* [Strategic Report](#pf2) + [Highlights](#pf2) + [2023 Financial Highlights](#pf2) + [2023 Operational Highlights](#pf3) + [2024 Highlights and Outlook](#pf3) + [NON-FINANCIAL AND SUSTAINABILITY INFORMATION STATEMENT](#pf3) + [CHAIRMAN’S REVIEW](#pf4) + [BUSINESS MODEL AND STRATEGIC OBJECTIVES](#pf6) + [SECTION 172 STATEMENT](#pfa) + [MARKET ANALYSIS](#pfc) + [RISK MANAGEMENT](#pfe) + [KEY PERFORMANCE INDICATORS](#pf16) + [FINANCIAL REVIEW](#pf18) + [LONG-TERMVIABILITY STATEMENT](#pf1a) + [PEOPLE AND VALUES](#pf1c) * [Governance](#pf2c) + [CHAIRMAN’S INTRODUCTION](#pf2c) + [BOARD OF DIRECTORS](#pf2e) + [REPORT OF THE BOARD](#pf30) + [AUDIT AND RISK COMMITTEE REPORT](#pf35) + [NOMINATION COMMITTEE REPORT](#pf38) + [REMUNERATION COMMITTEE REPORT](#pf3b) - [DIRECTORS’ REMUNERATION POLICY REPORT](#pf3d) - [ANNUAL REPORT ON REMUNERATION](#pf45) + [DIRECTORS’ REPORT](#pf4a) + [STATEMENT OF DIRECTORS’ RESPONSIBILITIES](#pf4e) * [Financial Statements](#pf4f) + [INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF GULF MARINE SERVICES PLC](#pf4f) + [CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME](#pf56) + [COMPANY STATEMENT OF FINANCIAL POSITION](#pf81) + [GLOSSARY](#pf8c) + [OTHER DEFINITIONS](#pf8e) + [CORPORATE INFORMATION](#pf90) ![]() Gulf Marine Services PLC ## Annual Report 2023 GULF MARINE SERVICES PLC Annual Report 2023 ![]() #### HIGHLIGHTS ### Our Vision ### To be the best SESV ### operator in the world #### 2023 Overview #### Revenue US$ 151.6m (2022: US$ 133.2m) #### Adjusted EBITDA US$ 87.5m (2022: US$ 71.5m) #### Net profit for the year US$ 42.1m (2022: US$ 25.4m) #### 2023 Financial Highlights — Group net profits of US$ 42.1 million (2022: US$ 25.4 million), reflecting the strength of the Group’s recovery. — Adjusted EBITDA 1 increased to US$ 87.5 million (2022: US$ 71.5 million) driven by an increase in revenue. Adjusted EBITDA margin 5 also increased to 58% (2022: 54%). — Net bank debt 2 reduced to US$ 267.3 million (2022: US$ 315.8 million). Net leverage ratio 3 reduced to 3.05 times (2022: 4.4 times). — Revenue increased by 14% to US$ 151.6 million (2022: US$ 133.2 million) driven by increased utilisation on E-Class and K-Class vessels and higher average day rates across all vessel classes, particularly E-Class. — Cost of sales as a percentage of revenue 6 reduced by five percentage points to 54% (2022: 59%). — Underlying general and administrative expenses 4 as a percentage of revenue reduced to 7% (2022: 8%). — Net reversal of impairment of US$ 33.4 million (2022: US$ 7.8 million) reflecting continued improved market conditions. — Finance expenses have increased to US$ 31.4 million (2022: US$ 17.7 million) driven by an increase in LIBOR/SOFR rates, the temporary introduction of both a 250 bps PIK in Q1 as well as the increase on the margin rate of the loan from 3.1 to 4.0%, both triggered by the net leverage ratio exceeding 4:1 times as at 31 December 2022. On achieving net leverage ratio below 4:1 times, PIK ceased to accrue in the second quarter of the year, and the margin was thereafter reduced by 90 basis points to 3.1%. This resulted in a reduction in the cost of financing of 340 basis points. — Impact of changes in the fair value of the derivative increased to US$ 11.1 million (2022: US$ 2.5 million), primarily due to the increase in the Group’s share price. #### Average fleet utilisation 94% (2022: 88%) #### Underlying G&A #### expenses as #### percentage of revenue 7% (2022: 8%) #### In this report #### Strategic Report Highlights IFC 2023 Financial Highlights IFC 2023 Operational Highlights 1 2024 Highlights and Outlook 1 Non-Financial and Sustainability Information Statement 1 Chairman’s Review 2 Business Model and Strategic Objectives 4 Section 172 Statement 8 Market Analysis 10 Risk Management 12 Key Performance Indicators 20 Financial Review 22 Long-term Viability Statement 24 People and Values 26 #### Governance Chairman’s Introduction 42 Board of Directors 44 Report of the Board 46 Audit and Risk Committee Report 51 Nomination Committee Report 54 Remuneration Committee Report 57 Directors’ Remuneration Policy Report 59 Annual Report on Remuneration 67 Directors’ Report 72 Statement of Directors’ Responsibilities 76 #### Financial Statements Independent Auditor’s Report 77 Group Consolidated Financial Statements 84 Company Financial Statements 127 Glossary 138 Other Definitions 140 Corporate Information 142 Also online at https://www.gmsplc.com/Results-and- Presentations.aspx #### HIGHLIGHTS ![]() 1Annual Report 2023 Strategic Report #### 2024 Highlights and Outlook — Adjusted EBITDA guidance is set at US$ 92 million to US$ 100 million for 2024. — Target utilisation for 2024 is 95% of which 83% is already secured. — Anticipate continued improvement on day rates as our vessel demand outstrips supply on the back of a pipeline of opportunities. — Average secured day rates of over 10% higher than 2023 actual levels. — Reversal of impairment recognised with a value of US$ 33.4 million indicative of continued improvement of long-term market conditions. — Group anticipates net leverage ratio to be below 2.5 times before the end of 2024. See Glossary. 1 Represents operating profit after adding back depreciation, amortisation, non-operational items and impairment charges or deducting reversal of impairment. This measure provides additional information in assessing the Group’s underlying performance that management can more directly influence in the short term and is comparable from year to year. A reconciliation of this measure is provided in Note 31 to the consolidated financial statements. 2 Represents total bank borrowings less cash. 3 Represents the ratio of net bank debt to adjusted EBITDA. 4 Represents general and administrative costs excluding depreciation, amortisation and other exceptional costs. A reconciliation of this measure is provided in Note 31 to the consolidated financial statements 5 Represents adjusted EBITDA divided by revenue. 6 Represents reported cost of sales divided by revenue. 7 Represents the percentage of available days in a relevant period during which the fleet of Self Elevating Support Vessels (SESVs) is under contract and in respect of which a customer is paying a day rate for the charter of the SESVs. #### 2023 Operational Highlights — Average fleet utilisation 7 increased by six percentage points to 94% (2022: 88%) with an improvement in E-Class and K-Class vessels at 92% (2022: 82%) and 95% (2022: 87%) respectively. — Average day rates increased to US$ 30.3k (2022: US$ 27.5k) with improvements across all vessel classes, particularly for E-Class. — New charters and extensions secured in the year totalled 8.4 years (2022: 19.4 years). — Operational downtime decreased to 0.8% (2022: 2.2%). #### NON-FINANCIAL AND SUSTAINABILITY INFORMATION STATEMENT The Group has complied with the requirements of section 414C7B of the Companies Act 2006 by including certain non-financial and sustainability information within the strategic report. We welcome the introduction of LR 9.8.6(8)R, which requires premium listed companies like GMS, to include TCFD statements in their annual reports. The table below sets out where relevant information can be found within this report\*: Reporting requirement and policies and standards which govern our approach: Information necessary to understand our business and its impact, policy due diligence and outcomes: Environmental matters • Greenhouse Gas (GHG) Emissions Policy • Climate change strategy • Carbon emission reporting • Task Force on Climate-related Financial Disclosures (TCFD) • Carbon emission reporting, page 35 • People and values section, page 26 • Carbon emission reporting, page 35 • TCFD, page 26 Employees • Anti-Corruption and Bribery Policy • Social Responsibility Policy • Whistleblowing Policy • Health and safety standards • Diversity and equal opportunities • Employee engagement and welfare • Ethical practises, page 38 • Ethical practises, page 38 • Ethical practises, page 38, and Audit and Risk Committee report, page 53 • Health and safety, page 39 • Diversity, page 37, and Directors’ Report, page 72 • Employee engagement and welfare, page 37 • People as at 31 December 2023, Page 38 Human rights • Disability Policy • Anti-Slavery Policy • Code of Conduct Policy • Employees and policies, Directors’ Report, page 74 • Ethical practises, page 38 • Ethical practises, page 38, Risk management page 17 Principal risks and impact on business activity • Risk management, pages 12 Remuneration Policy • Remuneration Policy, page 59 Description of the business model • Our business model, page 6 Key Performance Indicators (KPIs) • KPIs, page 20 \* Further details on policies and procedures are available on our corporate website: www.gmsplc.com ![]() 2 Gulf Marine Services PLC #### CHAIRMAN’S REVIEW Group Performance In 2023, the Group demonstrated improvement in its financial performance, attributed to an increase in both utilisation and average day rates across the fleet. Average utilisation was up six percentage points to 94% and the average day rates across the fleet increased to US$ 30.3k compared to the previous year's US$ 27.5k. It is important to highlight that these figures represent averages for the entire fleet, and considering some contracts carried over from previous years at lower rates, the actual increase for new contracts surpassed the reported average. This signals a positive trend in securing new contracts at rates higher than the fleet's overall average, contributing to the overall revenue growth. The improvement in revenue translated into an improved adjusted EBITDA of US$ 87.5 million (2022: US$ 71.5 million). This exceeded both our initial guidance range of US$ 75 million to US$ 83 million, as well as surpassing the revised guidance of US$ 86 million. This accomplishment highlights the success of our operational performance in maximising financial results. Capital Structure and Liquidity As a result of our commitment to deleveraging, the net leverage ratio on 31 December 2023 was reduced to 3.05 times (31 December 2022: 4.4 times), driven by a reduction in the net bank debt to US$ 267.3 million (31 December 2022: US$ 315.8 million) and with improved EBITDA for the year. Attaining a net leverage ratio below 4:1 was crucial, allowing us to limit the number of quarters we were charged PIK interest to one quarter. In 2023, our business thrived amid industry tailwinds, showcasing year-over-year growth in revenues, utilisation, and day rates. We successfully reduced our net leverage ratio to 3.05 times from 4.4 times as of 31 December 2022. Looking forward, we will continue our deleveraging journey as we spare no efforts to continue to increase shareholders value. During the year, we lowered the cost of financing by 340 basis points. Key benefits of being below 4:1 times includes GMS meeting its covenants, being able to pay dividends and cutting some debt monitoring fees. This achievement not only highlights our financial resilience but also positions us to effectively address other challenges, as highlighted in the risk management section, while advancing on our deleveraging journey. Concurrent with our deleveraging efforts aimed at shifting value from lenders to shareholders, we are initiating plans to reward our shareholders. Recently approved by the Board, our residual dividend policy seeks to strike a balance between investing in the business and providing returns to shareholders. Management is currently evaluating the timing for its implementation, a consideration that has only recently come to the forefront. The Group is in the process of refinancing its term facility in advance of the bullet payment becoming due in June 2025. Management’s ongoing discussions with various lending entities are aimed at securing terms that align with our long-term strategic objectives, ensuring continued financial stability. We are optimistic about the outcome of these negotiations and will keep shareholders updated as we navigate this pivotal phase in our financial planning. The Board expresses confidence in our ability to secure favourable terms that will contribute to the sustained success and growth. Governance In August 2023, we announced the departure of Rashed Al Jarwan, a non‐ executive Director of the Group, who retired from the Board. I extend my sincere gratitude to Rashed for his contributions during the pivotal period since joining the Board in 2020. Following Rashed’s retirement, we were pleased to welcome Haifa Al Mubarak who joined the Board as an independent non‐executive Director in October 2023. Haifa brings over 40 years of oil and gas experience to the business and also reflects our efforts to create a more representative Board, demonstrating our commitment to promoting diversity in all aspects of our organisation. I look forward to continuing to benefit from Haifa's insights and expertise. As a Board, we have continued to emphasise the development of effective risk management and internal control systems, including regular audits and reporting to ensure accountability and transparency. Demonstrated by over 50 meetings with investors and other stakeholders, we have open lines of communication on relevant information. We conducted sessions on transparent and ethical business practices, including a Code of Conduct review for employees and stakeholders, and ensuring compliance with relevant regulations and laws. This is an example of our continuous commitment towards environmental, social, and governance (ESG) initiatives, including sustainability practices and community engagement. # Committed # to Maximising # Shareholder Value ![]() 3Annual Report 2023 Strategic Report change is now integrated into our enterprise risk assessment process. Risk management workshops are held at least annually and attended by the Executive Chairman and other Directors. Full details are provided in our TCFD report on page 26. Outlook The offshore industry is dynamic, and today we are more agile to adapt and ensure sustained relevance in the future. I take pride in our successful deleveraging efforts, which along with our much improved operational and financial performance, underscores our commitment to enhancing shareholder value. Concurrently, we are actively exploring avenues for future growth, aligning ourselves with emerging trends and positioning for sustained success. Given the current high levels of utilisation secured, combined with higher day rates, the Group expects the financial performance to continue to improve and reiterates its adjusted EBITDA guidance for 2024 between US$ 92 million to US$ 100 million. This reflects our confidence in sustaining positive momentum. Finally, I would like to thank our employees, shareholders and other stakeholders for their continued support in achieving the Group’s ongoing success. Mansour Al Alami Executive Chairman 03 April 2024 Commercial and Operations The Group successfully secured four new contracts and extended four existing ones, totalling 8.4 years in aggregate (2022: 19.4 years in aggregate). Our operational performance also demonstrated continued improvement, as evidenced by a reduction in operational downtime to 0.8%, compared to 2.2% in 2022. Safety The Group improved its Lost Time Injury Rate (LTIR) going from 0.1 in 2022 to zero in 2023. However, two medical treatment cases were recorded taking the Total Recordable Injury Rate (TRIR) from 0.1 in 2022 to 0.18 in 2023. These levels continue to be below industry average. We continue to look at areas of improvement in our systems and processes and engaging our employees to ensure that our offshore operations continue to be as safe as possible in line with the expectations of our customers and stakeholders. Task Force on Climate-Related Financial Disclosures We continue to comply with LR 9.8.6(8)R requirements by including climate-related financial disclosures consistent with Task Force on Climate related Financial Disclosures (TCFD) recommendations and recommended disclosures. The TCFD recommendations focus on how companies respond to the risks and opportunities associated with climate change. Consistent with the recommendations, a climate scenario analysis was used to understand the potential climate-related transition and physical risks to our operations over the short, medium, and long term. Climate ![]() 4 Gulf Marine Services PLC #### BUSINESS MODEL AND STRATEGIC OBJECTIVES Our business model revolves around providing a practical and cost-effective solution to customers in the offshore oil, gas, and renewable energy sectors. We achieve this through a fleet of self-propelled Self-Elevating Support Vessels (SESVs), designed to meet the specific needs of our clients in challenging marine conditions. Prioritising Health, Environment and Quality Safety remains our foremost priority, supported by a resilient Health, Safety, Environment and Quality (HSEQ) management framework and a pervasive safety-centric culture. #### Meeting Client Demands for Efficiency and #### Cost Reduction As clients increasingly prioritise vessels that reduce costs and improve operational efficiencies for their projects. Our fleet of 13 SESVs, with an average age of 13 years, is designed to meet the operating standards our clients require. #### Empowering a Diverse #### Workforce for Success Our workforce, rich in diversity and global experience, personifies excellence in the SESV sector. GMS cultivates talent to unmatched standards by empowering individuals to grow, develop and realise their utmost potential, thereby driving success for our organisation. #### Leveraging Flexibility #### for Market Resilience GMS operates across various industries and geographical regions, leveraging the adaptability of its fleet to deliver highest quality services to a diverse clientele. This strategic flexibility enables us to maintain a market presence across different business sectors and geographies, positioning us as a resilient entity in times of fluctuating demand. #### Operates a Fleet of Self-propelled SESVs GMS owns and operates a fleet of SESVs, which are chartered to our clients, providing cost-effective and safe offshore support solutions. With an average age of 13 years, the fleet is well positioned within the market. GMS currently supports oil, gas and renewable energy clients in the Arabian Peninsula region and North-West Europe. #### Delivering #### Operational Excellence GMS is dedicated to achieving excellence across all operational activities, providing clients with a comprehensive suite of services aimed at enhancing operational efficiency while delivering time and cost benefits. Our commitment to maintaining excellent safety standards not only safeguards the well-being of clients, employees and contractors but also minimises our environmental footprint. To align with the in-country value requirements mandated by several of our Arabian Peninsula-based clients, GMS collaborates closely with local suppliers. This strategic partnership maximises in-country expenditures, thereby fostering economic growth within the region. Additionally, we encourage our partners to similarly prioritise in-country spending within their own supply chains whenever feasible. #### Our Resources Our Operations #### Drives Performance Through Reportable Metrics GMS assesses productivity across the Group by ensuring reportable metrics are clear, aligned, communicated and regularly reported. The annual Short-Term Incentive Plan incorporates a scorecard focused on performance, and thereby productivity, for all employees. ![]() 5Annual Report 2023 Strategic Report #### Shareholders Generating higher and sustainable profits through improving utilisation and charter day rates, reduction in operational cost base. Transfer of value to shareholders via improved capital structure through continued deleveraging of the Group’s balance sheet. #### Customers GMS delivers services that prioritise safety, reliability and cost-effectiveness, empowering clients to optimise their operations. Our commitment to safety highlights our exceptional track record in consistently providing clients with market leading services. #### People A dedicated workforce committed to performance and well-being flourishes within an environment characterised by positivity and openness. This engaged workforce remains a cornerstone of our operations, fostering a culture of excellence and continuous improvement. #### Suppliers Long-term partnerships focusing on local content. #### What We Deliver ![]() 6 Gulf Marine Services PLC #### Strategic Priority What it Means 2023 Progress Future Priorities #1 #### Revenue #### Maximisation Increase charter day rates driven by the improving supply/demand dynamics in our core markets. Maximise utilisation through best-in-class operations. Continually enhance operating capability while offering new and improved offshore support solutions, to anticipate client needs. Utilisation increased by six percentage points to 94% from the 2022 figure of 88%. This continues to be the highest level of utilisation achieved since 2014. Average day rates across the fleet increased by 10% compared to the previous year’s increase of 7%. New contracts and extensions secured in the year totalled 8.4 years (2022: 19.4 years). Focus on local content requirements demanded by our clients across the Arabian Peninsula region to ensure we are well placed to secure new contracts. Maintaining strong relationships with our core customers to win and secure contracts that add to our backlog. Renegotiate contractual terms when existing contracts come to an end with the precursor to day rate improvement and longer-term contracts. Continue to explore new opportunities in other markets. #2 #### Cost management Deliver safe and cost-effective operations. Optimise capital expenditure. Focused efficiencies in operational costs. Total Recordable Injury Rate (TRIR) slightly increased from 0.1 in 2022 to 0.18 in 2023 which continues to remain below industry average. Limiting capital expenditure to maintaining the fleet to a level that ensures safe operations and meets client requirements. The adjusted EBITDA has improved to US$ 87.5 million (2022: US$ 71.5 million), through cost control measures. Ensure key safety Key Performance Indicators (KPIs) are monitored frequently to allow safe and reliable operation of fleet. Managing inflationary pressures through negotiating terms with current key suppliers. Focus on maximising cash generation with a continued emphasis on reducing our leverage. #3 #### Working capital #### management Improved cash management across the Group to help reduce debtor days whilst improving credit terms with our key suppliers. Maximise cashflows from operations to help reduce leverage levels. Reduced leverage levels from 4.4 times at the end of 2022 to 3.05 times at the end of 2023, through effective working capital management as highlighted by a reduction in the trade debtors to US$ 30.6 million (2022: US$ 33.2 million). Group has continued to deleverage by making repayments of US$ 56.2 million (2022: US$ 51.4 million) towards its borrowings, of which, US$ 26.2 million (2022: US$ 3.8 million) were over and above its contractual obligations. A total of US$ 33.7 million (2022: US$ 3.8 million) was prepaid during 2023. Closely monitoring the ageing of receivables to ensure sufficient liquidity to meet our operational and banking requirements. Make additional prepayments towards the bank loans to continue to deleverage, thus reducing the finance cost. Refinancing its term facility in advance of the bullet payment becoming due in June 2025. #### #4Controls Maintain an efficient and effective control environment. Develop and maintain a robust internal controls manual. Equip our staff with greater skills to deliver quality performance. Monitoring the implementation of controls with close exception reporting. The Group has to comply with International Maritime Organization (IMO) regulations and during the year undertook Internal Audits Marine training in ISM, ISPS and MLC to fulfil IMO compliance. As such, all offshore staff have continued to comply with the training requirements to fulfil our accreditation. Internal auditors conducted audits of the HR and IT functions during the year. The IT audit is at its final stages with observations being discussed with the IT team, while the HR audit report has been completed. The report identified control weaknesses, which were assessed as not representing significant risks. Maintaining an internal control environment to appropriately mitigate the operating risks inherent in the sector, whilst allowing the Group to achieve its strategic objectives and deliver value to shareholders. Monitoring progress of the internal audit and implementing required controls to ensure a robust controls environment. #### BUSINESS MODEL AND STRATEGIC OBJECTIVES #### continued # Securing Sustainable Value # Creation for Shareholders Management's primary aim is to deliver resilient shareholder value by swiftly and efficiently deleveraging the Group. The following strategic priorities are entirely geared towards accomplishing this key objective. ![]() 7Annual Report 2023 Strategic Report #### Strategic Priority What it Means 2023 Progress Future Priorities #1 #### Revenue #### Maximisation Increase charter day rates driven by the improving supply/demand dynamics in our core markets. Maximise utilisation through best-in-class operations. Continually enhance operating capability while offering new and improved offshore support solutions, to anticipate client needs. Utilisation increased by six percentage points to 94% from the 2022 figure of 88%. This continues to be the highest level of utilisation achieved since 2014. Average day rates across the fleet increased by 10% compared to the previous year’s increase of 7%. New contracts and extensions secured in the year totalled 8.4 years (2022: 19.4 years). Focus on local content requirements demanded by our clients across the Arabian Peninsula region to ensure we are well placed to secure new contracts. Maintaining strong relationships with our core customers to win and secure contracts that add to our backlog. Renegotiate contractual terms when existing contracts come to an end with the precursor to day rate improvement and longer-term contracts. Continue to explore new opportunities in other markets. #2 #### Cost management Deliver safe and cost-effective operations. Optimise capital expenditure. Focused efficiencies in operational costs. Total Recordable Injury Rate (TRIR) slightly increased from 0.1 in 2022 to 0.18 in 2023 which continues to remain below industry average. Limiting capital expenditure to maintaining the fleet to a level that ensures safe operations and meets client requirements. The adjusted EBITDA has improved to US$ 87.5 million (2022: US$ 71.5 million), through cost control measures. Ensure key safety Key Performance Indicators (KPIs) are monitored frequently to allow safe and reliable operation of fleet. Managing inflationary pressures through negotiating terms with current key suppliers. Focus on maximising cash generation with a continued emphasis on reducing our leverage. #3 #### Working capital #### management Improved cash management across the Group to help reduce debtor days whilst improving credit terms with our key suppliers. Maximise cashflows from operations to help reduce leverage levels. Reduced leverage levels from 4.4 times at the end of 2022 to 3.05 times at the end of 2023, through effective working capital management as highlighted by a reduction in the trade debtors to US$ 30.6 million (2022: US$ 33.2 million). Group has continued to deleverage by making repayments of US$ 56.2 million (2022: US$ 51.4 million) towards its borrowings, of which, US$ 26.2 million (2022: US$ 3.8 million) were over and above its contractual obligations. A total of US$ 33.7 million (2022: US$ 3.8 million) was prepaid during 2023. Closely monitoring the ageing of receivables to ensure sufficient liquidity to meet our operational and banking requirements. Make additional prepayments towards the bank loans to continue to deleverage, thus reducing the finance cost. Refinancing its term facility in advance of the bullet payment becoming due in June 2025. #### #4Controls Maintain an efficient and effective control environment. Develop and maintain a robust internal controls manual. Equip our staff with greater skills to deliver quality performance. Monitoring the implementation of controls with close exception reporting. The Group has to comply with International Maritime Organization (IMO) regulations and during the year undertook Internal Audits Marine training in ISM, ISPS and MLC to fulfil IMO compliance. As such, all offshore staff have continued to comply with the training requirements to fulfil our accreditation. Internal auditors conducted audits of the HR and IT functions during the year. The IT audit is at its final stages with observations being discussed with the IT team, while the HR audit report has been completed. The report identified control weaknesses, which were assessed as not representing significant risks. Maintaining an internal control environment to appropriately mitigate the operating risks inherent in the sector, whilst allowing the Group to achieve its strategic objectives and deliver value to shareholders. Monitoring progress of the internal audit and implementing required controls to ensure a robust controls environment. # Securing Sustainable Value # Creation for Shareholders ![]() 8 Gulf Marine Services PLC #### SECTION 172 STATEMENT How GMS Engages with Stakeholders Stakeholder Objectives How did Engagement Support Board Decision Making? Shareholders GMS shareholders are institutional investors and private shareholders located across the world. We recognise the importance of the activities and outcomes of stewardship and regularly engage with investors on our financial performance, strategy and business model and our Environmental, Social and Governance (ESG) performance. The Executive Chairman holds regular meetings with the representatives of major shareholders and an update on these meetings is provided at each of the main Board meetings. GMS’ website has a dedicated section with a specific email address for all shareholders to use, which is monitored daily, and all emails receive a response. There is also an investor presentation that accompanies the full and half-year results, which shareholders can dial into. Our Annual General Meeting (AGM) provides another forum for our shareholder base to engage. GMS also has an active social media presence on LinkedIn and posts updates on major developments in the Group. Two of our non-executive Directors are nominated by our two largest shareholders. Refer to the Board Report on page 46 regarding protocols to manage information shared with the Group’s non-independent non-executive Directors. Investors are interested in a broad range of matters including, share price, financial and operational performance, strategic execution, management of corporate risk and capital allocation (including bonus payments for management and returns for investors) and ESG performance of the Group. The Directors of GMS regularly received reports on the Group’s major shareholders from the registrar. They also received reports on engagements with shareholders. The Executive Chairman engaged with major shareholders throughout the year. The Executive Team interacted with shareholders on over 40 occasions during 2023. The Board continued to have input to the Group’s communication with its shareholders. There continued to be a regular flow of trading updates including all major contract wins and information posted on the Group’s website and social media to provide transparency to all current shareholders in the business and any potential investors. The Board continued to engage with the major shareholders as a special resolution was not passed at the AGM in 2023. The Board hopes that the shareholders would support all the resolutions recommended and proposed at the AGM in 2024. Clients GMS works closely with its customers to deliver an industry-leading offering. The Board is informed of all tender activity at each Board meeting. Senior Management engage regularly with clients via face-to- face meetings to ensure GMS fully understands operational performance; client service and safety are the key drivers of meetings. Through this engagement, GMS learns about, immediate and ongoing tender requirements and future demand, and changes to strategy and/or technical or operational requirements. This informs critical business decisions associated with fleet deployment, prioritising future business development activity and resource and local content investment (HR, Procurement and Local Partnerships). It also helps with overhead sizing and allocation and capital expenditure planning, while meeting client needs. Clients are mainly concerned with ensuring value for money in the services received. They also wish to ensure that services meet their specifications and are delivered efficiently and safely. The Board combines strong relationships with key clients in the Arabian Peninsula region and a high level of industry knowledge. Engagement with clients was crucial in providing the information the Board needed to drive the Group’s long-term plans, which was key to the long-term delivery of GMS’ strategy. Engagement with our clients helped the Group to make informed decisions on capital expenditure, which remain limited to keeping vessels in class and equipment in good condition to meet specific client requirements. GMS’ focus over the coming years is on delivering a sustainable capital structure by deleveraging the balance sheet. Once this is sufficiently progressed, capital allocation and resources will be reviewed assuming resources are available. Refer to the Financial Review for more details. The Directors of Gulf Marine Services Plc, as individuals and together, consider that they have acted in a way that would most likely promote the success of the Group and for the benefit of its members as a whole and its other stakeholders. The key matters considered by the Board include the following: • the need to act fairly between members of the Group; • the need to maintain the Group’s business relationships with suppliers, customers and other stakeholders; • the interests and safety of the Group’s employees; • the impact of the Group’s operations on the community and the environment; • the desirability of the Group maintaining a reputation for high standards of business conduct; and • the likely consequences of any decision in the long term. The Board has always taken into account its obligations under Section 172(1) of the Companies Act 2006 (Section 172), including during the year, in line with current reporting requirements. Key decisions have been specifically confirmed at each Board meeting to take into account these matters. This has been supplemented by the roles of the individual Directors giving due regard and consideration for each element of the Section 172 requirements. The Board has always maintained an approach to decision-making that promotes the long-term success of the business and is in line with the expectations of Section 172. The disclosures set out here demonstrate how GMS deals with the matters set out in Section 172(1)(a) to (f). Cross-references to other sections of the report for more information are also included. ![]() 9Annual Report 2023 Strategic Report How GMS Engages with Stakeholders Stakeholder Objectives How did Engagement Support Board Decision Making? Lenders GMS continued to have extensive interaction with its lenders and respective teams. Capital structure is always kept under consideration in any decision making to ensure that the Group stays within its covenants. Lenders are primarily concerned with ensuring that the capital value of their loans are protected, and that interest is paid. They also wish to ensure that other material provisions of the lending agreements are complied with. The increase in adjusted EBITDA meant that the Group continues to successfully repay significant amounts of principal and this resulted in a reduction in leverage to 3.05 times (2022: 4.4 times). This was one of the main priorities for the Board, which Management successfully delivered. Refer to the Financial Review on pages 22 to 24 for further details. Suppliers GMS’ supply chain is fundamental to the ability to deliver reliable operations. The Group has a strategy of long-term partnerships with key suppliers based on regular and transparent communication with suppliers through site visits, calls and surveys. The Group continuously reviews its existing supply chain which ensures continuity of supply. The Board received regular updates on this during the year. Suppliers are primarily focused on fair and timely payment terms as well a collaborative approach and open terms of business. GMS works to maximise in-country spending, which is a requirement from National Oil Company (NOC) clients. The Board was given regular presentations and updates on the Group’s procurement activities including development of key focus areas for procurement in future. The Group continues to look into cost savings initiatives and maximising in-country value and renegotiate the terms of major supply contracts to improve efficiency. People Our employees are our most important asset. They want to work in an environment where they are safe and respected, and have the opportunity to learn, reach their potential and develop successful careers in a Company they can be proud of. The quality of the workforce is crucial to the success of GMS. We regularly communicate with both on and offshore staff via weekly email updates, meetings and video communication from the Executive Chairman to all offshore staff. All non-executive Directors have visited our offices in Abu Dhabi and engaged with staff during their visit. Lord Anthony St John of Bletso is our dedicated workforce engagement non-executive Director. An end of year celebration event was held at the Abu Dhabi HQ office to celebrate the collective wins as a team in 2023. During this event, long service employees were also recognised with awards for 10, 15, 20 and 25 years of service. Employees are concerned with job security, opportunities for training, a culture of fairness, inclusion and communication, compensation and benefits. Regular updates on Health and Safety and HR activities and its future plans are provided at main Board meetings. Refer to page 37 for more details on engagement with our people. ![]() 10 Gulf Marine Services PLC #### MARKET ANALYSIS Markets Arabian Peninsula Region In the Arabian Peninsula region, Offshore Oil and Gas (O&G) production is expected to increase over the next decade, driven by a planned 29% increase in production capacity. Self-Elevating Support Vessels (SESV’s) demand across the Arabian Peninsula region was at c.21,300 vessel days in 2023, an increase by 22% year-on-year, with an implied utilisation of 82%. Over the next five years, demand across the Arabian Peninsula markets is expected to grow rapidly and reach a height of 37,930 vessel days by 2027. This growth would effectively exceed available supply, leading to exploration and production contractors across the region to attempt to lock in capacity early to secure SESVs to support committed field development work. The high utilisation rates spurred several new build orders in 2022, which were fulfilled in 2023, consequently increasing the overall number of SESVs in the region. Additional orders for SESVs were placed in 2023, with anticipated delivery dates in 2024, however a portion of these new builds are earmarked for contracts already awarded. Increasing supply tightness as well as the importance of SESVs to support major offshore field developments has seen a uptick in day rates over the past few years. While day rates averaged US$ 30k over the 2017-2021 period, new tenders in 2023 drove the average rates to just over US$ 44k. In 2023, the Arabian Peninsula region revenue contributed 91% (2022: 89%) of the total Group revenue. During the year, the Group secured eight new contracts and extensions to current contracts with a total duration of 8.4 years. The Arabian Peninsula region saw an increase in fleet average utilisation from 88% to 95%, driven by the rise in demand for E-Class and K-Class vessels. As of 31 December 2023, GMS operates three vessels in Qatar, three vessels in KSA and six vessels in the UAE. North-West Europe Offshore wind farms in Europe remains a pivotal market for GMS across both operation and maintenance sectors, as well as in supporting the construction and commissioning of new wind farms. Anticipated overall activity is projected to average 9,150 vessel days annually from 2024 to 2027, with c.40% yoy surge expected in 2027-2028. In 2023, the North-West Europe region revenue contributed 9% (2022: 11%) of the total Group revenue. GMS currently has one of its large class vessels working in Europe engaged in the ongoing maintenance and operation of existing windfarms. The vessel is engaged on a long-term contract with options extending up to 2029. Market Outlook Global energy demand is the principal indicator of all O&G related investments, driving support for hydrocarbon exploration, and production and consequently demand for supply chain services such as SESVs. The BP Energy Outlook 2023 forecasts primary energy demand to increase by c.13% between 2020-2040. The Arabian Peninsula region is expected to provide the largest incremental demand of 4.8 mmboe in offshore O&G production – growing 29% from 16.6 mmboe to 21.4 mmboe over the next decade. In addition, it is likely that the offshore wind industry investment will generally exceed that of O&G for the foreseeable future accounting for c.45% of total offshore energy spending expected over the 2024-2027 period. ![]() 11Annual Report 2023 Strategic Report E-Class S-Class K-Class Map legend KSA Enterprise Kudeta Sharqi Qatar Endurance Evolution Kikuyu Europe Endeavour UAE Kawawa Kamikaze Keloa Pepper Scirocco Shamal ![]() 12 Gulf Marine Services PLC Senior Management The Executive team implements the risk management process from risk identification to management and mitigation. #### RISK MANAGEMENT Ensuring the effective identification, management and mitigation of business risks, as well as the pursuit of opportunities, are pivotal for achieving the Group’s strategic goals. A robust risk management system is established to facilitate the identification, analysis, evaluation, mitigation and continuous monitoring of risks, as outlined in the framework below. Board of Directors The Board has overall responsibility for the Group’s strategy and ensuring effective risk management. Audit and Risk Committee Responsibilities include reviewing the Group’s internal control and risk management systems as well as monitoring the effectiveness of the Group’s internal audit function. Internal Audit There are clear reporting lines from the internal audit function to the Audit and Risk Committee and the Executive team. The framework incorporates the policies, culture, organisation, behaviours, processes, systems and other aspects of the Group that, when combined, facilitate its effective and efficient operation. Business risks across the Group are addressed in a systematic way through the framework, which has clear lines of reporting to address the management of risks, and improvement of internal controls were considered appropriate. The Board has overall responsibility for ensuring that risks are effectively managed. As an integral part of their regular risk assessment procedures, the Board evaluates the relevance of Environmental, Social and Governance (ESG) issues to GMS' operations. The Audit and Risk Committee oversees the evaluation of the Group's internal control system and procedures. Following its assessment, the Audit and Risk Committee has determined that GMS' operational internal control system, including risk management practices, remains effective for day-to-day operations. The Audit and Risk Committee is responsible for reviewing the effectiveness of the Group’s financial controls and the financial reporting process, which include the timely identification and resolution of areas of accounting judgement, and the quality and timeliness of papers analysing those judgements. The Audit and Risk Committee reviewed control deficiencies identified during the prior year end and are satisfied that management have improved areas where control deficiencies were identified. There were no significant weaknesses identified by the Board as part of their review during the year. The enterprise risk assessment process begins with identifying risks through quarterly reviews by individual departments. This contains an assessment of the principal risks facing the Group. Mitigating controls are then identified. The departmental reviews are then consolidated by the Executive team to identify an overall heatmap. Emerging risks are also identified through these discussions and included in reporting to the Audit and Risk Committee, which reviews the risk profile at least quarterly. The Board reviews the risk profile formally on an annual basis (see page 52 for details of the Board’s actions as part of their review). ![]() 13Annual Report 2023 Strategic Report IMPACT LIKELIHOOD K3 K4 K5 K11 K8 K10 K6 K7 K1 K2 K1 Utilisation K2 Inability to secure appropriate capital structure K3 Arabian Peninsula region local content requirements K4 Inability to deliver safe and reliable operations K5 Liquidity and covenant compliance K6 People K7 Legal, economic and political conditions K8 Compliance and regulation K9 COVID-19 pandemic (Removed in 2023) K10 Cyber-crime – security and integrity K11 Climate change Residual Risk Heat Map ![]() 14 Gulf Marine Services PLC Principal Risks and Uncertainties Future results are uncertain due to factors beyond our control. Operating vessels offshore involves varying levels of uncertainty influenced by weather conditions, sea state and navigational hazards. Despite advanced technology and experienced crews, there’s always some uncertainty. Our operations follow strict safety regulations to minimise risks. It's important to plan and remain adaptable as circumstances change, impacting our results and investment value. The principal risks facing the Group in the next five years, along with mitigation measures, are outlined below, though not exhaustive. Risk Mitigating Factors and Actions 1 Utilisation Utilisation levels may be reduced by the following underlying causes: • Customer concentration leading to potential changes in our contract profile and pipeline. Risks of potential loss of some clients to competitors. • ADNOC continues to expand its fleet thus controlling the UAE market. • Fleet capabilities may no longer match with changing client requirements. Clients may increase the standard specification required for a Self-Elevating Support Vessel (SESV), which might require the Group to upgrade some of its fleet to be compliant. Strengthening Client Engagement and Foster Loyalty The Group maintains strong client relationships through consistent communication and a demonstrated history of delivering secure and reliable services. GMS has formulated strategies for fleet upgrades aligned with anticipated client needs in the future. These initiatives aim to craft commercial proposals that foster loyalty, encouraging customers to commit to longer-term contracts involving a greater utilisation of vessels through incentivisation. Diversification Strategies Across Business Segments and Geographies The Group actively seeks opportunities to optimise vessel utilisation and consistently evaluates avenues for diversifying its market presence by expanding its client portfolio. Customisation Capabilities for Client Needs The Group is capable of modifying assets in order to satisfy client requirements. Further, GMS’ vessels are adaptable to compete for a wider market share, enabling the Group to maximise the utilisation level and charter day rates. To comply with LIMS (Lifting Integrity Management System) the Group has involved engineering companies to perform technical studies on existing equipment to extend the life of equipment (time limited). #### RISK MANAGEMENT #### continued Key Revenue Maximisation Cost Management Working Capital Management Controls ![]() 15Annual Report 2023 Strategic Report Risk Mitigating Factors and Actions 2 Inability to Secure an Appropriate Capital Structure Poor financial performance, such as declining revenues or profitability, can make it more difficult for the Group to attract financing or negotiate favourable terms. A low share price may prevent GMS from raising sufficient levels of equity to recapitalise the business. As warrants were issued in January 2023, this may impact the Group’s ability to attract new investors as there would be a potential dilution if these warrants are exercised. Focus on Deleveraging Conscious focus on deleveraging has resulted in reduction in leverage levels to 3.05 times compared to 4.4 times in 2022. Group anticipates net leverage ratio to be below 2.5 times before the end of 2024. Investors Relationship Management Maintain strong investor relations and ensure timely dissemination of Regulatory News Service (RNS) updates. Increased share price The share price has increased from 4.65 pence as of 31 December 2022 to 14.5 pence as of 31 December 2023, reflecting investors’ confidence in the Group’s business strategy. 3 Arabian Peninsula Local Content Requirements Arabian Peninsula region National Oil Companies (NOCs) have local content requirements as part of their tender processes, which varies for each country, designed to give preference to suppliers that commit to improving their local content and levels of spend and investment in-country. This may prevent GMS from winning new contracts or lead to financial loss and/or a reduction in profit margins on existing contracts, which will ultimately impact operating cash flows and net profitability. Local Content Requirements GMS fully embraces local content regulations, reflecting its extensive experience in serving NOCs in the Arabian Peninsula region. The Group maintains offices in Arabian Peninsula region countries where it operates, actively overseeing its supply chain to prioritise the enhancement of local content. When required, GMS collaborates with local partners in targeted markets to strategically position itself for project acquisition. Notably, during the tendering phase, companies with superior audited local content scores are typically offered first refusal to match any lower bids. Market Knowledge and Operational Expertise The Group has well-established long-term relationships in the Arabian Peninsula region which provides an understanding of clients’ requirements and operating standards. Local Content The Group continues to explore ways to improve its local content scores in all the regions in which it operates. We are tracking the scores in two jurisdictions. 4 Inability to Deliver Safe and Reliable Operations Geo-political events or pandemic may impact ability to safely operate assets due to restricted crew travel in certain countries. The Group may suffer commercial and reputational damage from an environmental or safety incident involving employees, visitors or contractors. Inadequate preparation for situations, such as sudden equipment failure, inability to fulfil client requirements and unpredictable weather could have a negative impact on the business. Incomprehensive insurance coverage may lead to financial loss. Safety Commitment and Operational Reliability Our highest priority is providing safe and reliable operations. This is achieved through a resilient Health, Safety, Environment and Quality (HSEQ) management system and a strong safety-focused culture. Management has appropriate safety practices and procedures including disaster recovery plans and comprehensive insurance cover across our fleet. Training and Compliance Our employees undergo continuous and rigorous training on operational best practices. Scheduled Maintenance The Group adheres to regular maintenance schedules on its vessels to ensure compliance with the highest safety standards. Business Continuity Plan The Group has implemented a business continuity management plan, which it regularly updates to ensure the reliability of its operations, including the capability to transfer crew and source spares from different regions to maintain safe operations. Management continues to review and improve the current management systems and monitors the performance of HSEQ. ![]() 16 Gulf Marine Services PLC Risk Mitigating Factors and Actions 5 Liquidity and Covenant Compliance The business is exposed to short-term liquidity management risks due to high interest rates and inflation, which could impact the debt service obligations and the Group’s bank facilities covenants. Reduced liquidity could impact future operations and 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. Breach of covenant – All covenants are closely monitored due to the Group’s performance being very sensitive to many internal and external factors such as utilisation, operational downtime, interest rates and other variables. Liquidity Management The Group continues to manage liquidity carefully through focusing on cash collection from its customers. Optimising Capital Expenditure The Group continues to restrict capital expenditure to essential spending as well as specific client requirements, but without jeopardising the safe and reliable operations of its vessels. Covenant Compliance The management team and Board regularly examine future covenant compliance based on the latest forecasts and take necessary measures to avoid any potential where a future breach of covenant is at risk. The Group monitors its various covenants throughout the remaining period of the loan. Focus on Deleveraging Management continues to focus on making early repayments of the bank loans to reduce the interest costs, improve our leverage position and meet our covenant requirements. 6 People Attracting, retaining, recruiting and developing a skilled workforce. Losing skills or failing to attract new talent to the business has the potential to undermine performance. Effective Communication, Training and Engagement Initiatives Communication has remained a key practice of management. GMS held a full two-day strategy meeting at the Group’s headquarters in Abu Dhabi. This brought together the Board and Senior Management in a productive forum discussing longer-term plans for the business. It included presentations and discussion on each key aspect of the Group’s operations, recent and future industry developments and ongoing and future strategic plans. Further, events like our recent Abu Dhabi headquarters celebration, recognising employee milestones from 10–25 years of tenure, reinforce our united culture. As the Group matures and longtime experts pass their torches, we are committed to developing the next generation of leaders equipped to guide our mission. Remuneration Policy The Short-Term Incentive Plan (STIP) is based on a single Business Corporate Scorecard to ensure all staff are aligned and incentivised around delivering a single set of common goals. Equal Opportunities GMS is engaged in fair and transparent recruitment practices. It has a zero-tolerance policy towards discrimination and provides equal opportunities for all employees. Further, GMS adds value through development programs, promotion from within the organisation and focus on growing talent. Resource Planning The Group has identified all critical roles held by individuals and have adopted processes to ensure the smooth transition in the event of changes in those personnel. Also, in the short term, the Group utilised recruitment specialists and head-hunters to fulfil key positions as the need had arisen. #### RISK MANAGEMENT #### continued ![]() 17Annual Report 2023 Strategic Report Risk Mitigating Factors and Actions 7 Legal, Economic and Political Conditions Political instability in the regions in which GMS operates (and recruit from) may adversely affect its operations. As the majority of crew for certain key positions come from Eastern Europe and Southeast Asia, political instability may hamper the recruitment, retention and deployment of personnel. Emergency Response Planning and Insurance For all our major assets and areas of operation, the Group maintains emergency preparedness plans. Insurance cover over the Group’s assets is reviewed regularly to ensure sufficient cover is in place. Workforce Planning and Monitoring Workforce planning and demographic analysis is undertaken in order to increase diversity within the Group. Multiple new recruitment agencies registered to source and diversify crew composition across different geographies. Monitoring Inflation and Interest Rates Management is continually monitoring the liquidity position from changes in inflation and a focus on cost reduction. During the year, GMS has recruited a Cost Controller to monitor and manage financial expenditures to ensure adherence to budgetary constraints and optimise cost efficiency. The key aim of the Group is to deleverage through early repayments, which will reduce the impact of interest. 8 Compliance and Regulation Non-compliance with anti-bribery and corruption regulations could be detrimental to stakeholder relations and lead to reputational and financial loss. GMS’ operations are subject to international conventions on – and a variety of complex federal and local laws, regulations and guidelines relating to – health, safety and the protection of the environment. Compliance with these has become increasingly costly, complex and stringent. Failure to appropriately identify and comply with laws and regulations, could lead to regulatory investigations. Compliance with recently introduced UAE Corporate Tax Regulations, including adherence to transfer pricing requirements, poses potential administrative and financial obligations for the Group. Code of Conduct The Group has a Code of Conduct which includes anti-bribery and corruption policies, and all employees are required to comply with this Code when conducting business on behalf of the Group. It is mandatory for employees to undergo in-house training on anti-corruption. All suppliers are pre-notified of anti-bribery and corruption policies and required to confirm their compliance with these policies. Regulations A central database is maintained which documents all of GMS’ policies and procedures which comply with laws and regulations within the countries in which GMS operates. A dedicated Company Secretary is in place to help monitor compliance, in particular for UK legal and corporate governance obligations. External Review The internal auditors help ensure compliance with GMS policies, procedures, internal controls and business processes. Engagement of Tax Consultant A reputed tax consultant has been engaged to assist with a Group tax health check, a review of Group's transfer pricing policy and implementation of corporate tax in the UAE. 9 COVID-19 Pandemic – Removed During 2023 ![]() 18 Gulf Marine Services PLC Emerging Risks GMS operates an emerging risk framework as a tool for horizon scanning, with developments reported to the Audit and Risk Committee on a routine basis. Emerging risks are defined as a systemic issue or business practice that has either not previously been identified, has been identified but dormant for an extended period of time (five years); or has yet to arise to an area of concern. There is typically a high degree of uncertainty around the likelihood of occurrence, severity and/or timescales. Emerging risks are identified and/or monitored through internal debate by management and the Audit and Risk Committee, as well as discussions with key stakeholders (see the Group’s Section 172 statement), industry- specific journals, and reviews of reporting published by peer companies. Examples of emerging risks include unexpected changes in the demand for oil, technological advancements, monitoring of suppliers’ performance, changes to tax landscape in regions GMS operates in and potential client insolvencies. Risk Mitigating Factors and Actions 10 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. Cybersecurity Monitoring and Defence GMS operates multi-layer cyber-security defences which are monitored for effectiveness to ensure they remain up to date. GMS engages with third-party specialists to provide security services. 11 Climate Change Climate change poses both transition and physical risks to the Group. The transition risks come from the decarbonisation of the global economy. This 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. The physical risks also interact with principal risk 4 – Our inability to deliver safe and reliable operations. Legal and Policy Monitoring The Group carefully monitors legislative developments to ensure compliance with all relevant laws both in the UK and the Arabian Peninsula region. The TCFD disclosure in this report explains our assessment and response to climate-related risks to be transparent with our stakeholders. Physical Infrastructure The Group monitors weather patterns to ensure conditions are suitable for our offshore employees and vessels. Onshore buildings and offshore vessels are designed to withstand the heat in the Arabian Peninsula region. Environmental Impact GMS aims to minimise its environmental impact by installing energy and water efficiency measures. We also ensure our machinery and engines are regularly maintained so they operate efficiently. Long-term Planning GMS has a proven track record in the renewables sector which provides versatility in our business model. Our vessels are built to be as flexible as possible to maximise utilisation. We are aware that we may need to consider changing sea levels and environmental legislation when replacing vessels that are being retired in the long term. #### RISK MANAGEMENT #### continued ![]() 19Annual Report 2023 Strategic Report ![]() 20 Gulf Marine Services PLC #### KEY PERFORMANCE INDICATORS Key Performance Indicators (KPIs) serve as vital metrics for evaluating performance of the Group in relation to our strategic objectives. These KPIs comprise of financial and operational measures and each links to the four pillars of our strategic framework. Refer to the Glossary for the definition of each Alternative Performance Measure (APM). KPI Description 2023 Performance Revenue and utilisation Revenue reflects the amounts recognised from operating activities with clients during the year. It is driven by charter day rates and utilisation levels. Utilisation is the percentage of days that our fleet of Self-Elevating Support Vessels (SESVs) are chartered on a day rate out of total calendar days. The Group demonstrated an improved financial performance leading to an increase in revenue by 14% which is attributed to increase in both utilisation and average day rates across the fleet. Average utilisation was up six percentage points to reach 94% and the average day rates across the fleet increased to US$ 30.3k compared to the previous year’s US$ 27.5k. US$ 109m US$ 102m US$ 115m US$ 133m US$ 152m 2023 2022 2021 81% 69% 84% 94% 88% 2020 2019 % – SESV utilisation Bars – Revenue Adjusted EBITDA 1 and adjusted EBITDA Margin 2 Adjusted EBITDA (Earnings before Interest, Tax, Depreciation and Amortisation), excluding exceptional items and non-cash transactions such as impairments or reversal of impairments. It is a key measure of the underlying profitability of GMS’ operations. Adjusted EBITDA margin demonstrates the Group’s ability to convert revenue into profit. The improvement in revenue translated into an improved adjusted EBITDA of US$ 87.5 million. This exceeded both our initial guidance range of US$ 75 million to US$ 83 million, as well as surpassing the revised guidance of US$ 86 million. The adjusted EBITDA margin has also increased to 58% (2022: 54%). US$ 51m US$ 50m US$ 64m US$ 72m US$ 88m 2023 2022 2021 49% 47% 56% 54% 58% 2020 2019 % – Adjusted EBITDA Margin Bars – Adjusted EBITDA Adjusted profit and adjusted DLPS/DEPS 3 Adjusted profit or loss measures the net profitability of the business adjusted for exceptional items and non-cash transactions such as impairment. Adjusted DEPS means fully diluted earnings per share and adjusted DLPS means diluted loss per share, which measures the level of net profit/loss, including adjusting items, per ordinary share outstanding. Adjusted profit was US$ 9.8 million (2022: US$ 17.6 million). The decrease reflects higher finance expenses by US$ 13.8 million due to increase in interest rates and higher impact of changes in fair value of derivative by US$ 8.6 million. US$ 18m US$ 18m US$ 10m ADEPS US$ 0.02 ADEPS US$ 0.01 ADLPS US$ (0.04) ADEPS US$ (0.03) ADLPS US$ (0.06) US$ -20m US$ (20)m US$ (15)m 2023 2022 2021 2020 2019 Numbers – Adjusted DLPS/DEPS Bars – Adjusted profit/loss Net bank debt 4 to adjusted EBITDA Net debt to adjusted EBITDA is the ratio of net debt at year end to earnings before interest, tax, depreciation and amortisation, excluding adjusting items (see Glossary for details), as reported under the terms of our bank facility agreement. Maintaining this covenant below levels set out in the Group’s bank facilities is necessary to avoid an event of default. As a result of our commitment to deleveraging, the net leverage ratio on 31 December 2023 was reduced to 3.05 times (31 December 2022: 4.4 times), driven by a reduction in the net debt to US$ 267.3 million (31 December 2022: US$ 315.8 million) combined with improved EBITDA for the year. 7.6 8.0 5.8 4.4 3.1 2023 2022 2021 2020 2019 Key Revenue Maximisation Cost Management Working Capital Management Control See Glossary. 1 Represents operating profit after adding back depreciation, amortisation, non-operational items and impairment charges or deducting reversal of impairment. This measure provides additional information in assessing the Group’s underlying performance that management can more directly influence in the short term and is comparable from year to year. A reconciliation of this measure is provided in Note 31 to the consolidated financial statements. 2 Represents adjusted EBITDA divided by revenue. This measure provides additional information on underlying performance as a percentage of total revenue derived from the Group. ![]() 21Annual Report 2023 Strategic Report KPI Description 2023 Performance Backlog Backlog shows the total order book of contracts (comprising firm and option periods) at the relevant date. This is a leading indicator of future revenue and utilisation levels. Backlog increased in the year driven by new long-term contracts secured, partially offset by the unwinding of existing long-term contracts. US$ 240 US$ 199 US$ 179 US$ 342 US$ 459 2023 2022 2021 2020 2019 The backlog figures shown above are as at 1 April. Average FTE retention (Onshore and Offshore) Employee retention shows the percentage of staff who continued to be employees in the year. The percentages shown do not take into account retirements or redundancies. Average FTEs (Full Time Equivalent employees) throughout the year provides an indication of the Group’s service capacity, scale of operations, and manpower cost base. Group staff retention increased to 88% from 84% reported in 2022. Average onshore FTEs over the year have increased to 59 from 55 reported in 2022. While for offshore FTEs, the average number throughout the year increased from 511 in 2022 to 569. The total Group headcount increased from 594 at 31 December 2022 to 660 at 31 December 2023, which was driven by increased utilisation of our vessels, which required an increase in recruitment of offshore FTEs. 482 496 534 567 628 2023 2022 2021 84% 83% 86% 88% 92% 2020 2019 % – Employee retention Bars – Average FTEs TRIR and LTIR TRIR is the Total Recordable Injury Rate per 200,000 man hours, which provides a measure of the frequency of recordable injuries. LTIR is the Lost Time Injury Rate per 200,000 man hours which is a measure of the frequency of injuries requiring employee absence from work for a period of one or more days. Offshore man hours are calculated based on a 12-hour working period per day. The Group improved its LTIR going from 0.1 in 2022 to zero in 2023 as there was no Lost Time Injury incident. However, two medical treatment cases were recorded taking the TRIR from 0.10 in 2022 to 0.18 in 2023. 0 0.10 0.20 0.30 0.29 0.19 0.20 0.10 0.10 0.10 0.18 0.00 0.00 0.00 20232022202120202019 = TRIR = LTIR Underlying G&A 5 as percentage of revenue The underlying G&A to revenue expense ratio compares revenue to the amount of expenses incurred in onshore support operations. The underlying G&A has slightly increased from US$ 10.4 million in 2022 to US$ 10.7 million in 2023. However, underlying G&A as percentage of revenue has decreased from 8% in 2022 to 7% in 2023. US$ 14m US$ 10m US$ 10m US$ 10m US$ 11m 10% 13% 9% 7% 8% 2023 2022 2021 2020 2019 Underlying General and Administrative (G&A) expenses excluding depreciation and amortisation, and exceptional costs. % – G&A to revenue Bars – Underlying G&A Secured utilisation at 1 January after each reporting date Secured utilisation at 1 January represents the level of secured contracts we have in place for the year ahead across our fleet of vessels. The position is as at 1 January after each reporting date and is an important indicator to management and the Board of the risks to delivery of the business plan. The higher the level of secured work, the less reliant the Group is on identifying and securing future contracts. Secured utilisation has decreased by 10 percentage points compared to the prior year. The decrease is due to three K-Class vessel and one E-Class contracts coming to an end in 2024. These contracts are in the process of being renewed. 67% 73% 77% 84% 74 % 2023 2022 2021 2020 2019 3 Represents the adjusted earnings/loss attributable to equity holders of the Company for the period divided by the weighted average number of ordinary shares in issue during the period, adjusted for the weighted average effect of warrants and LTIP’s outstanding during the period. The adjusted earnings/loss attributable to equity shareholders of the Company is used for the purpose of basic gain/loss per share adjusted by adding back any exceptional costs, impairment charges or deducting reversal of impairment. This measure provides additional information regarding earnings per share attributable to the underlying activities of the business. A reconciliation of this measure is provided in Note 32 to the consolidated financial statements. 4 Represents total bank borrowings less cash. 5 Represents general and administrative expenses excluding depreciation and amortisation, and other exceptional costs. A reconciliation of this measure is provided in Note 31 to the financial statements. ![]() 22 Gulf Marine Services PLC Cost of Sales, Reversal of Impairment and Administrative Expenses Cost of sales as a percentage of revenue decreased by five percentage points to 54% compared to 59% reported in 2022. As a result of continued improved market conditions, an impairment assessment of the Group’s fleet was conducted which resulted in a net impairment reversal of US$ 33.4 million (2022: net impairment reversal of US$ 7.8 million). Refer to Note 5 to the consolidated financial statements for further details. Underlying general and administrative expenses 3 (which excludes depreciation, amortisation and other exceptional costs) reduced as a percentage of revenue to 7% in 2023 from 8% in 2022. Reported general and administrative expenses amounted to US$14.6 million, up from US$13.2 million in 2022, driven by increased staff costs and professional fees. Adjusted EBITDA The adjusted EBITDA increased to US$ 87.5 million (2022: US$ 71.5 million) which exceeded both our initial guidance range of US$ 75 million to US$ 83 million as well as surpassed the revised guidance of US$ 86 million. The increase reflects improvement in market conditions leading to higher utilisation and day rates. The adjusted EBITDA margin has also increased to 58% (2022: 54%). Adjusted EBITDA is considered an appropriate and comparable measure showing underlying performance, that management are able to influence. Please refer to Note 31 to the consolidated financial statements and Glossary for further details. Revenue US$’000 Gross Profit US$'000 Adjusted gross profit US$’000 Vessel Class 2023 2022 2023 2022 2023 2022 E-Class vessels 60,955 51,135 43,070 18,525 26,730 15,205 S-Class vessels 35,018 33,986 21,327 12,600 16,865 17, 2 31 K-Class vessels 55,630 48,036 38,440 29,409 25,814 20,310 Total 151,603 133,157 102,837 60,534 69,409 52,74 6 #### FINANCIAL REVIEW Revenue and Segmental Profit/Loss The Group posted 14% increase in revenue, reaching US$ 151.6 million compared to the previous year’s US$ 133.2 million. This growth was a result of combination of an increase in both utilisation and average day rates. Utilisation increased by six percentage points to 94% from the 2022 figure of 88%. This continues to be the highest level of utilisation achieved since 2014. Notable improvements in the utilisation rates were observed in the E-Class and K-Class vessels, reaching 92% (2022: 82%) and 95% (2022: 87%) respectively. S-Class vessels utilisation was slightly lower at 94% (2022: 97%). Average day rates across the fleet increased by 10% to US$ 30.3k compared to the previous year's US$ 27.5k with improvements across all vessel classes, particularly for E-Class whereby, the day rates improved by 17% to US$ 41.4k (2022: US$ 35.4k). K-Class and S-Class rates increased by 7% and 5%, respectively. The United Arab Emirates (UAE), Qatar and Saudi Arabia combined region continue to be the largest geographical market representing 91% (2022: 89%) of total revenue. The remaining 9% (2022: 11%) of revenue was earned from the renewables market in Europe. The table below shows the contribution to revenue, gross profit and adjusted gross profit 2 made by each vessel class during the year. 2023 US$m 2022 US$m 2021 US$m Revenue 151.6 133.2 115.1 Gross profit 102.8 60.5 60.6 Adjusted EBITDA 1 87.5 71.5 64.1 Net impairment reversal 33.4 7. 8 15.0 Net profit for the year 42.1 25.4 31.2 1 Represents operating profit after adding back depreciation, amortisation, non-operational items and impairment charges or deducting reversal of impairment. This measure provides additional information in assessing the Group’s underlying performance that management is more directly able to influence in the short term and on a basis comparable from year to year. A reconciliation of this measure is provided in note 31 to the financial statements. 2 Represents gross profit after deducting reversal of impairment/adding back impairment charges. This measure provides additional information on the core profitability of the Group. A reconciliation of this measure is provided in Note 31. 3 Represents general and administrative expenses excluding depreciation and amortisation, and other exceptional costs. A reconciliation of this measure is provided in Note 31 to the financial statements. ![]() 23Annual Report 2023 Strategic Report Finance Expense Finance expenses increased to US$ 31.4 million (2022: US$ 17.7 million) which is mainly driven by an increase in LIBOR/SOFR rates. Further, 250 basis points of PIK interest costs were also applied and the margin rate on the loan increased from 3% to 4% for first quarter of the year which were triggered by the net leverage ratio exceeding 4.0 times as at 31 December 2022. On achieving a net leverage ratio below 4:1 times, PIK interest ceased to accrue in the second quarter of the year, and the margin was thereafter reduced by 90 basis points to 3.1%. This has resulted in reduction in cost of financing by 340 basis points. Attaining a net leverage ratio below 4:1 times was crucial, allowing us to limit the number of quarters we were charged a PIK interest to one quarter only. Key benefits of being below 4:1 times is it allows GMS to meet its covenants, to pay dividends and to cut some debt monitoring fees. The accounting driven impact of changes in fair value of the derivative (the warrants issued to the lenders) increased to US$ 11.1 million (2022: US$ 2.5 million) in 2023, due to the increase in the share price of the Company. Company expects valuation charges over par value to get reversed when the warrants are either exercised or when they will expire, on 30 June 2025. Earnings Net profit for the year increased to US$ 42.1 million compared to US$ 25.4 million reported in 2022. The 65.7% increase in net profit was mainly driven by higher revenue and the reversal of impairments charged in the previous years. The increase was partially offset by an increase in finance expenses and the accounting impact of changes in the fair value of derivative (the warrants issued to the lenders) as explained above. Capital Expenditure The Group’s capital expenditure relating to drydocking and improvements of the vessels increased to US$ 11.3 million (2022: US$ 9.1 million). Cash Flow and Liquidity During the year, the Group delivered higher operating cash flows of US$ 94.4 million (2022: US$ 82.6 million). This increase is primarily from higher revenues generated during the year. The net cash outflow from investing activities increased to US$12.8million (2022: US$ 6.3 million). The Group’s net cash outflow from financing activities was US$ 85.2 million (2022: US$ 72.3 million) mainly comprising of repayments to the banks of US$ 56.2 million (2022: US$ 51.4 million) and interest paid of US$ 27.4 million (2022: US$ 17.5 million). The repayments towards the bank loan of US$ 56.2 million were almost double the Group's obligation to its lenders for 2023. The Group has US$ 8.7 million of available resources comprising cash and cash equivalents at the reporting date. Further, it has an available working capital facility of US$ 15.0 million (2022: US$ 20.0 million) which can be utilised to draw down cash, of which US$ 2.0 million (2022: Nil) was utilised, leaving US$ 13.0 million (2022: US$ 20.0 million) available for drawdown. During the period, the working capital facility was reduced by US$ 5.0 million. The facility expires alongside the main debt facility in June 2025. Balance Sheet Total non-current assets at 31 December 2023 were US$ 621.0 million (2022: US$ 605.3 million), following a net impairment reversal of US$ 33.4 million (2022: US$ 7.8 million) on some of the Group’s vessels. The total current liabilities increased to US$ 99.5 million from US$ 69.3 million in 2022, primarily due to higher scheduled repayments under the loan agreement for 2024. Additionally, trade payables and accrued expenses increased to US$ 13.2 million (2022: US$ 12.6 million) and US$ 16.1 million (2022: US$ 11.2 million), respectively. The Group was in a net current liability position as of 31 December 2023, amounting to US$ 52.1 million (2022: US$ 15.8 million). Total current assets have decreased as receivables are converted into cash that was used to repay the debt. Management closely monitors the Group's liquidity position including focus on the forecasted short-term cash flows which would be sufficient to meet the Group’s current liabilities, including the current portion of the bank borrowings which represents the principal repayments due over the next 12 months. The loan prepayments were also made after ensuring that forecasted cash inflows are sufficient to meet the Group's short-term obligations. Total non-current liabilities decreased as a result of reduction in bank borrowings. The increase in equity reflects the net profit achieved during the period. ![]() 24 Gulf Marine Services PLC #### FINANCIAL REVIEW #### continued How We Assess Our Prospects In assessing the Group’s long-term prospects, the Directors regularly evaluate the key risks of the Group including the factors likely to affect the Group’s future performance, financial position, cash flows, liquidity position and debt facilities. These assessments rely on established risk management procedures and involve analysing the Group's exposure to significant risks and uncertainties. The Group’s customers are principally involved in the exploration for and production of Oil and Gas and installation of windfarms. The Directors closely monitor its customers’ operational plans and related capital expenditure programmes, particularly in the short term in which projects will be in progress and for which requirements for services from GMS will be more certain. Assessment Period In line with Provision 31 of the 2018 UK Corporate Governance Code, the Directors have carried out a comprehensive review of the Group’s prospects and its ability to fulfil its obligations over a three-year period, similar to the timeframe assessed in the 2022 long-term viability evaluation. This period was selected with reference to the current backlog and business development pipeline, both of which offer limited visibility beyond this point, particularly in light of current macroeconomic volatility. Taking these factors into consideration, the Directors believe that a three-year forward-looking period, commencing on the date the annual accounts are approved by the Directors, is the appropriate length of time to reasonably assess the Group’s viability. This assessment is based on management’s reasonable expectations of the position and performance of the Group over this period, forecasts, and its planning timeframes. The Group is in the process of refinancing its term facility in advance as the bullet payment becoming due in June 2025, i.e. within the long-term viability assessment period. Management’s ongoing discussions with various lending entities are aimed at securing terms that align with our long-term strategic objectives, ensuring continued financial stability. Given the improved financial performance reported during 2023 and the current high levels of utilisation secured, combined with higher day rates, the Group expects the financial performance to continue to improve during the assessment period. As a result, management is optimistic about the outcome of these negotiations and expect to complete the process on improved terms in later half of 2024. #### LONG-TERM #### VIABILITY STATEMENT Net Bank Debt and Borrowings Net bank debt reduced to US$ 267.3 million (2022: US$ 315.8 million). This was a result of management’s commitment to accelerate deleveraging. The Group repaid US$ 56.2 million (2022: US$ 51.4 million) towards its term loan, of which, US$ 26.2 million (2022: US$ 3.8 million) were over and above its contractual obligation for 2023. A total of US$ 33.7 million (2022: US$ 3.8 million) was prepaid during 2023. Going Concern The Group is in the process of refinancing its term facility in advance as the bullet payment becoming due in June 2025. Management’s ongoing discussions with various lending entities are aimed at securing terms that align with our long-term strategic objectives, ensuring continued financial stability. Given the improved financial performance reported during 2023 and the current high levels of utilisation secured, combined with higher day rates, the Group expects the financial performance to continue to improve during the assessment period. As such, we are optimistic about the outcome of these negotiations. The Group’s forecasts indicate that its anticipated refinanced debt facility will provide sufficient liquidity for its requirements for at least the next 12 months and accordingly, the consolidated financial statements for the Group have been prepared on the going concern basis. For further details please refer the Going Concern disclosure in Note 3 to the consolidated financial statements. Related Party Transactions During the year, there were related party transactions for catering services of US$ 0.6 million (2022: US$ 1.2 million), overhauling services of US$ 2.4 million (2022: US$ 1.9 million) and laboratory services of US$ 18k (2022: US$ 7k) with affiliates of Mazrui International LLC, the Group’s second largest shareholder (25.6%). All related party transactions disclosed herein have been conducted at arm’s length and entered into after a competitive bidding process. This process ensures that the terms and conditions of such transactions are fair, reasonable, and comparable to those that would be available in similar transactions with unrelated third parties. The Group is not allowed to have any transactions with its largest shareholder, Seafox International (29.99%) as agreed with Lenders. Further details can be found in the Directors Report on page 73 and Note 24 of the consolidated financial statements. Adjusting Items The Group presents adjusted results, in addition to the statutory results, as the Directors consider that they provide a useful indication of performance. A reconciliation between the adjusted non-GAAP and statutory results is provided in Note 31 to the consolidated financial statements with further information provided in the Glossary. Alex Aclimandos Chief Financial Officer 03 April 2024 ![]() 25Annual Report 2023 Strategic Report Consideration of Principal Risks The nature of the Group’s operations exposes the business to a variety of risks. The Directors regularly review the principal risks to the business and assess the appropriate controls and the key mitigating actions used to address them. The Directors have further considered their potential impact within the context of the Group’s viability. The risk assessment process, principal risks, and the actions being taken to manage or mitigate them, are explained in detail on pages 12 to 18 of this Annual Report. Sensitivity Analysis To assess the Group’s viability, the Directors have performed analysis considering the following scenario: • no work-to-win in 2024 and 2025; • a 12%, 26% and 17% reduction in utilisation in 2024, 2025 and 2026 respectively; • a reduction in day-rates of an E-Class and two S-Class vessels by 20% and 25% respectively after expiry of their currently secured contracts; and • interest rate to remain at current levels instead of a forecasted decline of 25 basis points commencing second quarter of 2024. Based on the above scenario, the Group would not be in breach of its current term loan facility. The downside case is considered to be severe but would still leave the Group in compliance with the covenants under the Group’s banking facility until its maturity. Reverse Stress Testing In addition to the above downside sensitivity, the Directors have also conducted a reverse stress test, wherein EBITDA has been reduced to the extent of breaching the debt covenant. This scenario assumes a notable increase in operational downtime to 7%, which is in addition to the sensitivities applied in the downside case above. The 4.5% increase in operational downtime for FY24 would lead to a breach of the Finance Service Cover ratio as of 31 December 2024. Given the recent performance of the Group, improved market conditions and strengthening of the demand for GMS vessels, above breach scenario is highly unlikely to occur. However, should circumstances arise that differ from the Group’s projections, the Directors believe that a number of mitigating actions can be executed successfully in the necessary timeframe to meet debt repayment obligations as they become due and in order to maintain liquidity. Potential mitigating actions include the vessels off hire for prolonged periods could be cold stacked to minimise operating costs on these vessels which has been factored into the downside case. Additional mitigations could be considered including but not limited to reduction in overhead costs, relaxation/ waiver from covenant compliance and rescheduling of repayments with lenders. Management is aware of the broader operating context and acknowledges the potential impact of climate change on the Group’s financial statements. However, it is anticipated that the effect of climate change will be negligible during the going concern assessment period. Conclusion Considering the Group’s current position and its principal risks, the Directors have reasonable expectation for the Group to sustain operations and fulfil its obligations as they arise throughout the assessment period. The principal basis for this conclusion revolves around management’s strategic focus on deleveraging existing bank obligations and securing refinancing for the balloon payment due in June 2025, which continues to remain a key priority. Mansour Al Alami Executive Chairman 03 April 2024 ![]() 26 Gulf Marine Services PLC #### PEOPLE AND VALUES # 2023 TCFD & CFD Annual Report for # Gulf Marine Services PLC #### TCFD Overview Executive Statement “At GMS, we have acknowledged climate change as an emerging risk since 2019 and a principal risk since 2021. This is in recognition of the challenges it will pose to our business and the need for us to respond to this in our operations. In 2022, we set our targets for net-zero and developed our strategy for reaching them. Throughout 2023, we continued our work towards our commitments to reducing our environmental impact and limiting our contribution to climate change. COP28 this year was hosted close to home, and we were excited to follow and analyse the outcomes and future opportunities it brings to our business. We look forward to reporting back in 2024 on our further developments.” Mansour Al Alami Executive Chairman TCFD Compliance Statement GMS has complied with the requirements of LR 9.8.6(8)R by including climate-related financial disclosures consistent with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations and recommended disclosures. The current regulations require reporting on a ‘comply or explain’ basis. This year, we have complied with all 11 of the recommendations. The Companies (Strategic Report) (Climate- related Financial Disclosure) Regulations 2022 require publicly quoted and large private companies to integrate climate disclosures into their annual reports. We have complied with the eight reporting disclosure requirements of Climate-related Financial Disclosure (CFD), details of which can be found below. Table 1: GMS Compliance Statement TCFD Recommendation Climate-related Financial Disclosure Compliance Governance a) Describe the Board’s oversight of climate- related risks and opportunities. (c) a description of the governance arrangements of the company in relation to assessing and managing climate-related risks and opportunities. Compliant b) Describe management’s role in assessing and managing climate-related risks and opportunities. Compliant Strategy a) Describe the climate-related risks and opportunities the organisation has identified over the short, medium and long term. (d) a description of: (i) the principal climate-related risks and opportunities arising in connection with the operations of the company and, (ii) the time periods by reference to which those risks and opportunities are assessed. Compliant b) Describe the impact of climate-related risks and opportunities on the organisation’s businesses, strategy and financial planning. (e) a description of the actual and potential impacts of the principal climate-related risks and opportunities on the business model and strategy of the company. Compliant c) Describe the resilience of the organisation’s strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario. (f) an analysis of the resilience of the business model and strategy of the company, taking into consideration of different climate-related scenarios. Compliant ![]() 27Annual Report 2023 Strategic Report TCFD Recommendation Climate-related Financial Disclosure Compliance Risk Management a) Describe the organisation’s processes for identifying and assessing climate-related risks. (d) a description of how the company identifies, assesses, and manages climate-related risks and opportunities. Compliant b) Describe the organisation’s processes for managing climate-related risks. Compliant c) Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the organisation’s overall risk management. (e) a description of how processes for identifying, assessing, and managing climate-related risks are integrated into the overall risk management process in the company. Compliant Metrics and Targets a) Disclose the metrics used by the organisation to assess climate-related risks and opportunities in line with the strategy and risk management process. (d) the key performance indicators used to assess progress against targets used to manage climate-related risks and realise climate-related opportunities and a description of the calculations on which those key performance indicators are based. Compliant b) Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions, and related risks. Compliant c) Describe the targets used to manage climate-related risks and opportunities and performance against targets. (e) a description of the targets used by the company to manage climate- related risks and to realise climate-related opportunities and performance against those targets. Compliant Introduction – About TCFD TCFD provides a framework for assessing and reporting how climate change will impact our business. Its recommendations are divided into four areas, aligned with existing business processes (governance, strategy, risk management, and metrics and targets). We welcome the introduction of LR 9.8.6(8) R, which requires premium companies like GMS to include TCFD statements in their annual reports. It provides a structure to assess and report our climate-related risks. As a business focused on supporting various offshore operations, we are aware of our impact on the environment and the potential risks of climate change to our operations. We believe we have a responsibility to ensure a sustainable future. We are constantly researching opportunities to reduce our impact on the environment. In 2022, we calculated our Scope 3 emissions for the first time, which are those associated with our value chain. Based on those findings, in 2022, we set a net-zero 1 target of 2050 and interim targets to guide our progress. In 2023, we are proud to be making progress against these targets, which are outlined in the Metrics and Targets section of the report. #### Governance Overview The effective identification, management and mitigation of business risks and opportunities are essential to successfully delivering the Group’s strategic objectives. A risk management system is in place to support the identification, analysis, evaluation, mitigation and ongoing monitoring of risks, as shown in the framework below. The Group recognises that as part of our long-term business strategy, we need to operate responsibly. Therefore, climate change is an area of interest for the Board, Senior Management and GMS stakeholders. It was recognised as an emerging risk in 2019 and classified as a principal risk in 2021. The Board has seven principal meetings per year, and risk management and the key risks facing the Group are discussed at each of these meetings. Environmental, social and governance (ESG), including climate change, is a specific agenda item for the December Board meeting each year. Following through on the potential risks that climate change can pose to our business, we review and evaluate the levels of potential impacts on an annual basis. Our overall climate-related risks are assessed as low likelihood and low impact. We do not believe climate change will impact demand for our vessels in the near term. This is because demand for oil and gas production in the Group’s core market of the Arabian Peninsula region is forecasted to continue. However, should demand change, we can mobilise more of the fleet to offshore renewables without significant additional capital expenditure. We aim to ensure that we are aware of future developments in the potential risks and opportunities posed by climate change. Hence, we have designated it a principal risk. We have used the TCFD recommendations to improve our assessment of climate-related risks and guide our reporting on the findings. This financial year, we have conducted our third climate-scenario analysis, to review any recent changes in the risk levels and expand our understanding of our supply chain risks. Overall responsibility for risk management lies with the Board, supported by the Audit and Risk Committee. Our Senior Management team assists in implementing the risk management process, including risk identification, management and mitigation. This is all overseen by the internal audit function. Climate change, as a principal risk, is integrated into each stage of this process. ![]() 28 Gulf Marine Services PLC Board of Directors The Board has overall responsibility for the Group’s strategy and ensuring effective risk management. Internal Audit There are clear reporting lines from the internal audit function to the Audit and Risk Committee and the Senior Management team. The Audit and Risk Committee Responsibilities include reviewing the Group’s internal control and risk management systems as well as monitoring the effectiveness of the Group’s internal audit function. Senior Management The Senior Management team implements the risk management process from risk identification to management and mitigation. Figure 1: Risk Management Structure Within GMS #### PEOPLE AND VALUES #### continued 1 The standard defines net-zero targets as emission reductions of at least 90% across all scopes before 2050 and only a very small number of residual emissions (up to 10%) can be neutralised with carbon removals. The Board’s Oversight The Board has overall responsibility for ensuring that risks are effectively managed. ESG topics, including climate change, are included in the regular risk assessment procedure. The Board reviews the risk profile formally on an annual basis and monitors and oversees progress against goals and targets for addressing climate-related issues. Each year, the latest updates to the climate scenario analysis and climate-related risk assessment are presented to the Board in a workshop session. The session also aims to continue to build the Board’s climate- related competence. Board Committees Risk and Audit Committee The Audit and Risk Committee consists of at least two independent non-executive Directors, of which one is appointed as Chair. It meets at least twice a year, at appropriate times in the Company’s financial reporting and audit cycle. Also, it communicates (as needed) throughout the year with key individuals involved in the Company’s governance, including the Executive Chairman, the Chief Financial Officer, the external audit lead partner and the Head of Internal Audit. The Board is assisted in its responsibility for reviewing the effectiveness of the Group’s system of internal control and procedures by the Audit and Risk Committee. The Audit and Risk Committee receives reports from external advisors (as required) to ensure sufficient insight into the relevant issues to enable it to discharge its duties. An external consultant has been engaged to provide guidance on climate-related risks and conduct climate-scenario analysis. This information is considered when developing the Company’s strategy and risk management policies and while setting budgets. The Financial Controller reviews the risk register and feeds it back to the Audit and Risk Committee. Remuneration Committee The Remuneration Committee consists of at least two independent non-executive Directors, of which one is appointed as Chair. The Committee meets at least twice a year and at other times, as required. It is responsible for designing remuneration policies and practices for the Company’s Chair, executive Directors, Company Secretary and senior executives. The remuneration plan must support the Company’s long-term strategy, purpose, and values. The Committee considers corporate performance on ESG issues when setting the executive Directors’ remuneration. The Committee ensures that the incentive structure for Senior Management does not raise ESG risks by inadvertently motivating irresponsible behaviour. Whilst there are currently no direct links between Board remuneration and meeting our climate strategy or targets, we will revisit the possibility of adding climate strategy and targets as part of the remuneration process in the next two reporting years. Senior Management’s Role The Senior Management team comprises the Executive Chairman, Chief Financial Officer, Business Development & Commercial Director, Head of HSE & Quality, Director Operations and Chief Shared Services Officer. Together, they are responsible for identifying, managing and mitigating potential risks, including those associated with climate change and the transition to a low-carbon economy. The Senior Management team discusses climate-related issues a minimum of twice a year where climate change is an agenda item and routinely throughout the year as needed. The Senior Management team reports to the Board and the Risk and Audit Committee twice a year, with the main update prior to the Board’s annual update meeting. The update consists of information about climate-related strategy updates, progress against set targets, an overview of the workshop agenda and plans for the upcoming financial year. It meets with the Executive Chairman at least twice a year to conduct risk management workshops. Senior leadership is actively engaged with an external consultancy, to help guide climate-related agenda for GMS. They have participated in December’s climate-risk workshop along with the Board of Directors. This financial year, GMS full Scope 3 emissions have been calculated for the third time, allowing comparisons and measured progress tracking. Our Senior Management team will use this information to improve its understanding of GMS’ GHG emissions, guided by the Head of HSE & Quality, who manages Health, Safety and the Environment (HSE). This will help monitor progress against our reduction targets and net-zero strategy and appropriately assess the Group’s operational risk from climate change in line with climate-related scenarios. ![]() 29Annual Report 2023 Strategic Report Strategy GMS wants to ensure the long-term sustainable success of the Company, which requires responding appropriately to all relevant risks and adapting our business strategy, as necessary. As the risks of climate change become more apparent and are of increasing interest to our stakeholders, we have developed how we assess climate-related risks. Climate change is considered as our principal risk and we have a separate climate risk register, which provides details on the 18 associated risks, guided by the TCFD recommendations. Climate Scenario Analysis To understand the climate change risks, both physical and transitional, we conduct an annual climate scenario analysis. Physical risks are those associated with the physical impacts of climate change, for example, increased average temperatures and rising sea levels. Transition risks arise from the shift to a lower carbon economy, including increased regulation, moving to lower emissions technology and changing consumer demands. Climate scenario analysis uses possible representative futures, to model these potential impacts and the changes that will need to be made to limit global warming and reach net-zero. We have rerun the climate scenario analysis on our key sites and operations this financial year and have started to consider their financial impacts. Further financial modelling will be conducted during the next financial year, as we continue to research the medium and long-term actions in our net-zero strategy. The Scenarios Three warming pathways were modelled using data from several established models, including CORDEX (Coordinated Regional Climate Downscaling Experiment), CLIMADA (Climate Adaptation) and IAM (Integrated Assessment Models). The pathways represent a broad range of potential futures, to ensure that all risks are considered. The climate scenarios used in the risk assessment process make projections on hypothetical futures and as such come with a degree of uncertainty. While most of the information is obtained from existing climate models which have a high degree of accuracy, there is still a level of uncertainty. As such, the results of the analysis should only be used as a guide for the climate- related risks and opportunities facing Gulf Marine Services. Ten climate indicators were modelled for each site and scenario, for example, precipitation, aridity, temperature and water stress. Outlined below are the three warming pathways. <2°C by 2100: aligned with the Paris Agreement target of a maximum 1.5°C of warming above pre-Industrial levels. This scenario requires coordinated efforts by governments and businesses, to rapidly reduce carbon emissions through policy and operational changes, leading to high levels of transitional risks, but limited physical risks. 2–3°C by 2100: this scenario is envisaged as the outcome of reactive action from governments, with policies being introduced on an ad-hoc basis, whilst only the most committed businesses take serious action. It is associated with the highest level of transitional risks, due to the uncoordinated approach, and some physical risks. >3°C by 2100: this scenario will occur if limited action is taken over the next few decades. Although, this limits the transitional risks, particularly in the short and medium term, it has the highest degree of physical risk, due to increased global temperature rise. Under this scenario, climate tipping points are projected to be breached, leading to irreversible damage to our planet. The Time Horizons The impacts of climate change expand beyond our traditional horizons of business planning. The UK and UAE have set a net-zero date of 2050, and climate modelling is often based on temperature changes by 2100. As a result, and to align with our net-zero strategy, we have decided to use the following time horizons to assess our climate-related risks and opportunities. Table 2: Time Horizons Used for Climate Scenario Analysis Short-term: Medium-term: Long-term: 2023–2027 2028–2037 2038–2052 The Results Overall, the physical risk level is considered low for GMS’ operations and buildings. As most of the Group’s operations are already in extreme climate conditions, the infrastructure we own and use has been built accordingly. Our office buildings in the Arabian Peninsula region are already exposed to temperatures above 40°C for consecutive days. Therefore, the region’s infrastructure design and our working schedules consider these extreme weather conditions. Our risk management process classifies risks with an overall rating of red, amber or green based on a combination of the inherent risk and the control rating. Across all timelines and scenarios, no red ratings were assigned to climate-related transition risks. Most transition risks were determined to have a green rating. The number of risks rated significant increases over time, with tables 4 to 7 below presenting the scenario and timeline in which a significant rating is assigned. All physical risks were assigned a green risk rating. Table 3: Risk Rating Criteria Likelihood Factor Rating Impact Factor Rating Control Effectiveness Rating Almost Certain 5 Major 5 Very Good 5 Likely 4 Significant 4 Good 4 Possible 3 Moderate 3 Satisfactory 3 Unlikely 2 Minor 2 Weak 2 Rare 1 Insignificant 1 Unsatisfactory 1 Inherent risks Green – Inherent risk is equal to or lower than 9, regardless of the control rating. Amber – Inherent risk is greater than 9 but Controls are either 4 or above, qualifies as material. Red – Inherent risk is greater than 9 and Controls are 3 or below, qualifies as material. The steps we have taken to identify and manage each climate-related issue have been based on our existing risk management framework to ensure a consistent and efficient assessment and categorisation. Each climate-related issue is classified using our rating system. Our process ranks risks initially by their likelihood, then, each issue is ranked according to its impacts on GMS to determine an inherent risk score. We then rank each issue against our control effectiveness to determine the overall risk value. Risks scored with an overall score of greater than 9 are deemed as material. The findings of the updated climate scenario analysis were presented to key GMS staff and the Board in December 2023. As this was the third year of running this workshop, it included a discussion of how the risks were impacted by changes at GMS, within the broader macroeconomic landscape and by updates to the underlying data sets. Each risk was discussed to determine whether the impact and likelihood ratings needed amending. It was decided that no updates were needed from the 2022 ratings, as there had been no material changes in the past financial year. ![]() 30 Gulf Marine Services PLC #### PEOPLE AND VALUES #### continued #### Transition Risks – Policy & Legal Table 4. Policy & Legal risks with a description, the Timeline and Scenario of Highest Impact and Our Response Risk Description Scenario Our Response Enhanced emissions reporting obligations As a premium listed company on the London Stock Exchange, with operations primarily in the Arabian Peninsula region, GMS is subject to UK and UAE climate change and environmental reporting regulations. Changes to policy and reporting requirements are almost certain to occur in the short term with the UK committing to net-zero by 2050. However, only one of the Group’s vessels is currently located in Europe, which means that the potential operational/ financial impact of such changes would be limited to Moderate. In the short term, fewer climate-related policy obligations are anticipated for operations in the Arabian Peninsula region sites (as compared to the UK reporting regulations noted above); however, the UAE has its own 2050 net-zero target. Therefore, the potential likelihood of this risk is deemed to be lower (possible as compared to almost certain). However, if such policies and increased regulations were to be introduced over a longer period, the concentration of GMS’ fleet in the Arabian Peninsula region would result in a higher (Significant) potential impact. <2ºC, 2–3°C Short, Medium 2023 Risk rating – amber The Group aims to mitigate this risk by carefully monitoring legislative developments to minimise non-compliance with all relevant laws in the UK and the Arabian Peninsula region. Our Annual Report includes all the legally required information. We provide additional updates on our website as appropriate. There is potential for increased mandates and regulation of our existing products and services. In the long term, this is expected to be associated with the carbon emissions of our vessels. More detail on this is provided in Table 7 below. Financial impact: Increased opex. There are costs associated with this compliance, including engaging external specialists internal resources, and potential penalties if regulations are not followed. Non-compliance could result in fines of a minimum of £2,500 and a maximum of £50,000. These costs have been assessed and factored into the budget, which is currently considered negligible. A central database is maintained to document our legally required and regulated policies and procedures. We are ISO 14001 certified, which provides a framework for managing the environmental legislation that applies to our operations. Exposure to carbon pricing In the short term, this risk is unlikely and would have a minor impact. In the longer term, the impact would be minor in the 2–3°C scenario. However, this risk could be more likely and have a greater impact in the medium term. It is likely that in a <2°C scenario, carbon pricing and taxes could be introduced in the short term, and the potential cost impacts could be moderate to significant. 2–3ºC Medium 2023 Risk rating – amber There is no indication that carbon pricing will be introduced, which would affect GMS’ operations in the short term. In the interim, we have developed our net-zero strategy, which will reduce our carbon emissions and minimise the impact should a carbon tax be introduced. Changes in tax legislation will be closely monitored, and internal models can be used to factor this into the business strategy. Financial impact: increased capex and opex. Based on our 2023 Scope 1 emissions, our net-zero target and current projections for global carbon prices per tCO 2 e, a carbon tax could have various financial impact ranges; please see the table below. This is based on data from The World Bank, NGFS, IPCC, OECD and Reuters. Scenario 2027 (£) 2037 (£) 2052 (£) Proactive 1,875,301 1,531,786 – Reactive 605,172 3,784,860 – Inactive 692,417 981,942 1,252,694 ![]() 31Annual Report 2023 Strategic Report #### Transition Risks – Reputation Table 5. Reputation Risks with a Description, the Timeline and Scenario of Highest Impact and Our Response Risk Description Scenario Our Response Increased stakeholder concern In the short term, increased stakeholder concern may be seen, including from employees who may start to take company environmental action and preparedness into account. This could impact the Group’s revenue and employee retention. This concern would be greater in a <2°C scenario, where there is greater awareness and more action required. It would be lower in a 2–3°C scenario, where action is being taken sporadically. <2ºC, 2–3ºC Short, Medium Risk rating – amber The Group’s workforce requirement is concentrated in its core market of the Arabian Peninsula region, which is currently reliant on and supported by the oil and gas industry. It is expected to remain so in the near future. GMS does not anticipate struggling to retain suitably experienced and qualified staff. We are committed to acting responsibly towards the environment, as demonstrated by our net-zero targets and strategy. This will help mitigate this risk by showing that we are a proactive company in regard to climate change and environmental responsibility. Financial impact: reduced revenue, cost to recruit new employees if there is increased turnover. Shifts in consumer preferences As climate change becomes increasingly important and urgent, it will impact investment decisions. This is especially important following the outcomes of COP28, as we expect the general sentiment towards environmental and climate change matters to become more prominent. This could impact future access to capital for businesses that do not respond appropriately. <2ºC, 2–3ºC Short, Medium Risk rating – amber There is increasing concern over fossil fuel use in the UK/EU, although demand for oil and gas is predicted to grow. As a result, new investors may become more challenging to find. However, current shareholders are heavily invested in the Company’s existing strategy and business model. Therefore, the likelihood of a significant impact is only considered possible in the short term under the most optimistic scenario (<2ºC), which is not currently in line with the UAE’s approach. Financial impact: reduced ability to raise capital. Stigmatisation of sector Increased climate concerns can lead to the stigmatisation of certain sectors and industries. <2ºC, 2–3ºC Short, Medium Risk rating – amber This risk would significantly impact the business if realised, but we do not expect to experience an impact on demand for or production of oil and gas in the Arabian Peninsula region within the short to medium term. The amber rating is first given in the medium term for the <2ºC scenario, which is not the current trajectory for the Arabian Peninsula region. Financial impact: reduced revenue from decreased demand for services. Climate opportunities, for example, using our vessels for the maintenance of offshore renewable projects, offer versatility and resilience to our business model. As part of our vision of being the best self-elevating support vessel (SESV) operator in the world, it is important that GMS is seen to be acting responsibly and contributing to a sustainable future. We are aware that a suitable response to the challenges of climate change is increasingly important to our investors and shareholders. We believe that through our TCFD reporting and net-zero strategy, we are responding to this area of risk by proving our commitment to responding appropriately to climate change. ![]() 32 Gulf Marine Services PLC #### PEOPLE AND VALUES #### continued #### Transition Risks – Market Table 6. Market Risks with a Description, the Timeline and Scenario of Highest Impact and Our Response Risk Description Scenario Our Response Changing customer behaviour In a <2°C scenario, where urgent action is being taken, it is possible that there could be changing customer preferences resulting in reduced demand for goods and services. This could have a significant impact in the medium term. <2–3ºC Medium Risk rating – amber The Group will continue to monitor any shift in consumer demand across the regions in which it operates. However, oil and gas have always been the mainstay of our business. It is only considered possible for a significant impact to be felt in a <2ºC scenario, which is not currently considered in the UAE. Globally, the Westwood Global Energy Group report predicts an increase in demand for oil and gas over the next 40 years, including in the Group’s core markets. However, the Group is aware that the UAE, along with many other governments, has set a net-zero target and, in the long term, will need to make changes to meet these targets. GMS has a proven track record in the renewables sector and an ongoing presence in Europe for offshore wind projects. This provides versatility in our business model, and vessels are suitable for use in this sector without major additional capital expenditure. We are on a six-year contract for one of our vessels on a renewables project in Europe. We are researching a business management system that can support us in identifying potential areas for financial loss and help us adapt if our strategy needs to change. Financial impact: reduced revenue. Given the concentration of revenue in National Oil Companies in the Arabian Peninsula region, the impact could be significant if materialised. Increased cost of raw materials Climate policies could lead to additional abrupt and unexpected shifts in energy costs. <2–3ºC Medium Risk rating – amber This is considered a low risk, with only minor financial impact for the Group, as our clients pay for the fuel costs. However, we are always working to improve the efficiency of our vessels to meet our clients’ expectations, as they expect value for money in the services they receive. Financial impact: increased operating costs for clients. Transitioning to a net-zero economy will require changes to the products and services sold globally. This poses risks and opportunities for businesses. The main risk is the potential impact on the supply and demand for our services and changes in our supply chain. ![]() 33Annual Report 2023 Strategic Report Physical Risks All the physical risks considered have been assigned a green rating due to our existing controls. Therefore, the impact is expected to be low. Although physical impacts are expected from climate change, our offices and most vessels are in the Arabian Peninsula region, which adapted to an extreme climate with high temperatures, low precipitation, and high water stress. Infrastructure and workers’ rights regulations have been designed to manage these risks. The climate scenario analysis suggests that more frequent sandstorms will occur due to increased temperatures and decreased precipitation. Our vessels are prepared for sandstorms with specialised filtration devices that reduce the risk of sediment damaging the vessels’ engines. Decreased precipitation will exacerbate water stress in the region. Our vessels are equipped with desalination equipment to mitigate water stress. We are trialling machinery which can extract water from the air. Climate-related Opportunities Responding to climate change offers two major opportunities to GMS. From an operational perspective, improving our efficiency reduces our operating costs, improves our resilience to potential new laws around energy use and carbon emissions and demonstrates our commitment to being a sustainable business. In terms of business strategy, there is the opportunity to mobilise more vessels in the renewables sector. We already have a proven track record in this area and are keen to maintain an ongoing presence in Europe, to enable us to continue accepting offshore wind farm contracts. Currently, the GMS financial value associated with climate-related opportunities is 9.5% of our 2023 revenue (10.8% of 2022 revenue) as services provided to the renewable energy sector. Engaging with Our Clients and Supply Chain To manage our climate-related risks and reduce our carbon emissions, we need to engage with our clients and supply chain. We will be introducing additional social and environmental screening criteria for our suppliers, which will be the responsibility of our Procurement Manager. In 2023, we started, and in 2024, we plan to continue engaging with our suppliers on their carbon footprint, asking whether they already collect data on their Scope 1, 2 and 3 emissions, which feed into our Scope 3 emissions, and then starting to work with them to reduce those emissions. Currently, ten of our top 30 suppliers have already published their emissions on their websites or using the annual CDP disclosure questionnaire. This financial year, we have continued considering the risks associated with our suppliers directly and supply chain- associated risks in general. These cover three key areas: food, fuel and vessel parts. As part of our commitment to local sourcing and due to the in-country value schemes endorsed by our major clients, our top suppliers are all located in the Arabian Peninsula region. They are subject to similar transitional and physical risks as the Group. As with GMS, they are already prepared to cope with extreme conditions and transitional risks are expected to be limited in the short to medium term. #### Transition Risks – Technology Table 7. Technology Risks with a Description, the Timeline and Scenario of Highest Impact and Our Response Risk Description Scenario Our Response Costs to transition to lower emissions technology A requirement to transition to lower emissions technology is possible in the medium term, under a <2°C scenario, which could be associated with additional costs for GMS. The impact would be the same in a 2–3°C scenario, but this is considered unlikely. The likelihood of this risk will increase over time. <2ºC, 2–3ºC Short, Medium Risk rating – amber Existing vessels will likely need to be retired or will have fully depreciated across their remaining useful life before we are required to replace them with greener options. These routine replacements are factored into our budget and strategy. Therefore, we do not consider that vessel replacement costs will significantly impact our business at this point. This risk is higher in Europe, where we currently have one vessel and is considered lower in the Group’s core market of the Arabian Peninsula region. However, in the 2024 financial period, we will research the options for replacement vessels using lower-carbon fuels. If a feasible option is identified, we will replace our oldest vessel with a low-carbon alternative in 2030. Planning for net-zero, will help to minimise these risks, as these costs can be factored into our long-term business plan. Financial impact: increased capex. ![]() 34 Gulf Marine Services PLC #### PEOPLE AND VALUES #### continued #### Risk Management Our Risk Management Approach GMS has an established enterprise risk assessment process into which climate- related risk management has been integrated (see Risk Management section on page 12). Material risks identified in our climate risk register are integrated into the main risk register. This is in response to the increasing importance placed on climate change by the public, clients, investors and employees. The first step in the risk management process is identifying and assessing risks, which is conducted through reviews by individual departments. Mitigating controls are then determined. In the case of climate-related risks, we have engaged with a third party to ensure a thorough and informed understanding of the potential risks and opportunities, guided by the TCFD framework. Senior Management consolidates identified risks into an overall heatmap for principal risks. The Audit and Risk Committee review the risk profile at least quarterly. The Board discusses the Group’s risk register at its principal meetings and formally reviews the risk profile annually. The following steps were taken to assess climate-related risks through climate scenario analysis: Step 1 – Identifying the Risks: External specialists used climate scenario analysis in November 2023, for the third year in a row, to assess 14 potential transitional and four physical risks to the business over three climate warming pathways and three timelines. These were presented to Senior Management and the Board at the climate- risk workshop in December 2023 for their input on the potential size/scale of the risk/ opportunity, which could impact the business operations and strategy. Step 2 – Assessing the Risks: These provisional risks were presented to relevant internal stakeholders, including the Chief Financial Officer. The provisional risks were presented at Group and site levels. Following our existing enterprise risk assessment process and drawing on the relevant expertise of Senior Management, each provisional climate-related risk and opportunity was allocated a likelihood and impact rating, which were combined to provide the inherent risk rating for each scenario and timeline. Step 3 – Addressing the Risks: Each potential risk is appraised to determine the current mitigation measures and the most appropriate approach for managing residual risk. A provisional control effectiveness rating was assigned. This was combined with the inherent risk rating to provide a provisional overall risk rating of Red, Amber or Green for each scenario and timeline. There were no changes to this assessment from last financial year’s ratings. Therefore, there are still eight risks assigned an Amber rating in at least one scenario and timeline. Risk management workshops are held at least bi-annually between the Executive Chairman and the Senior Management team, where principal risks, including climate change, are assessed for impact and likelihood. In 2022, we developed our net-zero targets and strategy, which will mitigate some of the policy, legal, reputation and technology risks identified. Our net-zero targets and progress against those targets also demonstrate to interested stakeholders that we are taking climate change seriously. The resulting strategy will allow us to plan for the transition to a low-carbon economy, especially around our business travel, vessels and fuel use. Table 8: 2023 Progress Against Targets Target 2021 Baseline Value 2023 Value % Change Comments 2025: engage with the top ten suppliers by spend on their carbon emissions and reporting. Zero suppliers engaged. One supplier engaged. Additionally, ten of our top 30 suppliers have emissions data published, either on their own websites, reporting or through C D P. 100% Achieved 2030: assessing the feasibility of upgrading vessels’ engines and other equipment, with lower carbon emission alternatives. This will form an important part of our long-term strategy, as it is essential to reducing our Scope 1 emissions (those associated directly with our operations, primarily vessel fuel) No feasibility assessment under-taken. Work has begun to assess the feasibility of novel energy system jack-up barges. 14% In progress 2035: net-zero in absolute Scope 3 emissions from 1: Purchased goods and services, 4: Upstream transport and distribution, 5: Waste generated in operations, 6: Business travel, 7: Employee commuting and 8: Upstream leased assets. 22,959 tCO 2 e 9,015 tCO 2 e -60.7% Driven by a large decrease in our purchased goods and services and business travel emissions. On Track A 2.4% annual reduction is needed going forward. 2050: net-zero emissions in absolute Scope 1 and Scope 3 (2: capital goods and 3: fuel-related emissions) 58,114 tCO 2 e 68,378 tCO 2 e +17.6% Due to a 15.5% increase in fuel consumed by our vessels. Off Track We will continue to focus on our 2030 target of low-emission vessels to tackle these emissions. A 4.0% annual reduction is needed. ![]() 35Annual Report 2023 Strategic Report #### Metrics and Targets We acknowledge that we have a responsibility to reduce our environmental impact as far as possible, while delivering sustainable business growth. We have been measuring our Scope 1 and 2 emissions since 2014 and our Scope 3 emissions since 2021. Therefore, we selected financial year 2021 as our base year for our emission reduction targets, as this was the first year of our full emissions footprint. Our near-term and net-zero targets were approved by our Board in December 2022, and the progress against each of them is outlined in Table 8. Our ultimate net-zero deadline of 2050 is in line with the national targets of the UK, UAE and Qatar. Achieving net-zero requires us to reduce our CO 2 e emissions by 90% or more from our baseline year of 2021, offsetting the remaining 10% in our net-zero year. Our Scope 2 emissions account for 0.04% of total emissions and are considered de- minimis. Therefore, Scope 2 emissions have been excluded from these net-zero targets. Each year, we aim to improve the quality of our data collection to ensure our reporting is increasingly accurate. We acknowledge that sometimes this will increase the figures in some categories, and we will explain these in our reporting, as required. We believe this transparency is an important part of being a responsible business. Carbon Emissions In compliance with the UK Government’s Streamlined Energy and Carbon Reporting, we have included our emission figures, energy usage and intensity metrics for this reporting year. GMS provided relevant data to a third party which used this data to calculate our Scope 1, 2 and 3 emissions. No formal assurance was provided. Scope 1 emissions result from the direct combustion of gaseous and transportation fuels during the reporting year. Scope 2 refers to the emissions associated with purchased electricity used in our offices. Scope 3 emissions are the indirect emissions associated with operating our business. Although we do not have direct control over these emissions, we are taking steps to work with our supply chain and employees to develop an emission reduction strategy. Table 9: 2021, 2022 and 2023 Full Carbon Footprint (tCO 2 e) and Progress since Our 2021 Baseline Target 2023 2022 2021 Progress from 2021 Baseline Scope 1 54,396 51,860 47,247 >15.1% Scope 2 (location-based) 26 28 31 <16.1% Total Scope 3 22,996 26,205 33,827 <32.0% 1. Purchased goods and services 4,811 6,088 11,970 <59.8% 2. Capital goods 2,264 1,141 687 >229.5% 3. Fuel-related Emissions 11,717 10,270 10,180 >15.1% 4. Upstream transportation and distribution 304 5,641 251 >21.1% 5. Waste generated in operations 1,271 667 654 >94.3% 6. Business travel 2,481 2,275 10,027 <75.3% 7. Employee commuting 136 124 57 >138.6% 8. Upstream leased assets 11 – – >10 0.0% Total All Scopes 77,418 78,093 81,105 <4.5% Scope 1 and 2 CO 2 e emissions data has been calculated using the GHG Protocol – A Corporate Accounting and Reporting Standard (World Business Council for Sustainable Development and World Resources Institute, 2004); Greenhouse Gas Protocol – Scope 2 Guidance (World Resources Institute, 2015); ISO 14064-1 and ISO 14064-2 (ISO, 2018; ISO, 2019a); Environmental Reporting Guidelines: Including Streamlined Energy and Carbon Reporting Guidance (HM Government, 2019). Scope 3carbon emissions have been calculated in line with the GHG Protocol Corporate Value Chain (Scope 3) Reporting Standard. There is no data for categories 9-15, as these are not applicable to GMS. Category 8, upstream leased assets, became applicable in 2023, as we leased a small amount of shared office space in Qatar and Saudi Arabia. The large reduction in business travel emissions since the baseline is due to the removal of quarantine requirements for offshore staff due to COVID-19, which decreased the number of hotel nights. The large increase in capital goods in 2023, was due to an increase in capital expenditure. ![]() 36 Gulf Marine Services PLC #### PEOPLE AND VALUES #### continued Water Water is the most important resource on the planet. We know that our workers must always have access to adequate, safe drinking water. The water on our vessels is either sourced from desalination or single-use plastic bottles. Most water used on board is for drinking or sanitation services. As our crew are working under extreme temperatures, we do not feel it is safe to set water reduction targets, since a plentiful supply of water and electrolytes are always needed to reduce the risk of heat stroke or illness. Energy Usage and Carbon Intensity We use average carbon intensity data (tCO 2 e/$m revenue) to assess our performance against the Paris Agreement target. Our metrics use location-based Scope 2 emissions. UK energy use and emissions in 2022 and 2023 were zero. Table 10: Our 2021–2023 Energy Usage and Carbon Intensity Metrics Year 2023 2022 2021 Progress from 2021 Baseline Scope 1 Energy Usage MWh 198,063 190,060 171,165 >15.7% Scope 2 Energy Usage MWh 63 67 72 <12.0% Scope 1 and 2 tCO 2 e/$m revenue 360.41 389.47 398.78 <9.6% Scope 1, 2 and 3 tCO 2 e/$m revenue 512.70 586.48 700.84 <26.8% Efficiency Actions We continually assess how to reduce energy use and the associated carbon emissions. This financial year, we have booked flights based on carbon emissions, choosing lower-carbon flights when prices are similar. Waste Waste management is important in minimising our environmental footprint and will contribute to our net-zero journey. Our waste strategy is centred around four principles: Reduction, Reuse & Recycle, Treatment and Disposal. Our vessels are fitted with separate waste bins for each type of recyclable material or disposal method, which ensures that we have detailed data on waste materials. Waste is then emptied and brought to shore, where it can be appropriately managed. It is securely stored before the treatment process, to ensure our waste does not degrade, spill or get stolen. Due to the nature of our operations, we produce oil waste. Our oil waste is not contaminated or mixed, to ensure it can be correctly treated and recycled. We send regular reports to the local governing bodies concerning the quality and quantity of oil waste and its treatment methods. Table 11 summarises our waste produced and the percentage sent for recycling. Although we prioritise reducing the volumes of waste produced on board our vessels, our customer's crew make up around 75% of the people on board, with our crew making up the remainder. Therefore, we are unable to set formal waste reduction targets as our influence on this is limited. Table 11: A Breakdown of the Waste Types from Our Vessels and Offices during the Financial Year 2023 Metric 2023 2022 2021 Total waste produced (tonnes) 6,676 4,572 7,5 6 6 % of waste recycled 58.5% 1.0% 0.0% ![]() 37Annual Report 2023 Strategic Report Social Values Core values of Responsibility, Excellence and Relationships are incorporated into all aspects of the business. GMS is committed to ensuring the health and safety of its employees, subcontractors, clients and partners and to upholding high ethical standards. Responsibility GMS maintains a firm commitment to the health, safety, and environmental stewardship of all individuals and communities connected to our operations. We embed safety into everything we operate and maintain. Our sense of duty extends across all business relationships – with employees, subcontractors, clients, partners, shareholders and beyond. We believe that diligently managing risks and caring for people are fundamental to creating sustainable, long-term value. As we explore opportunities for growth, we remain guided by our foundational priorities of safety and collective welfare. We strive to deliver excellence while maintaining our responsibilities to the people we serve, the environments we protect, and the societies that grant us license to operate. Our commitments are ongoing and endured. Excellence At GMS, we pursue continuous improvement and innovation to better serve client needs. We build on past learnings and explore new ideas that can enhance delivery for our partners. We hold ourselves to high performance standards that exceed expectations. We set ambitious targets around superior quality, value, and outcomes to challenge our organisation across all levels to deliver positive impacts for clients and stakeholders. Our reputation for integrity and transparency underscores our business and guides our conduct. We operate rigorously and ethically to remain the preferred contractor for clients who value our commitments to sustainable quality. As we explore avenues for future growth, we stay rooted to our core priorities of service excellence, stakeholder welfare, and a continued commitment to delivering value to our clients. These priorities have been instrumental in establishing GMS as a respected player in our sector. We work diligently to uphold and strengthen that foundation of trust. Relationships At GMS, our people drive our success. We aim to attract and retain top talent and empower employees to perform their duties safely and impactfully. We champion diversity and provide environments where our team can thrive and realise their full potential. We reward excellence and integrity across all levels of our organisation. Core values of Responsibility, Excellence and Collaborative Relationships anchor our culture and decision-making. We maintain an unwavering commitment to the health, safety, and ethical treatment of employees, subcontractors clients and partners. Our people exemplify the spirit of world-class service, expertise and leadership that makes GMS a preferred partner. As we plan for the future, we will continue investing in our team’s growth across technical skills, well-being and professional development. Our vision depends on unleashing their potential for long-term innovation. GMS Organisation Structure GMS maintains a robust yet agile organisational structure that positions us for sustained excellence. We have built a foundation of Core functions in Operations, Marine and Engineering, Maintenance and project delivery that directly steer our technical capabilities and performance. Enabling support functions underpin and amplify these strengths by driving strategy, business development, procurement, finance and other essential expert services. This structure strikes an optimal balance – sharpening our client delivery focus through Core forces, while enabling teams streamline the wider business. With seasoned leadership guiding strategy, our model fosters seamless collaboration to mobilise the right talent for new opportunities. As markets evolve, GMS remains equipped for sustainable excellence. Our organisational foundations will drive growth through client-centric agility, operational discipline, unified vision, and governance rigor. Our structure serves as a robust platform ready for sustainable growth trajectories in the years ahead. Turnover Employee turnover decreased to 12% in 2023 from 16% in 2022. This decrease in the turnover trend underscores the success of various measures taken to retain talent such as competitive day rates for senior officers based on market benchmarking and opportunity for growth for high- performing employees. Diversity GMS boasts a global team of 660 personnel representing 34 countries (2022: 594 personnel representing 36 countries) – with diversity that fuels our innovation and connects us closer to the markets we serve. We leverage experience and specialised skills to responsibly expand our operational footprint. The information on page 38 provides details of the gender diversity and country of origin of our personnel as of 31 December 2023. GMS has a zero-tolerance toward discrimination either directly or indirectly on the grounds of gender, race, colour, nationality, ethnic or racial origins, marital status, religion or disability. GMS is an equal opportunities employer committed to seeking out and retaining the calibre of human talent that is strategically aligned with our business growth and performance. Our business success reflects the quality and skills of our people. Details of our Equal Opportunities Policy can be found in the Governance section of our website. For cultural and legal reasons, the extent to which the number of offshore female personnel can be increased is limited. Local labour laws, for example, in the countries in which GMS currently operates in the Arabian Peninsula region, stipulate that women cannot work in an inappropriate environment and hazardous jobs/industries, meaning the Group is unable to employ them offshore. As the provisions of the UK Government’s Equality Act 2010, relating to gender pay gap disclosure, are not applicable to GMS, this information has not been provided. Employee Engagement and Welfare Our 2023 engagement survey garnered an exceptional 91% participation rate. Results indicated strong workplace solidarity, with 99% agreeing they can stop unsafe work and 95% feeling empowered and valued in their roles. Another standout data point showed 99% confidence in our organisation's commitment to safety-first operations ensuring all personnel return home safe. Key insights gained will inform our retention and professional growth programs. While 34% of respondents indicated they may explore external opportunities, we aim to expand internal mobility, upskilling and career development initiatives. While participation levels signal strong workplace solidarity, closing experience gaps remains a priority. We strive to foster an environment where all team members feel invested in long-term personal success, enabling collective growth. ![]() 38 Gulf Marine Services PLC Nationalities 34 (2022: 36) Total Number of Directors 6 (2022: 6) Total number of Direct Reports to Executive Team 14 (2022: 21) Total number of Executive Team 3 (2022: 4) Offshore 599 (2022: 539) Total number of employees 660 (2022: 594) People as at 31 December 2023 Voluntary turnover 12% (2022: 16%) Onshore 61 (2022: 55) #### PEOPLE AND VALUES #### continued Male Female Events like our recent Abu Dhabi headquarters celebration, recognising employee milestones from 10-25 years of tenure, reinforce our united culture. They also highlight accomplished role models to inspire emerging talent. As our Company matures and longtime experts pass their torches, we are committed to developing the next generation of leaders equipped to guide our mission. Performance The Short-Term Incentive Plan (STIP) structure was redesigned during 2019 so that all participants, including executive Directors, are working towards the same transparent targets. There is no guaranteed variable pay awards at GMS, with all pay being performance-based. The 2023 STIP measures for employees are set out on page 68. This aligns with shareholder interests and encourages a performance-based culture to achieve Group objectives. Succession Planning GMS strives to provide growth opportunities by promoting from within whenever possible. We have structured succession planning processes based on experience and capabilities to fill key roles with internal candidates first. However, external recruitment is also utilised for highly specialised or volume hiring needs unsuitable for backfilling. All recruitment follows fair and ethical practices aligned with our values. In 2023, 34 employees were promoted across levels, a slight decrease from 37 in prior year. This stabilisation comes after major pandemic-recovery scale-ups and indicates prudent pace. Positively, 20% of onshore promotions granted last year advanced talented female staff into expanded responsibilities, signify efforts to uplift diversity are taking hold. While external hiring fills key gaps, our priority is nurturing talent internally. We believe purposeful development not only rewards employee investments – it transforms individual growth into collective gains. Learning and Development GMS aims to ensure that all employees maintain the relevant technical and regulatory training required to fulfil their roles. As seafarers, all crew maintain their relevant STCW (Standards of Training, Certification and Watchkeeping – a worldwide convention that ensures a lateral standard of training is achieved across all countries in the world) qualifications that license them to operate the Group’s vessels, in accordance with International Maritime Organisation requirements. For vessels operating within the offshore Oil & Gas sector, all crew also complete additional training in areas such as, but not limited to, offshore safety and awareness and emergency response. Ethical Practice The Group operates responsibly, in accordance with the formal legal and regulatory disclosure requirements expected of a UK listed company. GMS’ Code of Conduct sets out the basic rules of the Group. The Code’s purpose is to ensure work is undertaken safely, ethically, efficiently, and within the laws of the countries in which GMS operates. All staff receive Code of Conduct training as part of their induction, and the Group’s reputation and success are dependent on staff putting the Code into practice in all dealings with stakeholders. GMS maintains an awareness of human rights issues, which is reflected in its suite of Group policies, including the Anti-Corruption and Bribery Policy, Anti-Slavery Policy, Social Responsibility Policy and Whistleblowing Policy. All onshore employees and offshore key personnel must complete annual trainings focused on ethical business practices mandatory for upholding our standards globally. Whistleblowing Reporting Service An independent reporting service for whistleblowing is in place. It operates confidentially, is available 24 hours a day and is staffed by highly skilled professional call handlers. This service: • gives a voice to employees, contractors, suppliers and supply chain and other stakeholders; • helps maintain a culture of openness; • demonstrates that GMS takes malpractice seriously; • provides the Executive team with an overall temperature of the business; and • supports employees who speak up. The Whistleblowing Policy has a strict non-retaliation commitment to support any employees who speak up. 635 25 10 4 2 1 5 1 ![]() 39Annual Report 2023 Strategic Report 475 95 27 2 0 2 35 8 11 5 GMS Employees – By Region Review – 2023 Offshore Onshore MENA Asia Europe Africa Others (Canada, Venezuela, New Zealand) Health and Safety The Group adheres to the highest international standards of health and safety in operating its vessels. Our Management Systems, which oversee all activities and operations of the Group, are voluntarily accredited to ISO 9001, ISO 14001, and ISO 45001. Additionally, all vessels operate in compliance with the International Safety Management (ISM) Code, meaning the International Management Code for the Safe Operation of Ships and for Pollution Prevention, which is a legal requirement. Regular assessments of risks stemming from operations and activities are conducted to ensure the implementation of mitigation procedures, which are then communicated to all employees. Comprehensive training and employee engagement initiatives ensure that all employees are well-informed about operational risks. Annual training programs are developed and periodically reviewed to maintain efficacy. The Group implemented a remote healthcare system for all of its offshore workforce in 2021, providing access to onshore doctors and mental health support 24/7. In 2022, the Group implemented a Group-wide Marine Enterprise Resources Planning System to modernise and digitalise its vessel operations. The system integrates all aspects of vessel management through one web-based platform hosted on the cloud and accessed onshore and offshore. Management now has access to a centralised database used to enhance efficiency and improve decision-making. In 2023, the Group implemented an online platform that delivered comprehensive safety awareness trainings directly to individuals on board the vessels, ensuring quick comprehension and immediate application. With this system, crew that is off rotation do not miss important and relevant safety updates that pertains to the Group when they are back to the vessel. This is achieved because the system acts as a repository of safety information, guaranteeing access to the latest safety information anytime and anywhere. There were two medical treatment cases but no Lost Time Injuries. As a result, the Lost Time Injury rate improved from 0.1 in 2022 to zero in 2023. However, because of the other recordable injuries, our Total Recordable Injury Rate (TRIR) increased slightly from 0.1 in 2022 to 0.18 in 2023. These levels continue to be below industry average and in both cases, they maintained a downward trajectory when measured over the last five years. We continue to look at areas of improvements in our systems and processes and engaging our employees to ensure that our offshore operations continue to be as safe as possible in line with the expectations of our customers and stakeholders. Number of work-related fatalities 0 (2022: 0) Number of recordable work-related injuries 2 (2022: 1) Number of high-consequence work-related injuries 2 (2022: 0) Number of hours worked 2,378,216 (2022: 1,934,340) The information below is intended to provide an overview of the Health and Safety performance over the reporting period. ![]() 40 Gulf Marine Services PLC #### PEOPLE AND VALUES #### continued Measure Weighting Performance Range (from zero to full pay-out) EBITDA 30% Less than US$ 75m – Greater than US$ 88.0m EBITDA margin 15% Less than 53% – Greater than 60% Securing contract % of 2024 budget revenue 15% Less than 60% – Greater than 85% Securing contract % of 2025 budget revenue 15% Less than 35% – Greater than 55% Achieving Leverage <4.0 (25%) 25% After 31 December 2023 – On or before 30 June 2023 Total 100% The following results highlight key performance measures and their respective outcomes. 1 EBITDA\* 120 days | Total | | | US$’000 | | US’000 | US’000 | US’000 | US’000 | US’000 | US’000 | | Trade receivables | 28,714 | | 26 | – | – | – | 4,132 | 32,872 | | Less: Allowance for expected | | | | | | | | | | credit losses | (110) | | – | – | – | – | (2,116) | (2,226) | | Net trade receivables 2023 | 28,604 | | 26 | – | – | – | 2,016 | 30,646 | | Trade receivables | 30,16 | | 6 | 4,216 | – | – | 30 | 786 | 35,198 | | Less: Allowance for expected | | | | | | | | | | credit losses | (2,003) | | (10) | – | – | – | (6) | (2,019) | | Net trade receivables 2022 | 28 | ,16 3 | 4,206 | – | – | 30 | 780 | 3 3,179 | Seven customers (2022: nine) account for 99% (2022: 99%) of the total trade receivables balance (see revenue by segment information in Note 30). When assessing credit risk, ongoing assessments of customer credit and liquidity positions are performed. ![]() 108 Gulf Marine Services PLC 10 Prepayments, advances and other receivables | | | | | | --- | --- | --- | --- | | | 2023 | 2022 | | | | US$’000 | US$’000 | | | Accrued revenue | 2,656 | 1,303 | | | Prepayments | 3,557 | 3,137 | | | Deposits\* | 86 | 85 | | | Advances to suppliers | 1,758 | 3,197 | | | At 31 December | 8,057 | 7,7 | 2 2 | \* Deposits include bank guarantee deposits of US$ 39K (2022: US$ 39K). Guarantee deposits are paid by the Group for employee work visas under UAE labour laws. 11 Derivative financial instruments Warrants Under the terms of the Group’s loan facility, the Group was required to issue warrants to its lenders as GMS had not raised US$ 50.0 million of equity by 31 December 2022. On 2 January 2023, as the US$ 50.0 million equity raise did not take place, therefore 87,621,947 warrants were issued to the lenders. Based on the final report prepared by a Calculation Agent, the warrants give right to their holders to acquire 137,075,773 shares at an exercise price of 5.75 pence per share for a total consideration of GBP £7.9 million. Warrant holders will have the right to exercise their warrants up to the end of the term of the loan facility, being 30 June 2025. Management commissioned an independent valuation expert to measure the fair value of the warrants, which was determined using Monte Carlo option-pricing model, which takes into consideration the market values of comparable public companies, considering among other factors, the use of multiples of earnings, and adjusted to reflect the restrictions on the ability of our shares to trade in an active market. The simulation considers sensitivity by building models of possible results by substituting a range of values. Warrants valuation represents a Level 3 fair value measurement under IFRS 13 hierarchy. The fair value of the warrants as at 31 December 2023 was US$ 14.3 million (31 December 2022: US$ 3.2 million). The increase in fair value of the warrants is primarily due to increase in share price and its volatility. The share price increased from 4.65 pence as at 31 December 2022 to 14.5 pence as at 31 December 2023. A 10% change in share price will increase or decrease the valuation by US$ 0.2 million. Interest Rate Swap The Group had an Interest Rate Swap (IRS) arrangement, originally in place, with a notional amount of US$ 50.0 million. The remaining notional amount hedged under the IRS as at 31 December 2023 was US$ nil (31 December 2022: US$ 23.1 million). The IRS hedged the risk of variability in interest payments by converting a floating rate liability to a fixed rate liability. The IRS arrangement matured during the year, therefore, the fair value of the IRS as at 31 December 2023 was US$ nil (31 December 2022: asset value US$ 0.4m). In 2020 cash flows of the hedging relationship for the IRS were not highly probable and, therefore, hedge accounting was discontinued from that point. Historically, the fair value measurement of the interest rate swap was determined by independent valuers with reference to quoted market prices, discounted cash flow models and recognised pricing models as appropriate. They represent Level 2 fair value measurements under the IFRS 13 hierarchy. IFRS 13 fair value hierarchy Apart from warrants, the Group has no other financial instruments that are classified as Level 3 in the fair value hierarchy in the current year that are determined by reference to significant unobservable inputs. There have been no transfers of assets or liabilities between levels of the fair value hierarchy. There are no non-recurring fair value measurements. Derivative financial instruments are made up as follows: | | | | | | --- | --- | --- | --- | | | Interest | | | | | rate swap | Warrants | Total | | | US$’000 | US$’000 | US$’000 | | At 1 January 2023 | 386 | (3,198) | (2,812) | | Net loss on changes in fair value of interest rate swap | (59) | – | (59) | | Final settlement of derivatives | (327) | – | (327) | | Impact of change in fair value of warrants | – | (11,077) | (11,077) | | As at 31 December 2023 | – | (14,275) | (14,275) | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued FOR THE YEAR ENDED 31 DECEMBER 2023 ![]() 109Annual Report 2023 Financial Statements | | | | | | | --- | --- | --- | --- | --- | | | Interest | | | | | | rate swap | Warrants | | Total | | | US$’000 | US$’000 | | US$’000 | | At 1 January 2022 | (1,076) | (717) | | (1,793) | | Settlement of derivatives | 384 | – | | 384 | | Net gain on changes in fair value of interest rate swap | 1,078 | – | | 1,078 | | Impact of change in fair value of warrants | – | (2,481) | | (2,481) | | As at 31 December 2022 | 386 | (3 | ,19 8) | (2,812) | These consolidated financial statements include the cost of hedging reserve and cash flow hedge reserve which are detailed further in the consolidated statement of changes in equity. These reserves are non-distributable. The balance in the cashflow hedging reserve as at 31 December 2023 was nil (2022: US $ 0.28 million). 12 Cash and cash equivalents | | | | | --- | --- | --- | | | 2023 | 2022 | | | US$’000 | US$’000 | | Interest bearing | | | | Held in UAE banks | 1,422 | 1,209 | | Non-interest bearing | | | | Held in UAE banks | 964 | 2,824 | | Held in banks outside UAE | 6,280 | 8,242 | | Total cash and cash equivalents | 8,666 | 12,275 | 13 Share capital and other reserves Ordinary shares at £0.02 per share | | | | | --- | --- | --- | | | Number of | Ordinary | | | ordinary shares | shares | | | (Thousands) | US$’000 | | At 1 January 2023 | 1,016,415 | 3 0,117 | | As at 31 December 2023 | 1,016,415 | 30,117 | | | | | | --- | --- | --- | | | Number of | Ordinary | | | ordinary shares | shares | | | (Thousands) | US$’000 | | At 1 January 2022 | 1,016,415 | 3 0,117 | | As at 31 December 2022 | 1,016,415 | 30,117 | Capital redemption reserve | | | | | --- | --- | --- | | | | Capital | | | Number of | redemption | | | ordinary shares | reserve | | | (Thousands) | US$’000 | | At 1 January 2023 | 350,488 | 46,445 | | As at 31 December 2023 | 350,488 | 46,445 | ![]() 110 Gulf Marine Services PLC 13 Share capital and other reserves continued Share premium | | | | | --- | --- | --- | | | Number of | Share premium | | | ordinary shares | account | | | (Thousands) | US$’000 | | At 1 January 2023 | 1,016,415 | 99,105 | | As at 31 December 2023 | 1,016,415 | 99,105 | Prior to an equity raise on 28 June 2021 the Group underwent a capital reorganisation where all existing ordinary shares with a nominal value of 10 pence per share were subdivided and re-designated into 1 ordinary share with a nominal value of 2 pence and 1 deferred share with a nominal value of 8 pence each. The previously recognised share capital balance relating to the old 10p ordinary shares was allocated pro rata to the new subdivided 2p ordinary shares and 8p deferred shares. The deferred shares had no voting rights and no right to the profits generated by the Group. On winding-up or other return of capital, the holders of deferred shares had extremely limited rights, if any. The Group had the right but not the obligation to buyback all of the deferred shares for an amount not exceeding £1.00 in aggregate, which with the shareholders approval, was completed on 30 June 2022. Accordingly, 350,487,787 deferred shares were cancelled. Following the cancellation of the Deferred shares on 30 June 2022, a transfer of $46.4 million was made from Share capital – Deferred to a Capital redemption reserve. There was no dilution to the shares ownership as a result of the share reorganisation. Under the Companies Act, a share buy-back by a public company can only be financed through distributable reserves or the proceeds of a fresh issue of shares made for the purpose of financing a share buyback. The Company had sufficient reserves to purchase the Deferred shares for £1.00. The Group has issued warrants to its lenders which may result in increase in issued share capital in future (refer Note 11). 14 Restricted reserve The restricted reserve of US$ 0.3 million (2022: US$ 0.3 million) represents the statutory reserves of certain subsidiaries. As required by the Commercial Companies Law in the countries where those entities are established, 10% of profit for the year is transferred to the statutory reserve until the reserve equals 50% of the share capital. Following a recent change to the Regulations of Companies in Kingdom of Saudi Arabia, apportions can cease when the reserve equals 30% instead of 50% of the share capital, although the subsidiary continues to maintain this at 50%. This reserve is not available for distribution. No amounts were transferred to this reserve during the year ended 31 December 2023 (2022: US$ nil). 15 Group restructuring reserve The Group restructuring reserve arose on consolidation under the pooling of interests (merger accounting) method used for the Group restructuring. Under this method, the Group was treated as a continuation of GMS Global Commercial Investments LLC (the predecessor parent Company) and its subsidiaries. At the date the Company became the new parent company of the Group via a share-for-share exchange, the difference between the share capital of GMS Global Commercial Investments LLC and the Company, amounting to US$ 49.7 million (2022: US $49.7 million), was recorded in the books of Gulf Marine Services PLC as a Group restructuring reserve. This reserve is non-distributable. 16 Share based payment reserve Share based payment reserve of US$ nil (2022: US$ 3.6 million) relates to awards granted to employees under the long-term incentive plans. Refer to Note 28 for further details. 17 Capital contribution The capital contribution reserve is as follows: | | | | | --- | --- | --- | | | 2023 | 2022 | | | US$’000 | US$’000 | | At 31 December | 9,177 | 9,177 | During 2013, US$ 7.8 million was transferred from share appreciation rights payable to capital contribution as, effective 1 January 2013, the shareholders have assumed the obligation to settle the share appreciation rights. An additional charge in respect of this scheme of US$ 1.4 million was made in 2014. The total balance of US$ 9.2 million is not available for distribution. 18 Translation reserve and Retained earnings Foreign currency translation reserve represents differences on foreign currency net investments arising from the re-translation of the net investments in overseas subsidiaries. Retained earnings include the accumulated realised and certain unrealised gains and losses made by the Group. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued FOR THE YEAR ENDED 31 DECEMBER 2023 ![]() 111Annual Report 2023 Financial Statements 19 Non-controlling interests The movement in non-controlling interests is summarised as follows: | | | | | --- | --- | --- | | | 2023 | 2022 | | | US$’000 | US$’000 | | At 1 January | 1,988 | 1,912 | | Share of profit for the year | 726 | 76 | | At 31 December | 2,714 | 1,988 | The following table summarises the information relating to the subsidiary that has material non-controlling interest, before any intra-group eliminations. | | | | | --- | --- | --- | | | 2023 | 2022 | | | US$’000 | US$’000 | | Statement of financial position information: | | | | Non-current assets | 129 | 76 | | Current assets | 16,408 | 17,8 3 0 | | Non-current liabilities | (18) | (38) | | Current liabilities | (6,952) | (9,607) | | Net assets | 9,567 | 8,261 | | Net assets attributable to non-controlling interests | 2,714 | 1,988 | | Statement of profit or loss and other comprehensive income information: | | | | Revenue | 38,088 | 22,569 | | Profit after tax and zakat | 1,306 | 876 | | Total comprehensive income | 1,306 | 876 | | Profit allocated to non-controlling interests | 726 | 76 | | Statement of cashflow information: | | | | Cash flows from operating activities | (1,162) | 1,933 | | Cash flows from financing activities (dividends: nil) | (795) | (525) | | Net (decrease) / increase in cash and cash equivalents | (1,957) | 1,408 | 20 Provision for employees’ end of service benefits In accordance with Labour Laws of some of the countries where the Group operates, it is required to provide for end of service benefits for certain employees. The movement in the provision for employees’ end of service benefits during the year was as follows: | | | | | --- | --- | --- | | | 2023 | 2022 | | | US$’000 | US$’000 | | At 1 January | 2,140 | 2,322 | | Provided during the year | 723 | 270 | | Paid during the year | (468) | (452) | | At 31 December | 2,395 | 2,140 | 21 Trade and other payables | | | | | | --- | --- | --- | --- | | | 2023 | 2022 | | | | US$’000 | US$’000 | | | Trade payables | 13,213 | 12,618 | | | Due to related parties (Note 24) | 962 | 2,841 | | | Accrued expenses | 16,090 | 11,16 | 9 | | Deferred revenue | 3,546 | | 628 | | VAT payable | 392 | | 365 | | Other payables | 851 | | 358 | | | 35,054 | | 27,979 | No interest is payable on the outstanding balances. Trade and other payables are all current liabilities. ![]() 112 Gulf Marine Services PLC 22 Bank borrowings Secured borrowings at amortised cost are as follows: | | | | | --- | --- | --- | | | 2023 | 2022 | | | US$’000 | US$’000 | | Term loans | 273,939 | 328,085 | | Working capital facility (utilised)\* | 2,000 | – | | | 275,939 | 328,085 | \* The revolving working capital facility amounts to US$ 40.0 million (31 December 2022: US$ 45.0 million). US$ 25.0 million (31 December 2022: US$ 25.0 million) of the working capital facility is allocated to performance bonds and guarantees and US$ 15.0 million (31 December 2022: US$ 20 million) is allocated to funded portion, of which US$ 2.0 million was utilised as of 31 December 2023, leaving US$ 13.0 million available for drawdown (31 December 2022: US$ 20.0 million). The working capital facility expires alongside the main debt facility in June 2025. Bank borrowings are split between hedged and unhedged amounts as follows: | | | | | --- | --- | --- | | | 2023 | 2022 | | | US$’000 | US$’000 | | Unhedged bank borrowings | 275,939 | 305,008 | | Hedged bank borrowing via Interest Rate Swap\* | – | 23,077 | | | 275,939 | 328,085 | \* This is an economic hedge and not accounted for in accordance with IFRS 9, Financial Instruments. The Group used an IRS to hedge a portion of the Group’s floating rate liability by converting SOFR to a fixed rate. The IRS matured during the year, Refer to Note 27 for further details. Bank borrowings are presented in the consolidated statement of financial position as follows: | | | | | --- | --- | --- | | | 2023 | 2022 | | | US$’000 | US$’000 | | Non-current portion | | | | Bank borrowings | 234,439 | 298,085 | | Current portion | | | | Bank borrowings – scheduled repayments within one year | 39,500 | 30,000 | | Working capital facility | 2,000 | – | | | 275,939 | 328,085 | The principal terms of the outstanding facility as at 31 December 2023 are as follows: • The facility’s main currency is US$ and is repayable with a Secured Overnight Financing Rate (SOFR) plus a margin based on a ratchet depending on leverage levels. • Following the cessation of the LIBOR on 30 June 2023, the reference rate in the Common Terms Agreement has been changed to the SOFR as the new benchmark rate. • As of the second quarter of 2023, the Group has achieved a reduction in the net leverage ratio to below 4.0, and PIK is no longer accrued. As a result, the margin rate on the loan has been decreased from 4% to 3.1%. • The facility remains secured by mortgages over its whole fleet with a net book value at 31 December 2023 of US$ 562.2 million (31 December 2022: US$ 549.7 million) (Note 5). Additionally, gross trade receivables, amounting to US$ 32.9 million (31 December 2022: US$ 35.2 million) have been assigned as security against the loans extended by the Group’s banking syndicate (Note 9). • The Group has also provided security against gross cash balances, being cash balances amounting to US$ 8.7 million (31 December 2022: US$ 12.3 million) (Note 12) before the restricted amounts related to visa deposits held with the Ministry of Labour in the UAE which are included in deposits. These have been assigned as security against the loans extended by the Group’s banking syndicate. • As an equity raise of US $50.0 million did not take place by 31 December 2022, 87.6 million warrants were issued on 2 January 2023, giving debt holders the right to 137,075,773 million shares at a strike price of 5.75 pence per share. The facility is subject to certain financial covenants including: Debt Service Cover, Interest Cover, and Net Leverage Ratio, which are tested bi-annually in June and December. There are also additional covenants relating to general and administrative costs, capital expenditure and Security Cover (loan to value) which are tested annually in December. Further, there were restrictions to payment of dividends until the net leverage ratio falls below 4.0 times, a level reached in second quarter of 2023. All applicable financial covenants assigned to the Group’s debt facility were met as of 31 December 2023. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued FOR THE YEAR ENDED 31 DECEMBER 2023 ![]() 113Annual Report 2023 Financial Statements | | | | | | | | --- | --- | --- | --- | --- | --- | | | | Outstanding amount | | | | | | Current | Non-current | Total | | | | | US$’000 | US$’000 | US$’000 | Security | Maturity | | 31 December 2023: | | | | | | | Term loan – scheduled repayments within one year | 39,500 | – | 39,500 | Secured | June 2025 | | Term loan – scheduled repayments within more than one year | – | 234,439 | 234,439 | Secured | June 2025 | | Working capital facility – scheduled repayment within one year | 2,000 | – | 2,000 | Secured | June 2025 | | | 41,500 | 234,439 | 275,939 | | | | 31 December 2022: | | | | | | | Term loan – scheduled repayments within one year | 30,000 | – | 30,000 | Secured | June 2025 | | Term loan – scheduled repayments within more than one year | – | 298,085 | 298,085 | Secured | June 2025 | | Working capital facility – scheduled repayment more than one year | – | – | – | Secured | June 2025 | | | 30,000 | 298,085 | 328,085 | | | 23 Lease liabilities | | | | | --- | --- | --- | | | 2023 | 2022 | | | US$’000 | US$’000 | | As at 1 January | 3,522 | 2,924 | | Recognition of new lease liability additions | 3,231 | 3,122 | | Interest on lease liabilities (Note 35) | 245 | 170 | | Principal element of lease payments | (3,330) | (2,524) | | Derecognition of lease liability | (67) | – | | Interest paid | (245) | (170) | | As at 31 December | 3,356 | 3,522 | | Maturity analysis: | | | | Year 1 | 1,623 | 1,845 | | Year 2 | 1,297 | 834 | | Year 3 – 5 | 436 | 692 | | Onwards | – | 151 | | | 3,356 | 3,522 | | Split between: | | | | Current | 1,623 | 1,845 | | Non – current | 1,733 | 1,677 | | | 3,356 | 3,522 | 24 Related party transactions Related parties comprise the Group’s major shareholders, Directors and entities related to them, companies under common ownership and/ or common management and control, their partners and key management personnel. Pricing policies and terms of related party transactions are approved by the Group’s Board. Balances and transactions between the Group and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Key management personnel: As at 31 December 2023, there were 2.6 million shares held by Directors (31 December 2022: 2.6 million). Refer to the Governance Report on page 70. Related parties The Group’s principal subsidiaries are outlined in Note 3. The related parties comprising of the Group’s major shareholders are outlined in the Directors Report on page 73. The other related parties during the year were: | | | | --- | --- | | Partner in relation to UAE Operations | Relationship | | National Catering Company Limited WLL | Affiliate of a significant shareholder of the Company | | Sigma Enterprise Company LLC | Affiliate of a significant shareholder of the Company | | Aman Integrated Solutions LLC | Affiliate of a significant shareholder of the Company | The amounts outstanding to National Catering Company Limited WLL as at 31 December 2023 was US$ 0.5 million (2022: US$ 0.8 million) included in trade and other payables (Note 21). ![]() 114 Gulf Marine Services PLC 24 Related party transactions continued The amount outstanding to Sigma Enterprise Company LLC as at 31 December 2023 was US$ 0.5 million, (2022: US$ 1.8 million) included in trade and other payables (Note 21). The amounts outstanding to Aman Integrated Solutions LLC as at 31 December 2023 was US$ 3k (2022: US$ nil) included in trade and other payables (Note 21). During 2023, there were no transactions with Seafox international or any of its subsidiaries (2022: US $nil). Significant transactions with the related party during the year: | | | | | --- | --- | --- | | | 2023 | 2022 | | | US$’000 | US$’000 | | National Catering Company Limited WLL – Catering services | 581 | 1,232 | | Sigma Enterprise Company LLC – Vessel maintenance and overhaul services | 2,372 | 1,930 | | Aman Integrated Solutions LLC – Laboratory services | 18 | 7 | Compensation of key management personnel The remuneration of Directors and other members of key management personnel during the year were as follows: | | | | | --- | --- | --- | | | 2023 | 2022 | | | US$’000 | US$’000 | | Short-term benefits | 983 | 617 | | End of service benefits | 24 | 24 | | | 1,007 | 641 | Compensation of key management personnel represents the charge to the profit or loss in respect of the remuneration of the executive Directors. At 31 December 2023, there were four executive Directors (2022: four). Further details of remuneration of the Board and key management personnel relating to 2023 are contained in the Directors’ Remuneration Report on page 57. 25 Contingent liabilities At 31 December 2023, the banks acting for Gulf Marine Middle East FZE, one of the subsidiaries of the Group, had issued performance bonds amounting to US$ 19.6 million (31 December 2022: US$ 18.0 million), all of which were counter-indemnified by other subsidiaries of the Group. 26 Commitments | | | | | --- | --- | --- | | | 2023 | 2022 | | | US$’000 | US$’000 | | Capital commitments | 7,825 | 6,221 | Capital commitments comprise mainly capital expenditure, which has been contractually agreed with suppliers for future periods for equipment or the upgrade of existing vessels. 27 Financial instruments Categories of financial instruments | | | | | --- | --- | --- | | | 2023 | 2022 | | | US$’000 | US$’000 | | Financial assets: | | | | Current assets at amortised cost: | | | | Cash and cash equivalents (Note 12) | 8,666 | 12,275 | | Trade receivables and other receivables (Note 9,10)\* | 33,388 | 34,567 | | Current assets recorded at FVTPL: | | | | Interest rate swap (N ote 11) | – | 386 | | Total financial assets | 42,054 | 47, 228 | \* Trade and other receivables exclude prepayments and advances to suppliers. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued FOR THE YEAR ENDED 31 DECEMBER 2023 ![]() 115Annual Report 2023 Financial Statements | | | | | | --- | --- | --- | --- | | | 2023 | | 2022 | | | US$’000 | | US$’000 | | Financial liabilities: | | | | | Derivatives recorded at FVTPL: | | | | | Warrants (No te 11) | 14,275 | 3,19 | 8 | | Financial liabilities recorded at amortised cost: | | | | | Trade and other payables (Note 21)\* | 31,116 | | 26,986 | | Lease liabilities (Note 23) | 3,356 | | 3,522 | | Current bank borrowings – scheduled repayments within one year (Note 22) | 41,500 | | 30,000 | | Non-current bank borrowings – scheduled repayments more than one year (Note 22) | 234,439 | | 298,085 | | Total financial liabilities | 324,686 | | 361,791 | \* Trade and other payables excludes amounts of deferred revenue and VAT payable. The following table combines information about the following; • Fair values of financial instruments (except financial instruments when carrying amount approximates their fair value); and • Fair value hierarchy levels of financial liabilities for which fair value was disclosed. | | | | | | --- | --- | --- | --- | | | 2023 | | 2022 | | | US$’000 | | US$’000 | | Financial assets: | | | | | Recognised at level 2 of the fair value hierarchy: | | | | | Interest rate swap (N ote 11) | – | | 386 | | Financial liabilities: | | | | | Recognised at level 3 of the fair value hierarchy: | | | | | Warrants (No te 11) | 14,275 | 3,19 | 8 | The fair value of financial instruments classified as level 3 are, in certain circumstances, measured using valuation techniques that incorporate assumptions that are not evidenced by the prices from observable current market transactions in the same instrument and are not based on observable market data. The fair value of the Group’s warrants at 31 December 2023 has been arrived at on the basis of a valuation carried out at that date by a third-party expert, an independent valuer not connected with the Group. The valuation conforms to International Valuation Standards. The fair value was determined using a Monte-Carlo simulation. Favourable and unfavourable changes in the value of financial instruments are determined on the basis of changes in the value of the instruments as a result of varying the levels of the unobservable parameters, quantification of which is judgmental. There have been no transfers between Level 2 and Level 3 during the years ended 31 December 2023 and 31 December 2022. Capital risk management The Group manages its capital to support its ability to continue as a going concern while maximising the return on equity. The Group does not have a formalised optimal target capital structure or target ratios in connection with its capital risk management objectives. The capital structure of the Group consists of net bank debt and total equity. The Group continues to take measures to de-leverage the Company and intends to continue to do so in the coming years. Material accounting policies Details of the material accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in Note 3 to the consolidated financial statements. Financial risk management objectives The Group is exposed to the following risks related to financial instruments – credit risk, liquidity risk, interest rate risk and foreign currency risk. Management actively monitors and manages these financial risks relating to the Group. Credit risk management Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group and arises principally from the Group’s trade and other receivables and cash and cash equivalents. The Group has adopted a policy of dealing when possible, with creditworthy counterparties while keen to maximize utilization for its vessels. Cash balances held with banks are assessed to have low credit risk of default since these banks are highly regulated by the central banks of the respective countries. At the year-end, cash at bank and in hand totaled US$ 8.7 million (2022: US$ 12.3 million), deposited with banks with Fitch short-term ratings of F2 to F1+ (Refer to Note 12). ![]() 116 Gulf Marine Services PLC 27 Financial instruments continued Credit risk management continued Concentration of credit risk arises when a number of counterparties are engaged in similar business activities, or activities in the same geographic region, or have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentration of credit risk indicates the relative sensitivity of the Group’s performance to developments affecting a particular industry or geographic location. During the year, vessels were chartered to 7 companies in the Arabian Peninsula region and 2 companies in Europe, including NOCs and engineering, procurement and construction (“EPC”) contractors. At 31 December 2023, 7 companies in specific regions accounted for 99% (2022: 9 companies in specific regions accounted for 99%) of the outstanding trade receivables. The credit risk on liquid funds is limited because the funds are held by banks with high credit ratings assigned by international agencies. The amount that best represents maximum credit risk exposure on financial assets at the end of the reporting period, in the event counterparties failing to perform their obligations generally approximates their carrying value. The Group considers cash and cash equivalents and trade and other receivables which are neither past due nor impaired to have a low credit risk and an internal rating of ‘performing’. Performing is defined as a counterparty that has a stable financial position and which there are no past due amounts. Liquidity risk management Ultimate responsibility for liquidity risk management rests with the Board of Directors. The Group manages liquidity risk by seeking to maintain sufficient facilities to ensure availability of funds for forecast and actual cash flow requirements. The table below summarises the maturity profile of the Group’s financial liabilities. The contractual maturities of the Group’s financial liabilities have been determined on the basis of the remaining period at the end of the reporting period to the contractual maturity date. The maturity profile is monitored by management to assist in ensuring adequate liquidity is maintained. Refer to Going Concern in Note 3. The maturity profile of the assets and liabilities at the end of the reporting period based on contractual repayment arrangements was as follows: | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | | | | | | | Contractual cash flows | | | | | | | 1 to 3 | 4 to 12 | 2 to 5 | | | | Carrying | Total | months | months | years | | | Interest rate | amount | US$’000 | US$’000 | US$’000 | US$’000 | | 31 December 2023 | | | | | | | | Non-interest bearing financial liabilities | | | | | | | | Trade and other payables\* | | 31,116 | 31,116 | 31,116 | – | – | | Interest bearing financial liabilities | 8.6% – 9.2% | | | | | | | Bank borrowings – principal | | 275,939 | 275,939 | 4,000 | 37,500 | 234,439 | | Interest on bank borrowings | | 133 | 32,984 | 5,955 | 17,164 | 9,865 | | Lease liabilities | | 3,356 | 3,356 | 618 | 1,155 | 1,583 | | Interest on lease liabilities | | – | 251 | 60 | 110 | 81 | | | | 310,544 | 343,646 | 41,749 | 55,929 | 245,968 | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | | | | | | 1 to 3 | 4 to 12 | 2 to 5 | | | | Carrying | Total | months | months | years | | | Interest rate | amount | US$’000 | US$’000 | US$’000 | US$’000 | | 31 December 2022 | | | | | | | | Non-interest bearing financial liabilities | | | | | | | | Trade and other payables\* | | 26,986 | 26,986 | 26,986 | – | – | | Interest bearing financial liabilities | 3.2% – 6.7% | | | | | | | Bank borrowings – principal | | 328,085 | 328,085 | 7, 5 0 0 | 22,500 | 298,085 | | Interest on bank borrowings | | – | 40,395 | 2,656 | 7,6 0 3 | 3 0,136 | | Lease liabilities | | 3,522 | 3,522 | 462 | 1,383 | 1,677 | | Interest on lease liabilities | | – | 148 | 20 | 42 | 86 | | | | 358,593 | 39 9,136 | 37,6 24 | 31,528 | 329,984 | \* Trade and other payables excludes amounts of deferred revenue and VAT payable. In addition to above table, capital commitments are expected to be settled in next twelve months. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued FOR THE YEAR ENDED 31 DECEMBER 2023 ![]() 117Annual Report 2023 Financial Statements Interest rate risk management The Group is exposed to cash flow interest rate risk on its bank borrowings. The Group enters into floating interest rate instruments for the same. Further, the Group had an Interest Rate Swap (IRS) arrangement, originally in place, with a notional amount of US$ 50.0 million. The remaining notional amount hedged under the IRS as at 31 December 2023 was US$ nil (31 December 2022: US$ 23.1 million). The IRS hedged the risk of variability in interest payments by converting a floating rate liability to a fixed rate liability. The IRS arrangement matured during the year, therefore, the fair value of the IRS as at 31 December 2023 was US$ nil (31 December 2022: asset value US$ 0.4 million). In 2020 cash flows of the hedging relationship for the IRS were not highly probable and, therefore, hedge accounting was discontinued from that point. A change of 100 basis points in interest rates at the reporting date would have increased/(decreased) consolidated statement of profit or loss and other comprehensive income by US $ 3.3 million. Foreign currency risk management The majority of the Group’s transactions are denominated in US Dollars, UAE Dirhams, Euros and Pound Sterling. As the UAE Dirham, Saudi Riyal and Qatari Riyal are pegged to the US Dollar, balances in UAE Dirham, Saudi Riyal and Qatari Riyal are not considered to represent significant currency risk. Transactions in other foreign currencies entered into by the Group are short-term in nature and therefore management considers that the currency risk associated with these transactions is limited. The carrying amounts of the Group’s significant foreign currency denominated monetary assets include cash and cash equivalents and trade receivables and liabilities include trade payables. The amounts at the reporting date are as follows: | | | | | | | --- | --- | --- | --- | --- | | | Assets | | Liabilities | | | | 31 December | | 31 December | | | | 2023 | 2022 | 2023 | 2022 | | | US$’000 | US$’000 | US$’000 | US$’000 | | US Dollars | 21,912 | 26,556 | 3,421 | 13,146 | | UAE Dirhams | 1,154 | 283 | 6,482 | 1,110 | | Saudi Riyals | 8,531 | 10,332 | 1,307 | – | | Pound Sterling | 12 | 31 | 2,003 | 1,218 | | Euros | 6,141 | 4,535 | – | – | | Qatari Riyals | 3,694 | 6,237 | – | 317 | | Norwegian Krone | – | 2 | – | – | | Others | – | 26 | – | – | | | 41,444 | 48,002 | 13,213 | 15,791 | At 31 December 2023, if the exchange rate of the currencies other than the UAE Dirham, Saudi Riyal and Qatari Riyal had increased/ decreased by 10% against the US Dollar, with all other variables held constant, the Group’s profit for the year would have been higher/lower by US$ 0.4 million (2022: higher/lower by US$ 0.9 million) mainly as a result of foreign exchange loss or gain on translation of Euro and Pound Sterling denominated balances. 28 Long term incentive plans The Group had Long Term Incentive Plans (“LTIPs”) which were granted to senior management, managers and senior offshore officers. The employment condition attached to the Groups LTIP’s was that each eligible employee of the Company must remain in employment during the three-year vesting period. For 2019 and 2020 awards, LTIPs were aligned to Company’s share performance. The release of these shares was conditional upon continued employment and market vesting conditions. There were no LTIP awards granted during 2021. During the year ended 31 December 2023, the market vesting conditions for the LTIP awards granted in 2020 were not met, and all LTIP awards issued in 2020 were forfeited. During the year ended 31 December 2022, additional LTIPs awards were granted to the Chairman and Senior Management. The awards were to vest over three years subject to the same employment conditions and performance conditions being met in 2024 based on defined ranges. There was an underpin condition such that no awards would vest if the debt leverage in the Group exceeded 4.0 times EBITDA at 31 December 2022. As this criterion had not been met all LTIP awards issued in 2022 were forfeited. ![]() 118 Gulf Marine Services PLC 28 Long term incentive plans continued Equity-settled share-based payments were measured at fair value at the date of grant. The fair value determined, using the Binomial Probability Model together with Monte Carlo statistical method, at the grant date of equity-settled share-based payments, is expensed on a straight-line basis over the vesting period, based on an estimate of the number of shares that will ultimately vest. The fair value of each award was determined by taking into account the performance conditions, the term of the award, the share price at grant date, the expected price volatility of the underlying share and the risk-free interest rate for the term of the award. Non-market vesting conditions were taken into account by adjusting the number of equity instruments expected to vest at each balance sheet date so that, ultimately, the cumulative amount recognised over the vesting period was based on the number of awards that eventually vest. Any market vesting conditions were factored into the fair value of the share-based payment granted. To the extent that share-based payments are granted to employees of the Group’s subsidiaries without charge, the share-based payment is capitalised as part of the cost of investment in subsidiaries. The number of share awards granted by the Group during the year is given in the table below: | | | | | --- | --- | --- | | | 2023 | 2022 | | | 000’s | 000’s | | At the beginning of the year | 1,176,014 | 2,499,714 | | Granted in the year | – | 9,460,000 | | Cash settled in the year | – | (921,310) | | Forfeited in the year | (1,176,014) | (9,862,390) | | At the end of the year | – | 1,176,014 | The weighted average remaining contractual life for the vesting period outstanding as at 31 December 2023 was nil years (31 December 2022: 0.1 years). The weighted average fair value of shares granted during the period to 31 December 2023 was US$ nil (31 December 2022: US$ 0.06 million). | | | | | | --- | --- | --- | --- | | | LTIP | LTIP | LTIP | | Grant date | 14 Jun 2022 | 29 May 2020 | 15 Nov 2019 | | Share price | £0.06 | £0.09 | £0.08 | | Exercise price | £0.00 | £0.00 | £0.00 | | Expected volatility | 102% | 120% | 103% | | Risk-free rate | 2.17% | 0.01% | 0.48% | | Expected dividend yield | 0.00% | 0.00% | 0.00% | | Vesting period | 3 years | 3 years | 3 years | | Award life | 3 years | 3 years | 3 years | The expected share price volatility of Gulf Marine Services PLC shares was determined by considering the historical share price movements for a three-year period up to the grant date (and of each of the companies in the peer group). The risk-free return was determined from similarly dated zero coupon UK government bonds at the time the share awards were granted, using historical information taken from the Bank of England’s records. 29 Dividends There was no dividend declared or paid in 2023 (2022: nil). No final dividend in respect of the year ended 31 December 2023 is to be proposed at the 2023 AGM. The Directors have approved a residual dividend policy which seeks to strike a balance between funding growth initiatives and providing returns to shareholders. Management is currently evaluating the timing for its implementation. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued FOR THE YEAR ENDED 31 DECEMBER 2023 ![]() 119Annual Report 2023 Financial Statements 30 Segment reporting The Group has identified that the Directors and senior management team are the chief operating decision makers in accordance with the requirements of IFRS 8 ‘Operating Segments’. Segment performance is assessed based upon adjusted gross profit/(loss), which represents gross profit/(loss) before depreciation and amortisation and loss on impairment of assets. The reportable segments have been identified by Directors and senior management based on the size and type of asset in operation. The operating and reportable segments of the Group are (i) K-Class vessels, which include the Kamikaze, Kikuyu, Kawawa, Kudeta, Keloa and Pepper vessels (ii) S-Class vessels, which include the Shamal, Scirocco and Sharqi vessels, and (iii) E-Class vessels, which include the Endeavour, Endurance, Enterprise and Evolution vessels. All of these operating segments earn revenue related to the hiring of vessels and related services including charter hire income, messing and accommodation services, personnel hire and hire of equipment. The accounting policies of the operating segments are the same as the Group’s accounting policies described in Note 3. | | | | | | | --- | --- | --- | --- | --- | | | | | | Gross profit before adjustments for | | | | | | depreciation, amortisation and | | | Revenue | | | impairment charges | | | 2023 | 2022 | 2023 | 2022 | | | US$’000 | US$’000 | US$’000 | US$’000 | | E-Class vessels | 60,955 | 51,135 | 41,864 | 32,024 | | S-Class vessels | 35,018 | 33,986 | 23,217 | 23,899 | | K-Class vessels | 55,630 | 48,036 | 33,375 | 27,827 | | | 151,603 | 133,157 | 98,456 | 83,750 | | Depreciation charged to cost of sales | | | (24,153) | (23,567) | | Amortisation charged to cost of sales | | | (4,687) | (5,613) | | Expected credit losses | | | (207) | (1,824) | | Adjusted gross profit | | | 69,409 | 52,746 | | Impairment loss | | | (3,565) | (13,192) | | Reversal of impairment | | | 36,993 | 20,980 | | Gross profit | | | 102,837 | 60,534 | | Finance expense | | | (31,431) | (17, 6 5 6 ) | | Impact of change in fair value of warrants | | | (11,077) | (2,481) | | Other general and administrative expenses | | | (14,645) | (13,212) | | Foreign exchange loss, net | | | (987) | (138) | | Other income | | | 12 | 68 | | Finance income | | | 221 | 11 | | Profit for the year before taxation | | | 44,930 | 27,126 | Segment revenue reported above represents revenue generated from external customers. There were no inter-segment sales in the years. Segment assets and liabilities, including depreciation, amortisation and additions to non-current assets, are not reported to the key decision makers on a segmental basis and are therefore, not disclosed. Information about major customers During the year, four customers (2022: four) individually accounted for more than 10% of the Group’s revenues. The related revenue figures for these major customers, the identity of which may vary by year, was US$ 49.7 million, US$ 38.1 million, US$ 25.3 million and US$ 15.4 million (2022: US$ 9.0 million, US$ 22.1 million, US$ 43.1 million and US$ 22.4 million). ![]() 120 Gulf Marine Services PLC 30 Segment reporting continued Geographical segments Revenue by geographical segment is based on the geographical location of the customer as shown below. | | | | | --- | --- | --- | | | 2023 | 2022 | | | US$’000 | US$’000 | | United Arab Emirates | 58,452 | 51,848 | | Saudi Arabia | 38,088 | 22,645 | | Qatar | 40,680 | 44,259 | | Total – Arabian Peninsula region | 137,220 | 118,752 | | Total – Europe | 14,383 | 14,405 | | Worldwide Total | 151,603 | 133,157 | Type of work The Group operates in both the oil and gas and renewables sector. Oil and gas revenues are driven from both client operating cost expenditure and capex expenditure. Renewables are primarily driven by windfarm developments from client expenditure. Details are shown below. | | | | | --- | --- | --- | | | 2023 | 2022 | | | US$’000 | US$’000 | | Oil and Gas | 137,220 | 118,752 | | Renewables | 14,383 | 14,405 | | Total | 151,603 | 133,157 | Reversal of impairment of US$ 37.0 million and impairment charge of US$ 3.6 million was recognised in respect of property and equipment (Note 5) (2022: Reversal of impairment of US$ 21.0 million and impairment charge of US$ 13.2 million) attributable to the following reportable segments: | | | | | | --- | --- | --- | --- | | | 2023 | 2022 | | | | US$’000 | US$’000 | | | E-Class vessels | (16,340) | (3,319) | | | S-Class vessels | (4,462) | 4,631 | | | K-Class vessels | (12,626) | (9,100) | | | | (33,428) | ( 7,78 | 8 ) | | | | | | | | | --- | --- | --- | --- | --- | --- | | | E-Class vessels | S-Class vessels | K-Class vessels | | Total | | | US$’000 | US$’000 | US$’000 | | US$’000 | | 2023 | | | | | | | Depreciation charged to cost of sales | 12,892 | 5,660 | 5,601 | | 24,153 | | Amortisation charged to cost of sales | 2,035 | 692 | 1,960 | | 4,687 | | Net reversal of impairment | (16,340) | (4,462) | (12,626) | | (33,428) | | 2022 | | | | | | | Depreciation charged to cost of sales | 12,694 | 5,829 | 5,044 | | 23,567 | | Amortisation charged to cost of sales | 2,302 | 839 | 2,472 | | 5,613 | | Impairment charge/(reversal of impairment charge) – net | (3,319) | 4,631 | (9 | ,10 0) | ( 7,788 ) | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued FOR THE YEAR ENDED 31 DECEMBER 2023 ![]() 121Annual Report 2023 Financial Statements 31 Presentation of adjusted non-GAAP results The following table provides a reconciliation between the Group’s adjusted non-GAAP and statutory financial results: | | | | | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | Year ended 31 December 2023 | | | | | | Year ended 31 December 2022 | | | | | Adjusted | | | | Adjusted | | | | | | | | | | non-GAAP | | Adjusting | Statutory | non-GAAP | | | | Adjusting | Statutory | | | | | results | | items | total | results | | | | items | total | | | | | US$’000 | | US$’000 | US$’000 | US$’000 | | | | US$’000 | US$’000 | | | | Revenue | 151,603 | | – | 151,603 | 133,157 | | | | – | 133,157 | | | | Cost of sales | | | | | | | | | | | | | | – Vessel operating expenses before depreciation, amortisation and impairment | (53,147) | | – | (53,147) | (49,407) | | | | – | (49,407) | | | | – Depreciation and amortisation | (28,840) | | – | (28,840) | (2 | 9,18 | 0) | | – | (29,180) | | | | Expected credit losses | (207) | | – | (207) | | | (1,824) | | – | (1,824) | | | | Net reversal of impairment\* | – | | 33,428 | 33,428 | | | – | 7,7 | 8 8 | 7,7 | 8 8 | | | Gross profit | 69,409 | | 33,428 | 102,837 | | | 52,746 | 7,788 | | | 60,534 | | | General and administrative | | | | | | | | | | | | | | – Amortisation | (3,18 | 8) | – | (3,188) | | | (2,635) | | – | | (2,635) | | | – Depreciation | | (145) | – | (145) | | | (128) | | – | | (128) | | | – Other administrative costs | | (10,727) | – | (10,727) | | | (10,449) | | – | | (10,449) | | | – Exceptional legal costs\*\* | | – | (585) | (585) | | | – | | – | | – | | | Operating profit | | 55,349 | 32,843 | 88,192 | | | 39,534 | 7,788 | | | 47, 3 22 | | | Finance income | | 221 | – | 221 | | | 11 | | – | | 11 | | | Finance expense | | (31,431) | – | (31,431) | | | (17,6 5 6) | | – | | (17,6 5 6) | | | Impact of change in fair value of warrants | | (11,077) | – | (11,077) | | | (2,481) | | – | | (2,481) | | | Other income | | 12 | – | 12 | | | 68 | | – | | 68 | | | Foreign exchange loss, net | | (987) | – | (987) | | | (138) | | – | | (138) | | | Profit before taxation | | 12,087 | 32,843 | 44,930 | | | 19,338 | 7,788 | | 2 | 7,12 | 6 | | Taxation (charge)/credit | | | | | | | | | | | | | | – Taxation charge | | (2,329) | – | (2,329) | | | (1,724) | | – | | | (1,724) | | – Exceptional tax expense\*\* | | – | (533) | (533) | | | – | | – | | | – | | Profit for the year | | 9,758 | 32,310 | 42,068 | | | 17,614 | 7,788 | | | | 25,402 | | Profit attributable to: | | | | | | | | | | | | | | Owners of the Company | | 9,032 | 32,310 | 41,342 | | | 17,5 3 8 | 7,78 | | 8 | | 25,326 | | Non-controlling interests | | 726 | – | 726 | | | 76 | | | – | | 76 | | Earnings per share (basic) | | 0.89 | 3.18 | 4.07 | | | 1.73 | | 0.76 | | | 2.49 | | Earnings per share (diluted) | | 0.86 | 3.06 | 3.92 | | | 1.71 | | 0.76 | | | 2.47 | | Supplementary non statutory information | | | | | | | | | | | | | | Operating profit | | 55,349 | 32,843 | 88,192 | | | 39,534 | 7,7 | | 8 8 | | 47, 322 | | Add: Depreciation and amortisation | | 32,173 | – | 32 ,173 | | | 31,944 | | | – | | 31,944 | | Adjusted EBITDA | | 87,522 | 32,843 | 120,365 | | | 71,478 | | 7,78 | 8 | | 79,266 | \* The reversal of impairment credit/impairment charge on certain vessels have been added back to gross profit to arrive at adjusted gross profit for the year ended 31 December 2023 and 2022 (refer to Note 5 for further details). Management has adjusted this due to the nature of the transaction which it believes is not directly related to operations management are able to influence. This measure provides additional information on the core profitability of the Group. \*\* These exceptional legal cost and exceptional tax expense relates to ZATCA transfer pricing case legal fee and expected tax outcome as explained in Note 8. ![]() 122 Gulf Marine Services PLC 31 Presentation of adjusted non-GAAP results continued | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | | | Year ended 31 December 2023 | | Year ended 31 December 2022 | | | | | Adjusted | | | Adjusted | | | | | | non-GAAP | Adjusting | Statutory | non-GAAP | Adjusting | | Statutory | | | results | items | total | results | | items | total | | | US$’000 | US$’000 | US$’000 | US$’000 | | US$’000 | US$’000 | | Cash flow reconciliation: | | | | | | | | | Profit for the year | 9,758 | 32,310 | 42,068 | 17,614 | 7,7 | 8 8 | 25,402 | | Adjustments for: | | | | | | | | | Net reversal of impairment\* | – | (33,428) | (33,428) | | ( 7,7 | 8 8 ) | ( 7,788 ) | | Finance expenses | 31,431 | – | 31,431 | 17,6 5 6 | | – | 17,6 5 6 | | Impact of change in fair value of warrants | 11,077 | – | 11,077 | 2,481 | | – | 2,481 | | Other adjustments\*\* | 34,145 | 1,118 | 35,263 | 35,276 | | – | 35,276 | | Cash flow from operating activities before movement | | | | | | | | | in working capital | 86,411 | – | 86,411 | 73,027 | | – | 73,027 | | Change in trade and other receivables | 2,003 | – | 2,003 | 5,610 | | – | 5,610 | | Change in trade and other payables | 8,140 | – | 8,140 | 5,005 | | – | 5,005 | | Cash generated from operations | 96,554 | – | 96,554 | 83,642 | | – | 83,642 | | Income tax paid | (2 ,151) | – | (2,151) | (1,077) | | – | (1,077) | | Net cash flows from operating activities | 94,403 | – | 94,403 | 82,565 | | – | 82,565 | | Net cash flows used in investing activities | (12,788) | – | (12,788) | (6,304) | | – | (6,304) | | Payment of issue costs on bank borrowings | (374) | – | (374) | (148) | | – | (148) | | Other cash flows used in financing activities | (84,850) | – | (84,850) | (72,109) | | – | (72,109) | | Net cash flows used in financing activities | (85,224) | – | (85,224) | (72,257) | | – | (72,257) | | Net change in cash and cash equivalents | (3,609) | – | (3,609) | 4,004 | | – | 4,004 | \* The reversal of impairment credit/impairment charge on certain vessels and related assets have been added back to cash flow from operating activities before movement in working capital for the year ended 31 December 2023 and 2022 (refer to Note 5 for further details). \*\* These exceptional legal cost and exceptional tax expense relates to ZATCA transfer pricing case legal fee and expected tax outcome as explained in Note 8. 32 Earnings per share | | | | | --- | --- | --- | | | 2023 | 2022 | | Profit for the purpose of basic and diluted earnings per share being profit for the year attributable to Owners | | | | of the Company (US$’000) | 41,342 | 25,326 | | Profit for the purpose of adjusted basic and diluted earnings per share (US$’000) (Note 31) | 9,032 | 17,5 3 8 | | Weighted average number of shares (‘000) | 1,016,415 | 1,016,415 | | Weighted average diluted number of shares in issue (‘000) | 1,055,003 | 1,024,124 | | Basic earnings per share (cents) | 4.07 | 2.49 | | Diluted earnings per share (cents) | 3.92 | 2.47 | | Adjusted earnings per share (cents) | 0.89 | 1.73 | | Adjusted diluted earnings per share (cents) | 0.86 | 1.71 | Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company (as disclosed in the statement of comprehensive income) by the weighted average number of ordinary shares in issue during the year. Adjusted earnings per share is calculated on the same basis but uses the profit for the purpose of basic earnings per share (shown above) adjusted by adding back the non-operational items, which were recognised in the consolidated statement of profit or loss and other comprehensive income (Note 31). The adjusted earnings per share is presented as the Directors consider it provides an additional indication of the underlying performance of the Group. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued FOR THE YEAR ENDED 31 DECEMBER 2023 ![]() 123Annual Report 2023 Financial Statements Diluted earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year, adjusted for the weighted average effect of outstanding warrants and LTIPs during the year. Adjusted diluted earnings per share is calculated on the same basis but uses adjusted profit (Note 31) attributable to equity holders of the Group. The following table shows a reconciliation between the basic and diluted weighted average number of shares: | | | | | | --- | --- | --- | --- | | | 2023 | | 2022 | | | ’000s | | ’000s | | Weighted average basic number of shares in issue | 1,016,415 | | 1,016,415 | | Weighted average effect of LTIPs | – | 7,7 | 0 9 | | Weighted average effect of warrants | 38,588 | | – | | Weighted average diluted number of shares in issue | 1,055,003 | | 1,024,124 | 33 Revenue All revenue in the above table is in scope of IFRS 15 with the exception of lease income which is in scope of IFRS 16. | | | | | | --- | --- | --- | --- | | | 2023 | 2022 | | | | US$’000 | US$’000 | | | Charter hire | 76,111 | 70,295 | | | Lease income | 57,073 | 44,543 | | | Messing and accommodation | 9,173 | 12,74 | 6 | | Manpower income | 5,418 | | 3,516 | | Mobilisation and demobilisation | 2,255 | | 1,281 | | Sundry income | 1,573 | | 776 | | | 151,603 | | 133,157 | | Revenue recognised – over time | 149,871 | | 131,958 | | Revenue recognised – point in time | 1,732 | | 1,199 | | | 151,603 | | 133,157 | Included in mobilisation and demobilisation income is an amount of US$ 0.6 million (2022 US$ 0.6 million) that was included as deferred revenue at the beginning of the financial year. Lease income: | | | | | --- | --- | --- | | | 2023 | 2022 | | | US$’000 | US$’000 | | Maturity analysis: | | | | Year 1 | 68,207 | 5 7,6 6 5 | | Year 2 | 56,551 | 36,696 | | Year 3 – 5 | 73,649 | 32,947 | | | 198,407 | 12 7, 3 0 8 | | Split between: | | | | Current | 68,207 | 5 7,6 6 5 | | Non-current | 130,200 | 69,643 | | | 198,407 | 12 7, 3 0 8 | Further descriptions on the above types of revenue have been provided in Note 3. ![]() 124 Gulf Marine Services PLC 34 Finance income | | | | | --- | --- | --- | | | 2023 | 2022 | | | US$’000 | US$’000 | | Bank interest | 221 | 11 | 35 Finance expense | | | | | --- | --- | --- | | | 2023 | 2022 | | | US$’000 | US$’000 | | Interest on bank borrowings | 29,456 | 17, 2 31 | | Gain on IRS reclassified to profit or loss | 279 | 279 | | Net loss/(gain) on changes in fair value of interest rate swap (N ot e 11) | 59 | (1,078) | | Interest on lease liabilities (Note 23) | 245 | 170 | | Other finance expenses | 1,392 | 1,054 | | | 31,431 | 17, 6 5 6 | 36 Profit for the year The profit for the year is stated after charging/(crediting): | | | | | --- | --- | --- | | | 2023 | 2022 | | | US$’000 | US$’000 | | Total staff costs (see below) | 31,230 | 27, 3 5 0 | | Depreciation of property and equipment (Note 5) | 24,297 | 23,695 | | Amortisation of dry-docking expenditure (Note 6) | 4,687 | 5,613 | | Depreciation of right-of-use assets (Note 7) | 3,188 | 2,635 | | Net charge of expected credit losses (Note 9) | 207 | 1,824 | | Auditor’s remuneration (see below) | 1,127 | 787 | | Net foreign exchange loss | 987 | 138 | | Other income | (12) | (68) | | Expense relating to short term leases or leases of low value assets (Note 7) | 228 | 965 | | Reversal of impairment loss (Note 5) | (33,428) | ( 7,7 8 8) | The average number of full time equivalent employees (excluding non-executive Directors) by geographic area was: | | | | | --- | --- | --- | | | 2023 | 2022 | | | Number | Number | | Arabian Peninsula region | 598 | 539 | | Rest of the world | 30 | 28 | | | 628 | 567 | The total number of full-time equivalent employees (including executive Directors) as at 31 December 2023 was 660 (31 December 2022: 594). The number of full-time employees increased in the year due to an increase in offshore headcount from the second half of the year. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued FOR THE YEAR ENDED 31 DECEMBER 2023 ![]() 125Annual Report 2023 Financial Statements Their aggregate remuneration comprised: | | | | | --- | --- | --- | | | 2023 | 2022 | | | US$’000 | US$’000 | | Wages and salaries | 30,477 | 26,845 | | End of service benefit (Note 20) | 723 | 270 | | Share based payment charge | 17 | 45 | | Employment taxes\* | 13 | 190 | | | 31,230 | 27,3 5 0 | \* Employment taxes include US$ 6K (2022: US $ 0.17 million) in respect of social security costs for our crew working in France. The analysis of the auditor’s remuneration is as follows: | | | | | --- | --- | --- | | | 2023 | 2022 | | | US$’000 | US$’000 | | Group audit fees | 700 | 520 | | Overruns and out of pocket expenses in relation to 2022 Group audit | 177 | – | | Subsidiary audit fees | 100 | 100 | | Total audit fees | 977 | 620 | | Audit-related assurance services | 150 | 167 | | Total fees | 1,127 | 787 | 37 Changes in liabilities arising from financing activities The table below details changes in the Group’s liabilities arising from financing activities, including both cash and non-cash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the Group’s consolidated statement of cash flows as cash flows from financing activities. | | | | | | --- | --- | --- | --- | | | | Lease | Bank | | | Derivatives | liabilities | borrowings | | | (Note 11) | (Note 23) | (Note 22) | | | US$’000 | US$’000 | US$’000 | | At 1 January 2022 | 1,793 | 2,924 | 379,526 | | Financing cash flows | | | | | Repayment of bank borrowings | – | – | (51,445) | | Principal elements of lease payments | – | (2,524) | – | | Settlement of derivatives | (384) | – | – | | Interest paid | – | (170) | (17, 2 2 7 ) | | Total financing cashflows | (384) | (2,694) | (68,672) | | Non-cash changes: | | | | | Recognition of new lease liability additions | – | 3,122 | – | | Interest on lease liabilities (Note 35) | – | 170 | – | | Interest on bank borrowings (Note 35) | – | – | 17, 231 | | Net gain on change in fair value of IRS (N ote 11) | (1,078) | – | – | | Impact of change in fair value of warrants (N o te 11) | 2,481 | – | – | | Total non-cash changes | 1,403 | 3,292 | 17, 2 31 | | At 31 December 2022 | 2,812 | 3,522 | 328,085 | | Financing cash flows | | | | | Repayment of bank borrowings | – | – | (56,174) | | Working capital facility | | | 2,000 | | Principal elements of lease payments | – | (3,330) | – | | Settlement of derivatives | 327 | – | – | | Interest paid | – | (245) | (27,428) | | Total financing cashflows | 327 | (3,575) | (81,602) | | Non-cash changes: | | | | | Recognition of new lease liability additions | – | 3,231 | – | | Derecognition of lease liability | – | (67) | – | | Interest on lease liabilities (Note 35) | – | 245 | – | | Interest on bank borrowings (Note 35) | – | – | 29,456 | | Net gain on change in fair value of IRS (N ote 11) | 59 | – | – | | Impact of change in fair value of warrants (N o te 11) | 11,077 | – | – | | Total non-cash changes | 11,136 | 3,409 | 29,456 | | At 31 December 2023 | 14,275 | 3,356 | 275,939 | ![]() 126 Gulf Marine Services PLC 38 Events after the reporting period There were no subsequent events, that impact to these consolidated financial statements after the reporting period. 39 Reclassification Certain figures have been reclassified since the comparative consolidated financial statements as presented below. We believe the revised presentation gives users better information to understand these consolidated financial statements given the materiality of the warrants in the current period. | | | | | | --- | --- | --- | --- | | | Before | | After | | | reclassification | Reclassifications | reclassification | | | US$’000 | US$’000 | US$’000 | | Consolidated statement of profit or loss and other comprehensive income | | | | | Finance expense (Note 35) | (20,137) | 2,481 | (17,6 5 6) | | Impact of change in fair value of warrants | – | (2,481) | (2,481) | A transposition error was identified in relation to the presentation of derivative financial instruments on the face of the consolidated statement of financial position in the prior period. A current derivative liability ($3.2m) was included in both the current liability and non-current liability section of the statement of financial position. This has been corrected in the comparative amounts in the current year. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued FOR THE YEAR ENDED 31 DECEMBER 2023 ![]() 127Annual Report 2023 Financial Statements #### COMPANY STATEMENT OF FINANCIAL POSITION #### FOR THE YEAR ENDED 31 DECEMBER 2023 Notes 2023 US$’000 2022 US$’000 Non-current assets Investment in subsidiaries 5 368,666 248,580 Other receivables 7 93,943 6 7, 6 6 3 Total non-current assets 462,609 316,243 Current assets Other receivables 7 143 159 Cash and cash equivalents 6 25 2 Total current assets 168 161 Creditors: Amounts falling due within one year Other payables 9 91,464 61,631 Warrants 10 14,275 3,198 Net current liabilities 105,571 64,668 Net assets 357,038 251,575 Equity Share capital – Ordinary 11 3 0,117 30,117 Capital redemption reserve 11 46,445 46,445 Share premium account 11 99,105 99,105 Share based payment reserve – 3,631 Retained earnings 181,371 72,277 Total equity 357,038 251,575 The Company reported a profit for the financial year ended 31 December 2023 of US$ 105.5 million (2022: Profit US$ 14.9 million). The separate financial statements of Gulf Marine Services PLC (registered number 08860816) were approved by the Board of Directors and authorised for issue on 03 April 2024. Signed on behalf of the Board of Directors. Jyrki Koskelo Mansour Al Alami Independent non-executive Director Executive Chairman The attached Notes 1 to 15 form an integral part of these separate financial statements. ![]() 128 Gulf Marine Services PLC Share capital– Ordinary US$’000 Share capital– Deferred US$’000 Capital redemption reserve US$’000 Share premium account US$’000 Share based payment reserve US$’000 Retained earnings US$’000 Total equity US$’000 At 1 January 2022 30,117 46,445 − 99,105 3,647 5 7,410 236,724 Profit for the year − − − − − 14,867 14,867 Other comprehensive income for the year − − − − – − – Total comprehensive income for the year − – – − − 14,867 14,867 Transactions with owners of the Company Capital reorganisation (Not e 11) – (46,445) 46,445 − − − – Share based payment charge (Note 13) – – − − 45 − 45 Cash settlement of share-based payments (Note 13) – – − − (61) − (61) Total transactions with owners of the Company – (46,445) 46,445 − (16) − (16) At 31 December 2022 30,117 – 46,445 99,105 3,631 72,277 251,575 Profit for the year − − − − − 105,463 105,463 Other comprehensive income for the year − − − − – – – Total comprehensive income for the year – – – – – 105,463 105,463 Transactions with owners of the Company Share based payment charge (Note 13) – – – – 17 (17) – Transfer of share option reserve (Note 13) – – – – (3,648) 3,648 – Total transactions with owners of the Company – – – – (3,631) 3,631 – At 31 December 2023 30,117 – 46,445 99,105 – 181,371 357,038 The attached notes 1 to 15 form an integral part of these separate financial statements. COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2023 ![]() 129Annual Report 2023 Financial Statements #### NOTES TO COMPANY FINANCIAL STATEMENTS #### FOR THE YEAR ENDED 31 DECEMBER 2023 1 Corporate information Gulf Marine Services PLC (“the Company”) is a public company limited by shares in the United Kingdom under the Companies Act 2006 andis registered in England and Wales. The address of the registered office of the Company is 107 Hammersmith Road, London, United Kingdom, W14 0QH. The registered number of the Company is 08860816. The Company is the parent company of the Gulf Marine Services PLC Group comprising of Gulf Marine Services PLC and its underlying subsidiaries (“the Group”). The shareholder pattern of the Group is disclosed on page 73 of the annual report. The consolidated Group accounts are publicly available. 2 Material accounting policies Currency The functional and presentational currency of the Company is US Dollars (“US$”). Going concern The Company’s ability to continue as a going concern is premised on the same assessment as the Group. The Directors have assessed the Group's financial position through to June 2025 and hold a reasonable expectation of its ability to continue as going concern for the foreseeable future. With three consecutive years of reported profit and a forecast of continued positive operating cash flows, particularly in light of the market outlook, the Group remains well-positioned for sustained success. During the year, the Group made a repayment of US$ 56.2 million (2022: US$ 51.4 million) towards its borrowings, of which, US$ 26.2 million (2022: US$ 3.8 million) were over and above its contractual obligations, resulting in a reduction in the current ratio. A total of US$ 33.7 million (2022: US$ 3.8 million) was prepaid during 2023. Hence, the Group was in a net current liability position as of 31 December 2023, amounting to US $52.1 million (2022: US$15.8 million). Management closely monitors the Group's liquidity position including focus on the forecasted short-term cash flows which would be sufficient to meet the Group’s current liabilities, in particular, the current portion of the bank borrowings which represents the principal repayments due over the next 12 months. The loan prepayments were also made after ensuring that forecasted cash inflows are sufficient to meet the Group's short-term obligations. The Group also has a revolving working capital facility which amounts to US$ 40.0 million (31 December 2022: US$ 45.0 million). US$ 25.0 million (31 December 2022: US$ 25.0 million) of the working capital facility is allocated to performance bonds and guarantees and US$ 15.0 million (31 December 2022: US$ 20 million) is allocated to funded portion, of which US$ 2.0 million was utilised as of 31 December 2023, leaving US$ 13.0 million available for drawdown (31 December 2022: US$ 20.0 million). The working capital facility expires alongside the main debt facility in June 2025. The Group is in the process of refinancing its term facility in advance as the bullet payment becomes due in June 2025. Management's ongoing discussions with various lending entities are aimed at securing terms that align with our long-term strategic objectives, ensuring continued financial stability. Given the strong financial performance reported during 2023 and the current high levels of utilisation secured, combined with higher day rates, the Group expects the financial performance to continue to improve. As such, we are optimistic about the outcome of these negotiations. The forecast used for Going Concern reflects management's key assumptions including those around utilisation, vessel day rates on a vessel- by-vessel basis and refinancing of its term facility during latter half of the coming year. Specifically, these assumptions are: • average day rates across the fleet are assumed to be US$ 34.0k for the 18-month period to 30 June 2025; • 94% forecast utilisation for the 18-month period to 30 June 2025; • Strong pipeline of tenders and opportunities for new contracts that would commence during the forecast period. A downside case was prepared using the following assumptions: • no work-to-win during the 18-months period to 30 June 2025; • 17 percentage points reduction in utilisation for the 18-months period to 30 June 2025; • interest rate to remain at current levels instead of a forecasted decline of 25 bases points commencing second quarter of 2024. Based on the above scenario, the Group would not be in breach of its current term loan facility. The downside case is considered to be severe, but it would still leave the Group with US$ 7.9 million of liquidity and in compliance with the covenants under the Group's banking facilities throughout the assessment period. In addition to the above downside sensitivity, the Directors have also considered a reverse stress test, where EBITDA has been sufficiently reduced to breach debt covenant. This scenario assumes a substantial increase in operational downtime to 7%, compared to the base case cashflows with a 2.5% operational downtime. The significant increase in operational downtime for 2024 would result in breach of the Finance Service Cover ratio as at 31 December 2024. Should circumstances arise that differ from the Group's projections, the Directors believe that a number of mitigating actions can be executed successfully in the necessary timeframe to meet debt repayment obligations as they become due and in order to maintain liquidity. Potential mitigating actions include the vessels off hire for prolonged periods could be cold stacked to minimise operating costs on these vessels which has been factored into the downside case. Additional mitigations could be considered including but not limited to reduction in overhead costs, relaxation/waiver from covenant compliance and rescheduling of repayments with lenders. Management is aware of the broader operating context and acknowledges the potential impact of climate change on the Group's financial statements. However, it is anticipated that the effect of climate change will be negligible during the going concern assessment period. After considering reasonable risks and potential downsides, the Group's forecasts suggest that its bank facilities, combined with increased utilization at higher day rates and a strong pipeline of near-term opportunities for additional work, will provide sufficient liquidity to meet its needs in the foreseeable future. Accordingly, the consolidated financial statements for the Group for the year ended 31 December 2023 have been prepared on a going concern basis. ![]() 130 Gulf Marine Services PLC #### NOTES TO COMPANY FINANCIAL STATEMENTS continued #### FOR THE YEAR ENDED 31 DECEMBER 2023 2 Material accounting policies (continued) Basis of accounting The separate financial statements of the Company are presented as required by the Companies Act 2006. These have been prepared under the historical cost convention, modified to include certain items at fair value, and in accordance with Financial Reporting Standard 102 (FRS102) issued by the Financial Reporting Council. The Company has elected to take the exemption under Section 408 of the Companies Act 2006 (the ‘Act’) to not present the Company Income Statement nor the Company Statement of Comprehensive Income. The result for the Company for the year was a profit of US$ 105.5 million (2022: US$ 14.9 million). The principal accounting policies are summarised below. They have all been applied consistently throughout both years. The Company meets the definition of a qualifying entity under FRS 102 and has therefore, taken advantage of the disclosure exemptions available to it. Exemptions have been taken in relation to the presentation of a statement of profit or loss and other comprehensive income, cash flow statement, remuneration of key management personnel, and financial instrument disclosures. Refer to note 24 for remuneration of key management personnel and note 27 for financial instrument disclosures in consolidated financial statements. Investments Investments in subsidiaries are recognised at cost less impairment. Financial instruments Financial assets and financial liabilities are recognised in the Company’s statement of financial position when the Company becomes a party to the contractual provisions of the instrument. Financial liabilities Financial liabilities are classified as either financial liabilities at Fair Value Through Profit or Loss (‘‘FVTPL’’) or ‘‘other financial liabilities’’. Other payables are classified as ‘‘other financial liabilities’’. Other financial liabilities are initially measured at the transaction price, net of transaction costs. Other financial liabilities are subsequently measured at amortised cost using the effective interest rate (“EIR”) method, with interest expense recognised on an effective interest rate, except for short-term payables or when the recognition of interest would be immaterial. The EIR method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The EIR is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period. Derecognition of financial liabilities The Company derecognises financial liabilities when, and only when, the Company’s obligations are discharged, cancelled or they expire. Derivative liability The Company considers whether a contract contains a derivative liability, including warrants, when it becomes a party to the contract. Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date. The resulting gain or loss is recognised in profit or loss immediately. Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs. Financial assets Basic financial assets including other receivables and cash and bank balances are initially measured at transaction price, plus transaction costs. Such assets are subsequently carried at amortised cost using the effective interest method. Interest income is recognised by applying the effective interest rate method, except for short-term receivables when the recognition of interest would be immaterial. Other financial assets are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss. Impairment of financial assets Financial assets, includes investment in subsidiaries, are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected. Cash and cash equivalents Cash and cash equivalents comprise cash balances and call deposits. Taxation Current tax, including UK Corporation tax, is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date. ![]() 131Annual Report 2023 Financial Statements Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the reporting date where transactions orevents that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the reporting date. Deferred tax is measured on a non-discounted basis. Timing differences are differences between the Company’s taxable profits and its results as stated in the separate financial statements that arise from the inclusion of gains and losses in tax assessment periods different from those in which they are recognised in the separate financial statements. Unrelieved tax losses and other deferred tax assets are recognised only to the extent that, on the basis of all available evidence, it can be regarded as more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted. Deferred tax is measured using the tax rates and laws that have been enacted or substantively enacted by the reporting date that are expected to apply to the reversal of the timing difference. Foreign currencies Transactions in foreign currencies are recorded using the rate of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated using the contracted rate or the rate of exchange ruling at the balance sheet date and the gains or losses on translation are included in the profit or loss account. Share-based payments The fair value of an equity instrument is determined at the grant date based on market prices if available, taking into account the terms and conditions upon which those equity instruments were granted. If market prices are not available for share awards, the fair value of the equity instruments is estimated using a valuation technique to derive an estimate of what the price of those equity instruments would have been at the relevant measurement date in an arm’s length transaction between knowledgeable, willing parties. Equity-settled share-based payments to employees are measured at the fair value of the instruments, using a binomial model together with Monte Carlo simulations as at the grant date, and is expensed over the vesting period. The value of the expense is dependent upon certain key assumptions including the expected future volatility of the Company’s share price at the date of grant. The fair value measurement reflects all market based vesting conditions. Service and non-market performance conditions are taken into account in determining the number of rights that are expected to vest. 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. 3 Critical accounting judgements and key sources of estimation uncertainty In the application of the Company’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. Critical judgements in applying the Company’s accounting policies Critical accounting judgements are those which management make in the process of applying the Company’s accounting policies and that have the most significant effect on the amounts recognised in the separate financial statements. Management has not made any critical judgements in applying the Company’s accounting policies for the year ended 31 December 2023. Key source of estimation uncertainty 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. The key assumptions concerning the future, and other key sources of estimation uncertainty that may have a significant risk of causing amaterial adjustment to the carrying value of assets and liabilities within the next financial year, are outlined below. Recoverability of investments As noted above, the Company performs impairment reviews in respect of investments whenever events or changes in circumstance indicate that the carrying amount may not be recoverable. An impairment loss is recognised when the recoverable amount of an asset, which is the higher of the asset’s net realisable value and its value in use, is less than its carrying amount. The recoverability of investments is primarily impacted by the cash flows of the vessels owned by the Group’s subsidiary undertakings and cashflows related to the Group’s debt facility. The projection of cash flows related to vessels and debt facility requires the use of various estimates including future day rates, vessel utilisation levels, and discount rates, in which the estimate is most sensitive. For further details on analysis of the sensitivities of these estimates, refer to Note 5. The Company undertook a full impairment review of its investments during the year. The review led to the recognition of an aggregate impairment reversal of US$ 120.1 million (2022: US$ 18.8 million) on the investment in subsidiaries (see Note 5). As at 31 December 2023, the Company had investments of US$ 368.7 million (2022: US$ 248.6 million). Fair valuation of Warrants Management commissioned an independent valuation expert to measure the fair value of the warrants, which was determined using Monte Carlo option-pricing model. The simulation considers sensitivity by building models of possible results by substituting a range of values. The increase in fair value of the warrants is primarily due to increase in share price and its volatility. A 10% change in share price will increase or decrease the valuation by US$ 0.2 million. ![]() 132 Gulf Marine Services PLC 4 Dividends There was no dividend declared or paid in 2023 (2022: nil). No final dividend in respect of the year ended 31 December 2023 is to be proposed at the 2023 AGM. The Directors have approved a residual dividend policy which seeks to strike a balance between funding growth initiatives and providing returns to shareholders. Management is currently evaluating the timing for its implementation. 5 Investment in subsidiaries 2023 US$’000 2022 US$’000 Gross investment in subsidiaries as at 1 January 574,472 574,472 Gross investment in subsidiaries as at 31 December 574,472 574,472 Impairment as at 1 January (325,892) (344,666) Impairment reversal of investments during the year 120,086 18,774 Impairment as at 31 December (205,806) (325,892) Carrying amount as at 31 December 368,666 248,580 Based on the impairment reviews performed in previous years, management recognised impairment losses of US$ 327.7 million and US$ 17.0 million for the year ended 31 December 2020 (“FY20") and for the year ended 31 December 2021 (“FY21”), respectively. As conditions improved, including day rates, utilization, and market outlook, the historical impairment losses were subsequently reversed of US$ 18.8 million in fiscal year 2022. As at 31 December 2023, and in line with the FRS 102 requirements, management concluded that a formal impairment assessment was required to determine the recoverable amount of its investments in subsidiaries. Factors considered by management included favourable indicators, including an improvement in utilization, day rates, an increase in market values of vessels and decrease in interest rate, and unfavourable indicators including the market capitalization of the Group remaining below the book value of the Group’s equity. The review was done by determining the recoverable amount of each vessel in the fleet as the underlying cash generating units of the investment in subsidiaries. The net bank debt of the GMS Group was then deducted from the value in use of the investments, which was based on the combined value in use of vessels within the Group. The Group also obtained an independent valuation of its vessels as at 31 December 2023 for the purpose of its banking covenant compliance requirements. However, consistent with prior years, management does not consider these valuations to represent a reliable estimate of the fair value for the purpose of assessing the recoverable value of the Group’s vessels, noting that there have been limited, if any, “willing buyer and willing seller” transactions of similar vessels in the current offshore vessel market on which such values could reliably be based. Due to these inherent limitations, management concluded that recoverable amount should be based on value in use. Value in use assessment is based on management’s projections of utilisation and day rates and associated cash flows and adjusted to include full overheads and future tax charges. The risk adjusted cash flows were discounted using the post-tax discount rate of 11.5% (2022: 12.1%), which is based on the Group’s weighted average cost of capital. The cost of equity incorporated in the computation of the discount rate is based on the industry sector average betas, risk-free rate of return as well as Group specific risk premium reflecting any additional risk factors relevant to the Group. A post tax discount rate was used as the cashflows to derive the value in use of investment in subsidiaries includes the impacts of tax as described above. The review led to the recognition of an aggregate impairment reversal of US$ 120.1 million (2022: US$ 18.8 million) on the investment in subsidiaries. The assessment described above takes into account complete profitability of underlying investments which also included implications of tax and debt. The Company has conducted an analysis of the sensitivity of the impairment test to reasonably possible changes in the key assumptions (day rates, utilisation and nominal post-tax discount rates) used to determine the recoverable amount of investments. The first sensitivity modelled a 10% increase/reduction to day rates over the remaining useful economic life of vessels included in investments. A second sensitivity modelled a 10% increase/reduction to utilisation rates. Management would not expect an assumption change of more than 10% across all vessels within the next financial year, and accordingly believes that a 10% sensitivity to day rates and utilisation is appropriate. A third sensitivity was modelled where a 1% increase/decrease was applied to the post-tax discount rate mentioned above. Given that the change in the discount rate from the previous year is less than 1%, a 1% increase or decrease was deemed appropriate for this analysis. The results of the first sensitivity indicated that a 10% decrease to day rates would reverse the impairment reversal of US$ 120.1 million and result in additional impairment charge of US$ 1.7 million (total impact of US$ 121.8 million). In comparison, a 10% increase to day rates would increase the impairment reversal by US$ 113.8 million to US$ 233.9 million. The total carrying amount of investments would be US$ 246.9 million and US$ 482.4 million, respectively. The results of the second sensitivity indicated that a 10% decrease to utilisation would reverse the impairment reversal of 120.1 million and result in additional impairment charge of US$ 1.7 million (total impact of US$ 121.8 million). In comparison, a 10% increase to utilisation would increase the impairment reversal by US$ 71.3 million to US$ 191.4 million. The total carrying amount of investments would be US$ 246.9 million and US$ 440.0 million, respectively. NOTES TO COMPANY FINANCIAL STATEMENTS continued FOR THE YEAR ENDED 31 DECEMBER 2023 ![]() 133Annual Report 2023 Financial Statements The results of the third sensitivity indicated that a 1% decrease to the post-tax discount rate would lead to an increase in impairment reversal by US$ 45.2 million to US$ 165.3 million, whereas a 1% increase to the post-tax discount rate would lead to decrease to the impairment reversal by US$ 40.1 million to US$ 80.0 million. The total carrying amount of investments would be US$ 413.9 million and US$ 328.6 million, respectively. The Company has investments in the following subsidiaries: Name Place of Registration Registered Address Proportion of Ownership Interest 2023 2022 Type of Activity Gulf Marine Services W.L.L. United Arab Emirates Office 403, International Tower, 24th Karama Street, P.O. Box 46046, Abu Dhabi, United Arab Emirates 100% 100% Marine contractors Offshore Holding Invt SA Panama Bloc Office Hub, Fifth Floor, Santa Maria Business District, Panama,Republic of Panama 100% 100% Holding Company Offshore Logistics Invt SA Panama Bloc Office Hub, Fifth Floor, Santa Maria Business District, Panama,Republic of Panama 100% 100% Dormant Offshore Accommodation Invt SA Panama Bloc Office Hub, Fifth Floor, Santa Maria Business District, Panama,Republic of Panama 100% 100% Dormant Offshore Jack-up Invt SA Panama Bloc Office Hub, Fifth Floor, Santa Maria Business District, Panama,Republic of Panama 100% 100% Owner of barge “Kamikaze” Offshore Craft Invt SA Panama Bloc Office Hub, Fifth Floor, Santa Maria Business District, Panama,Republic of Panama 100% 100% Owner of barge “GMSEndeavour” Offshore Structure Invt SA Panama Bloc Office Hub, Fifth Floor, Santa Maria Business District, Panama,Republic of Panama 100% 100% Owner of barge “Kikuyu” Offshore Maritime Invt SA Panama Bloc Office Hub, Fifth Floor, Santa Maria Business District, Panama,Republic of Panama 100% 100% Owner of “Helios” – Dormant Offshore Tugboat Invt SA Panama Bloc Office Hub, Fifth Floor, Santa Maria Business District, Panama,Republic of Panama 100% 100% Owner of “Atlas” – Dormant Offshore Boat Invt SA Panama Bloc Office Hub, Fifth Floor, Santa Maria Business District, Panama,Republic of Panama 100% 100% Owner of barge “Kawawa” Offshore Kudeta Invt SA Panama Bloc Office Hub, Fifth Floor, Santa Maria Business District, Panama,Republic of Panama 100% 100% Owner of barge “Kudeta” GMS Endurance Invt SA Panama Bloc Office Hub, Fifth Floor, Santa Maria Business District, Panama,Republic of Panama 100% 100% Owner of barge “Endurance” Gulf Marine Services (UK) Limited United Kingdom 14 Carden Place, Aberdeen, AB10 1UR 100% 100% Operator of offshore barges Gulf Marine Saudi Arabia Co.Limited Saudi Arabia King Fahad Road, Al Khobar, Eastern Province , P.O.Box 31411 Kingdom Saudi Arabia 75% 75% Operator of offshore barges Gulf Marine Services (Asia) Pte. Ltd. Singapore 1 Scotts Road, #21-07, Shaw Centre, Singapore, 228208 100% 100% Operator of offshore barges GMS Enterprise Investment SA Panama Bloc Office Hub, Fifth Floor, Santa Maria Business District, Panama,Republic of Panama 100% 100% Owner of barge “Enterprise” GMS Sharqi Investment SA Panama Bloc Office Hub, Fifth Floor, Santa Maria Business District, Panama,Republic of Panama 100% 100% Owner of barge “Sharqi” GMS Scirocco Investment SA Panama Bloc Office Hub, Fifth Floor, Santa Maria Business District, Panama,Republic of Panama 100% 100% Owner of barge “Scirocco” GMS Shamal Investment SA Panama Bloc Office Hub, Fifth Floor, Santa Maria Business District, Panama,Republic of Panama 100% 100% Owner of barge “Shamal” GMS Jersey Holdco. 1 Limited\* Jersey 12 Castle Street, St. Helier, Jersey, JE2 3RT 100% 100% General investment GMS Jersey Holdco. 2 Limited Jersey 12 Castle Street, St. Helier, Jersey, JE2 3RT 100% 100% General investment GMS Marine Middle East FZE United Arab Emirates ELOB, Office No. E-16F-04, P.O. Box 53944, Hamriyah Free Zone, Sharjah 100% 100% Operator of offshore barges GMS Global Commercial InvtLLC United Arab Emirates Office 403, International Tower, 24th Karama Street, P.O. Box 46046, Abu Dhabi, United Arab Emirates 100% 100% General investment GMS Keloa Invt SA Panama Bloc Office Hub, Fifth Floor, Santa Maria Business District, Panama,Republic of Panama 100% 100% Owner of barge “Keloa” GMS Pepper Invt SA Panama Bloc Office Hub, Fifth Floor, Santa Maria Business District, Panama,Republic of Panama 100% 100% Owner of barge “Pepper” GMS Evolution Invt SA Panama Bloc Office Hub, Fifth Floor, Santa Maria Business District, Panama,Republic of Panama 100% 100% Owner of barge “Evolution” Gulf Marine Services LLC Qatar Qatar Financial Centre, Doha 100% 100% Marine contractor Mena Marine Limited\*\* Singapore Ugland House, Grand Cayman, KY1-1104, CaymanIslands, P.O. Box 309 0% 100% General investment GMS Phoenix Investment SA Bloc Office Hub, Fifth Floor, Santa Maria Business District, Panama, Republic of Panama 100% 100% Dormant \*Held directly by Gulf Marine Services PLC. \*\*Wound up on 29 December 2023. ![]() 134 Gulf Marine Services PLC 6 Cash and cash equivalents 2023 US$’000 2022 US$’000 Interest bearing Cash at bank 25 2 Total cash and cash equivalents 25 2 7 Other receivables 2023 US$’000 2022 US$’000 Non-current assets Amounts receivable from Group undertakings 93,943 67,6 6 3 93,943 67,6 6 3 Current assets Prepayments 143 159 143 159 94,086 67,822 Amounts receivable from Group undertakings are interest-free, unsecured and have no fixed repayment terms. 8 Deferred tax asset At the reporting date, the Company has unused tax losses of US$ 20.8 million available for offset against future profits (2022: US$ 16.4million). These UK tax losses may be carried forward indefinitely. The Company is not expected to have any future taxable profits tobe able to utilise the deferred tax assets and therefore, no deferred tax asset has been recognised in the current year (2022: Nil). 9 Other payables 2023 US$’000 2022 US$’000 Amounts falling due within one year Amounts owed to Group undertakings 89,770 60,801 Accruals 1,694 830 91,464 61,631 Amounts owed to Group undertakings are current, interest-free, unsecured and have no fixed repayment terms. Balances with related parties are repayable on demand. The present value of the liability is deemed to equal the undiscounted cash amount payable. No interest charge is therefore, imputed on these amounts. 10 Warrants Under the terms of the Group’s loan facility, the Group was required to issue warrants to its lenders as GMS had not raised US$ 50.0 million of equity by 31 December 2022. On 2 January 2023, as the US$ 50.0 million equity raise did not take place, therefore, 87,621,947 warrants were issued to the lenders. Based on the final report prepared by a Calculation Agent, the warrants give right to their holders to acquire 137,075,773 shares at an exercise price of 5.75 pence per share for a total consideration of GBP £7.9 million. Warrant holders will have the right to exercise their warrants up to the end of the term of the loan facility, being 30 June 2025. Management commissioned an independent valuation expert to measure the fair value of the warrants, which was determined using Monte Carlo option-pricing model, which takes into consideration the market values of comparable public companies, considering among other factors, the use of multiples of earnings, and adjusted to reflect the restrictions on the ability of our shares to trade in an active market. The simulation considers sensitivity by building models of possible results by substituting a range of values. Warrants valuation represents a Level 3 fair value measurement under IFRS 13 hierarchy. The fair value of the warrants as at 31 December 2023 was US$ 14.3 million (31 December 2022: US$ 3.2 million). The increase in fair value of the warrants is primarily due to increase in share price and its volatility. The share price increased from 4.65 pence as at 31 December 2022 to 14.5 pence as at 31 December 2023. A 10% change in share price will increase or decrease the valuation by US$ 0.2 million. NOTES TO COMPANY FINANCIAL STATEMENTS continued FOR THE YEAR ENDED 31 DECEMBER 2023 ![]() 135Annual Report 2023 Financial Statements The movement in the warrants is as follows: 2023 US$’000 2022 US$’000 As at 1 January (3,198) (717) Impacts of change in fair value of warrants (11,077) (2,481) As at 31 December (14,275) (3,198) 11 Share capital and reserves The share capital of Gulf Marine Services PLC was as follows: Ordinary shares at £0.02 per share Number of ordinary shares (Thousands) Ordinary shares US$’000 At 1 January 2023 1,016,415 3 0,117 As at 31 December 2023 1,016,415 30,117 Number of ordinary shares (Thousands) Ordinary shares US$’000 At 1 January 2022 1,016,415 3 0,117 As at 31 December 2022 1,016,415 30,117 Capital redemption reserve Number of ordinary shares (Thousands) Ordinary shares US$’000 At 1 January 2023 350,488 46,445 As at 31 December 2023 350,488 46,445 Share premium Number of ordinary shares (Thousands) Ordinary shares US$’000 At 1 January 2023 1,016,415 99,105 As at 31 December 2023 1,016,415 99,105 Prior to an equity raise on 28 June 2021 the Company underwent a capital reorganisation where all existing ordinary shares with a nominal value of 10 pence per share were subdivided and re-designated into 1 ordinary share with a nominal value of 2 pence and 1 deferred share with a nominal value of 8 pence each. The previously recognised share capital balance relating to the old 10p ordinary shares was allocated pro rata to the new subdivided 2p ordinary shares and 8p deferred shares. The deferred shares had no voting rights and no right to the profitsgenerated by the Group. On winding-up or other return of capital, the holders of deferred shares had extremely limited rights, if any. The Company had the right but not the obligation to buyback all of the deferred shares for an amount not exceeding £1.00 in aggregate, which with the shareholders approval, was completed on 30 June 2022. Accordingly, 350,487,787 deferred shares were cancelled. Following the cancellation of the Deferred shares on 30 June 2022, a transfer of $46.4 million was made from Share capital – Deferred to a Capital redemption reserve. There was no dilution to the shares ownership as a result of the share reorganisation. Under the Companies Act, a share buy-back by a public company can only be financed through distributable reserves or the proceeds of afresh issue of shares made for the purpose of financing a share buyback. The Company had sufficient reserves to purchase the Deferred shares for £1.00. The Company has one class of ordinary shares, which carry no right to fixed income. The share premium account contains the premium arising on issue of equity shares, net of related costs. Share based payment reserve of nil (2022: US$ 3.6 million) relates to awards granted to employees under the long-term incentive plans. The retained earnings represent cumulative profits or losses net of dividends paid and other adjustments. ![]() 136 Gulf Marine Services PLC 12 Staff numbers and costs The average monthly number of employees (including executive directors) was: 2023 Number 2022 Number Administration 4 3 4 3 Their aggregate remuneration comprised: 2023 US$’000 2022 US$’000 Wages and salaries 244 256 244 256 13 Long term incentive plans The Company had Long Term Incentive Plans (“LTIPs”) which were granted to senior management, managers and senior offshore officers. The employment condition attached to the Groups’ LTIPs was that each eligible employee of the Company must remain in employment during the three-year vesting period. For 2019 and 2020 awards, LTIPs were aligned to Company’s share performance. The release of these shares was conditional upon continued employment and market vesting conditions. There were no LTIP awards granted during 2021. During the year ended 31 December 2023, the market vesting conditions for the LTIP awards granted in 2020 were not met, and all LTIP awards issued in 2020 were forfeited. During the year ended 31 December 2022, additional LTIPs awards were granted to the Chairman and Senior Management. The awards were to vest over three years subject to the same employment conditions and performance conditions being met in 2024 based on defined ranges. There was an underpin condition such that no awards would vest if the debt leverage in the Group exceeded 4.0 times EBITDA at 31 December 2022. As this criterion had not been met all LTIP awards issued in 2022 were forfeited. Equity-settled share-based payments were measured at fair value at the date of grant. The fair value determined, using the Binomial Probability Model together with Monte Carlo statistical method, at the grant date of equity-settled share-based payments, is expensed on a straight-line basis over the vesting period, based on an estimate of the number of shares that will ultimately vest. The fair value of each award was determined by taking into account the performance conditions, the term of the award, the share price at grant date, the expected price volatility of the underlying share and the risk-free interest rate for the term of the award. Non-market vesting conditions were taken into account by adjusting the number of equity instruments expected to vest at each balance sheet date so that, ultimately, the cumulative amount recognised over the vesting period was based on the number of awards that eventually vest. Any market vesting conditions were factored into the fair value of the share-based payment granted. To the extent that share-based payments are granted to employees of the Company’s subsidiaries without charge, the share-based payment is capitalised as part of the cost of investment in subsidiaries. The number of share awards granted by the Company during the year is given in the table below: 2023 000s 2022 000s At the beginning of the year 1,176,014 2,499,714 Granted in the year – 9,460,000 Cash settled in the year – (921,310) Forfeited in the year (1,176,014) (9,862,390) At the end of the year – 1,176,014 NOTES TO COMPANY FINANCIAL STATEMENTS continued FOR THE YEAR ENDED 31 DECEMBER 2023 ![]() 137Annual Report 2023 Financial Statements The weighted average remaining contractual life for the vesting period outstanding as at 31 December 2023 was nil years (31 December 2022: 0.1 years). The weighted average fair value of shares granted during the period to 31 December 2023 was US$ nil (31 December 2022: US$ 0.06 million). LTIP LTIP LTIP Grant date 14 Jun 2022 29 May 2020 15 Nov 2019 Share price £0.06 £0.09 £0.08 Expected volatility 102% 120% 103% Risk-free rate 2.17% 0.01% 0.48% Expected dividend yield 0.00% 0.00% 0.00% Vesting period 3 years 3 years 3 years Award life 3 years 3 years 3 years The expected share price volatility of Gulf Marine Services PLC shares was determined by considering the historical share price movements for a three-year period up to the grant date (and of each of the companies in the peer group). The risk-free return was determined from similarly dated zero coupon UK government bonds at the time the share awards were granted, using historical information taken from the Bank of England’s records. 14 Events after the reporting period There were no subsequent events, that impact to these separate financial statements after the reporting period. 15 Rectification of error A typographical error was identified in relation to the total amount presented for Net current liabilities on the face of the Company statement of financial position in the prior period. This has been corrected in the comparative amounts in the current year. ![]() 138 Gulf Marine Services PLC Alternative Performance Measure (APMs) – an APM is a financial measure of historical or future financial performance, financial position, or cash flows, other than a financial measure defined or specified in the applicable financial reporting framework. APMs are non-GAAP measures that are presented to provide readers with additional financial information that is regularly reviewed by management and the Directors consider that they provide a useful indicator of underlying performance. Adjusted results are also an important measure providing useful information as they form the basis of calculations required for the Group’s covenants. However, this additional information presented is not uniformly defined by all companies including those in the Group’s industry. Accordingly, it may not be comparable with similarly titled measures and disclosures by other companies. Additionally, certain information presented is derived from amounts calculated in accordance with IFRS but is not itself an expressly permitted GAAP measure. Such measures should not be viewed in isolation or as an alternative to the equivalent GAAP measure. In response to the Guidelines on APMs issued by the European Securities and Markets Authority (ESMA), we have provided additional information on the APMs used by the Group. Adjusted diluted earnings/loss per share – represents the adjusted earnings/loss attributable to equity holders of the Company for the period divided by the weighted average number of ordinary shares in issue during the period, adjusted for the weighted average effect of warrants and Long Term Incentive Plans (LTIPs) outstanding during the period. The adjusted earnings/loss attributable to equity shareholders of the Company is used for the purpose of basic gain/loss per share adjusted by adding back the reversal of impairment, and any exceptional costs. This measure provides additional information regarding earnings per share attributable to the underlying activities of the business. A reconciliation of this measure is provided in Note 32 to the consolidated financial statements. Adjusted EBITDA – represents operating profit after adding back depreciation, amortisation, non-operational items and impairment charges or deducting reversal of impairment. This measure provides additional information in assessing the Group’s underlying performance that management is more directly able to influence in the short term and on a basis comparable from year to year. A reconciliation of this measure is provided in note 31 to the consolidated financial statements. Adjusted EBITDA margin – represents adjusted EBITDA divided by revenue. This measure provides additional information on underlying performance as a percentage of total revenue derived from the Group. Adjusted gross profit/(loss) – represents gross profit/loss after deducting reversal of impairment/adding back impairment charges. This measure provides additional information on the core profitability of the Group. A reconciliation of this measure is provided in Note 31 to the consolidated financial statements. Adjusted net profit/(loss) – represents net profit/(loss) after deducting net impairment reversals and adjustment for other exceptional costs. 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 year to year. A reconciliation of this measure is provided in note 31 to the consolidated financial statements. Average fleet utilisation – represents the percentage of available days in a relevant period during which the fleet of self-elevating support vessels (SESVs) is under contract and in respect of which a customer is paying a day rate for the charter of the SESVs. Average fleet utilisation is calculated by adding the total contracted days in the period of each SESV, divided by the total number of days in the period multiplied by the number of SESVs in the fleet. Cost of sales excluding depreciation and amortisation – represents cost of sales excluding depreciation and amortisation. This measure provides additional information of the Group’s cost for operating the vessels. A reconciliation is shown below: 2023 US$’000 2022 US$’000 Statutory cost of sales 81,987 78,587 Less: depreciation and amortisation (28,840) (29,18 0) 53,147 49,407 Cost of sales as a percentage of revenue – represents reported cost of sales divided by revenue. EBITDA – represents earnings before interest, tax, depreciation and amortisation, which represents operating profit after adding back depreciation and amortisation. This measure provides additional information of the underlying operating performance of the Group. Areconciliation of this measure is provided in Note 31. Margin – revenue less cost of sales before depreciation, amortisation and impairment as identified in Note 31 to the consolidated financial statements. #### GLOSSARY ![]() 139Annual Report 2023 Financial Statements Net bank debt – represents the total bank borrowings less cash and cash equivalents. This measure provides additional information of the Group’s financial position. A reconciliation is shown below: 2023 US$’000 2022 US$’000 Statutory bank borrowings 275,939 328,085 Less: cash and cash equivalents (8,666) (12,275) 267,273 315,810 Finance leases are excluded from net bank debt to ensure consistency with definition of the Group’s banking covenants. Net cash flow before debt service – the sum of cash generated from operations and investing activities. Net leverage ratio – the ratio of net bank debt at year end to adjusted EBITDA which is further adjusted for items including but not limited to reversal of impairment credits/(impairment charges), exceptional legal costs and non-operational finance-related costs in alignment with the terms of our bank facility agreement. The reconciliation is shown below: 2023 US$’000 2022 US$’000 A: Net bank debt, as identified above 267,273 315,810 B: Adjusted EBITDA, as disclosed in Note 31 to the consolidated financial statements 87,522 71,478 Net leverage ratio (A/B): 3.05 4.42 Non-operational finance expenses – this pertains to the items such as cost to acquire new bank facility, fair value movement in debt arrangement, etc. Operational downtime – downtime due to technical failure. Segment adjusted gross profit/loss – represents gross profit/loss after adding back depreciation, amortisation and impairment charges. This measure provides additional information on the core profitability of the Group attributable to each reporting segment. A reconciliation of this measure is provided in Note 30 to the consolidated financial statements. Underlying performance – day-to-day trading performance that management are directly able to influence in the short term. ![]() 140 Gulf Marine Services PLC Average day rates we calculate the average day rates by dividing total charter hire revenue per month by total hire days per month throughout the year and then calculating a monthly average. Backlog represents firm contracts and extension options held by clients. Backlog equals (charter day rate xremaining days contracted) + ((estimated average Persons On Board x daily messing rate) x remaining days contracted) + contracted remaining unbilled mobilisation and demobilisation fees. Includes extension options. Borrowing rate SOFR plus margin. Calendar days takes base days at 365 and only excludes periods of time for construction and delivery time for newly constructed vessels. Costs capitalised represent qualifying costs that are capitalised as part of a cost of the vessel rather than being expensed as they meet the recognition criteria of IAS 16 Property, Plant and Equipment. Day rates rate per day charge to customers per hire of vessel as agreed in the contract. Demobilisation fee paid for the vessel redelivery at the end of a contract, in which client is allowed to offload equipment and personnel. DEPS/DLPS diluted earnings/losses per share. Employee retention percentage of staff who continued to be employed during the year (excluding retirements and redundancies) taken as number of resignations during the year divided by the total number of employees as at 31 December. EPC engineering, procurement and construction. ESG environmental, social and governance. Finance service the aggregate of a) Net finance charges for that period; and b) All scheduled payments of principal and any other schedule payments in the nature of principal payable by the Group in that period in respect of financing: i) Excluding any amounts falling due in that period under any overdraft, working capital orrevolving facility which were available for simultaneous redrawing under the terms ofthat facility; ii) Excluding any amount of PIK that accretes in that period; iii) Including the amount of the capital element of any amounts payable under any financelease in respect of that period; and iv) Adjusted as a result of any voluntary or mandatory prepayment. Debt Service Cover represents the ratio of adjusted EBITDA to debt service. GCC Gulf Cooperation Council. GMS core fleet consists of 13 SESVs, with an average age of 13 years. Interest Cover represents the ratio of adjusted EBITDA to net finance charges. IOC Independent Oil Company. KPIs key performance indicators. Lost Time Injuries any workplace injuries sustained by an employee while on the job that prevents them from being able to perform their job for a period of one or more days. Lost Time Injury Rate (LTIR) the lost time injury rate per 200,000 man hours which is a measure of the frequency of injuries requiring employee absence from work for a period of one or more days. SOFR Secured Overnight Financing Rate. Mobilisation fee paid for the vessel readiness at the start of a contract, in which client is allowed to load equipment and personnel. Net finance charges represents finance charges as defined by the terms of the Group’s banking facility for that period less interest income for that period. #### OTHER DEFINITIONS ![]() 141Annual Report 2023 Financial Statements Net leverage ratio represents the ratio of net bank debt to adjusted EBITDA. NOC National Oil Company. PIK Payment In Kind. Under the banking documents dated 31 March 2021, PIK is calculated at 5.0% per annum on the total term facilities outstanding amount and reduces to: a) 2.5% per annum when net leverage reduces below 5.0x; and b) Nil when net leverage reduces below 4.0x. Under the documents dated 31 March 2021, PIK accrues on either 1 July 2021 if the US$ 25 million equity is not raised by 30 June 2021, or from 1 January 2023 if the US$ 50 million is not raised by 31 December 2022. PIK stops accruing at the date on which all loans are paid or discharged in full. Secured backlog represents firm contracts and extension options held by clients. Backlog equals (charter day rate xremaining days contracted) + (estimated average Persons On Board x daily messing rate) x remaining days contracted) + contracted remaining unbilled mobilisation and demobilisation fees. Includes extension options. Secured day rates day rates from signed contracts firm plus options held by clients. Secured utilisation contracted days of firm plus option period of charter hire from existing signed contracts. Security Cover (loan to value) the ratio (expressed as a percentage) of total net bank debt at that time to the market value of the secured vessels. SESV Self-elevating support vessel. SG&A spend means that the selling, general and administrative expenses calculated on an accruals basis should be no more than the SG&A maximum spend for any relevant period. Total Recordable Injury Rate (TRIR) calculated on the injury rate per 200,000 man hours and includes all our onshore and offshore personnel and subcontracted personnel. Offshore personnel are monitored over a 24-hour period. Underlying G&A underlying general and administrative expenses excluding depreciation and amortisation, and exceptional costs. Utilisation the percentage of calendar days in a relevant period during which an SESV is under contract and inrespect of which a customer is paying a day rate for the charter of the SESV. Vessel operating expense Cost of sales before depreciation, amortisation and impairment, refer to Note 31 to the consolidated financial statements. Warrants As per the banking document date 31 March 2021, warrants vested on 2 January 2023 upon failure to raise US$ 50 million. These warrants will expire on 30 June 2025 (maturity date of the facilities). ![]() 142 Gulf Marine Services PLC Board of Directors Mansour Al Alami Executive Chairman Hassan Heikal Deputy Chairman, non-Executive Director Lord Anthony St John of Bletso Independent non-executive Director Charbel El Khoury Non-executive Director Jyrki Koskelo Independent non-executive Director Haifa Al Mubarak Independent non-executive Director Registered Office Gulf Marine Services PLC Masters House 107 Hammersmith Road London W14 0QH Head Office Gulf Marine Services P.O. Box 46046 Abu Dhabi, UAE T: +971 (2) 5028888 F: +971 (2) 5553421 E: IR@gmsplc.com Company Secretary Tony Hunter Corporate Brokers Panmure Gordon 40 Gracechurch Street, London EC3V 0BT Legal Advisers Shearman and Sterling LLP 9 Appold Street London EC2A 2AP Auditors KPMG 1 Stokes Place St Stephen’s Green Dublin 2 D02 DE03 Public Relations Advisers Celicourt Communications Limited 4 Bream’s Buildings London EC4A 1HP Registrar Equiniti Aspect House Spencer Road Lancing West Sussex BN99 6DA Gulf Marine Services P.O. Box 46046 Abu Dhabi, UAE T: +971 (2) 5028888 F: +971 (2) 5553421 E: IR@gmsplc.com www.gmsplc.com #### CORPORATE INFORMATION ![]() Gulf Marine Services The outer cover of this report has been laminated with a biodegradable film. Around 20 months after composting, an additive within the film will initiate the process of oxidation. ![]() GULF MARINE SERVICES PLC Annual Report 2023 Gulf Marine Services P.O. Box 46046 Abu Dhabi, UAE T: +971 (2) 5028888 F: +971 (2) 5553421 E: IR@gmsplc.com #### www.gmsplc.com