Interim results for the six months ended 30/06/22

26 September 2022

Gulf Marine Services PLC

('Gulf Marine Services', 'GMS', 'the Company' or 'the Group')

Interim results for the six months ended 30 June 2022

GMS, a leading provider of advanced self-propelled, self-elevating support vessels serving the offshore oil, gas and renewables industries, is pleased to announce its Interim Results for the six months ended 30 June 2022 (H1 2022).

Overview 

H1 Highlights

· EBITDA guidance for 2022 remains at US$ 70 - 80 million

o forecasted utilisation of 86% for H2 which supports the 2022 EBITDA guidance

· H1 2022 revenue increased by 29% to US$ 66.4 million (H1 2021: US$ 51.4 million), driven by

o increased utilisation for H1 2022 to 89% (H1 2021: 77%) with notable improvements in E-Class vessels at 87% (H1 2021: 57%)

o increased H1 2022 average day rates to $27.2k (H1 2021: US$ 25.5k)

· H1 2022 EBITDA increased to US$ 37.3 million (H1 2021: US$ 26.5 million) due to an increase in revenue and a continued focus on costs savings

· H1 2022 Net profit after tax was US$ 13.1 million (H1 2021 US$ 2.0 million) mainly driven by an increase in revenue. Gross profit margin improved to 41% (H1 2021: 32%)

· Net debt1 reduced by US$ 29.9 million to US$ 341.4 million (31 December 2021: US$ 371.3 million) as the Group continues its focus on deleveraging

Outlook

· As demand in the market continues to grow, the Group anticipates improvements in day rates and utilisation, albeit at a slower pace than originally envisaged

· Secured backlog was US$ 163.3 million at 30 June 2022 (30 June 2021: US$ 215.4 million), which reflects the unwinding of long term contracts commenced prior to 2021 and partially offset by additional contract awards announced over the last 12 months

· Contract awards announced in H1 2022 have a combined total charter period of 2.6 years (H1 2021: 3.4 years), the Group is currently working on new potential contracts to improve the backlog

1 This represents an Adjusted Performance Measure (APM) as defined in the Glossary which is included in Note 23 to the interim consolidated Financial Statements.

Mansour Al Alami, Executive Chairman, GMS said:

"I am pleased to report GMS operational results for first half of the year which provides us a solid platform for achieving our full year EBITDA guidance. The first half performance reflected higher day rates, improved utilisation and efforts made on continuous cost savings. We will realise the benefits of improved day rates on new contract awards announced during H1 2022. As the Middle Eastern market continues to increase production, we expect an increase in demand for our sector, which in turn will lead to an increase in day rates and utilisation over time."

Alex Aclimandos

Chief Financial Officer

Gulf Marine Services PLC

23 September 2022

Notes to Editors:

Gulf Marine Services PLC, a company listed on the London Stock Exchange, was founded in Abu Dhabi in 1977 and has become a world leading provider of advanced self-propelled self-elevating support vessels (SESVs). The fleet serves the oil, gas and renewable energy industries from its offices in the United Arab Emirates, Saudi Arabia and Qatar. The Group's assets are capable of serving clients' requirements across the globe, including those in the Middle East, Southeast Asia, West Africa, North America, the Gulf of Mexico and Europe.

The GMS fleet of 13 SESVs is amongst the youngest in the industry, with an average age of eleven years. The vessels support GMS's clients in a broad range of offshore oil and gas platform refurbishment and maintenance activities, well intervention work and offshore wind turbine maintenance work (which are opex-led activities), as well as offshore oil and gas platform installation and decommissioning and offshore wind turbine installation (which are capex-led activities).

The SESVs are categorised by size - K-Class (Small), S-Class (Mid) and E-Class (Large) - with these capable of operating in water depths of 45m to 80m depending on leg length. The vessels are four-legged and are self-propelled, which means they do not require tugs or similar support vessels for moves between locations in the field; this makes them significantly more cost-effective and time-efficient than conventional offshore support vessels without self-propulsion. They have a large deck space, crane capacity and accommodation facilities (for up to 300 people) that can be adapted to the requirements of the Group's clients.

Gulf Marine Services PLC's Legal Entity Identifier is 213800IGS2QE89SAJF77

www.gmsplc.com

Disclaimer

The content of the Gulf Marine Services PLC website should not be considered to form a part of or be incorporated into this announcement.

Chairman's Review

Group performance

Revenue for the period increased to US$ 66.4 million (H1 2021: US$ 51.4 million), mainly driven by an increase in day rates to US$ 27.2k (H1 2021: US$ 25.5k) and by an increase in utilisation to 89% (H1 2021: 77%).

Vessel operating expenses increased to US$ 23.5 million (H1 2021: US$ 20.2 million), driven by an increase in rechargeable expenses relating to catering services coupled with increased utilisation during the period. General and administrative expenses also increased to US$ 5.8 million (H1 2021:US$ 4.9 million), reflecting higher professional fees, and other one-time expenses.

H1 2022 EBITDA stood at US$ 37.3 million (H1 2021: US$ 26.5 million), which was driven by an increase in utilisation, improved day rates and continuous focus on cost savings.

During H1 2022, two new contract awards were announced by to the Group for K-Class vessels, where average day rates were 32% higher than their previous contracts.

GMS reported a profit after tax during H1 2022 of US$ 13.1 million (H1 2021: US$ 2.0 million). This is mainly a result of the increased EBIDTA coupled with reduced finance expenses.

Capital structure and liquidity

The net leverage ratio has reduced to 4.56 times (31 December 2021: 5.79 times) due to a reduction in the net debt to US$ 341.4 million (31 December 2021: US$ 371.3 million) combined with improved EBITDA. The Group remains dedicated to its deleveraging journey.

As described in the 2021 annual report, the Group's current bank terms are to raise US$ 50 million equity before the end of the year or, if failing to do so, to issue of 87.6 million warrants giving potential rights to 134 million shares at a specific price if exercised. The position as at 30 June 2022 remains the same as that described in the 2021 annual report and neither of the two contractual scenarios have been ruled out. The Board considers the likelihood of issuance of warrants to be more likely than not.

Outlook

The Group anticipates seeing continued improvements in day rate and utilisation levels however this is expected to be more gradual over time. Secured backlog is US$ 163.3 million as at 30 June 2022(30 June 2021: US$ 215.4 million). The Group is currently working on a number of projects that will have a favourable impact on its backlog. 

We are pleased to be able to reconfirm our 2022 EBITDA guidance of US$ 70-80 million.

Mansour Al Alami

Executive Chairman

23 September 2022

Financial Review

Summary

Revenue increased to US$ 66.4 million, (H1 2021: US$ 51.4 million), mainly driven by an increase in both utilisation and average day rates.

EBITDA increased by 41% to US$ 37.3 million, (H1 2021: US$ 26.5 million), with the EBITDA margin increasing to 56% (H1 2021: 52%) mainly driven by the increase in utilisation, day rates and a continuous focus on costs savings.

Net profit has continued its positive trend, increasing to US$ 13.1 million (H1 2021: US$ 2.0 million). This was mainly achieved by the increased EBITDA and EBITDA margin partially offset by increase in tax expense provision due to increased activity in taxable jurisdictions.

Net debt1 has reduced by US$ 29.9 million to US$ 341.4 million (31 December 2021: US$ 371.3 million) as the Group continues deleveraging.

Improved trading performance has translated to a significant increase in cash generated for operating activities by 91% to US$ 42.2 million (H1 2021: US$ 22.1 million).

1 This represents an Adjusted Performance Measure (APM) as defined in the Glossary which is included in Note 23 to the interim consolidated Financial Statements

Revenue and segmental profit

The table below shows the contribution to revenue and segment gross profit made by each vessel class during the period.

Revenue in H1 2022 increased by 29% to US$ 66.4 million (H1 2021: US$ 51.4 million) following an increase in overall utilisation to 89% (H1 2021: 77%). Utilisation increased across all three vessel classes with a notable increase in E-Class vessels achieving 87% in the period (H1 2021: 57%). Both K- and S- Class vessels utilisation also increased to 85% and 99% respectively (H1 2021: 82% and 95% respectively).  S-Class utilisation increased to 99% (H1 2021: 95%) as a result of certain vessels being off hire in H1 2021 for drydocking activities.K-Class utilisation marginally increased to 85% (H1 2021: 82%) due to off-hire time for scheduled maintenance in H1 2021.

Average charter day rates also saw an increase by 7% in the period to US$ 27.2k (H1 2021: US$ 25.5k). This increase is mainly driven by a mix factor resulting from more expensive vessels having higher utilization and as such weighing more on the average.

Cost of sales and general and administrative expenses

Cost of sales increased by US$ 4.0 million to US$ 39.0 million (H1 2021: US$ 35 million) which reflected an increase in rechargeable expenses relating to catering services as well as a higher utilisation in H1 2022.

General and Administration expenses increased by 18% to US$ 5.8 million (H1 2021: US$ 4.9 million) reflecting higher professional fees, and other one-time expenses.

Other costs

Finance expenses in the period were US$ 7.3 million (H1 2021: US$ 8.0 million). Interest costs on borrowings reduced to US$ 6.8 million (H1 2021 US$ 11.4 million), mainly as a result of the refinancing in H1 2021 which impacted the Group's effective interest rate. Higher interest cost in the comparative period was partially offset with a net gain of US$ 3.1 million on revision of debt facility, comprising of a fair value gain of US$ 6.3 million offset by the costs to acquire the new loan facility which amounted to US$ 3.2 million.

A net foreign exchange gain of US$ 0.2 million in H1 2022 (H1 2021: loss of US$ 0.7 million) arose from favourable movements in exchange rates of the Pound Sterling against the US Dollar.

Tax expense increased to US$ 1.5 million (H1 2021: US$ 0.9 million) mainly due to an increase in activity in taxable jurisdictions combined with a higher withholding tax charge.

Cash flow and liquidity

The Group's net cash generated from operating activities increased to US$ 42.2 million (H1 2021: US$ 22.1 million) which reflected a strong operational performance during the period. The net cash outflow from investing activities for H1 2022 decreased to US$ 3.7 million (H1 2021: US$ 8.9 million) representing a higher capital expenditure incurred in 2021 to upgrade the vessels entering new contracts.

The Group's net cash outflow from financing activities during the period increased to US$ 36.7 million(H1 2021: US$ 7.8 million). The Group made debt repayments of US$ 28 million (H1 2021: US$ 24.5 million) which was comprised of US$ 15 million payments towards the working capital facility and US$ 13 million towards its term loans. The comparative period reflected cash inflows of US$ 27.8 million in relation to proceeds from the issuance of shares, which was partially offset by share issue and refinancing costs totalling US$ 4.6 million.

Balance sheet

Total current assets at 30 June 2022 were US$ 53.6 million (31 December 2021: US$ 57.1 million). The decline reflects a better management of trade receivable balance resulting in reduction of US$ 6.6 million, which is partially offset by payments made towards our long-term debt and an increase to cash and cash equivalents of US$ 1.8 million. Total current liabilities increased to US$ 59.3 million (31 December 2021: US$ 53.0 million) primarily as a result of an increase in accrued operational expenses through increased utilisation. Further, the Group's embedded derivative of US$ 1.4 was reclassified to current liabilities as warrants are expected to be issued on 2 January 2023. While the current assets are lower than current liabilities, the group expects to honour all its liabilities. For further details please refer to the Going Concern disclosure within Note 2 of the interim condensed consolidated financial statements.

Total non-current assets at 30 June 2022 were US$ 607.1 million (31 December 2021: US$ 617.2 million). The decline is due to depreciation and amortisation charged on non-current assets of US$ 15.8 million. This was offset by capital expenditure of US$ 5.5 million for class surveys and upgrades to the vessels. Total non-current liabilities reduced to US$ 326.4 million (31 December 2021: US$ 358.7 million) primarily due to the repayment ofUS$ 28 million (H1 2021: US$ 24.5 million) towards bank borrowings.

During H1 2022, the shareholders approved an agreement to buy back and cancel all the 350,487,787 Deferred shares that had arisen from the capital reorganization in 2021, for the aggregate consideration of £1.

On 30 June 2022, the buyback was completed, and the shares were subsequently cancelled. Following the cancellation of the Deferred shares, a transfer of $46.4 million was made from Share capital - Deferred to a Capital redemption reserve within the equity section of the statement of financial position.

Total equity increased to US$ 275 million (31 December 2021: US$ 262.7 million), largely attributable to a movement in retained earnings during the period.

Going concern

Management have assessed the Group's financial position for a period of not less than 12 months from the date of approval of the half year results and have a reasonable expectation that the Group will be able to continue in operational existence for the foreseeable future.

The Group's forecasts, having taken into consideration reasonable risks and downsides, indicate that its bank facilities along with order book of contracted work and a strong pipeline of near-term opportunities for additional work will provide sufficient liquidity for its requirements for the foreseeable future and the Group will remain in compliance with the covenants under the Group's banking facilities throughout the period until the end of September 2023. Accordingly, these consolidated interim financial statements for the Group have been prepared on a going concern basis. For further details please refer to the Going Concern disclosure within Note 2 of the interim condensed consolidated financial statements.

Related party transactions

During the period there were related party transactions with the minority shareholder of GMS Saudi Arabia Ltd, a subsidiary of the Group for the provision of safety equipment on some of our vessels and office space totalling US$ 0.3 million (H1 2021: US$ 0.3 million) and with National Catering Company Limited WLL, an affiliate of a significant shareholder of the Company, for Catering services totalling US$ 0.3 million (H1 2021: Nil).

Risks and uncertainties

There are a number of risks and uncertainties which could have a material impact on the Group's performance over the remaining six months of 2022. The Directors do not consider that the principal risks and uncertainties have materially changed since the last publication of the Annual Report for the year ended 31 December 2021. A detailed explanation of the risks summarised below, and how the Group seeks to mitigate the risks, can be found on pages 28 to 33 of the 2021 annual report which is available at www.gmsuae.com.

· Utilisation and Local content requirement - The Group relies on a limited number of blue-chip clients that may expose it to losses if these relationships breakdown. Middle East and North Africa (MENA) NOCs have introduced local content requirements as part of their tender processes designed to giving preference to suppliers that commit to improving their local content and levels of spend which may prevent GMS from winning contracts or lead to financial loss and/or a reduction in margins on existing contracts, which will ultimately impact cash flows and profitability.

· Inability to secure an appropriate capital structure - A continuing low share price may prevent GMS from raising sufficient levels of equity to recapitalise the business.

· Operations: inability to deliver safe and reliable operations - The Group may suffer commercial and reputational damage from an environmental or safety incident involving employees, visitors or contractors. Inadequate preparation for emergency situations, such as pandemics or geopolitical instability, could have a negative impact on the business. Insufficient insurance coverage may lead to financial loss.

· Liquidity and covenant compliance - The business is exposed to short-term liquidity management risks arising from potential increases in interest rates, which further increase debt service obligations, and unexpected increases in working capital. In addition, the Group's bank facilities are subject to covenant tests based on the financial performance. Compliance with these covenants depends on GMS' ability to secure ongoing work for the fleet. If GMS is unable to secure ongoing work, its financial performance and position may be adversely affected, and it may not comply with the covenants. In such a case, unless the banks agree otherwise, this could lead to an event of default. This would give lenders the right to accelerate repayment of the outstanding loans, and then exercise security over the Group's assets.

· People - Losing skilled workforce or failing to attract new talent into our business has the potential to undermine performance.

· Legal, economic and political conditions - Political instability in the regions in which GMS operates (and recruit from) may adversely affect its operations. The business is exposed to sudden changes in tax compliance requirements or changes in legislation which could lead to fines, financial loss or adversely impact liquidity. Sudden changes in inflation in regions GMS operates may adversely affect its operations.

· Compliance and Regulation - Failure to appropriately identify and comply with laws and regulations, and other regulatory statutes in new and existing markets, could lead to regulatory investigations. It may result in GMS failing to win a new contract, the early termination of an existing contract or exclusion from future contracts.

· COVID-19 pandemic - Although the impact of the COVID-19 pandemic appears to be subsiding, it may still pose a number of operational challenges to the Group such as increased cost due to strict quarantine requirements for crew, health risk to staff and delay in existing or future contracts as a result of interruptions in their supply chains.

· Cyber-crime - security and integrity - Phishing attempts result in inappropriate transactions, data leakage and financial loss. The Group is at risk of loss and reputational damage through financial cyber-crime.

· Climate change - Climate change poses both transition and physical risks to the Group. Transition risks come from the decarbonisation of the global economy which could result in changing investor sentiment making new investors harder to find. It may bring changing client preferences leading to reduced demand for our services. New legislation could require us to increase reporting and possibly substitute our products and vessels for greener alternatives. Physical risks include rising temperatures, which could further impact working hours, and rising sea levels, which could affect where our vessels can operate.

RESPONSIBILITY STATEMENT

Financial information for the period ended 30 June 2022.

We confirm to the best of our knowledge:

a) the condensed set of financial statements, which has been prepared in accordance with the applicable set of accounting standards, gives a true and fair view of the assets, liabilities, financial position and profit or loss of Gulf Marine Services plc and its undertakings, included in the consolidation as a whole as required by DTR 4.2.4R;

b) the interim management report includes a fair review of the information required by DTR 4.2.7R; and

c) the interim management report includes a fair review of the information required by DTR 4.2.8R.

By order of the Board

Mansour Al Alami Alex Aclimandos

Executive Chairman Chief Financial Officer

23 September 2022 23 September 2022

INDEPENDENT REVIEW REPORT TO GULF MARINE SERVICES PLC (THE "ENTITY")

Conclusion

We have been engaged by the Entity to review the Entity's condensed set of consolidated financial statements in the half-yearly financial report for the six months ended 30 June 2022 which comprises the condensed consolidated statement of comprehensive income, the condensed consolidated balance sheet, the condensed consolidated statement of changes in equity, the condensed consolidated statement of cash flows, a summary of significant accounting policies and other explanatory notes.

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of consolidated financial statements in the half-yearly financial report for the six months ended 30 June 2022 is not prepared, in all material respects in accordance with International Accounting Standard 34 Interim Financial Reporting ("IAS 34") as contained in the UK adopted International Accounting Standards and the Disclosure Guidance and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA").

Basis for conclusion

We conducted our review in accordance with International Standard on Review Engagements (UK) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity ("ISRE (UK) 2410") issued for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. 

We read the other information contained in the half-yearly financial report to identify material inconsistencies with the information in the condensed set of consolidated financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the review. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Conclusions relating to going concern

Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis for conclusion section of this report, nothing has come to our attention that causes us to believe that the directors have inappropriately adopted the going concern basis of accounting, or that the directors have identified material uncertainties relating to going concern that have not been appropriately disclosed.

This conclusion is based on the review procedures performed in accordance with ISRE (UK) 2410. However, future events or conditions may cause the Entity to cease to continue as a going concern, and the above conclusions are not a guarantee that the Entity will continue in operation.

INDEPENDENT REVIEW REPORT TO GULF MARINE SERVICES PLC (THE "ENTITY") (continued)

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA.

The directors are responsible for preparing the condensed set of consolidated financial statements included in the half-yearly financial report in accordance with IAS 34 as adopted for use in the UK. 

As disclosed in note 3, the annual financial statements of the Entity for the year ended 31 December 2021 are prepared in accordance with UK-adopted international accounting standards. 

In preparing the condensed set of consolidated financial statements, the directors are responsible for assessing the Entity's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Entity or to cease operations, or have no realistic alternative but to do so.

Our responsibility

Our responsibility is to express to the Entity a conclusion on the condensed set of consolidated financial statements in the half-yearly financial report based on our review.

Our conclusion, including our conclusions relating to going concern, are based on procedures that are less extensive than audit procedures, as described in the Basis for conclusion section of this report.

The purpose of our review work and to whom we owe our responsibilities

This report is made solely to the Entity in accordance with the terms of our engagement to assist the Entity in meeting the requirements of the DTR of the UK FCA. Our review has been undertaken so that we might state to the Entity those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Entity for our review work, for this report, or for the conclusions we have reached.

KPMG 23 September 2022

Chartered Accountants

1 Harbourmaster Place,

IFSC,

Dublin 1,

Ireland.

GULF MARINE SERVICES PLC

Condensed Consolidated Statement of Comprehensive Income

for the period ended 30 June 2022

All results are derived from continuing operations in each period/year. There are no discontinued operations in either period/year.

The accompanying notes form an integral part of these condensed consolidated financial statements.

GULF MARINE SERVICES PLC

Condensed Consolidated Balance Sheet 

as at 30 June 2022

The accompanying notes form an integral part of these condensed consolidated financial statements.

GULF MARINE SERVICES PLC

Condensed Consolidated Statement of Changes in Equity

The accompanying notes form an integral part of these condensed consolidated financial statements.

·

GULF MARINE SERVICES PLC

Condensed Consolidated Statement of Cash Flows

for the period ended 30 June 2022

The accompanying notes form an integral part of these condensed consolidated financial statements.

GULF MARINE SERVICES PLC

Notes to the Condensed Consolidated Financial Statements

for the period ended 30 June 2022

1 Corporate information

Gulf Marine Services PLC ("GMS" or the "Company") is a Company which is registered and was incorporated in England and Wales on 24 January 2014. The Company is a public limited liability company with operations mainly in the Middle East, North Africa and Europe. The address of the registered office of the Company is 107 Hammersmith Road, London, W14 0QH. The registered number of the Company is 08860816.

The principal activities of GMS and its subsidiaries (together referred to as the "Group") are chartering and operating a fleet of specially designed and built vessels. All information in the notes relate to the Group, not the Company unless otherwise stated.

The Group is engaged in providing self-propelled, self-elevating support vessels (SESVs) that present a stable platform for delivery of a wide range of services throughout the total lifecycle of offshore oil, gas and renewable energy activities, and which are capable of operations in the Middle East and other regions.

The condensed consolidated financial statements of the Group for the six-month period ended30 June 2022 were authorised for issue on 23 September 2022. The condensed consolidated financial statements do not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. The condensed consolidated financial statements have been reviewed, not audited.

The Group issued statutory financial statements for the year ended 31 December 2021, which were prepared in accordance with UK adopted International Accounting Standards in conformity with requirements of the Companies Act 2006. Those financial statements were approved by the Board of Directors on 12 May 2022. The report of the auditor on those accounts did not contain any statement under section 498(2) or 498(3) of the Companies Act 2006. The information for the year to 31 December 2021 contained in these condensed consolidated accounts has been extracted from the latest published audited financial statements. A copy of the statutory accounts for year ended31 December 2021 has been delivered to the Registrar of Companies.

2 Significant accounting policies

The accounting policies and methods of computation adopted in the preparation of these condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2021 as disclosed in the Annual Report, except for the adoption of new standards and interpretations effective as of 1 January 2022, which are described in more details below.

The condensed consolidated financial statements have been prepared on the historical cost basis, except for certain financial instruments that are measured at fair values at the end of each reporting period. The Group's management considers that the fair value of financial assets, financial liabilities and lease liabilities approximates their carrying amounts.

GULF MARINE SERVICES PLC

Notes to the Condensed Consolidated Financial Statements

for the period ended 30 June 2022 (continued)

2 Significant accounting policies (continued)

Basis of preparation

The annual consolidated financial statements of the Group will be prepared in accordance withUK adopted International Accounting Standards in conformity with requirements of the Companies Act 2006. The interim set of condensed consolidated financial statements included in this half-yearly financial report has been prepared in accordance with the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority and with International Accounting Standard (IAS) 34 Interim Financial Reporting as adopted by the United Kingdom.

The condensed consolidated financial statements do not include all the information required for full annual consolidated financial statements and should be read in conjunction with the Group's audited consolidated financial statements for the year ended 31 December 2021. In addition, results for the six-month period ended 30 June 2022 are not necessarily indicative of the results that may be expected for the financial year ending 31 December 2022. The condensed consolidated statement of comprehensive income for the six-month period ended 30 June 2022 is not affected significantly by seasonality of results.

Going concern

The Group's Directors have assessed the Group's financial position for a period of not less than12 months from the date of approval of the half year results and have a reasonable expectation that the Group will be able to continue in operational existence for the foreseeable future.

The Group was in a net current liability position as at 30 June 2022 amounting to US$ 5.7 million(31 December 2021: net current assets of US$ 4.2 million). The Group has US$ 10.1 million of available resources comprising cash and cash equivalents and it has an available undrawn working capital facility of US$ 13.5 million (31 December 2021: US$ 3.5 million) as at the at the reporting date.

The Group is expected to continue to generate positive operating cash flows for the foreseeable future and has in place a committed working capital facility of US$ 45.0 million (31 December 2021:US$ 50.0 million), of which US$ 25.0 million (31 December 2021: US$ 25.0 million) can be utilised to support the issuance of performance bonds and guarantees, of which US$ 12.5 million (31 December 2021:US$ 11.6 million) was utilised for this purpose as of 30 June 2022 (refer Note 18). The balance ofUS$ 20 million can be utilised to draw down cash. During the period, the working capital facility was reduced by US$ 5 million under the terms of the facility agreement. US$ 6.5 million of this facility was utilised as of 30 June 2022 (31 December 2021: US$ 21.5 million), leaving US$ 13.5 million (31 December 2021: US$ 3.5 million) available for drawdown. The working capital facility expires alongside the main debt facility in June 2025. (refer Note 15)

The Group's current bank terms are to raise US$ 50 million equity before the end of the year or, if failing to do so, to issue of 87.6 million warrants giving potential rights to 134 million shares at a specific price if exercised. The position as at 30 June 2022 remains the same as that described in the 2021 annual report and neither of the two contractual scenarios have been ruled out. The Board considers the likelihood of issuance of warrants to be more likely than not. If leverage is above 4.0x at31 December 2022, PIK interest would accrue at a rate defined within the Glossary. The Group's cashflow forecasts used for the Going Concern assessment includes PIK interest for the first six months of 2023.

GULF MARINE SERVICES PLC

Notes to the Condensed Consolidated Financial Statements

for the period ended 30 June 2022 (continued)

2 Significant accounting policies (continued)

Going concern (continued)

The Group's forecasts, having taken into consideration reasonable risks and downsides, indicate that its bank facilities along with order book of contracted work and a strong pipeline of near-term opportunities for additional work will provide sufficient liquidity for its requirements for the foreseeable future and the Group will remain in compliance with the covenants under the Group's banking facilities throughout the period until the end of September 2023, Accordingly, these consolidated interim financial statements for the Group have been prepared on a going concern basis.

GMS continues to remain cognisant of the wider context in which it operates and the impact that climate change could have on the financial statements of the Group. The impact of climate change is expected to be insignificant in the going concern assessment period.

While the current situation regarding the war in Ukraine and Russian sanctions remains uncertain, the Group believes that the potential impact of the war, border closures and resulting sanctions will not have a significant impact on its operations. Nevertheless, the Group's core market is middle east which is expected to invest heavily in shallow water production capacity over the coming decade which will drive demand for offshore marine services.

New and amended standards adopted by the Group

The following new and revised IFRSs have been adopted in these condensed consolidated financial statements.

· COVID-19-Related Rent Concessions beyond 30 June 2021 (Amendment to IFRS 16)

· Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37)

· Annual Improvements to IFRS Standards 2018-2020

· Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16)

· Reference to the Conceptual Framework (Amendments to IFRS 3)

The application of these new and revised IFRSs has not had any material impact on the amounts reported for the current and prior periods and did not require any retrospective adjustments but may affect the accounting for future transactions or arrangements. The full revised accounting policies applicable from 1 January 2022 will be provided in the Group's annual financial statements for the year ending 31 December 2022.

At the date of the condensed consolidated interim financial statements, the following other standards, amendments and Interpretations have not been effective and have not been early adopted by the Group:

· Classification of Liabilities as Current or Noncurrent - Amendments to IAS 1

· IFRS 17 Insurance Contracts

· Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS Practice Statement 2

· Definition of Accounting Estimate - Amendments to IAS 8

· Deferred Tax related to Assets and Liabilities arising from a Single Transaction - Amendments to IAS 12

These new and amended standards are not expected to have a significant impact on the Group's condensed consolidated interim financial information.

GULF MARINE SERVICES PLC

Notes to the Condensed Consolidated Financial Statements

for the period ended 30 June 2022 (continued)

3 Segment reporting

The segment information provided to the chief operating decision makers for the operating and reportable segments for the period include the following:

*See Glossary. 

Segment revenue reported above represents revenue generated from external customers. There were no inter-segment sales in either of the periods. Segment assets and liabilities, including depreciation, amortisation and additions to non-current assets, are not reported to the chief operating decision maker on a segmental basis and, therefore, are not disclosed.

GULF MARINE SERVICES PLC

Notes to the Condensed Consolidated Financial Statements

for the period ended 30 June 2022 (continued)

4 Presentation of adjusted non-GAAP results

The following table provides a reconciliation between the statutory and non-statutory financial results:

1Costs incurred to arrange a new bank facility have been added back to Profit/(loss) before taxation to arrive at adjusted net profit3 for the period ended 30 June 2021. This measure provides additional information in assessing the Group's total performance that management is more directly able to influence and on a basis comparable from period to period.

2The fair value adjustment on recognition of the new loan has been added back to loss before taxation to arrive at adjusted net profit3 for the period ended 30 June 2021. This measure provides additional information in assessing the Group's total performance that management is more directly able to influence and on a basis comparable from period to period.

3Please see Glossary for definition.

GULF MARINE SERVICES PLC

Notes to the Condensed Consolidated Financial Statements

for the period ended 30 June 2022 (continued)

5 Taxation

Tax is calculated at the rates prevailing in the respective jurisdictions in which the Group operates. The overall effective rate is the weighted average of the expected taxes to be paid in each jurisdiction. Income is subject to tax including withholding tax on Revenue and Corporation tax on Profit for the year in each taxable jurisdiction (being principally Qatar, the United Kingdom and Saudi Arabia). The Group effective tax rate was 14.8% for the period ended June 2022 (Six months ended June 2021: 9.13%).

The current tax charge of US$ 1.5 million (six-month period ended June 2021: US$ 0.9 million) included withholding tax amounting to US$ 0.9 million (six-month period ended June 2021: US$ 0.6 million).

A subsidiary of the Group received a tax assessment from the Saudi tax authorities (ZATCA) for an amount of US$ 7.3 million related to the transfer pricing of our inter-group bareboat agreement, for the period from 2017 to 2019. The Group has filed an appeal with the Tax Violations and Dispute Resolution Committee (TVDRC) against the assessment raised by ZATCA. The Directors have considered the claim, including consideration of third-party tax advice received. Noticing the claim retrospectively applied from 2010 in respect of a law which was issued in 2019, which applied a "tested party" assessment different to that supported by our tax advisors and using an approach which the Directors (supported by its tax advisors) consider to be inconsistent with the principles set out in the KSA transfer price guidelines, the Directors are confident that the Group has complied with the relevant tax legislation. On that basis, the Directors have not made a provision for the current or any future potential assessments of a similar nature.

6 Earnings per share