Board of directors' report 2009
For the year, I.M. Skaugen Group (IMS) reported a net loss of USD 10.1 million (profit of USD 7.9 million in 2008). The EBITDA was USD 24.1 million (USD 50 million in 2008). The Group’s gross revenues totalled USD 108 million (USD138.6 million in 2008).
The deviation in net profits and EBITDA reflects weaker operating market conditions for all business units. For the gas carriers it reflects higher share of spot voyages in the utilization of the Norgas fleet and a weaker spot market than the previous year . For SPT it reflects a more challenging tanker market and for the China based activities it reflects gain from a sale of assets in 2008 however not repeated in 2009, a loss on the sales of three “Wintergas” vessels in 2009/2010.
The net result in 2009 was charged with impairment cost and R&D cost related to dis-continued operations in the amount of USD 10.2 million. We have also charged cost as awarded by an arbitration panel for RMB 7.8 mill (USD 1.1 mill); these are cost related to a contract cancellation in 2007 for newbuildings of two gas carriers.
If we adjust for these charges, the EBITDA and net result would have been USD 27 million and USD 1.7 million respectively. In our opinion, these numbers reflect more appropriately the ongoing business and our core activities.
Net cash flow from operations in 2009 is USD 26.5 million (negative USD 3.6 million in 2008). The newbuilding activities combining the Wintergas and Multigas vessels (classified as projects under construction) were the main reasons of the negative cash flow from operations in 2008. The vessels will be delivered in 2009-2011, thus they will improve the cash flow from operations. As of 31 December 2009, the group has USD 52 million tied up in working capital for the Wintergas and Multigas vessels (2008 USD 90 million).
Total assets were USD 342.7 million. Shareholders equity amounted USD 94.4 million or USD 3.48/NOK 20 per share. The equity ratio was 27.6 percent. The net debt at the end of 2009 was USD 72.6 million and the net interest-bearing debt totaled USD 116.3 million. The ratio between current assets and current liabilities was 279 percent.
Total liquidity as of the end of 2009 was USD 96.1 million, which is considered sufficient for the company’s ongoing business activities. The interest coverage ratio (EBITDA / Net interest cost) was 1.6 for the year 2009, compared to 3.2 for 2008.
Segment reporting
Figures in the segment presentations below are taken from the management report, which provide a more detailed segment summary of the I.M. Skaugen Group’s underlying operations other than the official published accounts. The former utilizes proportional consolidation for group activities pursued through joint ventures reflects I.M. Skaugen’s share of these partnerships. Hence, it provides more detailed information on the total financial results achieved by the group through its various joint ventures. However, I.M. Skaugen’s joint venture activities are reported on the official accounts using the equity method complying with the International Financial Reporting Standards (IFRS).
| Business Segments | Gas Transportation Activities |
Skaugen China Activities |
Marine Transfer Activities |
Total IMS Group |
| 31 December 2009 | ||||
| USD'000 | ||||
| Revenue from external customers | 80 200 | 90 047 | 67 713 | 237 960 |
| Results | ||||
| Segment profit (EBITDA) | 25 006 | 927 | 3 086 | 29 019 |
| Depreciation and amortization | (10 488) | (2 275) | (2 124) | (14 887) |
| 14 518 | (1 348) | 962 | 14 132 | |
| Unallocated costs | (4 870) | |||
| Depreciation | (115) | |||
| Share of profit/(loss) of strategic associates | (1 125) | |||
| Share of profit/(loss) of non-strategic associates | (7 165) | |||
| Net financial items | (9 603) | |||
| Other | (1 283) | |||
| Net result before taxes | |
|
|
(10 029) |
Dividend
The Group manages its capital structure and makes adjustments in light of changes in economic conditions. The Board does not recommend any dividends for 2009 or for the spring of 2010. This is considered a temporary suspension of our dividend policy, solely based on the net loss for the year and to safeguard our financial position.
Issues related to CAPEX and debt financing
At the end of 2009 total CAPEX commitments on I.M. Skaugen’s newbuildings stood at USD 47 million for vessels financed through sale and leaseback agreements, of which USD 31 million (adjusted for ownership in JV’s) for vessels financed via traditional debt facilities.
The Company successfully tapped the Chinese debt markets for its overall corporate purposes in 2009 and this reflects the value of its presence in the market.
Bond portfolio of outstanding loans
The company has benefited from an improvement in the corporate bond markets in Norway which helped to provide construction on finance or working capital for the newbuilding programs at SMC. Maturity of the outstanding bond portfolio will mostly be offset by funds to be received from sale and leaseback arrangements on ships under construction by SMC. The counter-party in these sale lease-back structures are Teekay LNG Partners for one more ”Wintergas” vessels and two ”Multigas” 12, 000 cbm sized vessels.
Average interest cost (including of margin) for all outstanding bonds financed now stand at 5.7 percent, given the current USD interest rates. The company has USD 10.6 million of bonds falling due for repayment within next 12 months. The bond with the longest duration matures in June 2012.
