
At 31 December 2021 6,756 261 7,017
-------------------------- ------------------------ --------- --------
Carrying amount
At 31 December 2021 8,477 1,575 10,052
-------------------------- ------------------------ --------- --------
At 31 December 2020 9,396 700 10,096
-------------------------- ------------------------ --------- --------
Impairment reviews
The Group performs an annual impairment review for goodwill and
other intangible assets, or more frequently if there are
indications that these might be impaired.
Testing is carried out by allocating the carrying value of these
assets to cash-generating units (CGUs) and determining the
recoverable amounts of those CGUs. The recoverable amount is the
higher of the fair value minus the costs of selling and its value
in use. Value in use calculations are based on cash-flow
discounting methods.
The discounted cash-flows are calculated based on 3-year
projections of the budgets approved by the Board of Directors.
These cash-flows consider past experience and represent the best
estimate of management on future market developments and Group
performance.
The key assumptions for determining the value in use include the
pre-tax discount rate, which has been estimated at 16.25% for the
goodwill registered for each of the Coatings and Supply segments
(and at 17.25% for ACA Marine, SAS) and a long-term growth rate of
3.0%. These estimates, including the methodology used, may have a
significant impact on the registered values and impairment losses.
Management has concluded that the estimated growth rate used does
not exceed the average long-term growth rate for the relevant
markets where the group operates (Europe and USA).
The Group has conducted an analysis of the sensitivity of the
impairment test to changes in the key assumptions used to determine
the recoverable amount for each of the group of CGUs to which
goodwill and other intangible assets are allocated.
As part of this scenario analyses, the Directors considered the
impact on the recoverable amounts of the assets based upon the
following changes to the two key assumptions set out above for both
of the periods under review:
-- Long-term growth rate: reduced from 3.0% to 2.0%
-- Pre-tax discount rate: increased from 16.25% to 17.25%
If we reduce the long-term growth rate by 1% and decrease the
pre-tax discount rate by 2% the level of headroom would decrease by
EUR3 million.
Under neither of these scenarios did the recoverable amounts
fall below or anywhere near the carrying value of the assets. As a
result of this analysis, the Directors believe that any reasonably
possible change in the key assumptions would not cause the
aggregate carrying amount to exceed the aggregate recoverable
amount of the related CGUs.
13. Property, plant and equipment
Property Plant and Other plant, Other tangible Total
equipment tools, assets
and furniture
EUR 000 EUR 000 EUR 000 EUR 000 EUR 000
-------------------------- --------- ----------- --------------- --------------- --------
Cost
At 1 January 2020 5,942 2,211 3,743 9,996 21,892
Reclassifications 47 28 (61) (14) -
Additions 71 203 127 2,386 2,787
IFRS 16 - Right of use
assets - Additions 516 - - - 516
Disposals - (12) (11) (343) (366)
IFRS 16 - Right of use
assets - Disposals (392) - - - (392)
Exchange differences - (40) (1) (9) (50)
-------------------------- --------- ----------- --------------- --------------- --------
At 31 December 2020 6,184 2,390 3,797 12,016 24,387
Reclassifications 219 (219) -
Additions 20 198 68 290 576
IFRS 16 - Right of use
assets - Additions 819 - - 1,943 2,762
Disposals - (5) (16) (18) (39)
Exchange differences (9) (75) (2) (14) (100)
-------------------------- --------- ----------- --------------- ---------------
At 31 December 2021 7,233 2,508 3,847 13,998 27,586
-------------------------- --------- ----------- --------------- --------------- --------
Accumulated amortisation
At 1 January 2020 1,980 1,391 2,803 5,366 11,540
Charge of the period 112 200 208 594 1,114
IFRS 16 - Right of use
assets - Charges 882 - - - 882
Disposals - (11) (11) (326) (348)
Exchange differences - 26 - 4 30
-------------------------- --------- ----------- --------------- --------------- --------
At 31 December 2020 2,974 1,606 3,000 5,638 13,218
Charge for the period 111 189 204 589 1,093
IFRS 16 - Right of use
assets - Charges 1,179 - - 267 1,446
Disposals - (1) (3) (27) (31)
Exchange differences (3) (49) - (9) (61)
-------------------------- --------- ----------- --------------- ---------------
At 31 December 2021 4,261 1,745 3,201 6,458 15,665
-------------------------- --------- ----------- --------------- --------------- --------
Carrying amount
At 31 December 2020 3,210 784 797 6,378 11,169
-------------------------- --------- ----------- --------------- --------------- --------
At 31 December 2021 2,972 763 646 7,540 11,921
-------------------------- --------- ----------- --------------- --------------- --------
Property, plant and equipment consists of different categories
of tangible assets which are used across the Group in the delivery
of goods and services. Other tangible assets consist primarily of
scaffolding equipment.
The main additions for the year ended 31 December 2021 and 2020
correspond to the acquisition of machinery, other equipment, a new
property lease and scaffolding.
Leases
This note provides information for the leases where the group is
a lessee. The amounts recognised in the balance sheet are as
follows:
31 December 31 December
2021 2020
------------ ------------
EUR 000 EUR 000
------------ ------------
Non-current assets: Property,
plant and equipment - Right of
use asset 3,239 2,906
Current liabilities: Lease liabilities (1,374) (2,035)
Non-current liabilities: Lease
liabilities (1,872) (904)
------------ ------------
The following table sets out a maturity analysis of lease
payments related to IFRS16, showing the undiscounted lease payments
to be made after the reporting date.
In thousands of euros 2021 2020
Less than a year 1,374 1,004
One to five years 1,872 717
More than five years - -
------ ------
During the year, the Group made payments of EUR 2,485 thousand
towards leases (2020: EUR 1,505 thousand).
During 2021, the Group conducted a sensitivity analysis which
results that a change of a 1% in the incremental borrowing rate
would have the following impact on the Group financial
statements:
2021
--------
EUR 000
--------
Balance Sheet 1% 3%
Increase/(decrease) in
Right of Use assets 19 (19)
Increase/(decrease) in
lease liabilities 21 (21)
--------
Profit for the year
Increase/(decrease) in
depreciation (2) 2
========
14. Inventories
31 December 31 December
2021 2020
------------ ------------
EUR 000 EUR 000
------------ ------------
Raw materials 1,156 894
Goods for resale 2,452 2,235
3,608 3,129
============ ============
The cost of inventories recognised as an expense during the year
amounted to EUR13,890 thousand (EUR11,341 thousand in 2020).
15. Trade and other receivables
31 December 2021 31 December 2020
----------------- -----------------
EUR 000 EUR 000
----------------- -----------------
Trade receivables 8,685 5,798
Contract assets 5,429 4,018
Other receivables 906 1,254
Tax receivables 676 687
15,696 11,757
================= =================
Trade and other receivables are all current and any fair value
difference is not material. Trade receivables are considered past
due once they have passed their contracted due date.
Amounts invoiced to customers are due in 30 days. The Group
recognises an allowance for doubtful debts of 100% against those
receivables overdue that after a specific analysis are considered
not recoverable.
Trade receivables disclosed above include amounts (see below for
aged analysis) which are past due at the reporting date but against
which the Group has not recognised an allowance for doubtful
receivables because there has not been a significant change in
credit quality of the customers and the amounts are still
considered recoverable.
The Group does not hold any collateral or other credit
enhancements over any of its trade receivables nor does it have a
legal right of offset against any amounts owed by the Group to the
counterparty.
Amounts receivable from customers can be analysed as
follows:
31 December 31 December
2021 2020
------------ ------------
EUR 000 EUR 000
------------ ------------
Amount receivable not past
due 2,550 1,235
Amount receivable past due
but not impaired 6,135 4,563
Amount receivable impaired
(gross) 211 216
Less impairment (211) (216)
8,685 5,798
============ ============
Neither the amounts due from service contract customers nor
receivables from other debts are past due or impaired in the
current and prior periods.
The ageing of past due but not impaired receivables is as
follows:
31 December 31 December
2021 2020
------------ ------------
EUR 000 EUR 000
------------ ------------
<60 days 2,879 4,240
61-90 days 33 73
>91 days 3,223 250
6,135 4,563
============ ============
On 12 April 2021, the Nobiskrug shipyard went into
administration. At the time, the Group was working on a large Refit
project and two New Build projects in this shipyard. The total
amount due to the Group from Nobiskrug was EUR2.1 million (net of
VAT).
Management immediately entered into discussions with the
administrator of the shipyard, the owner of the large Refit
project, and eventually the new owner of the shipyard in order to
reach an agreement to restart the Refit project. As part of these
discussions, it was always agreed that the Group would receive
payment for the outstanding invoices related to the Refit project.
As a result of this agreement, no bad debt provision was made in
relation to these invoices in 2021. In January 2022, the Group
received payment of EUR2.2 million for the outstanding invoices and
recommenced work on the Project on broadly similar terms to the
original contract. A bad debt provision of EUR771 thousand was
recognised in relation to the other Nobiskrug balances.
The movement in the allowance recorded for doubtful debts is as
follows:
31 December 31 December
2021 2020
------------ ------------
EUR 000 EUR 000
------------ ------------
Balance at the beginning
of the year (216) (222)
Transfer - (29)
Amounts written off
during the year as
uncollectible 772 29
Impairment losses (recognised) (772) (32)
Amounts recovered during
the year 5 38
(211) (216)
============ ============
Contract assets
The contract assets primarily relate to the Group's right to
consideration for construction work completed but not invoiced at
the balance sheet date. The contract assets are included within the
caption "Trade and other receivable". The balance increased during
the year by EUR 1.4 million as the Group had worked more during the
period than amount billed which is reflected in the increase in
trade receivables.
16. Cash and cash equivalents
31 December 31 December
2021 2020
------------ ------------
EUR 000 EUR 000
------------ ------------
Cash and cash equivalents 443 3,600
443 3,600
============ ============
Cash and cash equivalents comprise cash and short-term bank
deposits with an original maturity of three months or less. The
carrying amount of these assets is approximately equal to their
fair value.
Net debt
Movements in net debt were as follows:
Borrowings
31 December 31 December
2021 2020
------------ ------------
EUR 000 EUR 000
Syndicated loan 2,000 4,918
ICO loan 3,500 3,000
Related Party Loan - Harwood 2,988 -
Capitalised costs - net (265) (109)
Revolving credit facility - 1,310
Factoring facility 5,492 3,179
CDTI loan 231 -
Credit facilities 2,000 63
Total borrowings 15,946 12,361
============ ============
Amount due for settlement
within 12 months 12,882 9,789
============ ============
Amount due for settlement
after 12 months 3,064 2,572
============ ============
The difference in capitalised costs - net set out above and the
figure in note 9 relates to fees charged to the Group by the banks
for a modification of the syndicated loan facility.
17.1 Summary of the borrowing arrangements
Syndicated loan -
On 3 March 2016, the Group subsidiary, Hemisphere Coating
Services, S.L.U., signed a syndicated loan agreement with three
financial institutions, which was originally due to expire in March
2021.
This syndicated loan is guaranteed by certain of the Group
subsidiaries and consists of two different facilities:
-- Facility A: loan for a total amount of EUR9,180 thousand with
biannual maturities of EUR918 thousand until it was fully repaid in
March 2021.
-- Facility B: loan for a total amount of EUR4,000 thousand
maturing at the end of the contract on March 2021 . This facility
was renegotiated in March 2021 extending the facility to December
2022, requiring four EUR1m payments every six months commencing in
June 2021. There are covenants attached to this facility.
Both facilities bear interest at EURIBOR +3%.
The loan requires compliance with certain financial covenants.
For the year ended 31 December 2021 the Group have obtained a
waiver for financial covenants.
ICO Loan -
On 29 June 2020, the Group entered into floating rate syndicated
financing agreements of EUR3.0 million of new borrowing facilities
through the Spanish government's ICO loan facility. The ICO in
Spain guarantees 70 per cent of the value of loans.
On 5 October 2021, the Group entered into floating rate
financing agreement of EUR0.5 million of new borrowing facilities
through the Spanish government's ICO loan facility. The ICO in
Spain guarantees 70 per cent of the value of loans.
Under the terms of these ICO loans, there is no repayment during
the twelve months following execution and the outstanding balance
is repaid over the subsequent 48 months via equal monthly payments.
The payback term was renegotiated in March 2021 extending the no
repayment period from twelve months to twenty-four months.
The ICO facilities bear interest at 4% and 1.5%. The amount
drawn on 31 December 2021 was EUR3.5 million.
Related Party Loan -
In July 2021, the Company agreed terms with North Atlantic
Smaller Companies Investment Trust plc ("NASCIT", an associate of
Harwood Capital LLP ("Harwood") , the Company's second largest
shareholder) to provide the Company with a short-term loan ("Loan"
or "Loan Agreement") for EUR3.0 million.
The maturity date of the Loan was 31 December 2021, however, on
15 December 2021, the Company agreed terms with Harwood Capital
Management Limited, an associate of Harwood, to advance a new loan
of EUR3.0 million (the "New Loan" or "New Loan Agreement") which
was used to repay the Loan.
The New Loan attracts interest at 8% p.a., with a maturity date
of 31 March 2022. There are no arrangement fees associated with the
New Loan, which can be repaid by the Company at any time without
penalty on or before its maturity date.
Additionally, the Group has at its disposal:
-- Credit facilities up to EUR 2.0 million.
-- Factoring and discounting facilities up to EUR 9 million.
-- Bank guarantees up to EUR3.4 million, of which EUR2.5 million
were drawn as of 31 December 2021.
As a result of the above agreements, at year end the Group has
bank facilities totalling EUR14.4 million of which EUR10.0 million
were drawn and EUR4.4 million were undrawn as of 31 December
2021.
18. Trade, deferred income and other payable
31 December 31 December
2021 2020
------------ ----------------------
EUR 000 EUR 000
Trade payables 14,617 12,020
Contract liabilities -
Deferred income 7,933 3,639
Wages and salaries - 2
Tax payables 2,483 2,470
25,033 18,131
============ ======================
Under the caption "Contract liabilities - Deferred income" are
contractual advances from customers related to on-going and future
projects. This number increased by EUR4,294 thousands as the Group
received more in deposits from clients during the period than it
did in 2020. As revenue is recognised in relation to these
contracts, the liability is decreased by an equal amount until the
liability is fully extinguished.
The average credit period taken for trade purchases is normally
between 30 and 60 days. The Group has financial risk management
policies in place to ensure that all payables are paid within the
pre-agreed credit terms.
The directors consider that the carrying amount of trade
payables approximates to their fair value.
19. Provisions
EUR 000
------------------
At 1 January
2020 487
------------------
Charge for the
year 271
Released (383)
At 31 December 2020 375
------------------
Charge for the
year 195
Released (356)
At 31 December 2021 214
------------------
Current 195
==================
Non-current 19
==================
31 December 31 December
2021 2020
------------------ ----------------
EUR 000 EUR 000
Guarantee provision 195 356
Legal and tax
provision 19 19
214 375
================== ================
As of 31 December 2021, the Group has a current provision
amounting to EUR195 thousand (2020: EUR356 thousand), for
re-painting guarantees contemplated in the contractual agreements
with clients for the painting of boats and vessels. This provision
is calculated as guarantee borne in the past year compared to the
total turnover for the corresponding year.
At 31 December 2021 the Group and its legal advisers consider
that the provisions recorded are sufficient for covering future
obligations.
20. Equity
At 31 December 2020 and 2021 the Company's share capital
amounted to EUR106 thousand represented by 46,640,000 ordinary
shares with a par value of GBP0.002, issued and fully paid up.
No dividend was declared or paid during the year ended 31
December 2021.
At 31 December 2021 the Group has a share based payment reserve
amounting to EUR284 thousand based on the agreements disclosed in
note 22.
21. Notes to the Cash Flow Statement
2021 2020
EUR 000 EUR 000
----------- ---------
(Loss) / profit for the year before
tax (7,209) 183
----------- ---------
- Depreciation and amortisation 3,500 2,995
- Other gains (46) -
- Performance share plan (1) (90)
- Finance costs 1,124 1,050
Adjustments to (Loss) / profit 4,577 3,955
----------- ---------
- Increase in inventories (479) (594)
- Increase in trade and other receivables (3,978) (2,682)
- Increase in trade, other payables
and provisions 6,739 554
Changes in working capital 2,282 (2,722)
----------- ---------
- Interest paid (1,124) (1,050)
- Income tax paid (1,292) (470)
----------- ---------
Other cash flows used in operating
activities (2,416) (1,520)
----------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES (2,766) (104)
=========== =========
22. Share-based payments
Performance Share Plan
The Company established a Performance Share Plan (the "PSP") for
Directors and other selected senior management, which was adopted
by the Board on 23 June 2017.
This award grants an option to acquire ordinary shares in the
capital of the Company at a price of GBP0.002 per ordinary share,
subject to the Performance Target. The award will normally vest on
the third anniversary of grant or, if later, when the Remuneration
Committee determines the extent to which any performance conditions
have been satisfied. These will be exercisable up until the tenth
anniversary of grant unless they lapse earlier.
In 2020, the 2017 plan was cancelled because the performance
conditions had not been satisfied.
The Company established a subsequent Performance Share Plan (the
"PSP") for Directors and other selected senior management, which
was adopted by the Board on 18 August 2020. The rules and
conditions of this plan are identical to the 2017 plan.
Details of the share options outstanding during the year are as
follows:
Number of Weighted average
share options exercise price
(pence)
---------------------------- --------------- -----------------
Outstanding at 1 January
2020 557,334 0.2
Granted during the year 518,822 0.2
Cancelled during the year (259,569) 0.2
Outstanding at 31 December
2020 816,587 0.2
---------------------------- --------------- -----------------
Granted during the year - 0.2
Cancelled during the year (363,919) -
Outstanding at 31 December
2021 452,668 0.2
---------------------------- --------------- -----------------
Assumptions used in the Black-Scholes model to determine the
fair value:
2020 PSP
--------------------------- ---------
Share price at grant date
(pence) 69.5
Exercise price (pence) 0.2
Option life (years) 3
Risk-free interest rate
(%) 0.63%
Expected volatility (%) 66.7%
Expected dividend yield
(%) 0%
--------------------------- ---------
Expected volatility was determined by calculating the historical
volatility of the Group's share price since the Company was
admitted to the AIM Market.
In 2021 the Group recognised a credit amounting to EUR1 thousand
for these plans. In 2020, the Group has recognised a credit
amounting to EUR90 thousand for these plans.
Warrant
The Company granted a warrant to Zeus Capital to subscribe for
such number of ordinary shares as is equal to 1 per cent of the
enlarged share capital of the Company following completion of the
placing. The warrant shall be exercisable in whole or in part at
any time during the period of 5 years from the first anniversary of
Admission. The warrant shall be exercisable at the placing price
multiplied by 105%.
Details of the warrant outstanding during the year are as
follows:
Number of Weighted average
share options exercise price
(pence)
---------------------------- --------------- -----------------
Outstanding at 31 December
2021 466,400 105
---------------------------- --------------- -----------------
Outstanding at 31 December
2020 466,400 105
---------------------------- --------------- -----------------
Assumptions used in the Black-Scholes model to determine the
fair value:
Share price at grant
date (pence) 100
Exercise price (pence) 105
Option life (years) 5
Risk-free interest
rate (%) 2.50%
Expected volatility
(%) 28.60%
-------
23. Financial instruments
Capital risk management
The Group manages its capital to ensure that entities in the
Group will be able to continue as going concerns while maximising
the return to shareholders through the optimisation of the debt and
equity balance. The Directors regularly review the working capital
forecasts of the Group to understand the impact of Group
performance and outside factors, such as the COVID pandemic, on the
liquidity position of the Group. Where necessary, the Directors
alter the balance of different types of equity that the Group can
access.
The capital structure of the Group consists of net debt
(borrowings disclosed in note 17) and equity of the Group.
Significant accounting policies
Details of the significant accounting policies and methods
adopted (including the criteria for recognition, the basis of
measurement and the bases for recognition of income and expenses)
for each class of financial asset, financial liability and equity
instrument are disclosed in note 2.
Categories of financial instruments
31 December 31 December
2021 2020
EUR 000 EUR 000
-----------
Financial assets
At amortised cost
Cash and cash equivalents (note 16) 443 3,600
Loans and receivables - long term 225 197
Other financial assets 130 6
Trade and other receivables (note
15) 15,020 11,756
15,818 15,559
31 December 31 December
2021 2020
EUR 000 EUR 000
-----------
Financial liabilities
At amortised cost
Amortised cost - borrowings (note
17) 10,454 9,203
Finance lease liabilities - 24
Lease liabilities (note 13) 3,246 2,939
Other financial liabilities - 38
Liabilities under factoring facilities
(note 17) 5,492 3,179
Trade payables (note 18) 14,617 12,020
At fair value through P&L
Derivative instruments not designated
hedge accounting relationships - 2
33,809 27,405
The carrying value of all financial assets and financial
liabilities equate to the fair value.
Management of the Group's financial risks is centralised in the
Group's Finance Department, which has established mechanisms to
monitor interest rate and exchange rate exposure, as well as credit
and liquidity risk. The main financial risks affecting the Group
are indicated below:
1. Credit risk
Credit risk arises from cash and cash equivalents and credit
exposure to customers, including outstanding receivables. Credit
risk is managed on a group basis.
For banks and financial institutions, only those with a Moody's
rating of AAA (or equivalent) or with which the Group has an
existing borrowing relationship are accepted.
Clients within the Coatings sector are either ultra-high net
worth individuals, the companies through which they own their boats
or shipyards that act as main contractors on behalf of the boat
owners. The credit risk of the first two categories is extremely
low. The risk is also mitigated by the fact that the Group has to
complete a project before the owner can use the vessel again. The
staged payments typical in these types of contracts means that
there is very little exposure to unpaid receivables by the end of a
project.
The Group regularly reviews the credit ratings of each shipyard
with whom in contracts to understand any potential credit risk
associated with them. Individual risk limits are set based on
external ratings in accordance with limits set by the board.
Credit exposure within the supply business comprises trade
receivables with yachts and their owners which are described above.
Trade customers (e.g. not yachts) have individual credit limits
based on public ratings and payment history. The compliance with
credit limits by Supply customers is regularly monitored by line
management. For some trade receivables the group may obtain
security in the form of guarantees, deeds of undertaking or letters
of credit which can be called upon if the counterparty is in
default under the terms of the agreement.
Sales to retail customers are required to be settled in cash or
using major credit cards, mitigating credit risk. There are no
significant concentrations of credit risk, whether through exposure
to individual customers, specific industry sectors and/or
regions.
The Group's treatment of bad debts and potential bad debts
during the periods under review for trade and other receivables,
including an analysis of past due amounts, is set out in note
15.
2. Liquidity risk
The Group manages liquidity risk by maintaining sufficient cash
and equivalents and the availability of funding through an adequate
amount of committed credit facilities to meet obligations when
due.
At the end of the reporting period, the Group held cash and cash
equivalents of EUR0.4 million (2020: EUR3.6 million) that are
expected to readily generate cash inflows for managing liquidity
risk. Due to the dynamic nature of the underlying businesses, group
treasury maintains flexibility in funding by maintaining
availability under committed credit lines. Management monitors
rolling forecasts of the group's liquidity reserve (comprising the
undrawn borrowing facilities below) and cash and cash equivalents
on the basis of expected cash flows. This is carried out by
management at Group level.
In addition, the group's liquidity management policy involves
projecting cash flows in major currencies and considering the level
of liquid assets necessary to meet these, monitoring balance sheet
liquidity ratios against external regulatory requirements and
maintaining debt financing plans.
Financing arrangements
The Group had access to EUR14.4 million of working capital
facilities at 31 December 2021. The Group's working capital
facilities are subject to annual review and renewal.
The tables below analyse the Group's financial liabilities into
relevant maturity groupings based on their contractual maturities
for: all non-derivative financial liabilities and net settled
derivative financial instruments for which the contractual
maturities are essential for an understanding of the timing of the
cash flows. The amounts disclosed in the table are the contractual
undiscounted cash flows. For interest rate swaps, the cash flows
have been estimated using forward interest rates applicable at the
end of the reporting period.
Contractual maturities of Less than Greater Carrying
financial liabilities at 12 months than 12 amount
31 December 2021 months
EUR 000 EUR 000 EUR 000
Non-derivatives
Trade payables 14,617 - 14,617
Borrowings 7,390 3,064 10,454
Liabilities under factoring
facilities 5,492 - 5,492
Lease liabilities 1,374 1,872 3,246
Total 28,873 4,936 33,809
Derivatives
Interest rate swap - - -
Total - - -
Contractual maturities of Less than Greater Carrying
financial liabilities at 12 months than 12 amount
31 December 2020 months
Non-derivatives
Trade payables 18,084 - 18,084
Borrowings 4,346 2,627 6,973
Liabilities under factoring
facilities 3,179 - 3,179
Lease liabilities 2,035 904 2,939
Total 27,644 3,531 31,175
Derivatives
Interest rate swap 2 - 2
Total 2 - 2
3. Currency risk
The Group operates primarily in euro and US Dollar. The Group
mitigates the risk by incurring costs in currencies matching its
revenues. Any remaining transactional foreign currency exposure is
not considered to be material and is not hedged. As at 31 December
2021, the Group had not derivative contracts for currency hedging
purposes.
4. Market risk
The Group's activities has a moderate expose it primarily to the
financial risks of changes in interest rates. The Group's
management focusses on the uncertainty of financial markets and
attempts to minimise the potential adverse effects on its
profitability.
4.1. Interest rate risk
As of 31 December 2021 and 2020, the main borrowing corresponds
to the syndicated loan which bears a variable interest rate.
4.1.1. Sensitivity analysis:
A change of a 0.5% in interest rates would have the following
impact on the Group financial statements:
31 December 31 December
2021 2020
------------
EUR 000 EUR 000
------------
Profit for the
year
Increase in
rates (28) (39)
Decrease in
rates 28 39
------------
This calculation assumes that the change occurred at the balance
sheet date and had been applied to risk exposures existing at that
date. This analysis also assumes that all other variables remain
constant and considers the effect of financial instruments with
variable interest.
5. Capital management
The primary objective of the Group's capital management is to
ensure that it has the capital required to operate and grow the
business at a reasonable cost of capital without incurring undue
financial risks. The syndicated loan also requires compliance with
certain financial covenants. For the year ended at 31 December 2021
the Group have obtained a waiver for financial covenants.
24. Subsidiaries
The Group consists of a parent company, GYG plc, incorporated in
the UK and a number of subsidiaries held directly by GYG plc, which
operate and are incorporated mainly in Spain but also in some other
countries around the world.
A list of the Company's subsidiaries is included below:
Name Principal Registered Office Ownership
activity
Civisello Inversiones, Global Building. Muelle Viejo.
S.L.U. Holding Palma de Mallorca. Spain. 100%
Hemisphere Yachting Global Building. Muelle Viejo.
Services, S.L.U. Holding Palma de Mallorca. Spain. 100%
Hemisphere Coating Global Building. Muelle Viejo.
Services, S.L.U. Coatings Palma de Mallorca. Spain. 100%
Hemisphere Central Global Building. Muelle Viejo.
Services, S.L.U. Central Services Palma de Mallorca. Spain. 100%
Pinmar Yacht Supply, Camino Escollera, 5. Palma
S.L. Supply de Mallorca. Spain 100%
Avenue 2010. Riviera Beach.
Pinmar USA, Inc. Coatings FL 33404. USA. 100%
Global Yachting Group, Station Road 55. Buckinghamshire.
Ltd Coatings UK. 100%
Cannon Place 78. Cannon Street.
ACA Marine, Ltd Holding London. UK. 100%
Hemisphere Yachting Lehmweg 17, 20251 Hamburg.
Services, GmbH Coatings Germany. 100%
Hemisphere Coating Herikerbergweg 238. 11O1CM
Services, B.V. Coatings Amsterdam. Netherlands. 100%
Hemisphere Coating
Services, S.A.S. (previously 46 Quai Francois Mitterrand.
ACA Marine, SAS) Coatings 13600 La Ciotat. France. 100%
The Group financial statements incorporate the financial
statements of the parent Company, GYG plc and the above
subsidiaries.
For the year ending 31 December 2021 the following subsidiaries
of the Company were entitled to exemption from audit under s479 A
of the Companies Act 2006 related to subsidiary companies:
Companies House
Name Principal Registration Number Ownership
activity
Global Yachting Group,
Ltd Coatings 9533209 100%
ACA Marine, Ltd Holding 10649007 100%
25. Related party transactions
Services provided
31 December 2021 31 December 2020
EUR 000 EUR 000
Global Yacht Finishing,
S.L. 41 41
41 41
Services received
31 December 2021 31 December 2020
EUR 000 EUR 000
Harwood Capital Management
Ltd 117 -
Quoque Ltd. - 316
AKC Management Services
Ltd 67 183
Global Yacht Finishing,
S.L. 327 329
511 828
GYG leases offices from Global Yacht Finishing, S.L. (Rupert
Savage is a director of both GYG and Global Yacht Finishing).
Quoque Ltd (a company owned by a close family member of the
Chief Executive Officer) provided consulting services in relation
to ERP design and implementation. These services are reviewed and
approved prior to commencement by the non-executive directors. In
addition to the amounts listed above for services received, the
Group credited for various accommodation and travel expenses of
EUR30 thousand in 2021 (EUR34 thousand in 2020) for Quoque
employees in the performance of those services. During 2021, the
Quoque partner a close family member has been employed by the
Company with a remuneration of EUR145 thousand.
During the year GYG contracted with AKC Management Services Ltd.
for the provision of management services amounting to EUR67
thousand (EUR183 thousand in 2020), of which EUR20 thousand was
outstanding at the year end (Kevin McNair is a director of both GYG
and AKC Management Services Ltd). During 2021, Kevin McNair
received a salary from GYG for the period after the contract
between GYG and AKC Management Services Ltd had expired.
The Directors who are independent of any related party review
the commercial terms of any contract or transaction prior to the
Group entering into the relevant contract. They base their
decisions upon prior commercial experience and, when necessary,
outside advice.
Balances
31 December 31 December
2021 2020
EUR 000 EUR 000
Harwood Capital Management
Ltd. (3,000) -
AKC Management Services
Ltd. (20) -
Quoque Ltd. - (25)
Global Yacht Finishing,
S.L. (53) (92)
(3,073) (117)
Harwood, a substantial shareholder in the Company, is also
classified as a related party under the AIM Rules for Companies
("AIM Rules"). Entry into the New Loan Agreement therefore
constitutes a related party transaction under the AIM Rules.
Accordingly, the Directors (each of whom is considered by the Board
to be independent of Harwood), consider, having consulted with
Singer Capital Markets Advisory LLP, acting in its capacity as the
Company's nominated adviser, that the terms of the New Loan are
fair and reasonable insofar as the Company's shareholders are
concerned (please refer to note 17 for more information).
Remuneration of key management personnel
The remuneration of Executive Directors and Non-Executive
Directors, who are the key management personnel of the group, is
set out below.
31 December 31 December
2021 2020
EUR 000 EUR 000
Salaries, fees and bonus 968 868
The above amounts include "salaries, fees and bonus" paid in EUR
amounting to GBP196 thousand in 2021 and GBP150 thousand in
2020.
Further information about the remuneration of individual
Directors is provided in the audited part of the Directors'
Remuneration report.
26. Post balance sheets events
In February 2022, Russia commenced an invasion of Ukraine which
continues unabated as of the date of this report. The duration of
the invasion and the full impact of this event is unknown at this
point but it is commonly accepted that it will have a material
negative impact on the European economy which will roll out on a
more global basis very quickly.
In response to the invasion, the EU, the UK and the US, along
with many other countries, have put in place a growing number of
sanctions against Russia as a nation and, more importantly for the
Group, against a growing number of Russia citizens and businesses.
The individuals, commonly known as oligarchs, face the seizure of
their assets outside of Russia. This includes, cash, investments,
properties and, in many cases, superyachts. Independent assessments
of the superyacht market estimate that between 7% and 9% of the
superyachts already in service are ultimately owned by
Russians.
The Group has performed a review of the existing portfolio of
projects, the Order Book and the current pipeline of potential
projects. While the Group does have some small exposure to existing
projects that are ultimately owned by Russians, the Directors do
not believe that these are likely to have a material impact on the
business in 2022.
In January 2022, the Group reached an agreement with the new
owner of the Nobiskrug shipyard in relation to the large Refit
project. Under the terms of the new agreement, the Group agreed to
complete the project on broadly similar commercial terms to the
original contract and received payment for the outstanding invoices
in relation to that project, totalling EUR2.0m.
Subsequent to the year end, the Group made repayments of EUR2.0
million against the loan from Harwood. At 26 April 2022, the
outstanding balance of EUR1.0 million was scheduled to be repaid by
31 July 2022.
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END
FR MZGZDFVLGZZZ
(END) Dow Jones Newswires
April 27, 2022 02:01 ET (06:01 GMT)
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