Globus Maritime Limited — FY2020 Form 20-F
Reporting period: Fiscal year ended December 31, 2020; filed March 29, 2021. This is an annual report, not a standalone fourth-quarter report. Financial statements are prepared under IFRS as issued by the IASB and amounts below are U.S. dollars.
Business context
Globus owns and operates dry-bulk vessels carrying commodities including iron ore, coal and grain. At year-end, its fleet comprised six vessels with 381,738 deadweight tons, versus five vessels and 300,571 deadweight tons at year-end 2019. The 2015-built Galaxy Globe was acquired in October 2020 for $18.4 million. The company reported 97.5% fleet utilization and a $5,210 average daily time-charter-equivalent (TCE) rate in 2020.
Key financial and operating metrics
Amounts in millions except per-share data, percentages and daily rates.
| Metric | FY2020 | FY2019 | Change / context |
|---|---|---|---|
| Voyage revenue | $11.753 | $15.623 | Down about 24%; principally lower average TCE rates |
| Voyage expenses | $2.490 | $2.098 | Higher, including increased low-sulphur fuel costs and longer repositioning periods |
| Vessel operating expenses | $8.581 | $8.882 | Down about 3%; daily operating cost fell to $4,531 from $4,867 |
| Operating loss | $(11.423) | $(33.649) | Included impairment charges of $4.615 and $29.902, respectively |
| Total comprehensive loss | $(17.372) | $(36.351) | Loss narrowed, largely as the prior-year impairment was much larger |
| Loss per share, basic and diluted | $(18.11) | $(873.36) | Share counts and per-share amounts reflect multiple reverse splits and substantial equity issuance |
| Adjusted EBITDA | $(3.075) | $2.678 | Non-IFRS measure; company cautions it is not a substitute for cash flow or IFRS results |
| Net cash from operating activities | $(6.243) | $0.213 | Shifted to cash use, attributed mainly to lower shipping rates |
| Net cash used in investing activities | $(18.542) | $(0.020) | Primarily Galaxy Globe purchase |
| Net cash from financing activities | $41.456 | $2.127 | Included $49.317 million proceeds from share issuance |
| Cash and cash equivalents | $19.037 | $2.366 | Restricted cash was an additional $2.066 million |
| Working capital | $9.2 surplus | $3.2 deficit | Improved following equity offerings |
| Debt outstanding, gross | $37.0 | $38.487 | Primarily EnTrust facility; IFRS carrying amount at 2020 year-end was $36.552 million |
| Interest expense and finance costs | $4.155 | $4.703 | Weighted-average interest rate rose to 9.44% from 8.66% |
The filing does not present a standard gross margin. Operating loss was approximately 97% of revenue in 2020; the ratio is heavily affected by operating costs and impairment. No common-share dividends were declared or paid in 2020, 2019 or 2018.
Material changes versus the prior year
- Revenue fell about 24% and average TCE declined to $5,210 from $7,564; utilization eased to 97.5% from 98.2%.
- The 2020 impairment charge was $4.615 million, compared with $29.902 million in 2019. Management recorded no further impairment in the remaining 2020 quarters, but identified impairment indicators for two vessels at year-end. Vessel carrying value was $62.350 million.
- Operating cash flow turned negative despite a much smaller reported net loss. Equity offerings generated $49.317 million before transaction costs, helping raise year-end cash and restore a working-capital surplus.
- The fleet expanded with Galaxy Globe. The October 2020 1-for-100 reverse split and significant share and warrant issuances materially changed the share base; the filing reported 3,040,123 common shares outstanding at year-end.
- Related-party administrative expense rose to $1.915 million from $0.371 million. In December 2020, the company doubled the annual consultancy fee payable to Goldenmare Limited, an entity affiliated with the CEO, to €400,000 and agreed to a one-time $1.5 million bonus. The filing says $1 million was paid after year-end.
Liquidity, outlook, risks and unusual items
- Debt and covenants: The $37 million EnTrust facility bears interest at LIBOR plus 8.5%, is secured by mortgages on five vessels and includes liquidity and collateral covenants. The company stated it was covenant-compliant at December 31, 2020. It planned a $6 million prepayment in March 2021; the filing describes this as expected, not completed. A March 2021 arrangement for up to $34.25 million of refinancing at LIBOR plus 3.75% remained subject to definitive documentation and closing conditions.
- Liquidity and going concern: The prior-year financial statements had substantial going-concern doubt, driven by liquidity and covenant concerns. Management said 2020 and subsequent equity offerings improved liquidity; its projections indicated cash and operating cash flow would be sufficient for forecast obligations and covenant compliance. This remains dependent on market conditions, cash generation and financing access.
- Chartering outlook: The fleet is exposed to volatile spot and short-term charter markets. Management stated current spot rates at the time did not support profitable operations. At the filing date, five vessels were on time charters at gross daily rates from $10,000 to $15,500, with terms generally ending April–August 2021; River Globe was in drydock and not employed. These rates and dates are as disclosed in the filing and are not guaranteed future results.
- COVID-19: The pandemic contributed to lower freight rates, reduced revenue and operational delays, including quarantine checks and crew-change difficulties. No charterer had invoked force majeure citing the pandemic as of the filing.
- Regulation and costs: IMO’s 0.5% sulphur cap took effect January 1, 2020. The vessels lack scrubbers and require more expensive low-sulphur fuel when the company bears fuel costs. Environmental rules, vessel maintenance, fuel, crew and insurance costs may pressure returns.
- Capital commitments and financing after year-end: The company agreed, subject to customary conditions, to buy a 2011 Kamsarmax for $16.2–$16.5 million and a 2018 Kamsarmax for $27 million. These acquisitions and refinancing were not completed as of the filing date. January and February 2021 equity offerings added substantial shares and warrants, creating further potential dilution.
- Governance and related parties: CEO-affiliated Goldenmare held Series B preferred shares with voting rights capped at 49.99% of total voting power. The filing also reports large CEO-affiliated consultancy fees and bonus payments. These arrangements merit review alongside the company’s related-party disclosures and approval process.
- Other risks: Vessel-value declines could threaten collateral coverage; the EnTrust loan has cross-default provisions. Other material exposures include customer concentration, refinancing and LIBOR transition, share-price volatility and potential Nasdaq listing compliance risks.
- Audit and controls: Ernst & Young issued an unqualified IFRS audit opinion and highlighted vessel impairment as a critical audit matter, particularly the subjective charter-rate assumptions used in discounted cash-flow forecasts. Management assessed disclosure controls and internal control over financial reporting as effective; the auditor did not provide an internal-control attestation.
Most important facts for investors to verify
- Actual completion, terms and cash impact of the proposed $34.25 million refinancing and the planned $6 million EnTrust prepayment.
- Closing, funding sources and expected returns for the two proposed vessel acquisitions, including their impact on debt, liquidity and cash flow.
- Current charter employment, rates, off-hire status and renewal terms as the short-term charters expire; compare realized TCE with vessel operating and financing costs.
- Whether operating cash flow improves from the 2020 outflow, and whether cash and covenant headroom remain adequate under weaker-rate scenarios.
- Impairment sensitivities to charter rates, utilization and vessel values, and the assumptions underlying the $62.350 million vessel carrying value.
- Fully diluted share count and potential warrant-related dilution, and the resulting effect on common shareholders’ voting and economic interests.
- Payments and future obligations under the CEO-affiliated consultancy agreement, including the remaining one-time bonus and the increased annual fee.