RNS No 5090k
CARISBROOKE SHIPPING PLC
30th September 1997
Chairman's Interim Statement
In my statement accompanying the annual report and accounts I warned that the
strength of Sterling against the European currencies was eroding our
competitiveness. Unfortunately, the trend has continued and, in the first
half of this year, Sterling appreciated by over 30% against the major European
currencies.
Carisbrooke trades in international markets, predominantly European, where the
largest fleets are controlled by Dutch and German operators. The dramatic
reduction in their currencies against Sterling has enabled them to offer their
ships for hire at prices that are higher in their currencies than they were
last year, but which are significantly lower in Sterling terms.
In order to remain competitive we have to match their rates and this has put
significant pressure on our operating margins. The rise in Sterling has also
reduced the competitiveness of the UK export sector. Companies have had to
reduce their profit margins or suffer a fall in the volume of products sold
abroad. This has had a knock-on effect on the volume of cargo available in
the market, putting further downward pressure on freight rates.
The combination of these factors has resulted in a reduction in the volume and
price of cargoes available to us at the same time as our ability to compete
has been undermined by the exchange rate. This has cost us #500,000 over the
first six months and has meant the group traded at only a small profit over
the period. Exceptional losses, which I refer to below, caused a pre tax loss
of #218,000. The effect would have been worse but for our policy of
maintaining a balance between contacts denominated in Sterling and spot market
based income.
A modern fleet is essential to remain competitive in the shipping industry of
today. Modern vessels are popular with our customers and are much more
efficient than older vessels, both in terms of manpower and running costs.
Our experience of the last six months has re-emphasised this, with our new
vessels, the MARK C and EMILY C, making a useful positive contribution.
However, such vessels are expensive to acquire.
The central part of our strategy, set out in the AIM prospectus last year, is
to arrange joint ventures and similar arrangements, which spread the equity
risk on newer vessels. In so doing we are also building a strong and stable
base of management income which will assist in smoothing the traditionally
cyclical nature of our industry. By retaining some equity participation, we
ensure increasing profits when markets are strong.
Since the half-year we have taken a major stride forward in this strategy by
agreeing to place the MARK C, EMILY C and VECTIS ISLE with a Dutch Investment
Fund, or "CV". Carisbrooke will subscribe approximately 20% of the CV's
equity, and will manage the three vessels, thus keeping them in our fleet.
The management contracts incorporate profit sharing arrangements. The tax
incentives available to Dutch private investors allow them to make attractive
returns while maintaining a relatively low level of gearing in the venture.
This in turn provides added stability to our management income.
This transaction and others described later will greatly reduce the group's
borrowings and free up capital for further similar ventures. The MARK C and
EMILY C are being sold at a book profit in Dutch Guilders when compared to
their purchase price. However, the movement in the exchange rate since then
will result in an exceptional book loss in Sterling. The final amount will
depend upon the exchange rate on completion but at a rate of NLG3.20 to #1 the
loss would equal #1.6 million. Against this, we have negotiated a purchase
option on the vessels that has a potential value of over #1.0 million.
The board has carefully considered the effect of this and is firmly of the
view that, while the initial effect is somewhat alarming, the future benefits
are far more important. In particular the virtual elimination of debt from
the balance sheet. A pro-forma balance sheet, showing the potential effect of
the sale at an exchange rate of NLG3.20 to #1, is included with the interim
figures in this statement.
If Sterling remains at a high level it will inevitably have an effect on the
equity values of ships. The rise in the Pound does however have a positive
side. It will provide attractive buying opportunities, as assets priced in
European currencies become cheaper in Sterling. Completion of the sale to the
CV will put the group in a position to turn Sterling's strength to our
advantage and we will have the resources to do this.
The MARK C and EMILY C have confirmed the benefit of investing in new tonnage
and there are sound commercial reasons for purchasing similar vessels,
particularly at current exchange rates. We have therefore contracted with the
Damen Shipyards Group for the purchase of another two vessels of this class.
Delivery is expected in the first half of 1998 at a total cost of
approximately 27 million Dutch Guilders. We are presently negotiating with
potential joint venture partners for these vessels and shareholders will be
informed of the outcome in due course.
In May this year half shares in the VECTIS FALCON and GRETA C were sold to a
group of European investors. The NATACHA C was sold to Norwegian interests in
May and is being chartered by the company until May of next year. These
transactions resulted in a book loss of #237,000, the exceptional loss
referred to above, but eliminated several bank loans and will provide further
income under management contracts.
The second half of the year is normally more profitable for the group and this
year there will be some benefit from the reduced interest cost and increased
management income from the reshaped fleet. Trading in July and August,
traditionally the quietest months of the year, has been flat but there are
signs that the market is slowly picking up. A high Pound relative to other
European currencies will inevitably reduce our income and profitability but
the recent slight fall in the exchange rate is very welcome in this respect.
The last few months have presented Carisbrooke with some very real challenges.
The decision to take a substantial book loss on the sale of our two new ships
was a hard one. Your directors are however convinced that this course of
action is very much in the long term interests of shareholders and has created
a foundation upon which the company can grow a higher quality business.
Completion of the CV will give the group a very strong balance sheet.
In view of this, the board has decided that is it appropriate to maintain the
interim dividend at the same level as last year. This will be 1p per share
payable on 3 December 1997 to shareholders on the register at 15 October 1997.
The final dividend recommendation will be dependent on trading results for the
second half of the year. There are however some faint signs now that our
market is beginning to improve and this, coupled with what should be a very
strong cash position at the year end, will hopefully enable the directors to
recommend a reasonable dividend for the year as a whole.
Peter Nicholson
Chairman
Carisbrooke Shipping PLC
Profit Statement
Unaudited Group Results for the half-year to 30 June 1997
Half year to 30 June Half year to Year to 31
1997 30 June 1996 December 1996
#'000 #'000 #'000
Turnover 5,499 4,615 12,712
Operating profit 486 491 1,345
Exceptional losses (237) 0 0
Other income/expense (2) 15 146
(239) 15 146
Profit before 247 506 1,491
interest expense
Interest payable (465) (141) (474)
Trading (loss)/profit
before taxation (218) 365 1,017
Estimated taxation (20) (20) (89)
(238) 345 928
Minority interest 0 6 74
Dividend (101) (101) (355)
(339) 250 647
Dividend per 50p ordinary share
Interim 1.0p 1.0p 1.0p
Final n/a n/a 2.5p
1.0p 1.0p 3.5p
Earnings per 50p ordinary share
Basic (2.3p) 4.2p 10.9p
Add back effect of 2.3p n/a n/a
exceptional losses
Before exceptionals 0.0p 4.2p 10.9p
The calculation of earnings per share is based on the loss of #238,000 (1996 -
profit of #351,000) and an average of 10,137,549 (1996 - 8,293,839) ordinary
shares in issue during the six months. The effect of the exceptional losses
is calculated using the exceptional losses of #237,000 and an average of
10,137,549 ordinary shares in issue during the six months.
Figures for the year ended 31 December 1996
These figures, as summarised above, are an abridged extract of the published
financial statements for that year on which the auditors gave an unqualified
opinion. A copy of these have been delivered to the Registrar of Companies.
Carisbrooke Shipping PLC
Group Balance Sheet
as at 30 June 1997 (unaudited)
30 June 1997 30 June 31 December
1996 1996
#'000 #'000 #'000
Fixed assets
Tangible assets 18,196 13,163 20,370
Investments 514 753 517
18,710 13,916 20,887
Current assets
Stock 166 123 160
Debtors
- due within one 1,687 1,694 2,106
year
- due after more 250 170 250
than one year
Cash at bank and in 6 478 83
hand
2,109 2,465 2,599
Creditors: amounts
falling due after
more than one year 2,819 2,875 4,377
(710) (410) (1,778)
Total assets less
current liabilities 18,000 13,506 19,109
Creditors: amounts
falling due after 10,171 5,572 10,926
more than one year
7,829 7,934 8,183
Capital and reserves
Called up share 5,069 5,069 5,069
capital
Share premium account 1,092 1,188 1,107
Revaluation reserve 31 31 31
Profit and loss
account
- brought forward 2,003 1,356 1,356
- profit in period (339) 250 647
1,664 1,606 2,003
7,856 7,894 8,210
Minority interest (27) 40 (27)
7,829 7,934 8,183
Carisbrooke Shipping PLC
Pro-forma balance sheet
at 30 June 1997 (unaudited) showing effect of sale to CV
as if it had taken place at that date
30 June 1997 Adjustment Pro-forma
s
#'000 #'000 #'000
Fixed assets
Tangible assets 18,196 (12,613) 5,583
Investments 514 876 1,390
18,710 (11,737) 6,973
Current assets
Stock 166 0 166
Debtors
- due within one year 1,687 0 1,687
- due after more than 250 0 250
one year
Cash at bank and in hand 6 1,378 1,384
2,109 1,378 3,487
Creditors: amounts
falling due within one 2,819 (678) 2,141
year
(710) (2,056) 1,346
Total assets less 18,000 (9,681) 8,319
current liabilities
Creditors: amounts
falling due after more 10,171 (8,081) 2,090
than one year
7,829 (1,600) 6,229
Capital and reserves
Called up share capital 5,069 0 5,069
Share premium account 1,092 0 1,092
Revaluation reserve 31 0 31
Profit and loss account
- brought forward 2,003 0 2,003
- profit in period (339) (1,600) 1,939
1,664 (1,600) 64
7,856 (1,600) 6,256
Minority interest (27) 0 (27)
7,829 (1,600) 6,229
Net asset value per 77.2p 61.4p
share
Net gearing 141% 14%
Note:
The ultimate sales proceeds of the Mark C, Emily C and Vectis Isle are fixed
in Dutch Guilders. The adjustments shown have been based on an illustrative
exchange rate of 3.20 Guilders to #1.00. The final proceeds and profit or
loss on sale will depend upon the exchange rate at completion.
During the year ended 31 December 1996 the vessels being sold contributed
#343,000 to the group profit before tax and they had a combined net asset
value of #3,724,000 at that date.
Copies of this announcement will be made available for the next 14 days from
the Company's offices at 10 Mill Hill Road, Cowes, Isle of Wight, PO31 7EA.
END
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