Business Context and Reporting Period
Company: Globus Maritime Ltd.
Filing Type: Form 20-F (Annual Report)
Reporting Period: Fiscal year ended December 31, 2016
Business Overview: Globus is an integrated dry bulk shipping company owning and operating a fleet of vessels transporting iron ore, coal, grain, and other commodities. As of December 31, 2016, the fleet consisted of five dry bulk vessels (one Panamax and four Supramaxes) with a total carrying capacity of 300,571 dwt. The company operates primarily on the spot market and short-term time charters.
Key Financial Metrics
| Metric (in thousands USD) | 2016 | 2015 |
|---|---|---|
| Total Revenues | $9,018 | $12,715 |
| Operating Loss | $(7,228) | $(29,708) |
| Total Comprehensive Loss | $(9,825) | $(32,396) |
| Adjusted LBITDA (Unaudited) | $(3,466) | $(2,376) |
| Net Cash Used in Operating Activities | $(3,600) | $(60) |
| Total Assets | $93,996 | $114,837 |
| Total Debt Outstanding | $65,778 | $78,600 |
| Working Capital Deficit | $(29,000) | $(64,900) |
| Daily TCE Rate | $3,962 | $4,333 |
Material Changes vs. Prior Period
- Revenue Decline: Total revenues decreased by 29% to $9.0 million, driven by a 31% drop in voyage revenues due to lower average Time Charter Equivalent (TCE) rates and a reduction in the fleet size (average vessels dropped from 6.5 to 5.2).
- Improved Operating Loss: Operating loss narrowed significantly from $29.7 million in 2015 to $7.2 million in 2016. This improvement was primarily due to the absence of the $20.1 million impairment loss recognized in 2015 and a $2.3 million gain from the sale of a subsidiary (Kelty Marine Ltd.).
- Fleet Reduction: The company sold the m/v Tiara Globe in 2015 and the vessel-owning subsidiary Kelty Marine Ltd. (owner of m/v Energy Globe) in March 2016, reducing the fleet from six to five vessels.
- Depreciation Adjustment: Depreciation expense decreased by 17% to $5.0 million, reflecting the smaller fleet and a reduction in the estimated scrap rate from $240/ton to $200/ton.
Outlook, Risks, and Contingencies
- Liquidity and Going Concern: The company reported a working capital deficit of $29 million as of December 31, 2016. Management raised doubts about the ability to continue as a going concern without further refinancing or capital raises. However, in February 2017, the company completed a private placement raising $5 million in cash and converting $20 million of related-party debt into equity and warrants.
- Debt Covenants: As of December 31, 2016, the company was in compliance with loan covenants for its DVB and HSH loan agreements due to waivers and amendments secured in 2016. In March 2017, agreements in principle were reached to further relax covenants through April 2018.
- Market Conditions: The dry bulk shipping market remains depressed with high volatility. The Baltic Dry Index (BDI) hit a record low in February 2016. The company is exposed to spot market rates, which are currently below operating costs for many vessels.
- Shareholder Dilution: A significant private placement in February 2017 issued 25 million common shares and warrants for 32.4 million shares, substantially diluting existing shareholders. The Chairman, George Feidakis, beneficially owns approximately 81.5% of the outstanding shares as of April 2017.
- Regulatory Risks: The company faces risks related to environmental regulations (MARPOL, IMO), potential delisting from Nasdaq if minimum bid price requirements are not met, and the stability of the Eurozone affecting operating costs.
Investor Verification Checklist
- Debt Restructuring Finalization: Verify that the "agreements in principle" reached in March 2017 with DVB Bank and HSH Nordbank regarding covenant waivers and loan amendments have been finalized and documented.
- Private Placement Proceeds: Confirm the full utilization of the $5 million cash proceeds and the $20 million debt-to-equity conversion from the February 2017 private placement.
- Going Concern Status: Review the company's cash flow projections for the period ending March 31, 2018, to assess if the recent capital raise is sufficient to cover debt payments and operations.
- Shareholder Dilution Impact: Assess the impact of the 32.4 million warrants outstanding (exercisable at $1.60/share) on future share price and liquidity.
- Market Rate Sensitivity: Evaluate the company's ability to generate positive cash flow given that current spot market rates are often below the vessel operating costs.