Final Results and Notice of AGM
20 March 2014
Thalassa Holdings Ltd
(Reuters: THAL.L, Bloomberg: THAL:LN)
("Thalassa" or the "Company")
Final results for the year ended 31 December 2013 and notice of AGM
Thalassa announces its final results for the year ending 31 December 2013. The audited financial statements are being posted to shareholders and are available on the Company website at www.thalassaholdingsltd.com.
Highlights:
Financial Highlights
• Revenue up 119% to US$30.6m (2012: US$14.0m).
• Operating Profit up 180% to US$4.2m (2012: US$1.5m).
• Operating margin up 300 bps to 13.7% (2012: 10.7%).
• Net Profit up 258% to US$4.3m (2012: US$1.2m).
• Earnings Per Share (diluted)* up 160% to US$0.26 (£0.16) (2012: US$0.10 (£0.06)).
• Book value up 397% to US$51.2m (2012: US$10.3m).
• Debt US$ nil (2012: US$ nil).
• Cash up 1,188% to US$32.2m (2012: US$2.5m).
• Capital raised £22.5m net (US$35.5m) through two placings totalling 11.74m shares.
*based on weighted average number of shares in issue of 16,567,796
Operational Highlights
• Statoil Contract awarded for the manufacture of a new Dual Portable Modular Source System ("D-PMSS™") for US$19.8m and for the provision of long term seismic acquisition services for permanent reservoir monitoring of the Snorre and Grane oil fields in the Norwegian sector of the North Sea for up to US$65.0m.
• Manufacture of the D-PMSSTM unit for Statoil completed and mobilised in October 2013.
• Completion of the first phase of the seismic data acquisition surveys conducted in Ecuador on behalf of Sevmorgeo S.A., a subsidiary of Joint Stock Company Sevmorgeo ("SMG").
Acquisitions
• Acquisition of the intellectual property and other assets of GO Science Limited.
2014 New Contracts
• New contract with SAExploration, Inc.
• New multi-client contract with TGS-NOPEC.
Contacts:
Thalassa Holdings Ltd:
Duncan Soukup, Executive Chairman +33 (0)6 78 63 26 89
WH Ireland Limited (Nominated adviser):
Chris Fielding, Head of Corporate Finance 020 7220 1650
www.thalassaholdingsltd.com
Chairman's Statement
Overview
I am pleased to report an exceptional set of results for the Company for the year ended 31 December 2013.
The award of the Statoil contract was a significant milestone. Unfortunately due to adverse weather conditions, we have yet to complete the first good shot point, however, this is now expected in April 2014. In 2013 we also completed the first phase of the contract with SMG Ecuador as reported in the 2013 interim results.
In 2013 the Company successfully raised US$35.5m (net). I am delighted by the support we have received from a number of leading UK institutional investors. The increase in cash has significantly strengthened the Company's balance sheet and provides us with sufficient working and expansion capital.
As announced on 8 January 2014 the Board approved an initial capital expenditure budget for 2014 of US$10m to refurbish the two compressors acquired in May 2012, to upgrade certain existing systems, and to build a mini-PMSSTM unit in anticipation of work during 2014 in the high resolution 3D sector utilising P-Cable 3D Seismic AS's technology. Our new mini-PMSSTM should be ready for deployment in May 2014 as part of the recently announced Multi-Client contract with TGS.
During the period the Company also completed the acquisition of the intellectual property and other assets of GO Science Limited for consideration of £1.86m. Whilst the Unmanned Aerial Vehicle (UAV) market is well established (due to US military demand for combat drones) the Autonomous Underwater Vehicles (AUV) market is significantly smaller and still at a very early stage of development. The use of AUV's in commercial projects in the oil and gas industry is currently limited to control of assets, using cameras, sonar and side sonar for bathymetric mapping.
GO Science's technology has the potential to be at the forefront of the next generation of seismic data acquisition.
Outlook for 2014
• New contract with SAExploration, Inc. to provide shallow water source handling and deployment services for seismic acquisition projects in the North Prudhoe Bay, Alaska. Mobilisation is anticipated to commence in June 2014 and the survey is expected to last approximately 90 days.
• New multi-client contract between the Company's subsidiary WGP Survey Ltd and TGS-NOPEC Geophysical Company ASA ("TGS") to collaborate on a project to jointly acquire and own multi-client seismic data on 10 survey blocks (approximately 500km2) in the Barents Sea.
• Continuation of the Statoil contract with deployment over Snorre due to commence in April 2014.
The pipeline remains strong with the Company's current level of order enquiry and tenders submitted in excess of US$142m (2012: US$91.5m).
Finally I would like to thank the staff for their continued hard work and dedication.
C. Duncan Soukup, Chairman, 19 March 2014
WGP 2013 Operational Review
WGP Group's strategy of 'Exploration and Beyond', was certainly fulfilled in 2013. Our objective is to focus on activities that we see as having current and future growth potential. We provide bespoke exploration solutions in frontier and challenging locations as well as permanent reservoir monitoring ("PRM") services with the objective of increasing production yields.
During 2013 we commenced two key projects:
An exploration contract was performed for SMG offshore Ecuador on behalf of PetroAmazonas. The scope of the project was initially to provide a seismic source solution to work in conjunction with SMG's seabed node crew(s) to complete a 3D seabed survey in the Bay of Guayaquil; this entailed the provision of one of the Group's PMSSTM units, installed on a locally supplied vessel. WGP's remit expanded during the course of the project to include the provision and subsequent installation of node handling equipment, on non-survey specific vessels of opportunity.
Secondly, a milestone contract was awarded by Statoil. WGP was engaged to support the permanent reservoir monitoring efforts over the Snorre and Grane fields in the Norwegian sector of the North Sea as part of the production of the reservoirs aimed at increasing and optimising their overall output.
WGP designed, built and sold to Statoil a ground-breaking D-PMSSTM and will over the next 5-9 years operate this equipment twice a year over two fields, Snorre and Grane.
The D-PMSSTM system was pre-assembled and commissioned onshore Stavanger during Q3 2013, broken down, re-assembled and mobilised on the client provided "Siem Sailor". A program of equipment functionality and performance tests were completed offshore towards the end of 2013 in anticipation of a full program of work over both fields in 2014.
In addition to the prime operational activity of WGP, there were other notable events during the year including:
• Late data sales from the 2012 High Resolution 3D P-Cable survey completed on behalf of Spring Energy (subsequently acquired by Tullow Oil) to a major E&P company which was awarded a licence block in the Norwegian 22nd Round, and which was keen to utilise the data as part of their appraisal of the block.
• Participation in a number of industry events, notably the 2nd Permanent Reservoir Monitoring Workshop organised by the EAGE (European Association of Geophysical Engineers) held in Stavanger during the summer which provided WGP the opportunity to present to clients and peers, its perspective on the future of containerised source systems.
With a mindset and culture of 'Zero Harm', WGP's Health & Safety record was enhanced during the year, and whilst operating in remote locations and often under time constraints, safety always remained paramount. With over 86,500 man hours recorded, there were zero LTI's (lost time incidents) and a continued emphasis on a proactive approach through the focus on 'Observation Cards' and enhancement of WGP's Safety Management System.
In 2014 WGP will continue to attempt to identify further opportunities in both frontier exploration and reservoir monitoring. The company will also strive to develop new technology and next generation solutions.
Mark Burnett, CEO WGP Exploration
Financial Review
Group results for the year to 31 December 2013 showed an increase of 119% in revenue to US$30.6m (2012: US$14.0m). Gross profit increased by 90% to US$9.3m (2012: US$4.9m) and operating profit (EBIT) by 180% to US$4.2m (2012: US$1.5m). Profit attributable to shareholders increased by 258% to US$4.3m (2012: US$1.2m) giving basic and diluted earnings per share of US$0.26 (£0.16) (2012 Basic: US$0.12 (£0.08), 2012 Diluted: US$0.10 (£0.06)).
Revenue increased by 119% in 2013 to US$30.6m (2012: US$14.0m), largely generated from the manufacture, sale of equipment and delivery of services to Statoil and for seismic survey services to SMG in Ecuador.
Cost of sales increased by 134% in 2013 to US$21.3m (2012: US$9.1m) resulting in a gross margin of 30.4% (2012: 35.3%), the decrease in margin representing the different mix in 2013 of services and the build and sale of equipment as compared to service only related activity in 2012.
Administrative expenses increased by 51.7% in 2013 to US$4.4m (2012: US$2.9m), commensurate with the expansion of the business and growth in revenue in the year.
Operating profit increased by 180% in 2013 to US$4.2m (2012: US$1.5m) representing a 28% increase in operating margin from 10.7% to 13.7% in the year.
Depreciation increased by 16.7% to US$0.7m (2012: US$0.6m) reflecting depreciation of the Group's equipment and amortisation of the intellectual property acquired from GO Science Ltd in the year. An assessment of the equipment was undertaken in the period as part of the annual impairment review and concluded that no impairment charge was required (2012: US$ nil).
Net financial income/(expense) of US$0.7m included foreign exchange gains in the period partially offset by interest and share option charges.
Net assets at 31 December 2013 amounted to US$51.2m (2012: US$10.3m).
The Company had zero debt at the period end.
Net cash flow from operating activities amounted to US$(0.9)m largely as a result of the outstanding trade receivable balance of US$6.6m at the period end of which US$2.8m has subsequently been received.
Net cash outflow from investing activities amounted to US$(5.7)m largely due to the acquisition of the business assets of GO Science Ltd (US$2.9m), a loan to the THAL Discretionary Trust (US$1.9m) and purchase of equipment (US$0.9m).
Net cash flow from financing activities amounted to US$36.3m comprising US$35.4m from the two placings of shares in the year and disposal of treasury shares (US$0.9m).
Consolidated Statement of Income
for the year ended 31 December 2013
2013 2012
$ $
Continuing operations
Revenue 30,551,967 14,007,070
Cost of sales (21,259,292) (9,067,000)
Gross profit 9,292,675 4,940,070
Administrative expenses (4,366,937) (2,896,329)
Operating profit before depreciation 4,925,738 2,043,741
Depreciation (685,173) (562,695)
Operating profit 4,240,565 1,481,046
Net financial income/(expense) 721,227 (228,154)
Profit before taxation 4,961,792 1,252,892
Taxation (575,722) (3,503)
Profit for the year 4,386,070 1,249,389
Attributable to:
Equity shareholders of the parent 4,285,931 1,203,184
Non-controlling interest 100,139 46,205
4,386,070 1,249,389
Earnings per share - US$ (using weighted average number of shares)
Basic 0.26 0.12
Diluted 0.26 0.10
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2013
2013 2012
$ $
Profit for the financial period 4,386,070 1,249,389
Other comprehensive income:
Exchange differences on re-translating foreign operations 197,185 (845)
Total comprehensive income 4,583,255 1,248,544
Attributable to:
Equity shareholders of the parent 4,483,116 1,202,339
Non-Controlling interest 100,139 46,205
Total Comprehensive income 4,583,255 1,248,544
Consolidated Statement of Financial Position
as at 31 December 2013
2013 2012
$ $
Assets
Non-current assets
Goodwill 368,525 368,525
Intellectual property 2,870,043 -
Property, plant and equipment 8,153,119 7,853,856
Available for sale financial assets 38,675 38,675
Total non-current assets 11,430,362 8,261,056
Current assets
Inventory 690,008 81,777
Loans 1,885,583 -
Trade and other receivables 7,078,753 628,078
Cash and cash equivalents 32,235,155 2,482,469
Total current assets 41,889,499 3,192,324
Liabilities
Current liabilities
Trade and other payables 2,084,595 1,173,839
Total current liabilities 2,084,595 1,173,839
Net current assets 39,804,904 2,018,485
Net assets 51,235,266 10,279,541
Shareholders' Equity
Share capital 250,575 133,175
Share premium 44,668,608 8,517,782
Treasury shares (279,982) (384,226)
Other reserves 177,536 (19,649)
Retained earnings 6,272,185 1,986,254
Total shareholders' equity 51,088,922 10,233,336
Non-controlling interest 146,344 46,205
Total equity 51,235,266 10,279,541
These financial statements were approved and authorised by the board on 19 March 2014.
Consolidated Statement of Cash Flows
for the year ended 31 December 2013
2013 2012
$ $
Cash flows from operating activities
Operating profit for the period before depreciation 4,925,738 2,043,741
(Increase) in inventory (608,231) (81,777)
(Increase) in trade and other receivables (6,450,675) (69,697)
Increase/(decrease) in trade and other payables 2,623,293 (120,710)
Net foreign exchange (gain)/loss (1,109,570) 193,870
Taxation (69,119) (3,503)
Cash used in/generated from operations (688,564) 1,961,924
Interest paid (166,749) (37,762)
Net cash flow from operating activities (855,313) 1,924,162
Cash flows from investing activities
Acquisition of investments - (38,675)
Acquisition of intellectual property (2,913,201) -
Investment income - 1,397
Interest received 30,958 1,236
Purchase of equipment (941,278) (1,397,764)
Loan to THAL Discretionary Trust (1,885,583) -
Net cash flow from investing activities (5,709,104) (1,433,806)
Cash flows from financing activities
Issue of ordinary share capital 35,366,920 21,288
Disposal of treasury shares 950,183 -
Net cash flow from financing activities 36,317,103 21,288
Net increase in cash and cash equivalents 29,752,686 511,644
Cash and cash equivalents at the start of the period 2,482,469 1,970,825
Cash and cash equivalents at the end of the period 32,235,155 2,482,469
Consolidated Statement of Changes in Equity
for the year ended 31 December 2013
Total Non
Share Share Treasury Other Retained Shareholders Controlling Total
Capital Premium shares Reserves earnings Equity Interest Equity
US$ US$ US$ US$ US$ US$ US$ US$
Balance as at
31 December 2011 111,887 8,517,782 (384,226) (18,804) 783,070 9,009,709 - 9,009,709
Shares issued on
exercise of options 21,288 - - - - 21,288 - 21,288
Movement in
non-controlling interest - - - - - - 46,205 46,205
Total comprehensive
income for the period - - - (845) 1,203,184 1,202,339 - 1,202,339
Balance as at
31 December 2012 133,175 8,517,782 (384,226) (19,649) 1,986,254 10,233,336 46,205 10,279,541
Issue of Ordinary
Share Capital 117,400 35,304,887 - - - 35,422,287 - 35,422,287
Sale of treasury shares - 845,939 104,244 - - 950,183 - 950,183
Total comprehensive
income for the period - - - 197,185 4,285,931 4,483,116 100,139 4,583,255
Balance as at
31 December 2013 250,575 44,668,608 (279,982) 177,536 6,272,185 51,088,922 146,344 51,235,266
Notes to the Consolidated Financial Statements
from the year ended 31 December 2013
1. General information
Thalassa Holdings Ltd (the "Company") is a British Virgin Island ("BVI") International business company ("IBC"), incorporated and registered in the BVI on 26 September 2007. The Company was established as a holding company, and currently has two operating subsidiaries, WGP Group Ltd ("WGP") and GO Science Group Ltd ("GO")(together with Thalassa Holdings Ltd, the "Group").
WGP Group Ltd is a wholly owned subsidiary of Thalassa which owns the seismic operating assets of the Thalassa Group and whose subsidiaries are:
• WGP Energy Services Ltd ("WESL")
• WGP Exploration Ltd ("WGPE")
• WGP Technical Services Ltd ("WGPT")
• WGP Professional Services Ltd ("WGPP")
• WGP Survey Ltd ("WGPS")
GO Science Group Ltd is a wholly owned subsidiary of Thalassa and is an AUV research and development company with one subsidiary:
• GO Science 2013 Ltd ("GO 2013")
The Group's interest in each of the subsidiaries is 100%, other than WGPS, where it owns 50%.
2. Accounting policies
The Group prepares its accounts in accordance with applicable International Financial Reporting Standards ("IFRS") as adopted by the European Union.
The financial statements are expressed in US dollars, being the functional currency of the company and its subsidiaries other than WGP Exploration Ltd which has a functional currency of pound sterling.
The principal accounting policies are summarised below. They have been applied consistently throughout the period covered by these financial statements.
2.1. Accounting principles, amendments and interpretations not yet effective
At the financial position date the following significant Standards and Interpretations, which are applicable to the Group, were in issue but not yet effective:
IFRS 9, 'Financial Instruments', had an effective date for accounting periods beginning on or after 1 January 2015. However, the standard since it was originally issued in November 2009, has undergone subsequent amendments, in October 2009, December 2011 and November 2013. The November 2013 amendment removed the effective date, which will be added once the standard has been finalised. Currently IFRS 9 outlines the recognition and measurement of financial assets, financial liabilities and the derecognition criteria for financial assets. Financial assets are to be measured either at amortised cost or fair value through profit and loss, with an irrevocable option on initial recognition to recognise some equity financial assets at fair value through other comprehensive income. A financial asset currently can only be measured at amortised cost if the Group has a business model to hold the asset to collect contractual cash flows and the cash flows arise on specific dates and are solely for payment of principal and interest on the principal outstanding. On adoption of the standard the Group will have to redetermine the classification of its financial assets specifically for available-for-sale and held-to-maturity financial assets.
Most financial liabilities will continue to be carried at amortised cost, however, some financial liabilities will be required to be measured at fair value through profit and loss (for example derivatives) with changes in the liabilities' credit risk to be recognised in other comprehensive income.
The derecognition principles of IAS 39, 'Financial Instrument: Recognition and Measurement', have been transferred to IFRS 9. There is unlikely to be an impact on the Group from this section of the standard when it is applied.
The hedge accounting requirements issued in November 2013, have been liberalised from that allowed previously. The requirements will be based on whether an economic hedge is in existence, with less restriction to prove whether a relationship will be effective than current requirements. As the principles have been liberalised it will make it more difficult for entities to discontinue hedge accounting, rather the company will need to rebalance a hedging relation that is no longer effective rather than discontinue the relation.
The Group has not evaluated the full extent of the impact that the standard will have on its financial statements. However the standard has not been EU endorsed.
IFRS 10, 'Consolidated Financial Statements', is effective for accounting periods beginning on or after 1 January 2014. The standard establishes the principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities. The new standard provides extensive guidance on applying the principle of control, which then governs the consolidation of an entity. The standard sets out the accounting requirements for the preparation of consolidated financial statements, which are unchanged from those that are required by the current IAS 27, 'Consolidated and Separate Financial Statements'. However IAS 27 has been amended to conform with IFRS 10, and will only apply to separate financial statements when IFRS 10 is applied. The Group has not evaluated the full extent of the impact that the standard will have on its financial statements but given that most of the subsidiaries are wholly owned, IFRS 10 is likely to have little impact on the Group.
IFRS 11, 'Joint Arrangements', is effective for accounting periods beginning on or after 1 January 2014. The standard applies to all entities that are a party to a joint arrangement and will replace IAS 31, 'Interest in Joint Ventures'. The accounting treatment is dependent on the type of joint arrangement, which is determined by considering the rights and obligations of the investor. On application of IFRS 11, IAS 28 is amended and retitled to 'Investment in Associates and Joint Ventures'. The Group is not party to joint ventures which are equity accounted for and therefore IFRS 11 is likely to have little impact on the Group.
IFRS 12, 'Disclosures of Interests in Other Entities', is effective for accounting periods beginning on or after 1 January 2014. The standard requires disclosure of information on the nature of, and risks associated with, interests in other entities; and the effects of those interests on the primary financial statements. The disclosures required relate to interests in subsidiaries, joint arrangements, associates and unconsolidated structured entities. The Group will include any addition disclosures in respect of its investments from the date at which the standard is effective.
IAS 32 (amendment), 'Offsetting Financial Assets and Financial Liabilities'. The IAS 32 amendment clarifies the existing offsetting requirements and therefore is unlikely to have any impact on the group. The amendment is effective for annual periods beginning on or after 1 January 2014.
2.2. Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.
Income and expenses of subsidiaries acquired or disposed of during the year are included in the consolidated statement of income from the effective date of acquisition and up to the effective date of disposal, as appropriate. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group.
All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.
2.3. Judgement and estimates
The preparation of financial statements in conformity with IFRS requires the Directors to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
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 judgement areas relate to the carrying value of plant and equipment, goodwill and intellectual property. The carrying value of the PMSSTM units may significantly differ from their market value. It is affected by management's assessment of its fair value and indicators of impairment. If the carrying value of a PMSSTM exceeds the recoverable amount then an impairment charge is recognised. Goodwill is reviewed annually for indication of impairment. Intellectual property is amortised and also reviewed annually for indication of impairment.
Judgement is also made in respect of the accounting treatment of the THAL Discretionary Trust. Management's assessment is based on various indicators including activities, decision-making, benefits and risks of the Trust. Based on this assessment management consider that the THAL Discretionary Trust should not be consolidated.
2.4. Property, plant and equipment
Property, plant and equipment are stated at cost less depreciation and any provision for impairment. Cost includes the purchase price, including import duties, non-refundable purchase taxes and directly attributable costs incurred in bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended. Cost also includes capitalised interest on borrowings, applied only during the period of construction.
Fixed assets are depreciated on a straight line basis over 15 years from the point at which the equipment is deployed and put into use.
2.5. Intangible assets
Goodwill
Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business (see note 2.15) less accumulated impairment losses, if any.
For the purposes of impairment testing, goodwill is allocated to each of the Group's cash-generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination.
A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss in the consolidated statement of income. An impairment loss recognised for goodwill is not reversed in subsequent periods.
On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.
Patents and trademarks
Patents and trademarks with a finite useful life acquired from third parties either separately or as part of the business combination are capitalised at cost and amortised over their remaining useful lives on a straight line basis and recognised within depreciation in the income statement.
2.6. Inventories
Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the first in first out principle and includes expenditure incurred in acquiring the inventories and other costs incurred in bringing them to their existing location and condition.
The net realisable value is the cost less any impairment recognised. Inventories are expensed as utilised in the Group's operations.
Costs associated with contracts which are long term in nature are included in inventories to the extent that they cannot be matched with contract work accounted for as revenue. Amounts included in work in progress are stated at cost, after provision has been made for any foreseeable losses.
2.7. Impairment of assets
An assessment is made at each reporting date of whether there is any indication of impairment of any asset, or whether there is any indication that an impairment loss previously recognised for an asset in a prior period may no longer exist or may have decreased. If any such indication exists, the asset's recoverable amount is estimated. An asset's recoverable amount is calculated as the higher of the asset's value in use or its net selling price.
An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. An impairment loss is charged to the statement of income in the period in which it arises. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the recoverable amount of an asset, however not to an amount higher than the carrying amount that would have been determined (net of any depreciation / amortisation), had no impairment loss been recognised for the asset in a prior period. A reversal of an impairment loss is credited to the statement of income in the period in which it arises.
2.8. Investments
Available for sale investments are initially measured at cost, including transaction costs. Gains and losses arising from changes in fair value of available for sale investments are recognised directly in other comprehensive income, until the security is disposed or is deemed to be impaired, at which time the cumulative gain or loss previously recognised in other comprehensive income is included in the statement of income for the period.
2.9. Revenue
Revenue is measured at the fair value of the consideration received or receivable.
In respect of contracts which are long term in nature and contracts for ongoing services, revenue, restricted to the amounts of costs that can be recovered, is recognised according to the value of work done in the period. Revenue in respect of such contracts is calculated on the basis of time spent on the project and estimated work to completion.
Where the outcome of contracts which are long term in nature and contracts for ongoing services cannot be estimated reliably, revenue is recognised only to the extent of the costs recognised that are recoverable.
Where payments are received in advance in excess of revenue recognised in the period, this is reflected as a liability on the statement of financial position as deferred revenue.
2.10. Taxation
The Company is incorporated in the BVI as an IBC and as such is not subject to tax in the BVI.
WGP Exploration Ltd is incorporated in the UK and is therefore subject to UK tax regulations. Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities, based on tax rates and laws that are enacted or substantively enacted by the balance sheet date. Tax is charged or credited directly to equity if it relates to items that are credited or charged to equity. Otherwise tax is recognised in the income statement.
2.11. Foreign currency
Transactions in currencies other than the entity's functional currency (foreign currencies) are recorded at the rate of exchange prevailing on the dates of the transactions. At each reporting date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the financial position date. Exchange differences arising are included in the statement of income for the period. Exchange differences on the retranslation of operations denominated in foreign currencies are included in Other Comprehensive Income.
2.12. Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are added to the cost of those assets until such a time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in profit and loss in the period incurred.
2.13. Financial instruments and risk management
Financial assets and liabilities are recognised on the Group's statement of financial position when the Group becomes party to the contractual provisions of the instrument.
Loans and receivables are initially measured at fair value and are subsequently measured at amortised cost, plus accrued interest, and are reduced by appropriate provisions for estimated irrecoverable amounts. Such provisions are recognised in the statement of income.
Trade receivables are initially measured at fair value and are subsequently measured at amortised cost, do not carry any interest, and are reduced by appropriate provisions for estimated irrecoverable amounts. Such provisions are recognised in the statement of income.
Cash and cash equivalents comprise cash in hand and demand deposits and other short-term highly liquid investments with maturities of three months or less at inception that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.
Trade payables are not interest-bearing and are initially valued at their fair value and are subsequently measured at amortised cost.
Equity instruments are recorded at fair value, being the proceeds received, net of direct issue costs.
Share Capital - Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of taxation, from the proceeds.
Treasury shares - Where any Group company purchases the Company's equity share capital, the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the Company's equity holders until the shares are cancelled or reissued.
Where such shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the Company's equity holders.
Financial instruments require classification of fair value as determined by reference to the source of inputs used to derive the fair value. This classification uses the following three-level hierarchy:
Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 - inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices);
Level 3 - inputs for the asset or liability that are not based on observable market data (unobservable inputs).
2.14. Share based payments
Fair valued share based payments
Where new share options have been granted in the period, a charge is made to the consolidated statement of income and share premium reserve based on the fair value (the economic value) of the grant, measured at the grant date. The charge is spread over the vesting period. The valuation methodology takes into account assumptions and estimates of share price volatility, future risk-free interest rate and exercise behaviour and is based on the Black-Scholes method. When share options are exercised there is a transfer from the share option reserve to share capital and share premium account.
At the end of each reporting period the Group revises its estimate of the number of share options that are expected to vest taking into account those which have lapsed or been cancelled. It recognises the impact of the revision to original estimates, if any, in the profit or loss, with a corresponding adjustment to share premium reserve.
Refer to Note 19 for details of all share-based payments.
2.15. Business combinations
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are generally recognised in profit or loss as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed.
2.16. Going concern
The financial information has been prepared on the going concern basis as management consider that the Group has sufficient cash to fund its current commitments for the foreseeable future.
3. Operating profit for the year
The operating profit for the year is stated after charging:
2013 2012
$ $
Consultancy fees 646,025 244,072
Wages and salaries 1,006,725 998,370
Social security costs 103,303 129,414
Pension costs 43,617 56,977
Audit fees 32,497 46,396
Included within consultancy fees / wages and salaries is US$3,000 in relation to amounts paid for directors' remuneration (2012: US$ 4,000).
4. Net financial income/(expense)
2013 2012
$ $
Share option expenses (55,367) -
Interest on bank deposits - 1,236
Loan interest receivable 30,958 -
Bank interest payable (41,749) (37,762)
Loan interest payable (125,000) -
Foreign currency gains / (losses) 912,385 (193,025)
Investment income - 1,397
721,227 (228,154)
Loan interest payable relates to a short term loan facility in March 2013 and repaid in full in April 2013.
5. Income tax expense
2013 2012
$ $
Current tax 575,722 3,503
Deferred tax - -
Total Tax 575,722 3,503
$ $
Profit before tax 4,961,792 1,252,892
Tax at applicable rates 154,891 3,503
Adjustment in relation to previous periods 69,119 -
Withholding Tax 351,712 -
Total Tax 575,722 3,503
The applicable tax rates in relation to the Group's profits are BVI 0%, UK 23.25% and Norway 28%.
6. Earnings per share
2013 2012
$ $
The calculation of earnings per share is based on
the following profit and number of shares:
Profit for the period (US$) 4,285,931 1,203,184
Weighted average number of shares of the Company:
Basic 16,352,316 9,914,407
Share options 215,480 1,961,120
Diluted 16,567,796 11,875,527
Earnings per share:
Basic (US$) 0.26 0.12
Diluted (US$) 0.26 0.10
Number of shares outstanding at the period end:
Number of shares in issue 25,057,522 13,317,522
Treasury shares (1,078,667) (1,462,000)
Basic number of shares in issue 23,978,855 11,855,522
Share options 340,000 200,000
Diluted number of shares in issue 24,318,855 12,055,522
7. Loans and receivables
2013 2012
$ $
Loans and Receivables 1,885,583 -
Loans and receivables includes a loan of US$1,854,625 plus accrued interest of US$30,958 to the THAL Discretionary Trust. Interest is payable at 3% per annum (reviewed periodically to keep in line with market rates).
The THAL Discretionary Trust is a trust, independent of Thalassa, established for the benefit of individuals or parties to whom the Trustees wish to make awards at their discretion.
On April 17 2013, the Trust acquired 416,667 ordinary shares in the Company at £1.20 per share.
On August 1 2013, the Trust acquired 383,333 ordinary shares in the Company at £1.63 per share.
The above transactions were financed by a loan from the Company.
8. Segment information
The Group has one operating segment being operations from geophysical project management, services and the supply of equipment. The split of revenue for the period was as follows.
Sale of Sale of
Total Services Goods
$ $ $
Revenue 30,551,967 10,268,189 20,283,778
The Group has one geographical segment, being the global market as a whole, as the Group's asset deployment is not limited to a specific area of the world.
9. Related party transactions
Under the consultancy and administrative services agreement entered into on 23 July 2008 with a company in which the Chairman has a beneficial interest, the Group was invoiced US$440,000 for consultancy and administrative services provided to the Group including US$200,000 of consultancy fees. An additional US$1,000 of Director fees were also invoiced to the Group. As at 31 December 2013, the amount owed to this company was US$1,000 (2012: US$258,283).
On 17 April 2013, the Chairman acquired 447,750 ordinary shares of US$0.01 each in the Company at a price of 120 pence per share as part of the placing announced on 12 April 2013. US$440,000 of the total proceeds from this transaction were offset against fees invoiced by the company in which the Chairman has a beneficial interest and the balance of US$365,950 settled by cash.
Under a consultancy agreement entered into on 6 November 2013, a company in which Mr Robert Anderson has a beneficial interest, invoiced the Group US$10,997 (2012: US$nil) in relation to consultancy fees and expenses. The amount owed to this company as at 31 December 2013 was US$5,121 (2012: US$nil).
On 17 April 2013 the THAL Discretionary Trust acquired 416,667 Ordinary Shares in the Company at £1.20 financed by a loan from the Company of £500,000.40.
As per the announcement on 2 August 2013 the Company sold 383,333 Ordinary Shares out of treasury to the THAL Discretionary Trust at a price of £1.63 per ordinary share, financed by a loan from the Company of £624,832.79.
As per the announcement on 8 January 2014 the Company sold 1,078,667 Ordinary Shares out of treasury to the THAL Discretionary Trust at a price of £0.264 per ordinary share, financed by a loan of £3,054,768 from the Company. Mr Soukup is a trustee of the Trust.
10. Property, plant and equipment
Plant and Plant and
equipment equipment
2013 2012
$ $
Cost
Cost at 1 January 9,340,893 7,943,129
Additions 941,278 1,397,764
Cost at 31 December 10,282,171 9,340,893
Depreciation
Depreciation at 1 January (1,487,037) (924,342)
Charge for the period (642,015) (562,695)
Depreciation at 31 December (2,129,052) (1,487,037)
Closing net book value at 31 December 8,153,119 7,853,856
As outlined in note 2.4, an assessment is made at each financial position date as to whether there is any indication of impairment of any asset. An impairment review of the equipment has been undertaken and the management have concluded that there is no impairment charge to be recorded for the period.
11. Goodwill
2013 2012
$ $
Cost
Cost at 1 January 368,525 368,525
Cost at 31 December 368,525 368,525
Accumulated Impairment
At 1 January - -
Charge for the period - -
At 31 December - -
Carrying Amount
At 31 December 368,525 368,525
Goodwill relates to the acquisition of WGP Exploration Ltd in November 2011.
12. Intellectual property
Patents & Trademarks 2013 2012
$ $
Cost
Cost at 1 January - -
Additions 2,913,201 -
Cost at 31 December 2,913,201 -
Accumulated amortisation and impairment
At 1 January - -
Charge for the period (43,158) -
At 31 December (43,158) -
Carrying Amount
At 31 December 2,870,043 -
Intellectual property includes the cost of intangible assets acquired from GO Science Ltd in the period.
13. Investments - Available for sale financial assets
2013 2012
$ $
Available for sale investments
At the beginning of the period 38,675 -
Acquisitions - 38,675
At 31 December 38,675 38,675
Financial instruments require classification of fair value as determined by reference to the source of inputs used to derive the fair value. At the point of acquisition, the investment was classified as Level 1, as it was listed on a recognised stock exchange, but subsequently reclassified to Level 3 following its de-listing. The value at the period end has been assessed and unchanged from the value at acquisition.
14. Inventories
2013 2012
$ $
Parts and equipment 209,872 81,777
Work in progress 480,136 -
At 31 December 690,008 81,777
15. Trade and other receivables
2013 2012
$ $
Trade receivables 6,577,280 133,846
Other receivables 302,133 409,346
Prepayments 199,340 84,886
Total trade and other receivables 7,078,753 628,078
As at 31 December 2013, the analysis of trade receivables that were past due but not impaired was as follows:
Neither past
due nor 0-30 30-90 90+
Total impaired days days days
$ $ $ $ $
2013 6,577,280 39,912 2,122,773 1,319 4,413,276
The outstanding balance as at 18 March 2014 was US$3.8m.
16. Trade and other payables
2013 2012
$ $
Trade payables 335,608 1,080,722
Other payables 197,885 74,164
Corporation tax payable 491,406 -
Accruals 1,059,696 18,953
Total trade and other payables 2,084,595 1,173,839
17. Share capital
As at As at
31 Dec 2013 31 Dec 2012
$ $
Authorised share capital:
100,000,000 ordinary shares of $0.01 each 1,000,000 1,000,000
Allotted, issued and fully paid:
25,057,522 ordinary shares of $0.01 each 250,575 133,175
Number of
Number Treasury Treasury
of shares shares shares $
Balance at 31 December 2012 13,317,522 1,462,000 (384,226)
Shares issued 11,740,000 -
Shares sold - 383,333 104,244
Balance at 31 December 2013 25,057,522 1,078,667 (279,982)
Share capital represents 25,057,522 ordinary shares of US$ 0.01 each.
Treasury shares represents the cost of the Company buying back its shares. There were 1,078,667 shares held in Treasury as at 31 December 2013.
Other reserves represents the exchange differences on retranslation of foreign operations.
On 17 April 2013, the Company issued 4,500,000 ordinary shares of US$0.01 each in nominal value at a price of 120 pence per Ordinary Share (US$8.2m).
On 5 November 2013, the Company issued 7,240,000 ordinary shares of US$0.01 each in nominal value at a price of 250 pence per Ordinary Share (US$28.9m).
The holders of issued shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company's residual assets.
18. Capital management
The Group's capital comprises ordinary share capital, retained earnings and capital reserves, the group has no debt. The Group's objectives when managing capital are to provide an optimum return to shareholders over the short to medium term through capital growth and income whilst ensuring the protection of its assets by minimising risk. The Group seeks to achieve its objectives by having available sufficient cash resources to meet capital expenditure and ongoing commitments.
At 31 December 2013, the Group had capital of US$51,235,266 (2012: US$ 10,279,541). The Group does not have any externally imposed capital requirements.
19. Share - based payments
Thalassa Holdings Ltd share options
Non -
Executive
Director director Other
share share share
options options options
Outstanding at 1 January 2013 100,000 20,000 80,000
Options granted 50,000 100,000 -
Options lapsed - - (10,000)
Outstanding at 31 December 2013 150,000 120,000 70,000
19.1. Director share options
On 21 November 2012 100,000 share options were granted to Duncan Soukup at a strike price of £0.521. The options have been granted for a period of three years.
On 9 October 2013 50,000 share options were granted to Francis Smulders at a strike price of £2.535. The options have been granted for a period of three years.
19.2. Non-Executive Director share options
On 21 November 2012 20,000 share options were granted, 10,000 to David Thomas and 10,000 to Graham Cole at a strike price of £0.521. The options have been granted for a period of three years.
On 9 October 2013 100,000 share options were granted to Robert Anderson at a strike price of £2.535. The options have been granted for a period of three years.
19.3. Employee and consultant share options
On 21 November 2012 80,000 share options were granted to employees and consultants at a strike price of £0.521. The options have been granted for a period of three years.
19.4. Share options in WGP Energy Services Ltd granted to employees of WGP
WGP Energy Services Ltd share options
Employees
of WGP
share options
Outstanding at 1 January 2013 91,000
Options lapsed (91,000)
Outstanding at 31 December 2013 -
On 23 July 2008, certain employees of WGP were granted five year options in respect of a total of up to 100,000 ordinary shares of WESL at US$1.00 per share, representing 1.4% of WESL's issued share capital.
All of the WGP employee options lapsed during the year to 31 December 2013.
19.5. Share option charges
On 9 October 2013, 150,000 share options were granted and were valued using the Black-Scholes option pricing model. The total fair value of the options granted has been estimated at £185,850 (US$298,921) based on a fair value per option of £1.239. The principal inputs into the model were as follows:
2013 2012
Number of Options Granted 150,000 200,000
Vesting Period 2 years 3 years
Option strike price £2.54 £0.521
Current share price (at granting date) £2.54 £0.521
Volatility 75.0% 50.0%
Risk-free interest rate 0.5% 0.5%
Life of Option 2 years 3 years
The volatility is based on historical volatility of the Group's shares of 75% considering the general stock market conditions and the industry.
The charge to share option expense in the period was US$55,367.
19.6 Weighted average exercise price
Details of the number and weighted average exercise price of options granted, exercised, expired and forfeited during the year are as follows:
2013 2012
Weighted Weighted
average Number average Number
exercise price of options exercise price of options
$ $
At the beginning of the year 0.84 200,000 0.01 2,125,000
Forfeited during the year 0.84 (10,000) - -
Exercised during the year - - 0.01 (2,125,000)
Granted during the year 4.08 150,000 0.83 200,000
Outstanding at the reporting date 2.27 340,000 0.84 200,000
2013 2012
Exercisable at the reporting date 190,000 200,000
The weighted average remaining contractual life of the options is 2.0 years.
20. Investment in subsidiaries
Details of the Company's subsidiaries at the year end are as follows:
Effective
Share holding
Name of subsidiary Place of incorporation 2013 2012
WGP Group Ltd British Virgin Islands 100% 100%
WGP Energy Services Ltd British Virgin Islands 100% 100%
WGP Exploration Ltd United Kingdom 100% 100%
WGP Technical Services Ltd British Virgin Islands 100% 100%
WGP Professional Services Ltd British Virgin Islands 100% -
WGP Survey Ltd British Virgin Islands 50% 50%
GO Science Group Ltd British Virgin Islands 100% -
GO Science 2013 Ltd United Kingdom 100% -
WGP Professional Services Ltd was incorporated 14 March 2013 as a 100% owned subsidiary of WGP Group Ltd.
GO Science Group Ltd was incorporated 16 September 2013 as a 100% owned subsidiary of Thalassa Holdings Ltd.
GO Science 2013 Ltd was incorporated 25 September 2013 as a 100% owned subsidiary of GO Science Group Ltd.
21. Financial instruments
The Group's financial instruments comprise cash and cash equivalents together with various items such as trade and other receivables and trade payables etc, that arise directly from its operations. The fair value of the financial assets and liabilities approximates the carrying values disclosed in the financial statements. Included within cash and cash equivalents is an amount of $2,205,181 (2012: £100,000) which is restricted in relation to sales contracts with a particular customer.
The main risks arising from the Group's financial instruments are interest rate risk, foreign exchange risk, credit risk and liquidity risk.
Interest rate risk
The Group does not undertake any hedging against interest rate risk. The Group finances its operations from the cash balances on the current and deposit accounts. The Group has no borrowings as at 31 December 2013.
Foreign exchange risk
The Group undertakes hedging activities from time to time to mitigate foreign exchange risk. There were no hedging instruments open at the period end.
An increase in foreign exchange rates of 5% at 31 December 2013 would have increased the profit and net assets by US$145,604 (2012: US$95,360). A decrease of 5% would have had an equal and opposite impact. The majority of the Group's balances are held in USD. As 31 December 2013 approximately 35% of amounts owing to suppliers are held in GBP, 49% in NOK and 7% in EUR.
Credit risk
Group credit risk is predominantly a matter of individual corporate risk. However Group companies also operate in frontier and challenging regions which has the potential to add risk and uncertainty both from an operational and financial point of view. Whenever and wherever possible the Group attempts to mitigate this risk.
In line with other international companies, the Group is exposed to geopolitical risks and the possibility of sanctions which could adversely affect our ability to perform operations or collect receivables from our clients. This risk is un-insurable and un-hedgeable.
The company's customers include large multinational E&P companies and other geophysical service providers. In 2013, a significant proportion of the Groups revenue was generated from 2 customers. As at 31 December 2013, trade receivables outstanding amounted to US$6.6m of which US$5.9m was from these 2 customers. This balance has been substantially reduced since the end of the reporting period (see note 23 Subsequent Events).
Liquidity risk
The Group's strategy for managing cash is to maximise interest income whilst ensuring its availability to match the profile of the Group's expenditure. All financial liabilities are generally payable within 30 days and do not attract any other contractual cash flows. Based on current forecasts the Group has sufficient cash to meet future obligations.
22. Contingent liabilities
Under the terms of the Groups manufacturing and sale agreements, the Group may be required to repurchase equipment from 2017 onwards, at rates intended to reflect fair value.
23. Subsequent events
As a result of an increase in enquires during 2013, the Company announced on 8 January 2014 that the Board had approved an initial capital expenditure budget for 2014 of US$10.0m to refurbish the two compressors acquired in May 2012, upgrade certain existing systems and build a mini-PMSSTM unit in anticipation of work during 2014 in the high resolution 3D sector utilising P-Cable 3D Seismic AS's technology.
As per the announcement on 8 January 2014 the Company sold 1,078,667 Ordinary Shares to the THAL Discretionary Trust out of treasury at a price of £0.264 per ordinary share.
As per the announcement on 8 January 2014 the Company provided a loan of £3,054,768 to the THAL Discretionary Trust.
On 25 February 2014, the Company announced a new contract award with SAExploration to provide shallow water source handling and deployment services for seismic acquisition projects in the North Prudhoe Bay, Alaska. Mobilisation is anticipated to commence in June 2014 and the survey is expected to last approximately 90 days.
On 5 March 2014, the Company announced that it's subsidiary, WGP Survey Ltd, and TGS NOPEC Geophysical Company ASA have executed a contract to collaborate on a project to jointly acquire and own multi client seismic data on 10 survey blocks (approximately 500km2) in the Barents Sea. The project, is expected to mobilise in May 2014 and last up to six months.
The trade receivables outstanding as at 18 March 2014 was US$3.8m as compared to $6.6m as at 31 December 2013.
24. Copies of the consolidated financial statements
The consolidated financial statements are available on the Company's website: www.thalassaholdingsltd.com.
25. Annual General Meeting
Notice is hereby given that the Annual General Meeting of Thalassa will held at at Le Cabanon, Pointe des Douaniers 06320 Cap d'Ail, France on 29 April 2014 at 12:00 noon .
This information is provided by RNS
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