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Trading statements

GMS focusing on managing cost base

05 July 2016 08:11

Gulf Marine Services believes delivering cost efficiencies for clients through its low cost, flexible and efficient vessels should open up more opportunities as markets stabilise and start to improve.

GMS says it has already implemented a series of cost-saving initiatives and managing its cost base appropriately will continue to be a focus for the group.

In March, GMS reported that its clients in the Middle East were seeking cost efficiencies as a result of the challenging low oil price environment.

This continues to be the case and a notice of early termination has now been received for a Large Class SESV operating as a static accommodation unit for a national oil company (NOC) in the MENA region. The vessel is expected to come off charter in Q4 2016.

The contract for a Small Class vessel has also been terminated by a client, with this charter ending in Q3 2016.

In addition, a two-year option period on a Small Class vessel has not been exercised by the client. The current secured backlog, reflecting the above charter updates, is US$ 257.8 million.

The group says it has agreed an amendment to its bank facility agreement that permits the maximum net leverage ratio to be 5 times EBITDA up to 1 July 2018.

The group is now expecting 2016 EBITDA to be US$ 100-110 million, equivalent to an EBITDA margin in the high 50% range, with 2016 earnings per share of 14.5-15.5 cents expected.

The new build programme is nearing completion. Year end net debt is expected to be approximately US$ 435 million and reducing thereafter.

Chief executive Duncan Anderson said: "As previously announced, our NOC clients in the Middle East are implementing cost-saving measures in light of the current challenges facing the industry. This has involved corporate restructuring across their own businesses and the pursuit of supply chain efficiencies. We expect the need to sustain production will, in due course, result in the resumption of higher levels of opex activities, though the timing of this is not easy to predict. As a MENA-based business GMS is well-placed to engage in the upturn in opportunities when they arise.

"The European market shows greater stability, and a number of opportunities in other countries in the MENA region outside of the UAE and elsewhere are under discussion.

"While current trading conditions are difficult, and somewhat unpredictable at a regional level, our focus remains on maximising vessel utilisation and I am confident that our state-of-the-art fleet and leading operational expertise will prevail, giving us a real competitive edge over other market participants. Delivering cost efficiencies for our clients through our low cost, flexible and efficient vessels should open up more opportunities as markets stabilise and start to improve."

At 8:11am: (LON:GMS) Gulf Marine Services PLC share price was -3.37p at 43.63p

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