Globus Maritime Limited — FY 2019 Form 20-F
Reporting period: Fiscal year ended December 31, 2019. Filed March 31, 2020. This is an annual report, not a standalone fourth-quarter report. Financial statements are prepared under IFRS as issued by the IASB; amounts below are U.S. dollars.
Business context and results
Globus owns and operates five dry-bulk vessels—four Supramaxes and one Panamax—with aggregate capacity of 300,571 dwt. Average fleet size was five vessels. For 2019, fleet utilization was 98.2%; the average daily time charter equivalent (TCE) rate was $7,564, down from $9,213 in 2018.
| Metric | 2019 | 2018 | Change / context |
|---|---|---|---|
| Voyage revenue | $15.623 million | $17.354 million | Down 10%, primarily from lower average TCE rates |
| Operating loss | $33.649 million | $1.448 million | Includes $29.902 million vessel impairment |
| Net and comprehensive loss | $36.351 million | $3.568 million | Loss per share: $8.73, versus $1.11 |
| Adjusted EBITDA | $2.678 million | $4.319 million | Non-IFRS measure; down from prior year |
| Operating cash flow | $0.213 million | $3.851 million | Lower mainly due to weaker shipping and TCE rates |
| Investing cash flow | $(0.020) million | $(0.126) million | Limited equipment purchases |
| Financing cash flow | $2.127 million | $(6.435) million | Reflects refinancing and new borrowing proceeds, offset by repayments and interest |
Voyage expenses rose 75% to $2.098 million, largely because bunker expenses increased. Vessel operating expenses fell 10% to $8.882 million; daily operating expense declined to $4,867 from $5,438. Interest expense and finance costs rose to $4.703 million from $2.056 million, and the weighted-average interest rate increased to 8.66% from 4.97%. A $1.950 million derivative gain partly offset financing costs; it was principally related to the convertible note’s embedded derivative valuation.
Financial position, debt and liquidity
- Total assets were $55.656 million, down from $86.674 million; vessel carrying value fell to $48.242 million from $83.750 million, including the impairment charge.
- Total equity was $9.879 million, down from $41.050 million. Accumulated deficit was $135.648 million.
- At year-end, cash and cash equivalents were $2.366 million and restricted cash was $2.435 million. Undrawn availability under the related-party Firment Shipping facility was $11.1 million.
- Working capital deficit was $3.2 million, improved from $40.4 million in 2018, largely reflecting debt refinancing and reclassification of maturities.
- Gross borrowings were approximately $41.1 million; IFRS borrowings net of unamortized debt costs were $37.746 million. The $37 million EnTrust facility is secured by mortgages on all five vessels and bears interest at LIBOR plus 8.5%. Net debt, as defined by the company, was $33.686 million.
- Management reported compliance with loan covenants at December 31, 2019, but projected that available cash and operating cash flows might not meet near-term debt service and minimum-liquidity requirements. The filing states that substantial doubt exists about the company’s ability to continue as a going concern. The auditor’s opinion was unqualified and also highlighted this going-concern uncertainty.
Material changes, outlook and risks
- The company recognized a $29.9 million impairment after vessel recoverable values fell below carrying values. The five-vessel fleet’s aggregate carrying value was $48.2 million after impairment.
- In June 2019, Globus drew $37 million under the EnTrust facility and used the proceeds to repay the Hamburg Commercial Bank and Macquarie facilities. EnTrust principal repayments were scheduled to begin in 2021, with a substantial balloon payment in 2022, subject to cash-sweep terms.
- In March 2020, the convertible-note holder extended maturity from March 13, 2020 to March 13, 2021. The note’s conversion terms may result in further share issuance; approximately $1.168 million of principal and accrued interest was converted into 1,167,767 shares during the first quarter of 2020. Firment Shipping also extended its credit facility maturity to April 1, 2021.
- At the filing date, three vessels had short time charters beginning in March 2020, at gross daily rates of $4,300, $10,250 and $10,000; two vessels were seeking employment. These near-term fixtures are not long-term earnings guidance.
- Management was exploring additional borrowing, refinancing and other funding options, including use of the undrawn related-party facility. It anticipated conversion of the remaining convertible note rather than cash repayment, but outcomes are uncertain. No specific 2020 financial guidance is provided.
- COVID-19, restrictions on trade and vessel movements, and weaker freight rates were identified as risks arising after year-end. Management cautioned that the full impact was uncertain and could further weaken rates, cash flows and covenant headroom.
- Other material risks include dependence on volatile spot and short-term charter markets, vessel values and collateral covenants, refinancing and liquidity needs, convertible-note dilution and redemption provisions, customer concentration, and the Nasdaq minimum-bid-price deficiency. The company also noted the IMO 0.5% sulphur cap effective January 1, 2020; its vessels lack scrubbers and require more expensive low-sulphur fuel.
- No common dividends were declared or paid in 2019, 2018 or 2017. The filing reports no material pending legal proceedings or material contingencies known to management.
Most important facts for investors to verify
- Current liquidity, minimum-liquidity covenant compliance, scheduled debt payments and whether refinancing or additional financing has been secured.
- Actual cash availability under the Firment facility, including its related-party terms, maturity and conditions; distinguish undrawn commitments from cash on hand.
- EnTrust interest costs, cash-sweep obligations, vessel collateral coverage and the 2021–2022 repayment and balloon-payment profile.
- Convertible-note balance, conversion and redemption terms, and subsequent share issuance and dilution.
- Vessel employment, realized charter rates, off-hire, operating costs and the effect of COVID-19 and fuel regulations on margins and cash flow.
- Nasdaq bid-price compliance status and any resulting financing, listing or covenant consequences.